Tort Reform as Carrot-and-Stick
48 Pages Posted: 9 Apr 2008 Last revised: 2 Jul 2010
Date Written: 2008
The most persuasive of tort reforms are limits on damages that a plaintiff can recover in a medical malpractice lawsuit. More than half of states have passed some brand of liability limit under the guise of tort reform. Hospitals, physicians, and defense lawyers praise these reforms and regard them as a panacea, a good way to stanch increased medical costs from medical malpractice lawsuits and young physicians from high-risk medical practices. On the other side of the debate, trial lawyers and patient advocates argue that these so-called reforms are a scourge that creates a second harm to those who need compensation the most, the injured, and gives a protection to those who deserve it the least, the injurer. Is there a way out of this simple binary in which the players are either for tort reform or against it? Previous reform-minded commentators have failed to offer a solution that both creates better incentives to behave well and recognizes the political appeal of limits on damages. This Article breaks new ground in the tort reform debate by proposing to link the debate about tort reform explicitly to the debate about hospital and physician performance.
Specifically, this Article proposes that states consider treating tort reforms as a carrot or incentive for positive behavior. That is, state legislatures bent on passing liability-restricting tort reforms should only use these measures to reward healthcare providers, like hospitals and physicians, who routinely follow best practices. For instance, as the Article will show, state legislatures might approve a liability limit only for hospitals that are compliant with the recommended best treatments. These top-performing hospitals, but only these hospitals, would be protected from the specter of virtually unlimited damages in the event of suit. In this way, hospitals will have new incentives to avoid medical error, police misconduct, and strictly adhere to best practices. To demonstrate application, the Article draws on a database of 21 quality measures of performance for four defined conditions, heart attack, heart failure, adult surgery, and pneumonia. The data is collected by most hospitals in the United States and maintained by the Centers for Medicare and Medicaid Services. The Article proposes tying eligibility for tort reform to healthcare performance based, initially, on these 21 measures.
Keywords: tort reform, medical malpratice
JEL Classification: K13
Suggested Citation: Suggested Citation