No Fault for Medical Injury: Theory and Evidence

University of Cincinnati Law Review, Vol. 67, 1998

Posted: 1 Mar 1999

See all articles by Randall R. Bovbjerg

Randall R. Bovbjerg

The Urban Institute

Frank A. Sloan

Duke University - Center for Health Policy, Law and Management; Duke University, Fuqua School of Business-Economics Group; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

This article presents new administrative and empirical evidence from a multi-year study of the only two operational medical no-fault programs in the U.S. Virginia and Florida in the late 1980s began covering children with severe birth-related neurological injuries on a no-fault basis. The study surveyed the two programs, affected parties, and observers, drawing empirical comparisons with tort performance using Florida's unusual data base of all closed malpractice claims. Background is provided on both the theory of no fault and prior experience in Workers' Compensation and auto no fault.

No fault theory promises to improve both compensation and deterrence. Compensation, by lowering administrative costs, speeding resolution of claims, and covering more injuries. Deterrence, at least in some forms of no fault, by clarifying standards of responsibility, reducing the perceived erraticness of determinations, and by experience rating premiums. For Virginia and Florida, however, the primary goal was akin to tort reform--to maintain affordable obstetrical liability coverage for physicians, which in the late 1980s was jeopardized by very expensive "bad baby" cases.

Success was achieved by taking a narrowly defined category of expensive neurological injuries out of tort. Almost all physicians participate, voluntarily paying assessments for tort protection. Malpractice premiums have dropped relative to the nation at large. Other achievements include delivering higher compensation relative to need than do comparable tort claims; doing so at extremely low overhead cost, especially for attorneys' fees on both sides; and resolving claims filed far faster than for tort. Moreover, no-fault administration functions reasonably well, and cases do not normally seem to be difficult to resolve even with minimal process. Most physicians and claimants express satisfaction with the no fault experience, but the same is true for similar obstetrical claimants under tort.

On the negative side, the programs have remained even smaller than expected for their narrow design. More claims come forward than for comparable earlier tort cases, but many fewer than the number of families with severe birth-related neurological injuries, especially cerebral palsy--and minuscule relative to medical injuries more generally. Caseload is far too small to permit experience rating or any activist approach to risk management or quality assurance. Further, the programs have not eliminated tort, even for costly obstetrical injuries, and no-fault claimants' continue to rely on plaintiffs' attorneys to guide their choice of forum. Indeed, the Supreme Court of Florida authorized claimants to go straight to courts, an approach understandably favored by trial attorneys. (A 1998 legislative amendment sought to reassert the primacy of no fault.)

Thus, no fault failed to make compensation broadly available, and its small size also prevents experience rating and risk management to improve deterrence. Moreover, the continuation of tort for uncovered obstetrical injuries continues incentives for defensive practices and may well inhibit practitioners from referring injuries to no fault lest they wind up in court. As often happens, success or failure depends on the details of implementation. Better understanding should allow others to refine no-fault programs to better meet their proponents' objectives.

Suggested Citation

Bovbjerg, Randall R. and Sloan, Frank A., No Fault for Medical Injury: Theory and Evidence. University of Cincinnati Law Review, Vol. 67, 1998, Available at SSRN: https://ssrn.com/abstract=147016

Randall R. Bovbjerg (Contact Author)

The Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States

Frank A. Sloan

Duke University - Center for Health Policy, Law and Management ( email )

Box 90253
Durham, NC 27708
United States
919-684-8047 (Phone)
919-684-6246 (Fax)

Duke University, Fuqua School of Business-Economics Group ( email )

Box 90097
Durham, NC 27708-0097
United States

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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