Administrative Compensation for Medical Malpractice Injuries: Reconciling the Brave New World of Patient Safety and the Torts System

Abstract

The medical malpractice tort system is a failure. Judged on economic terms, more than fifty percent of the dollars are lost to transaction costs, and the instability of the market disrupts the orderly delivery of medical care. Judged on public health terms, it not only fails to provide incentives for better medical care, but its irrationality actually impedes the adoption of better medical care practices in several important situations. Most damning, judged on justice terms, it provides inadequate or non-existent compensation to most injured patients and undeserved windfalls to others, while forcing good doctors to subsidize the errors of incompetent physicians, who thus gain a market edge. Medical malpractice has been very good for the pocketbooks and political aspiration of lawyers, but it has failed the public and health-care providers alike.

The magnitude of the failure of the tort system has been documented in a series of studies of substandard medical care, starting with the New York Study in the 1980s and culminating in the 1999 Institute of Medicine Study (the IOM study), To Err is Human, and the sequel, Crossing the Quality Chasm. These studies claimed that each year as many as 98,000 Americans die and many more suffer significant injuries from medical mistakes, making malpractice one of the leading causes of death. The New York Study also echoed the finding of previous studies that most injured patients did not sue for medical malpractice, and among those who did, the severity of their injuries and not the scientific merits of their claim determined their compensation.

Implicitly recognizing the failure of the states to deal with patient safety, the federal government is moving forward with a national system for reviewing the quality of medical care and disciplining errant providers. While the authors believe that the fundamental motivation for this patients’ system is to save money through controlling the delivery of medical care, nonetheless, it can be the core of an alternative to the torts system. This article explores an integrated quality credentialing and administrative compensation system for medical negligence. The authors argue that such a system must replace the tort system. Current efforts to impose federal quality standards while tinkering with concepts such as enterprise liability and no-fault compensation as adjuncts to the tort system will only perpetuate the injustice of the current system.

Keywords: medical malpractice, tort reform, administrative compensation, qa, quality assurance

JEL Classification: i18, k13