Reed Magazine November 2004

The medical malpractice system and tort reform

Tempest in a teapot

In evaluating the medical malpractice system from the point of view of enhancing consumer welfare, it is important to keep in mind the interdependencies among its component institutions, especially relationships between the medical malpractice system and the medical services sector. Indeed, from this point of view, the contemporary controversy over caps on recoveries may be a tempest in a teapot. Fashioning policy in this domain may be dominated by larger issues calling for more fundamental reform.

For example, the Institute of Medicine of the National Academy of Sciences recently has called for restructuring the medical services sector. According to the IOM, today’s medical services sector is not capable of improving sector performance to deliver to the public the quality of care it wants. The report aims for system change. The central principle informing this quality-improvement exercise is that the patient’s experience should be the fundamental source of the definition of quality at all levels.

No-fault tort reform

The report stresses the threat posed by the medical malpractice system to implementation of its recommendations, which call for a medical culture of openness and honesty with respect to system performance. But the current litigation climate promotes fear and secrecy. The conclusion is that tort reform is a crucial step on the way to establishing conditions for a 21st century medical-services system. The report calls for experimentation with so-called “no-fault” tort systems with enterprise-level responsibility for compensation of victims. Considerations such as these make it clear that design of policy in the domain of medical malpractice must include careful analysis of the interactions between the medical malpractice system and the medical services sector.

Getting there from here

It is one thing to point out that consumer preferences should be decisive for resolution of the tort-reform controversy. It is another to suggest how this might be achieved. One possibility would be to abandon tort law in favor of contract (with arbitration of contract disputes) as the basis for asserting claims in this domain. This would work best in enterprise-liability settings (e.g., HMOs organized as pre-paid group practices). The parties, the Health Plan, and the beneficiaries (appropriately represented) could negotiate contract language on such matters as the definition of malpractice and the loading on premiums to cover the costs of the system agreed to.

In Oregon, we are voting on Proposition 35, which seeks a constitutional amendment to authorize a $500,000 cap on non-economic damages in medical malpractice cases. I find myself somewhat conflicted by this development. On the one hand, it is a way to represent consumer preferences in the resolution of this controversy. On the other hand, I do not favor loading our constitution with ad hoc provisos of this sort.

Some opponents of tort reform regard these initiatives as an assault on our rights to trial by jury. Proponents of tort reform provide a rationale in terms of anticipated benefits in medical-services markets. But they also should provide a rationale in terms of legal theory addressed to the role of the jury in our justice system. After all, the right to trial by jury has a canonical status as a right absolutely central to our system of justice. End of Article

Carl Stevens ’42 is professor of economics, emeritus, at Reed. His teaching, research, and writing has been addressed in part to unions and collective bargaining, especially in the negotiation process and dispute management.


Reed Magazine November