Hoover Daily Report

Three Proposals for Malpractice Liability Reform

Wednesday, August 24, 2005

Last week, I argued that conventional reforms to the medical liability system such as reasonable caps on noneconomic damages reduce health-care costs and improve access to care. Although caps help, they are only part of the solution. This week, I present three other ideas for reform that offer substantial promise.

Patients and their health-care providers should be given more freedom to experiment with alternatives to the courts. Under federal law, patients and providers are supposed to be able to commit to alternative dispute resolution (ADR), in which an arbitrator resolves their cases with binding decisions. The evidence indicates that ADR compensates victims faster, more fairly, and with lower transaction costs than do the courts. ADR also can enhance incentives for doctors and hospitals to take more appropriate precautions against medical errors by replacing the current compensation lottery with a more consistent decision-making process.

Yet ADR is surprisingly uncommon. Its proponents argue that some state laws and judicial decisions make ADR agreements impossible to enforce. According to this reasoning, few agree to ADR because its decisions don't mean much. Its opponents argue that pro-doctor bias, or at least the perception of bias, is responsible for its unpopularity. According to this reasoning, patients are wary of ADR because arbitrators are more likely to favor those who pay for their services than individual plaintiffs.

Before we give up on ADR, however, we need to reform public policy to give it a chance. To give everyone more confidence in ADR, legal and regulatory reform should ensure that its decisions are both enforceable and impartial.

Data on adverse medical events collected by providers to improve the quality of care should not be admissible in malpractice cases. In general, such data are discoverable by plaintiffs, unless they fall under a state's specific statutory exception. Although this may seem to be in patients' best interests, a rule of discoverability involves a trade-off. It helps individual plaintiffs, but hurts patients as a group, by giving providers the perverse incentive to avoid learning about mistakes when there isn't a lawsuit. According to the Institute of Medicine, the costs of full discoverability exceed the benefits; reforming the rule will enhance providers' incentives to reduce the number of medical errors. Congress and several state legislatures have considered such reforms; they should adopt them immediately.

It should be easier to use clinical practice guidelines in malpractice trials. In general, procedural legal rules limit the use of guidelines—written statements of what constitutes appropriate care—as evidence. One possible reform would allow compliance with a guideline to be used as a defense against a charge of malpractice; another reform would allow failure to comply with a guideline, without a patient's written permission, to be used as evidence of malpractice.

Allowing guidelines to be used in court solves two problems. First, it would make trials more predictable. Second, expanding the role of guidelines would alert providers (and patients) to "best medical practices," which our health-care system desperately needs to do.