Tuesday, September 10, 2013

Perry Celebrates Tort Reform Anniversary

Governor Rick Perry of Texas gave a commemorative speech on the 10th Anniversary of Proposition 12, a sweeping medical lawsuit tort reform act.

At the beginning of his speech, Gov. Perry outlined the economic and medical necessities for the reform:

"Ten years ago, Texas doctors were faced with an awful choice: stop providing critical services their patients desperately needed, shut down their practice altogether, or leave the state.

"It was a crisis precipitated by a system that fostered an unrelenting stream of lawsuit after lawsuit, headlined by outrageous awards for nebulous damages.

"As a result, medical malpractice rates either soared to prohibitively high rates, or were no longer offered by insurers.

"Doctors either stopped providing medical care in critical, high-risk specialties or ceased setting up practice in Texas. Hit particularly hard were critically-needed medical specialists and ER doctors, who were the most frequent targets of baseless lawsuits brought by unscrupulous lawyers.
That meant Texans lost access to care."
Later in his remarks, Gov. Perry highlighted some of the positive effects that have manifested because of the reforms passed 10 years ago:

"Since Proposition 12 passed 10 years ago, Texas has added more than 30,000 doctors, with significant gains in communities that had been traditionally medically under-served.

"Over 3,000 new medical licenses have been issued each year for the past seven years, and more than 3,500 over the last two fiscal years.

"We also set a record for applications, with more than 4,600 applications filed in Fiscal Year 2013.
I'm continually surprised some people still want to argue the case that tort reform hasn't worked; they're swimming upstream against a flood of hard data.

"Many of the same lawsuit reforms we passed also freed entrepreneurs and employers across our state to worry less about lawsuit abuse and invest fewer resources in defending them."

 Proposition 12 Is Model Tort Reform Legislation for the Nation

With the arguments over repealing "Obamacare", cutting off its funding, or delaying some of its more toxic sections continuing, the 10th Anniversary of Prop. 12 raises some key points.

One of the major contributing factors to costs of healthcare come from high overhead costs and extraneous testing (some of which can be rather invasive). Of the overhead costs, one of the largest is mandatory malpractice insurance. Even Licensed Professional Counselors (mental health) require malpractice insurance.

Every time a major suit is settled or decided in court, malpractice insurance companies add restrictions and provisions to policies. These include altering equipment or procedures so that doctors that never faced the issue in question will be mitigated from ever facing it. This drives up costs. Refusal to comply with the provisions of the policy could result in revocation of the policy. Doctors, nurses, LPNs, PAs, LPCs, etc, etc. cannot practice (provide care) without insurance. They don't have it, they don't have a license. It is sort of like driving a car, except the consequences are more dire should they get caught.

So, who ends up paying the increased malpractice premiums? The costs get added to the overhead costs of the practice. Doctors need to maintain a certain profit margin (to give raises to employees, buy gasoline to get to work, feed their families, do pro bono work, pay back student loans, etc.). So, the added overhead gets passed to patients. Well, patients with insurance see those added costs, after deductibles and co-pays, go to their insurance companies, many of which have the same underwriters that backed the malpractice insurance. Translation, this benefits the insurance companies on both the supply and demand sides of the market.

What does it do to consumers? Well, you have more tests the doctor must do in order to treat you. There is another co-pay. You have certain medications you have to try before being allowed to use the one that is most likely to work. There is another co-pay. If you have an HSA or are paying out-of-pocket (or have a high deductible), the cost is all on you. The money doesn't go to the doctors. It goes to the malpractice insurance companies, medical equipment suppliers, and pharmaceutical companies. It screws the patients.

If a case of malpractice occurs, many patients consult lawyers. The lawyers salivate. You owe them for each motion they file. You pay them for each hour spent on your case. If the suit is successful, you get that $10,000 settlement for the ingrown toenail that was cut too close and bled too much, ruining your Louis Vuitton knock-offs and embarrassing you at your church BBQ that one Saturday. So, who pays out that $10k? After the deductible, it comes from the insurance company, who then raises rates to cover the loss. When the malpractice rates go up, so does the overhead, therefore the bill, therefore you co-pays and premiums for your health insurance. In the long-run, it ends up costing you more than the $10k you won, which is closer to $5k after the legal and court expenses. So, who made out? The insurance companies and the lawyers (on both sides of the litigation/mediation).

Too many frivolous lawsuits like the one mentioned above are one the the largest factors causing skyrocketing costs of healthcare. Proposition 12 reduced the number of such lawsuits.

Now, gross malpractice is a serious thing. Should the law allow for suits and compensation for injured parties in those cases? Yes, of course. Take the case from years ago when a man underwent lifesaving surgery. During the course of the procedure, a surgical sponge was left inside of him. Later, it was discovered when the patient was not recovering. A second surgery was needed to recover the sponge. Additional medications, antibiotics, and care was necessary. It was a preventable accident, yes. Nobody is perfect. But safeguards were not in place, then, that are routine now (such as counting  the sponges and other items used to make sure that the number in the biohazard bags are the same number inventoried and used in the surgery). Should that person receive some settlement? Yes.

The person who put on her Louis Vuitton's the day of her toenail ligation, no.

Proposition 12 went a long way towards reforming those torts and suits. There is still some way to go. But it is a start, giving Texas a jump that leaves other states playing "catch-up". The sad truth is that many states haven't yet approached the starting line. They are still playing with the glittery laces on their still-in-the-box Nike knock-offs.

In the healthcare reform debates that preceded Obamacare, "Tort Reform" was tabled. Lobbyists representing civil suit lawyers successfully kept that out of the bill. Instead, we had the IRS put in charge of taxing and fining doctors, patients, and employers, increasing medical care costs while negatively affecting private sector employment.

Sure, some "demand side" reform is needed. A more free, less regulated market would help in that area. Adding taxes and fees to medical bills is not the answer to reducing costs. Artificially increasing demand by forcing people to purchase a commodity does not. Reducing available options by making HSAs no longer cost-effective alternatives does not. In fact, these increase the prices.

Making the supply side cost more by raising malpractice insurance rates, taxing and fining medical equipment, and increasing the costs of getting new pharmaceuticals approved for public use also drive up costs. Add payouts and legal fees over frivolous lawsuits and the costs go higher.

One of the best ways to decrease costs is to increase supply. The more options are available, the more doctors that are free and encouraged to practice, the lower the prices due to the competition. To reduce the costs of supply and increase overall supply, tort reform removes many of the barriers to that competition, therefore reducing costs. Everybody, except the lawyers who specialize in filing or defending against malpractice suits, wins. Those lawyers? Well, there will always be a need for good divorce and family law attorneys.