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Damage Caps and Medical Malpractice Litigation: III

Ok, so today I will be much shorter, and start right up with our findings. I ended my last post with a bunch of points, including our estimation that the Texas cap will reduce payouts in tried cases by 27%, and settled cases by 18% (assuming no change in the volume and mix of cases). In dollar terms, that corresponds to a reduction of $60M in payouts for tried cases, and $780M in settled cases. (For reasons that the paper outlines, these figures are in 1988$ -- to get to 2008$, multiply by 1.83 -- and you get $110M, and $1.47B.

Whose hide do those savings come out of? Predictably enough, it is claimants with non-economic damages that exceed the cap -- and the greater the percentage of one's award that is non-economic and above the cap, the larger the impact. Payouts in tried cases are larger than in settled cases, and size does matter: 47% of the tried cases (and 18% of the settled cases) have paid non-economic damages that exceed the cap.

Who has paid non-economic damages that exceed the cap? We have demographic information on age, employment status, and whether the plaintiff is deceased or not. The following table shows how payout is affected, in the tried and settled cases, for various groups defined by these categories.

The table shows that some types of cases (death cases, cases in which the plaintiff is unemployed, and cases in which the plaintiff is elderly) had higher aggregate and per-claim reductions in payout. The reduction is larger in tried cases than in settled cases -- which makes sense, since as noted above, the payouts in settled cases are smaller. This means that fewer cases are over the cap, and those that are have a smaller "haircut" from the cap. The differences are statistically significant for per-case mean reductions in tried cases, comparing death with non-death (23% v. 12%), and unemployed with employed (19% v. 11%) -- but not for elderly v. adult-non-elderly (19% v. 14%).

The next table provides a finer breakdown for adult, non-elderly plaintiffs.

There is a striking gap between the 53% aggregate reduction in payout for unemployed deceased plaintiffs, versus 17% for employed deceased plaintiffs or 15% for employed non-deceased plaintiffs. The gap for unemployed non-deceased plaintiffs v. employed non-deceased plaintiffs is more modest (24% v. 15%). Within the death and non-death groups, the per-case mean differences are not significant -- perhaps due to small sample size, but they become so in the last comparison, between unemployed deceased plaintiffs and employed non-deceased plaintiffs (31% v. 9%).

To summarize, the Texas cap hits hardest those with large non-economic damage awards -- and those plaintiffs are disproportionately likely to be deceased, unemployed, and perhaps elderly.

My next post will address how "tweaking" cap design affects the impact. Stated differently, it will address which of the 31 states has the most severe and least severe cap -- and how a $250k flat cap compares to a $1.75M total damages cap in terms of its impact on payouts.

John Moore (www):
How do you quantify the effect on "defensive medicine," where medical providers do excessive tests and treatments to avoid lawsuits?

My daughter's due date is effectively being decided by lawyers - the OB's won't go beyond a certain date for fear of lawsuits, not for medical reasons!
12.5.2008 1:11am
Tracy W (mail):
So people whose payments we would expect to have a higher proportion of non-economic damages lose more than those whose payments include a large amount of economic damages, by a cap on non-economic damages? In other words, so far the caps are working as expected.

I suppose this study was worthwhile conducting, as it would have been very surprising if it had happened to find otherwise.
12.5.2008 5:55am
Robert Oshel (mail):
This shows that the costs of malpractice are being shifted from the physicians making the errors to the victims, particularly children, the elderly, the unemployed, etc. The real solution is not to shift the costs of malpractice but to reduce it in the first place. Treat the disease, not the symptoms. Improve patient safety.

As the recently retired Associate Director for Research and Disputes of the National Practitioner Data Bank, I know of many instances of physicians with multiple malpractice payments but no action by State Medial Boards to restrict or revoke their licenses. The NPDB data also show that a very small percentage of physicians are responsible for the majority of all the money paid out for malpractice. If the Boards took action against these physicians, malpractice payments would be reduced because there would be less malpractice. Both the vast majority of good physicians and the public should demand strong action by the Medical Boards rather than lowering compensation to injured patients.
12.5.2008 7:55am
TomH (mail):
Mr. Moore - I would point out that often legal reasons (int he way that you are discussing them) are medical reasons.

The case would revolve around whether the treatment provided comports with the medical standard of the area where the treatment is rendered. So your daughter's doctor, in determining a due date "deadline", is simply taking into account the opinions of many doctors who have won in lawsuits, i.e. whose opinions have taken the day over other doctors whose opinions have been deemed to be wrong.

Maybe this results in a more conservative kind of medicine, but wouldn't you rahter an oversafe doctor, rather than one open to experiment?
12.5.2008 2:12pm
Dan Simon (mail) (www):
It's not terribly interesting to measure who has their awards slashed the most--that's simply a question of whose damages are predominantly non-economic. (And as we've seen, the obvious answer is, "those who have nothing, and therefore can't suffer economic harm".) The far more interesting statistic is how aggregate damage awards are affected by caps, for different demographic groups. I would predict that while the indigent lose the most proportionally from the caps, most (perhaps even nearly all) cap-engendered award reductions affect solidly middle-class people, with the affluent being disproportionately affected.

If I'm right, then uncapping non-economic damage awards would be yet another bait-and-switch social program, sold as a protection for the poor and weak and then feasted on by the comfortably-off.
12.5.2008 6:07pm
JoelP:

Maybe this results in a more conservative kind of medicine, but wouldn't you rahter an oversafe doctor


It turns out that the factors which sway juries are not identical to the factors which improve patient care. The factors which improve a physician's malpractice risk are not the same ones which improve patients' risk.

People (particularly juries) are likely to think that a nonindicated blood test is harmless, and that it's great if doctors order them "just in case". But a nontrivial fraction of tests are abnormal even in healthy individuals. Ordering defensive tests may result in a great deal of patient harm, even though they sound "conservative".
12.5.2008 11:59pm

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