Damage Caps and Medical Malpractice Litigation: IV

Today, I want to focus on cap design. But first, one clarification from yesterday. Of course, we should expect caps on non-economic damages to hit those with large non-economic damages harder. How much harder is a different question -- particularly when past studies that have addressed that issue have used verdicts (and not payouts) to study that point. The problem with using verdicts is that even without a damages cap, defendants in our dataset don't pay what juries award. So, using verdicts instead of payouts gives you a inflated/misleading answer about the effect of the cap (both in the aggregate, and on specific plaintiff categories). That's why the aggregate figures for cap effect (37% reduction in verdict dollars v. 27% reduction in payout dollars on a far-smaller base) look the way they do. In dollar terms, the damages cap "takes away" $156M in verdict dollars, but only $60M in actual payout dollars.

To make it easier to see that point, I've re-done the tables from my last posting, to include the impact on both verdict and payout.

In each instance, the cap has a larger impact -- sometimes much larger -- on verdicts than on payouts. So, those who are basing their hopes (or fears) regarding the overall impact of a non-econ cap on their perception of what will happen to the largest/most salient verdicts should moderate their expectations.

I'll post later on cap design.

Thanks for doing this. I know you are not getting a lot of comments but I am learning a lot.
12.5.2008 10:09am
Frog Leg (mail):
I second Happyshooter. Great sequence of posts!
12.5.2008 10:39am
Brian K (mail):
defendants in our dataset don't pay what juries award.

how does this happen? is the plaintiff voluntarily accepting a smaller amount of money than he was awarded? how can the defendant pay less than the award?
12.5.2008 11:16am
mischief (mail):
May I point out that the fear of lawsuit has its own effects? And the verdicts inspire fear?
12.5.2008 11:48am
M.D.-Almost J.D.:
I think the actual question is not the caps (directly).. but the effect of the caps on:
1. Litigation: Are there more suits or less suits; are there more settlements? Is the a greater incentive to litigate rather than settle?

2. Patients/plaintiffs: are their medical expenses due to the malpractice (past and future) being covered 100%?

3. Medical Practice: Is there better care due to caps? Are physicians more or less likely to commit malpractice? Is there a lower cost of health care due to less "defensive medicine"?
(My personal observation is that physicians live in greater fear of lawsuits than necessary.)

I think as our economy goes into recession, we will see a large increase in Medical malpractice premium to once again be called a crisis. This is in many way unrelated to lawsuit pay out, but related to lower returns on investment and thus greater pressure from stockholders.
12.5.2008 12:16pm
Jeff R.:
how does this happen? is the plaintiff voluntarily accepting a smaller amount of money than he was awarded? how can the defendant pay less than the award?

The defendant offers the smaller amount, and the plaintiff can either take it or wait two or three years for the appeals string to run out before getting a dime, I'd imagine.
12.5.2008 1:01pm
Dan Simon (mail) (www):
A far more interesting statistic would be how aggregate damage awards are affected by the caps, broken down by demographic group. I would predict, for example, that while the indigent may lose the largest fraction of their own awards as a result of the caps, their combined share of total reductions is actually quite small, with most (perhaps even nearly all) cap-engendered award reductions affecting solidly middle-class people, and the affluent losing an even more disproportionately large fraction of the total.

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 6:18pm

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