Why We Can't Get National Malpractice Reform

by Dan Diamond, California Healthline Contributing Editor

To err is, well, human.

And since the Institute of Medicine reached that conclusion a dozen years ago, in a breakthrough report on medical errors, health care leaders have undertaken massive campaigns to improve patient safety.

But the corresponding effort -- how those errors should be litigated, or alternately not -- has changed little. The current White House flirted with tort reform during the run up to the Affordable Care Act, but a newly released memo hints at why the idea was abandoned.

Did President Obama err by ignoring malpractice reform?

Why We Need National Reform

Exposure to medical liability is a real issue for many providers.

About one in 14 physicians have a malpractice claim filed against them in an average year, according to a recent study in the New England Journal of Medicine. Most physicians will face at least one malpractice claim during their careers.

That litigation adds up -- total malpractice payouts are roughly $6 billion per year.

There's also a larger, if more difficult-to-quantify, level of spending on "defensive medicine." One Health Affairs study found that unnecessary tests and procedures physicians order out of fear of malpractice lawsuits represents about $46 billion annually.

According to the chair of the American Medical Association, this is "real money" -- much of it manifesting as excess Medicare spending -- that demands a real solution.

"The argument that these billions are too small to worry about is the same logic that got us into our current fiscal predicament," Dr. Robert Wah wrote to the New York Times.

Why We Don't

Of course, malpractice-related spending represents -- sorry, Dr. Wah -- just a tiny slice of the nation's $2.5 trillion in annual health care spending. And the difficulty of enacting any health reform, plus resistance from the nation's well-funded trial lawyers lobby, has historically meant that tort reform wasn't prioritized over more politically expedient health insurance coverage expansions or attempts at cost control.

There's also some evidence that tort reform is better done at the state level, given the different legal climates across the nation.

The Golden State is among the few states that have imposed a $250,000 cap on pain-and-suffering damages, a measure that's been well-defended by the California Medical Association. The law helps keep "doctors' medical liability premiums -- and thus health care costs -- in check ... [and] helps ensure patients have access to their doctors," according to CMA.

Advocates for tort reform often argue that California's cap, or a similar cap in Texas, actually attract physicians by creating a more friendly climate to practice medicine.

But one physician points out that such reforms may not count for much.

Writing in Health Affairs, the University of Texas' William Sage notes that mass physician relocation is unlikely, given the complexities of uprooting one's family. Sage adds that state-level liability reform increases long-term physician supply by just 3%, essentially by slowing older physicians' retirement and luring younger ones.

What We Could Do

A White House memo came to light last week, as part of a lengthy article in The New Yorker about the president's decision-making, points to some of the most viable national tort reforms.

The memo's hardly new -- it was originally penned in July 2009 -- and its proposals are familiar, too, with some providers already deploying the models.

In a thorough post, University of Chicago professor Harold Pollack examines the five ideas that White House advisers presented to Obama:

  • Safe harbor for physicians who hew to nationally accepted guidelines;
  • Early disclosure of medical errors and proactive mediation;
  • Pre-trial screening panels, to weed out frivolous cases;
  • Mediation to resolve disputes; and
  • Special health courts and expert panels.

Obama was most interested in the second option -- which reflected his 2005 legislation advocating early disclosure -- as an avenue to retain the AMA's support during the fraught negotiations. He encouraged his advisers to consider the measure.

But he also told his advisers, "we shouldn't do anything that weighs down the overall effort."

And as Pollack notes, including tort reform would've meant including the House Judiciary Committee -- giving Chair John Conyers an opportunity to push his own health reform bill.

Given that the White House was already struggling to shepherd the ACA through Congress, the unpredictability of involving even more legislators may have proven "decisive" in choosing to pass on tort reform, Pollack concludes.

Why Efforts are Stalled

Instead, the ACA included $50 million for pilot projects to examine malpractice reform -- which Congress ultimately didn't fund. And the Department of Justice also didn't receive its $250 million for fiscal 2012 to explore alternative approaches to tort reform, Politico reports.

Some critics pin the failure of malpractice reform on the trial lawyers' association, with one consumer advocate concluding that "a few thousand trial lawyers are blocking reform that would benefit 300 million Americans."

But the White House's decision reflects a tougher-to-solve reason why tort reform often stalls: There are too many stakeholders. Payers, patient advocates, physicians, policymakers -- all have a different take on what national tort reform should look like.

And while Democrats were able to assemble different groups to support the ACA, partly through using their public plan proposal as both a rallying point and a cudgel, there's no equivalent burning platform to force medical malpractice reform. At least, not yet.

"Road to Reform" will keep an eye on tort reform efforts. Here's what else is happening around the nation.

Administration Actions

  • Last week, HHS denied a request by Texas for a temporary waiver from medical-loss ratio rules under the federal health reform law. HHS determined that nearly all insurers in the state's individual market could either already meet the 80% spending requirement in the law or have said they will not leave Texas once the requirement is imposed (Baker, "Healthwatch," The Hill, 1/27).
  • In a statement issued last week, White House Communications Director Dan Pfeiffer said that internal memos detailing the Obama administration's negotiation strategy on the federal health reform law were released to The New Yorker without authorization (CQ HealthBeat, 1/27). An article published in the magazine based on the memos highlighted President Obama's willingness to consider various medical malpractice reforms to secure physicians' support for the law (Pickert, "Swampland," Time, 1/27).

On the Hill

  • Last week, an official with the National Association of Health Underwriters said that Sen. Mary Landrieu (D-La.) is expected to develop legislation that would exempt insurance agents and broker commissions from medical-loss ratio rules under the federal health reform law. Sens. Ben Nelson (D-Neb.) and Johnny Isakson (R-Ga.) are among those expected to co-sponsor the bill. Similar legislation (H 1206) already exists in the House (Reichard, CQ HealthBeat, 1/25).
  • Last week, the House Rules Committee adopted a rule that sets up a House floor vote this week on legislation (HR 1173) that would repeal the Community Living Assistance Services and Supports program created by the federal health reform law. Although the bill is not expected to pass the Senate, House Republicans hope a repeal vote will cast a negative light on Democrats for supporting a program that the Obama administration said is unworkable (Pecquet, "Healthwatch," The Hill, 1/24).

Promoting Reform

  • In her first public appearance last week since being nominated, acting CMS Administrator Marilyn Tavenner said the Obama administration has made significant progress in implementing the federal health reform law. Tavenner said the administration already has enacted important provisions in the law and pledged to continue working to improve the quality of care and reduce costs (Baker, "Healthwatch," The Hill, 1/26).
  • Last week, the Obama administration released a report describing the progress of the Center for Medicare and Medicaid Innovation at CMS, which was created under the federal health reform law to develop strategies to lower costs and improve care quality. Since opening in 2010, CMMI has launched 16 initiatives with more than $1.7 billion in federal funding. Officials said the agency -- which has a total of $10 billion in health reform funding at its disposal through 2019 -- likely will roll out a series of new initiatives soon (Aizenman, Washington Post, 1/26). In related news, two Republican leaders on the House Ways and Means Committee requested in a letter sent last week to HHS Secretary Kathleen Sebelius details of all "current and anticipated" projects at the Center for Medicare and Medicaid Innovation at CMS (Daly, Modern Healthcare, 1/29).
  • During an unaired portion of an interview on "The Daily Show with Jon Stewart" last week, HHS Secretary Kathleen Sebelius said she is confident that the U.S. Supreme Court will uphold the reform law. She noted that if the high court does not uphold the individual mandate, the Obama administration will pursue other avenues to reform the health care system. If the high court strikes down the mandate, "I think we keep going," she added (Baker, "Healthwatch," The Hill, 1/24).

Rolling Out Reform

  • During a National Academy of Social Insurance conference last week, Joel Ario -- former director of the CMS Office of Insurance Exchanges -- said that states are making more progress toward establishing health insurance exchanges under the federal health reform law than they publicly acknowledge. Ario said that even if the law is overturned by the U.S. Supreme Court or repealed by a Republican president and Congress, having several states make progress on the exchanges will bring significant change to the insurance market (McCarthy, National Journal, 1/26).
  • Last week, Steve Larsen -- director of the Center for Consumer Information and Insurance Oversight at CMS -- called on health insurance agents and brokers to work with the government to develop the health insurance exchanges for small businesses under the federal health reform law. During a National Association of Health Underwriters meeting, Larsen said HHS will continue to seek members' input and advice as it develops the Small Business Health Options Programs, or SHOP exchanges (Reichard, CQ HealthBeat, 1/25).

In the States

  • Although the 2006 Massachusetts health reform law contains provisions similar to those in the federal health reform law, state officials are working to revise it to be compliant with standards in the federal overhaul. For example, state officials must determine whether to lower penalties associated with not complying with the individual mandate -- which are higher than those in the federal law -- or to have residents pay both the state and federal fines (Nocera, Politico, 1/30).

Studying Its Effects

  • Insurance plans already provide drug benefits that far exceed minimums established by HHS under the federal health reform law, according to an Avalere Health analysis. For the analysis, Avalere analyzed the drug benefits in health plans that could be used to establish essential health benefits standards. The standards set by HHS require benchmark plans to cover only one medication in a particular class. As a result, health plans will have flexibility to change their drug benefits without flouting federal law, the analysis states (Baker, "Healthwatch," The Hill, 1/26).
  • In a news release issued last week, Republicans on the House Ways and Means Committee pointed to new Gallup Poll data indicating that the number of uninsured U.S. residents increased from 14% in 2008 to 17% in 2011 as evidence of the weakness of the federal health reform law. Democrats said the data underscore the need for the overhaul's provision to extend coverage to millions of uninsured individuals by 2014 (Baker, "Healthwatch," The Hill, 1/24).

Advocacy

  • In a letter sent to House lawmakers last week, the Alliance for Retired Americans and the AFL-CIO urged lawmakers to oppose a bill (HR 1173) that would repeal the Community Living Assistance Services and Supports program created by the federal health reform law. The groups said the CLASS program can be modified to work effectively and added that repealing the program "would do nothing to address the glaring need for adequate coverage of long-term services and supports" (Pecquet, "Healthwatch," The Hill, 1/25).
  • In a letter sent to HHS last week, a coalition of children's health advocacy groups -- led by the American Academy of Pediatrics -- said that essential health benefits guidance issued by the department last month ignored their input and Congress' intent that the secretary should develop the standards. The coalition also expressed concern that plans offered in the health insurance exchanges would not "adequately address the needs of children, whose medically necessary services are frequently excluded from private insurance packages" (Bunis, CQ HealthBeat, 1/24).

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