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Trial Lawyers Inc.

   Trial Lawyers Inc.: Health Care
    The Lawsuit Industry's Effect on American Health, 2005


The Lawsuit Industry's Effect on American Health: Condition Critical?
Trial Lawyers Inc. Health Care
A Message from the Director

Focus: Lines of Business
Drugs and Medical Devices
Special Focus: Vaccines
Medical Malpractice
Special Focus: Hospitals
Health Maintenance Organizations

Government Relations/Public Relations
Outlook and Conclusion

Other Resources
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The Manhattan Insitute's Center for Legal Policy.
Walter Olson's OverLawyered.com.



Reformers look for healthy solutions to rein in Trial Lawyers, Inc.

Reforming the legal system to facilitate better health care is a delicate —but not impossible—operation. The aggressive public- and government-relations arms of Trial Lawyers, Inc. work tirelessly to oppose change; America's federalist system makes reform a state as well as a national concern; and the highly complex issues involved in civil justice reform are not easily understood by elected representatives and policymakers— even those not beholden to the trial bar's campaign financiers. Still, after the high costs of medical-malpractice-lawsuit abuse galvanized doctors, who raised tort reform's visibility through well-publicized demonstrations and strikes,[261] the public has begun to understand that an out-of-control legal system has serious real-world health effects. Aggressive grass-roots efforts have the litigation industry on the defensive, but reformers need to capitalize on this momentum by prescribing comprehensive solutions to effectively treat a health-care system ravaged by Trial Lawyers, Inc.

States Push for Change

Tort law rests primarily in the states, and the states have been at the forefront of reform. State capitols around the country now have medical liability reform on the agenda: in 2005, legislators in 48 states introduced more than 400 bills on the issue.[262] More than 60 of these bills are now law, including measures to cap noneconomic damages, establish standards for expert witnesses, and set statutes of limitation on filing malpractice suits.[263] In all, 27 states now limit noneconomic damages in medical-liability cases.[264]

While states' laws vary in their effectiveness, in those states where damage caps and other broad reforms have passed, malpractice premiums have generally come down and doctors' shingles have stayed up. Since Texas legislators imposed a $250,000 limit on noneconomic damages in 2003, malpractice suits have dropped by half, and the five largest insurers have announced rate cuts that will save doctors and hospitals $50 million a year.[265] An Agency for Healthcare Research and Quality study found that rural counties in states with such caps saw a 3.2 percent rise in doctors per capita.[266] Over the long run, medical-malpractice reforms have been highly successful: since California passed its $250,000 noneconomic damages cap in 1975, its medical-malpractice premiums have risen "only" 245 percent, versus 750 percent nationwide.[267]

Federal Reform: What's on the Table

Success at the state level, however, cannot by itself fix the health-care liability problem. Trial Lawyers, Inc. shops its cases to the most lenient forums, so suits against drug and medical-device manufacturers—whose products are sold nationwide—often wind up in "magic jurisdictions" that function as cash registers for the plaintiffs' bar (see p. 9).[268] Critics of federal tort reform often point out, rightly, that tort law is a historical province of the states. But products-liability law has expanded dramatically in the last 50 years,[269] and the litigation industry's forum-shopping enables plaintiff-friendly states to impose costs on other states, even when those states have conflicting regulations or statutes.[270] Thus, federal products-liability reform fits easily within the ambit of Congress's power to regulate interstate commerce.[271] The case for federal reform of medical- malpractice liability is less clear-cut; but considering that Medicare and Medicaid constitute close to half of medical spending, taxpayers nationwide bear the costs of outlier states' plaintiff-friendly tort systems, so the case for federal remedy is compelling.[272]

Understanding the national implications of the issue, President Bush has led the fight for medical-liability reform at the federal level and has proposed legislation to limit liability on medical malpractice as well as on pharmaceuticals and medical devices.[273] The bill—the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2005—would place a $250,000 cap on noneconomic-damage awards, limit attorneys' fees, enact a three-year statute of limitations for malpractice cases, and mandate standards for expert witnesses.[274] Also, the federal legislation borrows from Michigan's salutary law—now under siege by Trial Lawyers, Inc.—that prohibits certain suits against companies that have complied with their regulators:[275] the HEALTH Act would prohibit punitive damages against a manufacturer whose product has been approved by the Food and Drug Administration.

The president's proposed remedy, however, will be a hard prescription to fill. Although the House passed the president's bill in July—as it has seven times before—the legislation remains stalled in the Senate.[276] Trial Lawyers, Inc. is spending millions to keep it there and has hired additional lobbyists to turn up the heat on lawmakers who might be considering voting for it. Democrats are lined up against the bill, ready to mount a filibuster if necessary, and won't let the bill go anywhere without changes, such as increasing the damages cap.[277] Even then, its passage is not assured unless the president can convert some key opponents of the legislation, Republicans as well as Democrats.[278]

What's Missing: A Comprehensive Plan for Reform

In calling for the elimination of punitive-damage awards for FDA-approved drug litigation, the HEALTH Act administers a much-needed antidote of reason for Trial Lawyers, Inc.'s feverish public-relations campaign against the pharmaceutical industry, but the legislation really does not go far enough. As shown in Ernst v. Merck—where the jury gave a $24 million compensatory award for mental anguish[279]—it is far too easy for juries to use noneconomic damages like "pain and suffering" to punish companies even where punitive damages are limited by law. An effective federal reform must limit all noneconomic damages—not just punitive awards—that juries could extract from drug companies that have complied with the FDA.

The litigation industry's assault on American health care is a threat both to our wealth and our health, and effective reform requires bold action.

Moreover, a strong case can be made that Congress should preempt state drug suits altogether.[280] Whether assessing the causal link between Vioxx and Robert Ernst's death, or the general safety of breast implants and Norplant, lay juries have demonstrated enormous difficulty in assessing complex scientific claims. When juries make unpredictable, often wrong, decisions in the thousands of state drug lawsuits led by Trial Lawyers, Inc., they interfere with federal regulatory schemes designed to foster innovation, and they endanger medical progress.

Preempting state drug suits need be neither unsafe nor unfair. As demonstrated throughout this report, the haphazard system of drug litigation tends not to efficiently deter bad behavior, but certainly deters research and innovation. By eliminating a system in which tort suits are shopped to judges beholden to Trial Lawyers, Inc. and tried before juries unable to make accurate scientific judgments, federal preemption would lower the tax on drug research and prevent the litigation industry from interfering with the FDA's role of protecting public safety. Furthermore, preempting state suits against drug makers who comply with the FDA does not mean that individuals injured by drugs or medical devices must go uncompensated: the existing federal no-fault Vaccine Injury Compensation Program offers a template for fairly and efficiently compensating those harmed by drug side effects.[281]

To improve the handling of medical-malpractice liability claims, states would be well advised to experiment with comprehensive solutions of their own. One model would establish special health courts in which judges with experience in adjudicating medical issues would vet expert witnesses and try cases without juries.[282] Juryless courts already exist in family law and for tax and bankruptcy cases, and focus on equitable treatment of the parties involved rather than meting out blame and punishment to wrongdoers. By eliminating junk science, sympathetic juries, and grandstanding lawyers, such courts could dramatically reduce costs while expediting the process of compensating injured patients. They would establish precedents to guide future adjudication and discourage the groundless, scattershot suits that fill court dockets today.

The litigation industry's assault on America's health-care system is a threat to both our wealth and our health, and effective reform requires bold action. The reforms outlined above would improve our legal system to better deter accidents while encouraging innovation, allow consistent standards that would award uniform compensation to similar claimants, and lower the steep tax that Trial Lawyers, Inc. levies on the U.S. health-care system. But the plaintiffs' bar will fight even marginal reforms. No magic pill will eliminate the tort plague, but effective curatives exist if the American people can muster the will to administer them.

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261. See, e.g., Associated Press, Doctors Try Labor Tactics in Bid to Cut Insurance Cost, N.Y. Times, Dec. 27, 2004, at A13.
262. See National Conference of State Legislatures, supra note 138.
263. See id.
264. See American Tort Reform Association, Tort Reform Record 29-35 (July 22, 2005), available at http://www.atra.org/files.cgi/7927_Record7-05.pdf.
265. See Alan J. Ortbals, Dramatic Changes Follow Texas Medical Malpractice Tort Reform, Ill. Bus. J., May 9, 2005, available at http://www.ibjonline.com/print_medical_malpractice_tort_reform.html.
266. See William E. Encinosa & Fred J. Hellinger, Have State Caps on Malpractice Awards Increased the Supply of Physicians?, Health Affairs, May 31, 2005, available at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.250.
267. National Association of Insurance Commissioners Profitability Index (2003) (showing increase in annual California premiums from $228 million to $787 million from 1976 to 2002, versus an increase from $958 million to $8.15 billion nationally, excluding California).
268. See Scruggs, supra note 90.
269. See generally Huber, supra note 73.
270. See, e.g., John H. Beisner et al., One Small Step for a County Court . . . One Giant Calamity for the National Legal System, 7 Civ. Just. Rep. (Manhattan Inst. Center for Legal Policy, Apr. 2003), available at http://www.manhattan-institute.org/pdf/cjr_07.pdf.
271. Such activity should fall under "the particular restraints imposed on the authority of the States, and certain powers of the judicial department," which James Madison noted were an essential constitutional function to "provide for the harmony and proper intercourse among the States." Federalist 42.
272. A federal scheme for handling all medical-malpractice claims is less feasible, and perhaps less desirable, than one for drugs. Doctors are regulated by the states, not the federal government. Furthermore, cross-state forum shopping is much less common for medical malpractice than for drug litigation; typically, doctors are sued in the plaintiff's home state or where the alleged injury occurred. So, if a state has bad medical-malpractice laws, it will lose doctors to its neighbors, and thus its citizens bear much of the cost of their own inadequate legislation. Still, the fraction of health spending assumed by the federal government—of $1.7 trillion in U.S. health expenditures in 2003, over $500 billion came from the federal government, see National Health Expenditures, at http://www.cms.hhs.gov/statistics/nhe/historical/t3.asp—certainly gives the federal government a constitutional nexus for overarching reform. Cf. South Dakota v. Dole, 483 US 203 (1987).
273. See Press Release, Office of the Press Secretary, President Discusses Lawsuit Abuse at White House Economy Conference (Dec. 15, 2004), available at http://www.whitehouse.gov/news/releases/2004/12/20041215-11.html.
274. See H.R. 534, 109th Cong. (2005).
275. Michigan House Bill 4981, introduced June 21, 2005, proposes to amend section 4 of the Michigan Consumer Protection Act, Mich. Comp. Laws § 445.901 et seq (2004), which provides statutory defenses to product liability claims, including adherence to government standards, FDA standards, and sellers' defenses.
276. See Sandra Lee Breisch, BOC Measures Professional Liability Concerns, Am. Acad. of Orthopaedic Surgeons Bull., June 2002, available at http://www.aaos.org/wordhtml/bulletin/jun02/fline1.htm (citing six prior passages, not including the subsequent 108th Congress).
277. For instance, Senator Feinstein, one of the Senate Democrats most amenable to tort reform, supports a $500,000 noneconomic-damages cap. See http://www.feinstein.senate.gov/03Releases/r-medmal.htm.
278. See Drinkard, supra note 225 (noting majority opposition to the 2003 HEALTH Act, including Republican Senators Lindsey Graham and Richard Shelby).
279. See Frank, supra note 94.
280. See Epstein, supra note 95.
281. See Burke, supra note 101, at 160–63.
282. See, e.g., Betsy McCaughey, Medical Courts, Wall St. J., Aug. 25, 2005, at A8; Editorial, "Health Courts" Offer Cure, USA Today, July 4, 2005, available at http://www.usatoday.com/news/opinion/editorials/2005-07-04-our-view_x.htm; Philip K. Howard, A Case for Medical Justice, Philadelphia Inquirer, May 16, 2004, available at http://cgood.org/healthcare-reading-cgpubs-opeds-26.html.





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