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Senator Kennedy on his Opposition to the Medical Malpractice Legislation

by Pamela Leavey

The Senate is began what is to be a “health care legislation week” with “consideration _ and likely defeat _ of two bills that would cap the damages juries can award in medical malpractice cases.” Senator Kennedy gave a moving speech on the Senate floor earlier today on his opposition to the Medical Malpractice legislation (S.22) offered by the Republicans.

The following is the text of the speech as prepared for delivery:

This legislation (S. 22) is not a serious attempt to address a significant problem being faced by physicians in some states. It is the product of a party caucus rather than the bipartisan deliberations of a Senate committee. It was designed to score political points, not to achieve the bipartisan consensus which is needed to enact major legislation. In fact, the legislative language was not even available for review until late last week. For these reasons, it does not deserve to be taken seriously by the Senate.

We must reject the simplistic and ineffective responses proposed by those who contend that the only way to help doctors is to further hurt seriously injured patients. Unfortunately, as we saw in the Patients’ Bill of Rights debate, the Bush Administration and Congressional Republicans are again advocating a policy which will benefit neither doctors nor patients, only insurance companies. Caps on compensatory damages and other extreme “tort reforms” are not only unfair to the victims of malpractice, they do not result in a reduction of malpractice insurance premiums.

Not only does this legislation fail to do what it claims, but it would do many things that its authors are attempting to conceal. In reality, this legislation is designed to shield much of the health care industry from basic accountability for the care it provides. While those across the aisle like to talk about doctors, the real beneficiaries will be insurance companies and large health care corporations. This amendment would enrich them at the expense of the most seriously injured patients; men, women and children whose entire lives have been devastated by medical neglect and abuse.

S.22 would drastically limit the financial responsibility of the health care industry to compensate injured patients for the harm they have suffered. This legislation is extremely broad in its scope. It defines a “health care liability claim” as any claim “based upon the provision of, use of, or payment for (or the failure to provide, use, or pay for) health care services.”

It is attempting to use the sympathetic family doctor as a Trojan horse concealing an enormous array of special legal privileges for every corporation which provides a health care service, or insures the payment of a medical bill. For example, this proposal would shield HMOs and health insurers that refuse to provide needed care. Less accountability will never lead to better health care.

Every provision of this bill is carefully designed to take existing rights away from those who have been harmed by medical neglect and corporate greed.

This legislation would deprive seriously injured patients of the right to recover fair compensation for their injuries by placing an arbitrary cap on how much they can receive for non-economic loss, that is for the very real pain and suffering these victims experience every day. This cap only serves to hurt those patients who have suffered the most severe, life-altering injuries and who have proven their cases in court.

They are the paralyzed, the brain-injured, and the blinded. They are the ones who have lost limbs, organs, reproductive capacity, and in some cases even years of life. These are life-altering conditions which deprive a person of the ability to engage in many of the normal activities of day to day living. It would be terribly wrong to take their rights away. The Bush Administration talks about deterring frivolous cases, but caps by their nature apply only to the most serious cases which have been proven in court.

A person with a severe injury is not made whole merely by receiving reimbursement for medical bills and lost wages. Non-economic damages compensate victims for the very real loss in quality of life that results from a serious, permanent injury. It is absurd to suggest that $250,000 is fair compensation for a person paralyzed for life.

The sponsors of this bill claim that they have increased the cap from $250,000 to $750,000. But, that claim is very misleading. The $250,000 limit would still apply to the overwhelming majority of malpractice victims, no matter how severe their injuries. The $750,000 limit would apply only to the small number of cases in which three different defendants –one doctor and two health care institutions – were all responsible for the victim’s injury. It would not even apply in cases where three doctors all committed malpractice. In reality, nothing has changed from prior Republican bills. Nearly all victims would still be prohibited from receiving more than $250,000 for their injuries.

Caps are totally arbitrary. They do not adjust the amount of the compensation ceiling with either the seriousness of the injury, or with the length of years that the victim must endure the resulting disability. Someone with a less serious injury can be fully compensated without reaching the cap.

However, a patient with severe, permanent injuries is prevented by the cap from receiving full compensation for their more serious injuries. Is it fair to apply the same limit on compensation to a person who is confined to a wheelchair for life that is applied to someone with a temporary leg injury?

Caps discriminate against younger victims. A young person with a severe injury such as paralysis must endure it for many more years than an older person with the same injury. Yet, that young person is prohibited from receiving greater compensation for the many more years he will be disabled. Is that fair?

Caps on non-economic damages discriminate against women, children, minorities, and low income workers. These groups do not receive large economic damages attributable to lost earning capacity.

Women who are homemakers and caregivers for their families sustain no lost wages when they are injured, so they only receive minimal economic damages. Should a woman working in the home receive less compensation for the same injury than a woman working outside the home? Is that just?

A seriously injured child may be confined to his or her home for years of painful recuperation, but that child has no lost wages. Should he get less compensation than an adult with a similar injury? Is that fair?

Non-economic damages – compensation for lost quality of life – is particularly important to these vulnerable populations.

In addition to imposing caps, this legislation would place other major restrictions on seriously injured patients seeking to recover fair compensation. At every stage of the judicial process, it would change long-established judicial rules to disadvantage patients and shield defendants from the consequences of their actions.

1) It would abolish joint and several liability for all damages. This means the most seriously injured people may never receive all of the compensation that the court has awarded to them. They may not even receive full payment for their lost wages and medical bills. Under this provision, health care providers whose misconduct contributed to the patient’s injuries will in many cases be able to escape responsibility for paying full compensation to that patient.

2) The bias in the legislation could not be clearer. It would preempt state laws that allow fair treatment for injured patients, but would allow state laws to be enacted which contained greater restrictions on patients’ rights than the proposed federal law. This one-way preemption contained in Section 11 (c) shows how result-oriented the legislation really is. It is not about fairness or balance. It is about protecting defendants.

3) The amendment preempts state statutes of limitation, cutting back the time allowed by many states for a patient to file suit against the health care provider who injured him. Under the legislation, the statute of limitations can expire before the injured patient even knows that it was malpractice which caused his or her injury.

4) It places severe limitations on when an injured patient can receive punitive damages, and how much punitive damages the victim can recover. Under the bill, punitive damages can only be awarded if the defendant acted “with malicious intent to injure” or “deliberately failed to avoid unnecessary injury.” This is far more restrictive than current law. It entirely prohibits punitive damages for “reckless” and “wanton” misconduct, which the overwhelming majority of states allow. In the very small number of cases where punitive damages would still be allowed, the bill would cap them at twice the amount of economic damages, no matter how egregious the defendant’s conduct and no matter how large its assets.

5) It imposes unprecedented limits on the amount of the contingent fee which a client and his or her attorney can agree to – limiting it to 15% of most of the recoveries. This will make it more difficult for injured patients to retain the attorney of their choice in cases that involve complex legal issues. It can have the effect of denying them their day in court. Again the provision is one-sided, because it places no limit on how much the health care provider can spend defending the case.

If we were to arbitrarily restrict the rights of seriously injured patients as the sponsors of this legislation propose, what benefits would result? Certainly less accountability for health care providers will never improve the quality of health care. It will not even result in less costly care. The cost of medical malpractice premiums constitutes less than two-thirds of 1 % (0.66%) of the nation’s health care expenditures each year. For example, in 2004, health care costs totaled $1.88 trillion, while the total cost of all medical malpractice insurance premiums was $11.4 billion. Malpractice premiums are not the cause of the high rate of medical inflation. This bill will not make health care more affordable.

The White House and other supporters of caps have argued that restricting an injured patient’s right to recover fair compensation will reduce malpractice premiums. But, there is scant evidence to support their claim. In fact, there is substantial evidence to refute it.

Between 2000 and 2003, there were dramatic increases in the cost of medical malpractice insurance in states that already had damage caps and other restrictive tort reforms on the statute books, as well as in states that did not. No substantial increase in the number or size of malpractice judgments suddenly occurred which would have justified the enormous increase in premiums that many doctors were being forced to pay. Now rates have stabilized, again both in states with and states without damage caps.

Comprehensive national studies show that medical malpractice premiums are not significantly lower on average in states that have enacted damage caps and other restrictions on patient rights than in states without these restrictions. Insurance companies are merely pocketing the dollars which patients no longer receive when “tort reform” is enacted.

Let’s look at the facts. Slightly more than half of the states have a cap on medical malpractice damages. Many of them have had those statutes for a substantial number of years. The other half of states do not have a cap on malpractice damages. The best evidence of whether such caps affect the cost of malpractice insurance is to compare the rates in those two groups of states. Based on data from the Medical Liability Monitor on all fifty states, the average liability premium in 2005 for doctors practicing in states without caps on malpractice damages ($45,719) was actually lower than the average premium for doctors practicing in states with caps ($51,405). There are many reasons why insurance rates vary substantially from state to state. This data demonstrates that it is not a state’s tort reform laws which determine the rates. Caps do not make a significant difference in the malpractice premiums which doctors pay. This is borne out by a comparison of premium levels for a range of medical specialties.

· The average liability premium in 2005 for doctors practicing internal medicine was more (18.7% more) for doctors in states with caps on malpractice damages ($16,212) than in states without caps on damages ($13,658). Internists actually pay more for malpractice insurance in states that have caps.

· The average liability premium in 2005 for general surgeons was more (19.4% more) for doctors in states with caps ($57,662) than states without caps ($48,267). Surgeons are paying more for malpractice insurance in the states that have caps.

· The average liability premium for OB/GYN physicians in 2005 in states with caps ($80,341) was also more than for doctors in states without caps ($75,233). OB/GYNs in states with caps paid slightly more (7% more) than in states without caps.

Clearly, a state’s tort laws do not determine that state’s medical malpractice insurance rates.

This evidence demonstrates that capping malpractice damages does not benefit the doctors it purports to help. It only helps the insurance companies earn even bigger profits. As Business Week Magazine concluded after reviewing the data at the height of the malpractice rate crisis “the statistical case for caps is flimsy.” (March 3, 2003 issue)

In 2003, Weiss Ratings, Inc., a nationally recognized financial analyst conducted an in-depth examination of the impact of capping damages in medical malpractice cases. . Their conclusions sharply contradict the assumptions on which this legislation is based. Weiss found that capping damages does reduce the amount of money that malpractice insurance companies payout to injured patients. However, those savings are not assed on to doctors in lower premiums.

The Weiss Report, stated:

“Since the insurers in the states with caps reaped the benefit of lower medical malpractice payouts, one would expect that they would reduce the premiums they charged doctors. At the very minimum, they should have been able to slow down the premium increases. Surprisingly, the data show they did precisely the opposite.”

Between 1991 and 2002, the Weiss analysis shows that premiums rose by substantially more in the states with damage caps than in the states without caps. The 12 year increase in the median annual premium was 48.2% in the states that had caps, and only 35.9% in the states that had no caps. In the words of the report: “On average, doctors in states with caps actually suffered a significantly larger increase than doctors in states without caps… In short, the results clearly invalidate the expectations of cap proponents.”

Since malpractice premiums are not significantly affected by the imposition of caps on recovery, it stands to reason that the availability of physicians does not differ between states that have caps and states that do not. AMA data shows that there are 283 physicians per 100,000 residents in states that do not have medical malpractice caps and 249 physicians per 100,000 residents in states with caps. Clearly there is no correlation.

If a federal cap on non-economic compensatory damages were to pass, it would sacrifice fair compensation for injured patients in a vain attempt to reduce medical malpractice premiums. Doctors will not get the relief they are seeking. Only the insurance companies, which created the problem, will benefit.

Insurance industry practices were responsible for the sudden dramatic premium increases which occurred in some states between 2000 and 2003. The explanation for these premium spikes can be found not in legislative halls or in courtrooms, but in the boardrooms of the insurance companies themselves.

There were substantial increases in a number of insurance lines, not just medical malpractice, during that period. Insurers make much of their money from investment income. Interest earned on premium dollars is particularly important in medical malpractice insurance because there is a much longer period of time between receipt of the premium and payment of the claim than in most lines of casualty insurance. The industry creates a “malpractice crisis” whenever its investments do poorly. The combination of a sharp decline in the equity markets and record low interest rates several years ago was the reason for the sharp increase in medical malpractice insurance premiums during that period. What we witnessed then was not new. The industry has engaged in this pattern of behavior repeatedly over the last thirty years. When “tort reform” laws are enacted, the insurance companies pocket the resulting savings to bolster their profits.

Data from the National Association of Insurance Commissioners shows that in 2005, the profits for the five largest for-profit medical malpractice insurers were more than double those of the Fortune 500 average. (17.7% v 8.7%)

Doctors, especially those in high risk specialties, whose malpractice premiums have increased dramatically do deserve premium relief. That relief will only come as the result of tougher regulation of the insurance industry. When insurance companies lose money on their investments, they should not be able to recover those losses from the doctors they insure. Unfortunately, that is what is happening now.

Doctors and patients are both victims of the insurance industry. Excess profits from the boom years should be used to keep premiums stable when investment earnings drop. However, the insurance industry will never do that voluntarily. Only by recognizing the real problem can we begin to structure an effective solution that will bring an end to unreasonably high medical malpractice premiums.

There are specific changes in the law which should be made to address the abusive manner in which medical malpractice insurers operate. The first and most important would be to subject the insurance industry to the nation’s anti-trust laws. It is the only major industry in America where corporations are free to conspire to fix prices, withhold and restrict coverage, and engage in a myriad of other anti-competitive actions. A medical malpractice “crisis” does not just happen. It is the result of insurance industry schemes to raise premiums and to increase profits by forcing anti-patient changes in the tort law. I have introduced, with Senator Leahy, legislation which will at long last require the insurance industry to abide by the same rules of fair competition as other businesses.

Unlike the harsh and ineffective proposals in S. 22, this is a real solution which will help physicians without further harming seriously injured patients. Unfortunately, the Republican leadership continues to protect their allies in the insurance industry and refuses to consider real solutions to the malpractice premium crisis.

I want to conclude with a quotation from the analysis of medical malpractice premiums by Weiss Ratings, Inc. Weiss Ratings is not speaking from the perspective of a trial lawyer or a patient advocate, but as a hard-nosed financial analyst that has studied the facts of malpractice insurance rating. Here is their recommendation to us based on those facts:

“First, legislators must immediately put on hold all proposals involving non-economic damage caps until convincing evidence can be produced to demonstrate a true benefit to doctors in the form of reduced med mal costs. Right now, consumers are being asked to sacrifice not only large damage claims, but also critical leverage to help regulate the medical profession – all with the stated goal that it will end the med mal crisis for doctors. However, the data indicate that, similar state legislation has merely produced the worst of both worlds: The sacrifice by consumers plus a continuing – and even worsening – crisis for doctors. Neither party derived any benefit whatsoever from the caps.”

Before yielding the floor, I want to briefly address the second malpractice bill (S. 23) that the Republican leadership has brought before the Senate. The only difference between them is that the first bill would take basic rights away from all patients, while the second bill takes those rights away only from women and newborn babies who are the victims of negligent obstetric and gynecological care. That difference does not make the latter bill more acceptable. On the contrary, it adds a new element of unfairness.

The proponents argue that they are somehow doing these women and their babies a favor by depriving them of the right to fair compensation when they are seriously injured. It is an Alice in Wonderland argument which they are making. Under their proposal, a woman whose gynecologist negligently failed to diagnose her cervical cancer until it had spread and become incurable would be denied the same legal right as a man whose doctor negligently failed to diagnose his prostate cancer until it was too late. Is that fair? By what convoluted logic would that woman be better off? Both the woman and the man were condemned to suffer a painful and premature death as a result of their doctors’ malpractice, but her compensation would be severely limited while his is not. She would be denied the right to introduce the same evidence of medical negligence which he could. She would be denied the same freedom to select the lawyer of her choice which he had. She would be denied the right to have her case tried under the same judicial rules which he could. That hardly sounds like equal protection of the law to me. Yet, that is what the advocates of this legislation are proposing.

Of course, this bill does not only take rights away from women. It takes them away from newborn babies who sustain devastating prenatal injuries as well. These children face a lifetime with severe mental and physical impairments all because of an obstetrician’s malpractice, or misconduct by a health care provider or insurer. This legislation would limit the compensation those children can receive for lost quality of life to $250,000 in nearly all cases — just $250,000 for an entire lifetime! What could be more unjust?

There are babies who suffered serious brain injuries at birth and will never be able to lead normal lives. There are women who lost organs, reproductive capacity, and in some cases even years of life. These are life-altering conditions. It would be terribly wrong to take their rights away. The Republicans talk about deterring frivolous cases, but caps by their nature apply only to the most serious cases which have been proven in court. These badly injured patients are the last ones we should be depriving of fair compensation.

The entire premise of this bill is both false and offensive. Our Republican colleagues claim that women and their babies must sacrifice their fundamental legal rights in order to preserve access to Ob/Gyn care, that they must leave their rights at the door. The very idea is outrageous. For those locales –mostly in sparsely populated areas – where the availability of Ob/Gyn specialists is a problem, there are far less drastic ways to solve it.

This bill is based on the false premise that the availability of Ob/Gyn physicians depends on the enactment of draconian tort reforms. If that were accurate, states that have already enacted damage caps would have a higher number of Ob/Gyns providing care. However, there is in fact no correlation. States without caps actually have 29.1 Ob/Gyns per 100,000 women, while states with caps have 25.5 Ob/Gyns per 100,000 women. States without caps actually have more Ob/Gyns serving their female population.

This is not a more acceptable bill because it applies only to women and newborn babies injured by obstetrical and gynecological malpractice. That makes it even more arbitrary, even more outrageous. Not one victim should be denied the basic rights that this bill would take away.

I urge my colleagues to oppose both of these very unfair bills.

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