Cap the Doctors; Sky's the Limit for Lawyers

From George Gilder's newsletter...

Cap the Doctors; Sky's the Limit for Lawyers
By Philip K. Howard, July 31, 2009

"Health-care reform is bogged down because none of the bills before Congress deals with the staggering waste of the current system, estimated to be $700 billion to $1 trillion annually. The waste flows from a culture of health care in which every incentive is to do more -- that's how doctors make money and that's how they protect themselves from lawsuits.

Yet the congressional leadership has slammed the door on solutions to the one driver of waste that is relatively easy to fix: the erratic, expensive and time-consuming jury-by-jury malpractice system. Pilot projects could test whether this system should be replaced with expert health courts, but leaders who say they want to cut costs will not even consider them.

What are they scared of? The answer is inescapable -- such expert courts might succeed and undercut the special interest of an influential lobby, the trial lawyers. An expeditious and reliable new system would compensate patients more quickly and at a fraction of the overhead of the current medical justice system, which spends nearly 60 cents of every dollar on lawyers' fees and administrative costs.

Even more compelling, expert health courts would eliminate the need for "defensive medicine," thereby helping to save enough money for America to afford universal health coverage.

Defensive medicine -- the practice of ordering tests and procedures that aren't needed to protect a doctor from the remote possibility of a lawsuit -- is ubiquitous. A 2005 survey in the Journal of the American Medical Association related that 93 percent of high-risk specialists in Pennsylvania admitted to the practice, and 83 percent of Massachusetts physicians did the same in a 2008 survey. The same Massachusetts survey showed that 25 percent of all imaging tests were ordered for defensive purposes, and 28 percent and 38 percent, respectively, of those surveyed admitted reducing the number of high-risk patients they saw and limiting the number of high-risk procedures or services they performed.

Defensive medicine is notoriously hard to quantify, but some estimates place the annual cost at $100 billion to $200 billion or more. Quantification is difficult because defensiveness is now embedded in the culture of American health care; it's hard to separate the financial incentives from the distrust of justice. Yet every physician, and most patients, can give examples. In a recent letter to the Wall Street Journal, a Texas doctor described how, since being unsuccessfully sued in 1995, he has "doubled and tripled the number of tests and consultations that I order."

A few years ago, I was not allowed to have minor knee surgery at an orthopedic hospital unless I went through a comprehensive "pre-operative examination." There was no financial incentive to the hospital because this pre-operative exam was to be done elsewhere. As it turned out, I had recently endured all those tests in my annual physical. But the orthopedic hospital would not accept month-old test results, nor even an explicit waiver by me of any liability. The result was pure waste: more than $1,000 spent on wholly unnecessary tests.

Health-care professionals live the reality of defensive medicine every day. Do an online search of the phrase "defensive medicine," and you will find scores of testimonials. But congressional leadership, amid all the talk of cost-containment, has assiduously avoided even mentioning the phrase.

Containing costs, as Rep. Jim Cooper (D-Tenn.) noted on "Face the Nation" recently, requires overhauling the culture of health-care delivery. Incentives need to be realigned. That requires a legal framework that, instead of encouraging waste, encourages doctors to focus on what's really needed. One pillar in a new legal framework is a system of justice that is trusted to reliably distinguish between good care and bad care. Reliable justice would protect doctors against unreasonable claims and would expeditiously compensate injured patients. The key is reliability. Traditional "tort reform" -- merely limiting noneconomic damages -- is not sufficient to end defensive medicine, because doctors could still be liable when they did nothing wrong.

The shifts in legal structure required to contain costs are hard to "score," using the terminology of the Congressional Budget Office. Only with experience can anyone quantify the real value of realigning incentives. But surveys and studies repeatedly confirm what every doctor knows -- that they go through the day ordering tests and procedures that aren't really needed.

As the nation debates health-care overhaul, not addressing defensive medicine would be a scandal, a willful refusal by Congress to deal with one of the causes of skyrocketing health-care costs. The real crisis here is not that health care is broken; people of good will could come together and create the conditions for rebuilding the incentive structure of health-care delivery. The real crisis is that Congress is broken, and that it answers to special interests instead of the needs of all Americans."