By Alex Stein
President Trump’s budget for Fiscal Year 2018 proposes a thoroughgoing reform of our medical malpractice system [Executive Office of the President of the United States, Major Savings and Reforms, Budget of the U.S. Government, Fiscal Year 2018, at 114 (2017) (hereinafter, the “Budget”)]. The reform’s stated goals are “[to] reduce defensive medicine … limit liability, reduce provider burden, promote evidence-based practices, and strengthen the physician-patient relationship.”
To achieve these goals, the reform will introduce the following measures:
- a cap on non-economic damage awards of $250,000 (adjustable to inflation);
- a three-year statute of limitations;
- allowing courts to modify attorney’s fee arrangements;
- abolition of the “collateral source” rule (to allow judges and jurors to hear evidence of the plaintiff’s income from other sources such as workers’ compensation and insurance);
- creating a safe harbor for clinicians who follow evidence-based clinical-practice guidelines.
The Trump administration is also planning to authorize the Secretary of Health and Human Services “to provide guidance to States to create expert panels and administrative health care tribunals to review medical liability cases.” The Budget does not specify the nature of the contemplated federal guidance and the powers that the expert panels and tribunals will receive. For that reason, I will not examine this reform item here.
The Budget does not specify the ways in which the administration is planning to implement the above-mentioned reforms. The options are:
- Direct congressional legislation.
- A model Act that states will be encouraged to adopt. For example, the federal government will offer special funding to states that implement its model Act while denying it to the non-compliant states.
- Model legislation combined with financial penalties for the noncompliant states. For example, the federal government may decide to reduce its participation in the non-compliant states’ expenditures on programs such as Medicaid.
Among these options, only (1) and (2) are constitutionally and politically viable. The third option will require Congress to pass a statute that will be opposed not only by many democrats, but also by republican supporters of state rights. More fundamentally, such legislation will violate the anti-commandeering doctrine of the Tenth Amendment and federalism, and will thus be unconstitutional. See New York v. United States, 505 U.S. 144 (1992). My examination of the proposed reforms therefore focuses only on Options (1) and (2).
DIRECT CONGRESSIONAL LEGISLATION
The Commerce Clause, U.S. Const. art I, § 8, clearly authorizes Congress to carry out nationwide reforms of medical liability to reduce the costs and increase the affordability of medical care (see, e.g., Katherine Shaw & Alex Stein, Abortion, Informed Consent, and Regulatory Spillover, 92 Ind. L.J. 1, 47-52 (2016)). The proposed reforms, nonetheless, would still face serious constitutional challenges. Some of those reforms are also ill-suited to promote their own goals.
(1) THE $250,000 CAP ON NON-ECONOMIC DAMAGES
The proposed cap on statutory damages replicates California’s $250,000 cap introduced in 1975 by the Medical Injury Compensation Reform Act. In today’s terms, the cap amount should be around $1.1M, but California’s Proposition 46 that purported to make this inflation-based adjustment was defeated in a November 2014 referendum.
The $250,000 cap is unconscionably low, especially for victims in cases of wrongful death and catastrophic injury. Under any plausible criterion, non-economic damages—pain and suffering, diminished enjoyment of life, and loss of consortium—far exceed $250,000. The proposed cap will also produce disturbing regressive effect: it will disproportionately tax middle class and low-income victims by reducing their total recovery amounts at a much higher rate relative to medical malpractice victims with high-paying jobs (who will receive much higher amounts of compensation for their economic losses). This regressive effect will be further exacerbated by the fact that middle-class and low-income patients are also more likely to become victims of medical malpractice than wealthy patients, given that wealthy patients purchase for themselves and for their families better medical care.
The proposed cap also discriminates between medical malpractice victims and other tort victims, to whom the jury can award any compensation for non-economic harms that falls within reason.
For these reasons, the cap will face an equal protection challenge under the Fourteenth Amendment. To withstand this challenge, the government must have a demonstrable legitimate interest in the nationwide cap. Specifically, the cap’s introduction must have the potential for reducing defensive medicine and the costs of medical care. This “legitimate interest” claim would not be easy to sustain in light of its recent repudiation in McCall v. United States, 134 So.3d 894 (Fla. 2014)—a decision that voided Florida’s $1M cap on non-economic damages recoverable in connection with a malpractice victim’s death. For my analysis of this decision, see here. The fact that a doctor will not pay more than $250,000 in non-economic damages will not reduce her incentive to practice defensive medicine, given that she still stands to pay substantial amounts of compensation to future plaintiffs and that her malpractice liability will be recorded at the National Practitioner Databank (for problems created by this blacklisting, see here).
If the Trump administration is right about doctors’ fear of frivolous suits and excessive liability, this problem should be tackled head-on. Instead of capping plaintiffs’ recovery for non-economic damages, the legal system should put in place clear definitions of medical malpractice and adequate care that will shield doctors from liability in all cases in which they provide customary care by treating patients according to the practices and protocols established by the medical profession. Many states have already implemented this measure and virtually eliminated frivolous lawsuits: see Alex Stein, Toward a Theory of Medical Malpractice, 97 Iowa L. Rev. 1201, 1209-15 (2012).
Furthermore, studies cited with approval in the McCall decision show that the cost of medical liability insurance is not affected by caps on recoverable non-economic damages. An increase in this cost over the past three decades was brought about by inflation and the vagaries of the market. A decrease in the level of compensation for malpractice victims’ non-economic harms therefore will not make it cheaper for doctors to purchase liability insurance. Narrowing the scope of physicians’ malpractice liability is far more likely to achieve this result. See Stein id., at 1209-15, 1256-57.
The administration will also have to choose the appropriate mechanism for implementing its cap. This mechanism may come in the form of a simple jury instruction not to award the plaintiff non-economic damages that exceed $250,000. This instruction would often be ineffectual. When jurors come to believe that the victim’s compensation is unreasonably low, they might boost the victim’s economic recovery to bring her total compensation award closer to the figure they believe is right. See Catherine M. Sharkey, Unintended Consequences of Medical Malpractice Damages Caps, 80 N.Y.U. L. Rev. 391 (2005).
For that reason, the administration might prefer the more common mechanism that allows jurors to come up with any estimate of the plaintiff’s non-economic damage while mandating that judges reduce this estimate whenever it exceeds the maximal amount permitted by the statutory cap. See, e.g., Lebron v. Gottlieb Mem’l Hosp., 930 N.E.2d 895, 902, 908 (Ill. 2010) (explaining that under Illinois statute that caps medical malpractice victims’ non-economic recovery at $1M, “the court is required to override the jury’s deliberative process and reduce any non-economic damages in excess of the statutory cap, irrespective of the particular facts and circumstances, and without the plaintiff’s consent” and holding that this provision “effects an unconstitutional legislative remittitur” that violates separation of powers).
This mechanism, however, interferes with trial management in state courts. As such, it can hardly be forced upon states by congressional legislation. As Laurence Tribe put it in his testimony before the Senate Committee on the Judiciary, “For Congress directly to regulate the procedures used by state courts in adjudicating state-law tort claims … would raise serious questions under the Tenth Amendment and principles of federalism.” Anthony J. Bellia Jr., Federal Regulation of State Court Procedures, 110 Yale L.J. 947, 950-51 & n.13 (2001).
(2) STATUTE OF LIMITATIONS
The proposed statute of limitations brings about no change whatsoever. In fact, most state laws impose a 2 year limitations period.
(3) REGULATING ATTORNEY FEES
Authorizing courts to modify the conventional contingent-fee arrangement that entitles the attorney to collect one-third from the plaintiffs award (plus expenditures) is unlikely to promote the reform’s goals. The reformers will do well to learn from New York’s experience with its Judiciary Law § 474-a—a provision that set up an elaborate sliding-scale fee system for attorneys in actions for medical malpractice, while allowing courts to increase the attorney’s compensation in special cases. This experience shows no decline in the filings of medical malpractice suits. At the same time, it indicates that the system has created different conflicts of interest between attorneys and clients while limiting the victim’s ability to hire the best attorney for prosecuting her suit against the physician. See Senate Bill S554 to repeal Judiciary Law § 474-a (noting, inter alia, that attorneys representing plaintiffs in medical malpractice suits have an incentive to strike a cheap early settlement).
(4) DOING AWAY WITH THE “COLLATERAL SOURCE” RULE
The collateral source rule holds that a wrongdoer cannot benefit from payments a victim receives from other sources, such as insurance companies, government agencies, and private donors. Those payments belong to the victim alone. Consequently, abolishing this rule would transfer the victim’s money to the wrongdoer. This transfer is unfair and may also weaken the physicians’ incentive to avoid malpractice. See Alex Stein, The Domain of Torts, 117 Colum. L. Rev. 535, 597-98 (2017). Moreover, abolition of the collateral source rule may violate equal protection as well (compare Thompson v. KFB Insurance Co., 850 P.2d 773 (Kan. 1993) (equal protection violated) with Barme v. Wood, 689 P.2d 446 (Cal. 1984) (equal protection not violated)).
(5) CLINICAL-PRACTICE GUIDELINES AS A SAFE HARBOR
This part of the reform will introduce a statutory provision that incentivizes physicians to treat patients in accordance with clinical practice guidelines. Physicians who follow those guidelines will receive immunity from malpractice liability. The reformers thus favor a switch from the traditional medicine with its patient-specific applications of medical science to what has become known as “evidence-based medicine”—an evolving discipline that translates clinical experience into statistical data to formulate practice guidelines for physicians. Whether this switch will benefit patients is far from clear. Many doctors believe—for good reasons—that basic science that investigates actual causes and effects is more reliable than statistics and that their patient-specific observations and intuitions will deliver patients a better treatment than the “one size fits all” approach. See L. Jonathan Cohen, Bayesianism Versus Baconianism in the Evaluation of Medical Diagnoses, 31 Brit. J. Phil. Sci. 45 (1980).
Be that as it may, a switch to evidence-based medicine and clinical practice guidelines will create a serious problem for physicians, which might offset the advantages of the new immunity against suit. This switch will not change the nature of the traditional medicine as a body of knowledge that identifies successful methods of patient care. The doctors’ informed-consent requirements consequently will include the duty to inform the patient about the traditional treatment options that go beyond the guidelines and the guidelines’ statistics. As a result, the doctor would have to engage in a rather complicated informed-consent dialogue with her patient and face greater exposure to a suit for violating the patient’s right to be informed. To forestall this problem, the reformers would have to allow physicians not to inform patients about treatment options other than those included in the guidelines, but this freedom to misinform is not a viable possibility from both social standpoint and the medical profession’s point of view.
STATE LEGISLATION (MOTIVATED BY FEDERAL FUNDING)
This reform option has special implications for the proposed damage cap. As far as other measures are concerned, it will bring about the same advantages and face the same problems as a federal statute.
Having the states’ legislative assemblies pass a statute that caps medical malpractice victims’ non-economic damages at $250,000 will forestall the Tenth Amendment challenge. Yet, it will give rise to two other constitutional problems. The statutory cap might be in violation of the constitutional right to a jury trial and the separation of powers principle. See Lebron, id.; Watts v. Lester E. Cox Med. Ctr., 376 S.W.3d 633 (Mo. banc 2012) (voiding Missouri’s cap on non-economic damages resulting from medical malpractice for violating Article I, § 22(a) of the state’s constitution under which “the right of a trial by jury as heretofore enjoyed shall remain inviolate”). This violation is virtually certain to occur if the most effective and consequently most prevalent cap model, known as a “statutory remittitur,” is adopted. Under this model, the judge instructs jurors to assess the plaintiff’s non-economic and economic damage separately from one another without informing them about the cap. Subsequently, if the jurors return an assessment of the plaintiff’s non-economic damage that exceeds $250,000, the judge will bring it down to that amount. This model is unlikely to pass constitutional muster, as explained in Leebron, Watts, and several other state Supreme Court decisions.
The cap will also conflict with the constitutional provisions that entrench the citizen’s right to sue and recover full compensation for personal injury and wrongful death. These entrenchments protect the right to sue and recover compensation as it was on the day of the constitution’s ratification, and they are present in many state constitutions. See, e.g., Or. Const., Art. I, § 10 (entrenching “every man’s” right to “remedy by due course of law for injury done him in his person, property, or reputation”); Tenn. Const., § 17 (“…every man, for an injury done him in his lands, goods, person or reputation, shall have remedy by due course of law, and right and justice administered without sale, denial, or delay.”); Utah Const., Art. XVI, § 5 (“The right of action to recover damages for injuries resulting in death, shall never be abrogated, and the amount recoverable shall not be subject to any statutory limitation, except in cases where compensation for injuries resulting in death is provided for by law.”); N.Y. Const. Art. I, § 16 (“The right of action now existing to recover damages for injuries resulting in death, shall never be abrogated; and the amount recoverable shall not be subject to any statutory limitation.”).
Courts have interpreted these entrenchments as a complete ban on damage caps: see Smith v. United States, 356 P.3d 1249 (Utah 2015); Klutschkowski v. Oregon Medical Group, 311 P.3d 461 (Or. 2013). In Horton v. Oregon Health and Science University, 376 P.3d 998, 1028 (Or. 2016), the Oregon Supreme Court has slightly relaxed this approach when it ruled that “[w]hen the legislature does not limit the duty that a defendant owes a plaintiff but does limit the size or nature of the remedy, the legislative remedy need not restore all the damages that the plaintiff sustained to pass constitutional muster, but a remedy that is only a paltry fraction of the damages that the plaintiff sustained will unlikely be sufficient.” (citations omitted). Under this criterion, capping noneconomic damages for all types of victims of medical malpractice would still be unconstitutional. For my discussions of these developments, see here, here, here, and here.
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For all these reasons, the medical malpractice reform contemplated by the Trump administration is unlikely to take hold and achieve its goals. The reformers should redirect their attention from remedies, attorney fees and evidence-based medicine to the definitions of medical malpractice and adequate care. Aligning these definitions with the medical profession’s customs, practices and protocols and ensuring that courts do not deviate from these definitions will go a long way toward creating a fair and socially beneficial tradeoff between patients’ rights and doctors’ protection against unmeritorious suits.