"Countless frivolous lawsuits?" Unlikely. | News
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Sunday, June 26, 2011

"Countless frivolous lawsuits?" Unlikely.

Posted by on Sun, Jun 26, 2011 at 9:53 AM

I'm in danger of belaboring points here on a vetoed bill, but the hyperbolic rhetoric dial is still turned up on Senate Bill 33, the medical malpractice bill Gov. Bev Perdue vetoed Friday.

Take a look at Senate President Pro Tem Phil Berger's statement on the veto, and particularly the first sentence:

"In countless frivolous lawsuits, trial lawyers win big and drive up health care costs for everyone ..."

Roughly 50 percent of the malpractice insurance in North Carolina is written by Medical Mutual or MAG Mutual insurance. This is from MAG Mutual's 2010 annual report:

This localized approach is a major reason MAG Mutual won 91 percent of all cases taken to verdict in 2010.

And this is from Med Mutual's 2010 annual report:

We tried a total of 20 cases in 2010, with only one resulting in a plaintiff verdict.

If either company is worried about frivolous lawsuits, neither mentions it over the course of their 20-page annual reports. In fact, Medical Mutual lists a "favorable claims experience" as one of the primary reasons it was able to book record profits last year.

Medical providers absolutely practice defensive medicine, ordering procedures they think are probably unnecessary. Ask them. They'll tell you.

Fear of a lawsuit is one of the reasons they do this. But is that a reasonable fear?

Several years ago a team of physicians reviewed 1,452 closed malpractice cases, looking at whether there was a legitimate error by the doctor, and whether jury awards were appropriate. They published the results in The New England Journal of Medicine in 2006, and these are excerpts are from the study:

Previous research has established that the great majority of patients who sustain a medical injury as a result of negligence do not sue. (That's backed up via this 1991 study and this one, from 2000.) ...

Claims without merit were generally resolved appropriately: only one in four resulted in payment. When close calls were excluded, claims without evidence of injury or error accounted for 13 percent of total litigation costs. ...

Our findings point toward two general conclusions. One is that portraits of a malpractice system that is stricken with frivolous litigation are overblown. Although one third of the claims we examined did not involve errors, most of these went unpaid. The costs of defending against them were not trivial. Nevertheless, eliminating the claims that did not involve errors would have decreased the direct system costs by no more than 13 percent (excluding close calls) to 16 percent (including close calls). In other words, disputing and paying for errors account for the lion's share of malpractice costs. ...

Although the number of claims without merit that resulted in compensation was fairly small, the converse form of inaccuracy — claims associated with error and injury that did not result in compensation — was substantially more common. One in six claims involved errors and received no payment. The plaintiffs behind such unrequited claims must shoulder the substantial economic and noneconomic burdens that flow from preventable injury. Moreover, failure to pay claims involving error adds to a larger phenomenon of underpayment generated by the vast number of negligent injuries that never surface as claims. ...

In monetary terms, the system's overhead costs are exorbitant. The combination of defense costs and standard contingency fees charged by plaintiffs' attorneys (35 percent of the indemnity payment) brought the total costs of litigating the claims in our sample to 54 percent of the compensation paid to plaintiffs. The fact that nearly 80 percent of these administrative expenses were absorbed in the resolution of claims that involved harmful errors suggests that moves to combat frivolous litigation will have a limited effect on total costs. Substantial savings depend on reforms that improve the system's efficiency in the handling of reasonable claims for compensation.

Just to sum up: People file frivolous lawsuits, but the system generally roots them out and the financial impact of limiting them is relatively small. The opposite problem — malpractice victims who never file a claim or lose their lawsuit — is "substantially more common."

I've done a good bit of reporting on medical malpractice issues here, here, and here. Studies generally find that malpractice award caps — if they can survive a constitutional test, which they didn't in Georgia — save a little money.

But I've seen no evidence that there are "countless frivolous lawsuits" out there driving up health care costs. I've asked Sen. Berger's press secretary to point to any evidence he can. So far, he hasn't.

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