Backroom Tort Reform
In February, New York Governor Andrew Cuomo’s Medicaid redesign team proposed a $2.3 billion dollar cut to the state Medicaid budget. Proposed cuts to the health care industry’s budget are usually met with strong opposition from hospital workers unions and lobbying groups. Surprisingly, in response to Governor Cuomo’s proposal, hospital officials placed full-page ads in newspapers around New York pledging their support for the cuts.
It turns out that one of Governor Cuomo’s seventy-nine proposed changes includes limiting hospital liability in malpractice lawsuits. So called “tort reform” has long been a controversial issue in New York state and around the county. Doctors and hospitals allege that lawyers unfairly gouge them for minor mistakes, while lawyers argue that victims should have a right to sue the doctors and hospitals that injured them.
The surprising agreement between Governor Cuomo and hospital officials has prompted some to speculate that the malpractice limitations were placed in the proposal with a political agenda.
“It’s obvious to us that this was a deal,” said Stephen P. Younger, the president of the New York State Bar Association. “The health care industry is being given a plum in exchange for standing up for the governor’s program.”
On the other hand, advocates of the proposal cite the serious savings tort reform could bring. The proposal’s principal reform places a cap on damages awarded to victims in lawsuits filed against doctors and hospitals. By reeling in the amount hospitals and doctors spend on insurance premiums, the Medicaid redesign team suggests the cap could immediately save New York $384 million dollars a year. Additionally, the New York Times reports that the Greater New York Hospital Association projects that the proposed tort reform could eventually save the health care industry $700 million dollars a year.
But neither the media nor the proposal’s supporters have explained the math behind those impressive numbers. A closer look at the proposal shows that malpractice limitations were not recommended to save New York money, but to prevent political squabbles over the Medicaid budget.
Governor Cuomo’s proposal caps “non-economic” damages awarded to victims of negligent health care. “Non-economic” damages are awarded to victims to compensate for their pain and suffering. Sympathetic juries often will award victims shockingly large damages for pain and suffering. Reports of these awards suggest they could drain hospital funds, but no tort reform is needed to prevent unreasonable awards. Judges reviewing jury awards can and regularly do remit, or rescind, part of the pain and suffering awards to make them reasonable.
Arguably, even reasonable pain and suffering awards could drain the financial resources of the already taxed health care system. But in actuality, capping non-economic damages tends to shift the costs of serious medical malpractice injuries to taxpayers.
By removing lucrative pain and suffering awards, attorneys are much less likely to take any medical malpractice cases on a contingency basis. As a result, many injured persons will be unable to afford to file lawsuits against the doctors and hospitals which injured them. These victims’ medical costs will not be compensated directly by the doctors and hospitals which acted negligently, but by the system as a whole when victims are forced to rely on Medicare or Medicaid to pay their bills.
Even worse, capping non-economic damages disproportionally harms seriously injured children, elderly persons, and poor persons. Since these three groups would not have been earning much money at the time of their injury, their economic damages (think: compensation for missed time on the job) are extremely limited. Since these victims are rarely able to afford an attorney on their own, a cap will, in effect, bar lawsuits and sentence these injured persons to a lifetime of reliance on state support.
Additionally, pain and suffering damages provide an increased incentive for doctors and hospitals to practice carefully. In October 2009, a Congressional Budget Office investigation concluded that limits on the right to sue for medical malpractice “might be expected to have a negative impact on health outcomes.” Without the deterrence impact of pain and suffering awards, New York should expect more injuries, and accordingly, more costs to the health care industry.
Governor Cuomo’s proposal fails to even contemplate the potential cost shifting results of its tort reform. Instead, it looks at potential savings hospitals and doctors could receive by paying lower insurance premiums in isolation from the effects of installing non-economic damages cap. The proposal states that in 2009 New York hospitals spent $1.6 billion dollars to cover malpractice expenses. With a $250,000 cap on non-economic damages, the proposal estimates that insurance premiums will decrease by 24 percent, saving New York $384 million dollars annually. But the proposal fails to provide information on how much hospitals currently pay out in pain and suffering awards above the $250,000 mark. Without these statistics it is unclear whether the cap could actually save insurance providers enough money to justify lowering premiums. Moreover, the proposal admits that insurance costs are subject to the whims of particular providers. So while some studies show that the non-economic damages cap in California has coincided with slower growing insurance premiums than the rest of the nation, there is no guarantee that insurance providers in New York will pass potential savings onto hospitals, rather than pocket it for themselves. Anyway, if Governor Cuomo and the health care industry were concerned about insurance costs, shouldn’t they be reforming the insurance industry, not limiting victims’ access to civil justice?
Unfortunately, honest, open debate about these contentious issues was not held before Governor Cuomo submitted his proposal to the legislature. The governor’s Medicaid redesign team included four health industry officials but no plaintiffs’ attorneys, so the “redesign” almost certainly lacked a balanced perspective on tort reform. Then, five hours after the redesign team made the proposals public, they abruptly cut hearings short and voted to finalize the proposals for legislative review.
There has been an intentional lack of substantive discussion on the tort reform proposed. Additionally, common sense analysis of the impact of a cap on malpractice awards shows that the taxpayers are unlikely to see actual savings from reform. In all, it looks like the citizens of New York are witnessing another backroom deal, this time between the Governor and the health care industry, sacrificing victim’s rights for political peace.