The State : PERSONAL PERSPECTIVE : California’s Lesson: Malpractice Reform Won’t Cut Health-Care Costs

California’s medical-malpractice reforms, passed in 1975, have mostly aided insurance companies and physicians--not the persons injured by medical negligence. In fact, most lawyers in California will simply not handle a medical-malpractice case.

The contingent fee allows those who can’t pay a lawyer’s hourly fees to take their cases to court. It provides a client the means to finance litigation with money essentially borrowed from the lawyer. If the lawyer loses, it is as if he or she made a bad loan.

Lawyers cannot earn a living by mak-ing bad loans, so they will only make loans when there is a good opportunity for a return. The sliding-scale limitation on the contingent fee, a provision of the California reform, further reduces these opportunities, since it has the effect of underestimating the amount of time needed for particular cases.

Medical-malpractice cases can take years to resolve and thousands of hours of attorney time. They are notoriously risky. Moreover, when the contingent-fee limitation is restricted to one area of tort law, such as medical malpractice, tort lawyers simply shift to more profitable areas of practice. This only makes it more difficult for medical-malpractice victims to obtain representation.

The result is that attorneys who handle these cases concentrate only on those that have high economic damages associated with them--cases involving “bad babies,” wrongful-death of a breadwinner, demonstrable brain damage.

Indeed, entire categories of cases have been eliminated since malpractice reform was implemented in California. Victims in cases that have a value between $50,000 and $150,000 are basically without representation. For example, incidents of failure to diagnose an appendicitis still occur, but not many suits are filed in California. The reasons are simple:

* 80% of medical-malpractice cases that go to trial are won by the defendant medical practitioner;

* Medical-malpractice cases by their nature are expensive;

* Physicians in California, as in virtually all states, can withhold consent to settle and, therefore, control whether a case is settled or goes to trial;

* They are required to report malpractice settlements to the Medical Board of California.

If, by settling, a physician is to be reported to the board, he or she has little to lose by proceeding to trial, where the chances of success are 80%. Professionally, they are in a no-worse position if they lose, than they would be by being reported to the board. Under such conditions, given the expense to the plaintiff and the plaintiff’s attorney, cases in the $50,000-$150,000 range are rarely filed.

On the other hand, of the medical-malpractice cases filed, a far greater number will go to trial than be settled. In California, a significantly higher percentage of medical-malpractice cases go to trial--the costly alternative--than any other type of case.

Medical-malpractice premiums, which were supposed to drop as a result of the reforms, have not diminished in California, according to physician groups. And there can be little doubt that, with damage caps on pain and suffering and limitations on attorneys’ fees, there are fewer cases being filed.

As the number of case filings has diminished and dollar amounts of awards decreased, one can assume medical-malpractice reform is benefiting some entity, but it most certainly is not benefiting the average citizen.

With health-care costs in the United States running at $800 billion annually, and medical-malpractice insurance running at about $6 billion--less than 1% of the total--so-called medical malpractice reform is not the answer to reducing costs. It would be better to look at some of the real costs incurred in the delivery of health care.

One need not look beyond the most frequently performed surgery in the United States--the implantation of intra-ocular lens. The 15-minute operation may be performed by a physician from six to 20 times a day, for which the charge may be $2,500, or higher, per operation. The same procedure in an outpatient-hospital setting will cost in excess of $7,500. The implanted intraocular lens may have about three to four cents of plastic in it--and cost the hospital $100 to $200. As of the early 1990s, the United States government was paying more for the implantation of intraocular lenses than for the next four most frequently performed operations combined.

Another example of real costs is the proliferation of expensive CAT and MRI machines. In Santa Monica, where I practice, there are seven MRI machines, more than in the entire country of Canada. Because of their proliferation, these wonderful but expensive machines are underutilized. As a result, the cost of the diagnostic tests have gone up to cover the machine’s cost.

Reducing health-care costs is not going to be achieved by some of the far-reaching medical malpractice-reform proposals now being considered by the Congress. What will occur is that victims of medical negligence will have a decreased opportunity for redress.*