The Impact of Changing Our Tort System

Tort reform is a topic that has been discussed in the past and little if any action has been done by any legislative session in Congress by either party. The cost of healthcare is skyrocketing and many believe it will continue to grow under the Affordable Care Act if it stays in place given the unpopularity of the law. According to Wikipedia.org tort is a system for compensating wrongs and harm done by one party to another’s person, property or other protected interests (e.g. reputation, under libel and slander).

One aspect of what I consider to have a major cost impact to healthcare is the limitless amounts of money which seem to be awarded in what some individuals believe to be frivolous lawsuits. The amount of cases which seem to enter our court system is enormous and something needs to be done to address the current volume. I am not contemplating changing the ability of individuals to see restitution if they have been harmed but in many cases it takes years to have decisions finalized given the volume.

Today there is some hope with two pieces of legislation currently being processed in Congress. While these may not come to pass in this election year, they should. Issues with healthcare costs need to be addressed. There are many facets of healthcare cost as can be seen with the lengthy Affordable Care Act. Some say the law should be repealed entirely while others want changes to be made. Given the complexity of the law it would take enormous effort to get the votes to repeal this legislation. Accomplishing this would require the creation of replacement legislation but there are other avenues which can be taken. One of these is changing the rules of our present tort system.

In the previous paragraph I mentioned there are two pieces of legislation presently being evaluated in Congress related to our tort system. The first is H.R.5 in the House of Representatives and the other is S.218 in the Senate. The titled of the Senate version is Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH). The purpose of the Senate version includes five objectives. These are listed below:

1. Improve the availability of health care services in cases in which health care liability actions have been shown to be a factor in the decreased availability of services;

2. Reduce the incidence of ‘defensive medicine’ and lower the cost of health care liability insurance, all of which contribute to the escalation of health care costs;

3. Ensure that persons with meritorious health care injury claims receive fair and adequate compensation, including reasonable noneconomic damages;

4. Improve the fairness and cost-effectiveness of our current health care liability system to resolve disputes over, and provide compensation for, health care liability by reducing uncertainty in the amount of compensation provided to injured individuals; and

5. Provide and increased sharing of information in the health care system which will reduce unintended injury and improve patient care

The House version of this legislative effort has exactly the same purpose which is amazing in itself. There is no question our present tort system I agree that any individual or business that has valid justification for filing a lawsuit for damages or injuries has the right to seek restitution from those responsible. Tort reform has been a hot topic and though it may not be unanimously accepted by all citizens some sort of tort reform is justified. I am also not discounting the responsibility businesses or individuals have with regards to inflicting harm to others, their businesses or their property. It is important to remember the cost of damages awarded through lawsuits is reflected in the prices for products and services. Businesses are in business to make a profit and when their costs go up they must raise their prices and typically their business insurance goes up as well.

Our present tort system is out of control both in the lack of consistency in the amount of awards being granted by courts in relation to lawsuits filed for the same type of incidents in multiple states. Tort reform is a hot topic and the point of the Affordable Health Care Act was to reduce the cost of healthcare does not appear to address tort reform within the content. This is the reason why the House of Representatives and the Senate have legislation being evaluated during this session of Congress. It must be pointed out that both these pieces of legislation were introduced in 2011 but they have yet to be finalized between the two branches of Congress and sent to the President.

The impact of changing our tort system we have now is reflected in the purposes listed for the two pieces of legislation described above. Today we know the high cost of receiving healthcare is affected by the amount of insurance doctors and hospitals must pay to cover potential lawsuits related to the healthcare services they provide. Extra costs today for healthcare services can also be attributed to defensive medicine. This in effect involves doctors ordering tests to cover every possible cause of a patient’s illness. This occurs to protect them against possible illnesses which may develop in a patient in the future for which a test if conducted may have identified. Our tort system just as our healthcare system needs the right changes to be made having an indirect and sometimes direct impact on the cost we pay for healthcare.

Another benefit of revamping our tort system would be the impact on the volume of healthcare liability lawsuits and potentially reducing the time involved between lawsuits being filed and actually seeing resolution. The principles involved with this legislative effort addresses specific subjects such as creating a statute of limitation of three years from the date of injury or one year after discovery of the injury.

Another aspect involved with our tort system puts limits on noneconomic damages to $250,000. It addresses the fact that to some extent each party may have some responsibility in the injury and addresses the percentage in awarding the settlement. In another but bold move the legislation restricts payment of attorney contingency fees to a decreasing percentage based on the decreasing value of the amount awarded. Today attorney fees can be a big part of any lawsuit settlement and in effect raises the cost healthcare organizations must address.

In other areas it addresses the requirements for punitive damages and only awards them when they meet two sets of criteria. The first “ it is proven by clear and convincing evidence that a person acted with malicious intent to injure the claimant or deliberately failed to avoid unnecessary injury the claimant was substantially certain to suffer; and secondly compensatory damages are awarded. It limits punitive damages to the greater of two times the amount of economic damages. The last two aspects of the legislation address the issue of punitive damages with respect to products approved, cleared or licensed by the Food and Drug Administration (FDA) or otherwise considered in compliance with FDA standards.

The key thing about these two pieces of legislation which must roll into one is the wording which will result in the final product. Any legislation must have the proper wording that makes sense in terms of the objectives/purpose to ensure the methods to accomplish them are in place within the legislation. The final language both in terms and content can or will have an impact on whether the enacted legislation will be successful in accomplishing the objectives. Basically language must be clear as to allow any individual who reads it understands it without needing a lawyer to interpret it. Compliance/success is more easily achieved when requirements are clearly written. Let us hope this legislation in this election year is finalized and signed by the President to make a real difference in the cost of healthcare.