Litigation-industry excesses contribute to growing health-care costs in America, according to a recently released study by the Manhattan Institute.
The study, "Trial Lawyers Inc. Health Care; The Lawsuit Industry's Effect on American Health, 2005," found that medical liability costs have grown much faster than health-care inflation. "Indeed, medical-malpractice liability alone constitutes over 10 percent of the entire U.S. tort tax, which by 2003 represented over $3,300 for a family of four."
"While the excesses of the litigation industry alone cannot explain America’s mounting medical costs, litigation is a large, and growing, contributor to our health-care bill," the director of the institute's Center for Legal Policy, James Copland, said in an introduction to the study.
Noting the direct effect of litigation on health-care costs "only begin[s] to scratch the surface of the toll that these predatory lawsuits exact on our economy—and on our health itself," Copland wrote. "Med-mal lawsuits tend to inflate health-care costs by encouraging 'defensive medicine'—unnecessary procedures and referrals that doctors and hospitals prescribe in order to limit their exposure to future litigation. Studies suggest that defensive medicine costs are several times higher than the direct liability costs themselves."
The study showed that much of the medical malpractice litigation industry is now focused on pharmaceutical litigation.
"Wyeth’s massive reserve for Fen-Phen litigation is $21 billion, and Merck’s exposure to Vioxx lawsuits may total as much as $50 billion," Copland noted. "Such figures are astronomical in comparison with these companies’ individual budgets, representing nine to twelve times each company’s annual research and development costs. In fact, since each drug was only widely used for about four years, the approximate annualized liability cost of these two drugs comes to almost $18 billion—equivalent to 10 percent of the annual revenues for the pharmaceutical industry as a whole."
"It is worth noting that the litigation industry does a very poor job compensating the victims it professes to be protecting," the study said. "Not only are most medical-malpractice claimants not harmed by avoidable doctor error, but most medical-malpractice victims never sue, and plaintiffs typically wait years to recover damages—then getting less than 50 cents on the dollar, with lawyers’ and administrative fees soaking up the majority of settlements and verdicts."
"The litigation industry's assault on America's health-care system is a threat to both our wealth and our health, and effective reform requires bold action," the study said. The study encouraged reforms that would improve the legal system to deter accidents while encouraging "innovation," and allow for consistent standards that would award uniform compensation and lower the "steep tax" that litigation levies on the health care system.
"To improve the handling of medical-malpractice liability claims, states would be well advised to experiment with comprehensive solutions of their own," the study said. "One model would establish special health courts in which judges with experience in adjudicating medical issues would vet expert witnesses and try cases without juries."
The study said family law, tax, and bankruptcy cases are tried without juries to enhance the focus on the parties involved "rather than meting out blame and punishment to wrongdoers."
"By eliminating junk science, sympathetic juries, and grandstanding lawyers, such courts could dramatically reduce costs while expediting the process of compensating injured patients," the study said. "They would establish precedents to guide future adjudication and discourage the groundless, scattershot suits that fill court dockets today."
The study is available at www.triallawyersinc.com/healthcare/hc01.html.