First of all, thanks to Kevin for you comments. I'll always toss around the word "discuss" even when I'm just talking to myself. I do, however, truly believe that a more astute, thorough discussion of the issues raised on this blog will result from several minds coming together to think and talk about them.
If you did not see them, here is a link to Kevin's comments regarding "Approaches to Cutting Healthcare Costs."
A few thoughts as an introduction. Our civil justice system's aim to compensate injured parties for encroachments on individual rights and any harm sustained as a result. In medical malpractice cases, these consequential damages can be significant, particularly in cases involving a wrongful death, loss of ability to work, etc. However, when we hear about extreme awards to plaintiffs, often those involve some measure of punitive damages, meant not to compensate the plaintiff but rather to punish the defendant for his actions. Thus, by seeking these damages that are outside of what the plaintiff requires to be made whole, patients and their attorneys have added an extra layer of potential cost for medical professionals, facilities, and insurance companies. Those are my two points: (1) The potential costs of defending and/or losing litigation are factors that must be built into medical fees and insurance premiums, and (2) patients have had and continue to have a role in increasing costs they must bear. (For some data, see the article Medical Malpractice Awards at Record Lows. Even though the article states that malpractice related expenses are declining, malpractice insurance premiums in 2006 still represented about 12 billion dollars of healthcare costs and actual malpractice payments were another 3.9 billion.)
Kevin observes that insurance policy holders bear these increased costs twice - once in insurance premiums and again in medical fees actually incurred. I think this occurs sometimes, but not always. If we place policy holders on a spectrum based on their level of insurance coverage, we would have on one end policies with more coverage; insurance picks up almost all expenses beyond co-pays and deductibles. On the other end of the spectrum are policies with less coverage, and holders may be left with additional responsibilities once that coverage is exhausted. Generally speaking, on the "more coverage" end of the spectrum, policy holders absorb rising costs in insurance premiums, and on the "less coverage" side, policy holders probably absorb more of the rising costs in fees not covered by their insurance plan. Obviously there are a host of stops between "more coverage" and "less coverage" where patients do bear costs both in their insurance premiums and in any fees not covered by their insurance.
At different points in his first paragraph, Kevin asks (1) how the legal system could be changed for the benefit of healthcare costs and (2) how insurance companies could be better regulated to keep costs down and coverage up in spite of potentially excessive costs like litigation. I like that we are addressing these two side-by-side. As to # 1, I do not see the legal system changing dramatically. While there's no bright-line limit on punitive damages, the Supreme Court indicated in State Farm v. Campbell that anything more than a single digit ratio of punitive:consequential damages would probably violate a defendant's due process. A cap on punitive damages, probably in relation to the consequential damage award, is about as much regulation as I believe the legal system will see. Plus, I am leery of limiting a patient's right to seek redress for his injuries, particularly in light of data suggesting fewer injured patients are receiving malpractice awards or settlements. See Medical Malpractice Awards at Record Lows. However, a decline in awards or settlements could speak to the quality of claims being brought by patients, not necessarily a turning of the tide against patients in litigation.
For me, that leaves either the insurance companies or the medical industry itself as sectors in which government regulation could help to lower healthcare costs. Frankly, I am not sure what cost-control measures would work, outside of government financial subsidy on one end or the other. Could the government attempt to make fees for medical procedures somewhat uniform, thereby essentially capping the medical fees? Could the government somehow cap insurance company profits or revenues or generate a uniform system of calculating insurance premiums? While they are not unregulated, both the healthcare industry and the insurance industry function essentially as private, for-profit ventures. And while some industries, like airlines, are paring back services so they can lower prices during the tough economic times, the medical profession particularly still fosters competition geared toward improving and expanding services. For example, pregnant couples like labor and delivery units with remodeled rooms, wi-fi, whirlpool tubs - all the bells and whistles. The point I want to make is that we are talking about cutting costs in an industry where bigger, better, and nicer generally thrives. Because of its nature alone, cost-cutting will not be an easy task.
As to Kevin's related question about pharmaceutical companies and insurance, I am sure insurance companies offering prescription drug plans must absorb the costs of pharmaceutical litigation somewhere along the line. If the "retail price" of drugs reflects all of its maker's costs - including potential litigation - and policy holders pay a low co-pay, then any fluctuation would fall to the insurance company, I suppose.
I guess the take away message from this longer-than-necessary post is that, flawed as it may be, I do not see much potential for change in or regulation of the legal field as it relates to healthcare costs. Some limitation on punitive damages could help, and evidence seems to suggest that medical malpractice related costs are currently on the decline. However, the medical malpractice lawsuit will never go away; it serves two immediately apparent and necessary functions - (1) a protection for patients who receive substandard care and (2) a quality-control measure for medical personnel. The system is what it is, and no matter what healthcare reform comes down the pike, costs related to the legal system will be an inescapable part of that discussion.
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