No-fault med mal: no gain for the injured.

The introduction of no-fault medical malpractice insurance is one of the most comprehensive attempts in over 20 years at changing the way people wrongfully injured can recover their losses. This system would partially compensate anyone who suffered a significant physical disability from medical treatment without proof of the treating physician's negligence.

The injured party would not have a right of action in court. Instead, a tribunal would decide if the party could recover. The tribunal would compare an iatrogenic injury--one that is the proximate result of medical treatment--with a set of injury outcomes known to be the result of malpractice, approving recovery only if the injury in question matched one of the predetermined outcomes.

Individual physicians would be shielded from liability. Liability would be attributed to the physicians' affiliated hospital or health care organization.(1)

Recovery of economic and noneconomic losses caused by medical malpractice has always been a primary goal of the civil justice system. Proponents of no-fault insurance argue that the current system fails to achieve complete recovery for the injured party and incurs an exorbitant cost. Proponents indict the current system with four basic arguments:

* The system overlooks many people injured by medical malpractice who should be eligible to recover for their injuries.

* The amount of time parties wait to recover is too long.

* Large verdicts and settlements have drastically increased malpractice insurance premiums for physicians.

* The tort system causes random results, creating situations where injured parties are either over- or under-compensated for losses.

Proponents argue that the no-fault system could eliminate these problems. This article examines the no-fault system and its ability to achieve its stated goals, while considering new issues and problems the system would create.

The central facet of no-fault medical malpractice insurance is the limitation of a person's access to the civil justice system. Although a recent trend in statehouses has been curtailing an injured party's right of recovery, no-fault's attempt to limit these rights is more acute than other legislative proposals, especially in the medical malpractice area.

Generally, legislative attempts to address the real and perceived problems caused by the medical malpractice tort system have centered on decreasing physicians' liability insurance costs and eliminating frivolous claims.(2) These limitations are manifested in requirements for having claims certified by medical experts,(3) placing caps on pain and suffering or punitive damages,(4) and limiting contingent fees.(5) In addition, states have amended statutes of limitation and changed settlement payment procedures.(6) The legislation, while focusing on judgment relief for physicians by reducing noneconomic damages, has never attempted to eliminate a victim's right to use the civil justice system.

Proponents of no-fault insurance aim to create a system that would partially or totally bar an injured party's claim and shield bad physicians from liability. The underpinnings of this system began with a case study in New York state and an empirical analysis of the no-fault system in Sweden.

Workers' comp model

The no-fault system being proposed in the United States is a result of the Harvard Medical Practice Study Group's work in New York.(7) The study, which was conducted by a group of Harvard University law and medical school professors, concluded that a no-fault system based on the workers' compensation model could address many of their stated problems with medical malpractice litigation.

The "Harvard Group" attempted to implement the no-fault system designed from the New York study in a five-year empirical trial in Utah, which was to be funded by the Robert Wood Johnson Foundation.(8) Proponents decided not to introduce the plan in Utah's most recent legislative session.

The no-fault proposal aims to replicate the results of the no-fault system in Sweden.(9) But an examination of this system reveals significant differences from the Harvard proposal that would preclude a direct comparison of the two.

The Swedish system has been compared with U.S. workers' compensation insurance and no-fault automobile insurance. However, the Swedish medical malpractice system is very different from both those schemes, and it is different from the Harvard Group's no-fault proposal.

The Swedish system is a no-fault system; noneconomic damages are completely eliminated and no liability is attributed to any party. All physicians, hospitals, and health care organizations are shielded from liability.(10) This is markedly different from the Harvard proposal, which attaches enterprise liability to all hospitals and health care organizations affiliated with the wrongdoing medical staff.(11)

Another difference between the two is that Swedes retain the right to use their civil justice system to recover for medical negligence.(12) The system is a voluntary alternative to the tort system. To entice Swedish citizens to use the no-fault system, its benefits have been made basically equal to those of the tort system.(13)

Because the Swedish system has differences that cannot be duplicated in the Harvard proposal, any successes of the Swedish no-fault system should not be attributed to no-fault insurance generally, or potentially to the Harvard proposal specifically.

Causation, liability, recovery

The no-fault system the Harvard Group has proposed does not eliminate the elements needed to establish a prima facie case in the current tort system. Causation, liability, and the amount of recovery still must be determined in the no-fault plan. Each of these elements is addressed by creating a bureaucratic entity to provide the answers.

Causation. Proving causation is the most difficult part of medical malpractice tort litigation. The no-fault system would operate using a list of designated compensable events (DCEs), adverse medical outcomes that result from poor or improper medical treatment.(14) The list would be compiled by a panel of physicians and researchers that would examine every type of adverse outcome or injury caused by general medical treatment.

The panel would isolate injuries that were the result of bad medical care. This subset would be considered designated compensable events.(15) The panel would then create a table listing every DCE. The table would be used by an administrator to determine if an injured party could recover for an iatrogenic injury.(16)

An administrator would compare an injury to all similar injuries listed on the table. If the injury matched one from the table, the administrator would allow recovery. If not, the injury would automatically be judged as one that did not result from poor medical treatment, and recovery would be barred. Basically, the table would attempt to predetermine causation, with the intent of eliminating the need for a causation inquiry.

The no-fault proposal restricts the number of potential claims by imposing an artificial time limit on injured parties. A person who suffers a significant injury would not recover losses unless the injury persists for more than two months. The rationale is that this would limit compensation to only long-term disability.(17)

The de facto result is that a fact finder need not determine when the improper treatment caused the person to begin accruing losses. The proposal avoids this factual inquiry by barring parties from recovering the first two months of losses.

Liability. Attributing liability is done by using enterprise (18) Enterprise liability would attribute losses to the medical staff's employer, that is, the hospital or health care organization.

The hospital or health care organization would also be liable for injuries caused by the malpractice of affiliated physicians and medical staff not on the (19) Institutions that are not large enough to shoulder the risk individually can purchase malpractice liability insurance to protect themselves from losses caused by direct and affiliated employees and staff.

Recovery. The process for recovery is similar to the process for recovery under workers' compensation. Injured parties would recover for their losses in periodic payments. The injured would recover for medical treatment and rehabilitation expenses not covered by other insurance policies in full.(20) All other losses would be recovered at a decreased percentage.

Recovery for net earnings and household services would be compensated at 80 percent of the person's prior income level. Recovery for lost earnings would be capped at 200 percent of the state's average wage.

The Harvard Group would create a specific schedule of payments for loss of enjoyment of life caused by certain physical impairments. Punitive damages and damages for pain and suffering would not be allowed.(21) Recovery of iatrogenic losses from any other insurance policy would offset no-fault insurance payments.(22)

No-fault fails

The proposed no-fault system cannot achieve its goals. It also fails to incorporate the necessary and positive attributes the current civil justice system provides.

The civil justice system accomplishes two goals when an injured party exercises the right to recover against the physician who caused the injury. The person can recover fully for all losses, and the judgment punishes the wrongdoing physician. The no-fault proposal clearly states that only a set percentage of an injured person's losses would be compensated as a means to decrease system costs. The civil justice system's deterrent value would be greatly diminished, if not eliminated, by the no-fault proposal.

The civil justice system not only punishes and deters malpractice, it also encourages the discovery of medical care mistakes that would not be found but for diligent investigation.(23) The no-fault system does not allow complete recovery for those who suffer iatrogenic injuries, nor does it directly deter negligent behavior. Abandoning these two goals renders the no-fault proposal problematic and incomplete even before considering empirical examples or the individual elements that establish the no-fault insurance framework.

The two states that have limited no-fault medical malpractice insurance have encountered problems, even though their plans are narrowly tailored and apply to small segments of their populations. Florida's and Virginia's no-fault malpractice systems apply to newborns who suffer neurological damage caused by medical treatment during delivery.(24)

The no-fault insurance programs in both states provide for medical and rehabilitation expenses as well as compensation to replace lost future wages and noneconomic losses. The compensation for future wages and noneconomic damages is less than the compensation that would be provided under the tort system.(25)

Unfortunately, the no-fault systems have not performed as expected. The families of newborns who suffered neurological injuries during birth have had a difficult time proving the injuries were iatrogenic, especially when the babies suffered from cerebral palsy or other birth defects. Commentators have noted these no-fault systems do not function as well as they should.(26)

The Swedish system has garnered positive results because of the social and legal climate in that country, not because of a general advantage that is created by no-fault insurance.

The Swedish social and legal systems contrast to U.S. social and legal systems. Generally, Swedes do not exercise their right to use the civil justice system to establish liability as vigorously as Americans do because Swedes' social mores and perceptions of liability are different from those of Americans.(27)

The Swedish tort system strictly limits the amount of recovery for injured parties, which is different from the U.S. system, which aims to fully compensate an injured party for losses. The Swedish system also makes no attempt to deter physicians' negligent behavior, while the U.S. civil justice system and the no-fault system proposed by the Harvard Group attempt to do this. Ultimately, the reason the Swedish no-fault insurance system is so inexpensive to operate while appearing to offer the same advantages as the U.S. tort system is that the Swedish tort system offers limited benefits to injured parties.(28)

The Harvard Group's proposal is very different from the successful Swedish model, and the elements that make the latter system successful could never be implemented in the United States. Parts of the proposed system that emulate the Swedish system do not establish clear evidence that no-fault medical malpractice insurance could ever work in the United States.

Problems on the table

Using designated compensable events to establish causation would lead to more problems than solutions. Creation of the DCE table would be difficult. Decisions on which adverse treatment outcomes would be recoverable would reflect the subjective judgment of those who created the table.

Physicians, who want to limit their liability, would tailor the DCE table to lower the number of recoverable claims. Consumers, on the other hand, would want a broad and inclusive set of DCEs to protect themselves from as many iatrogenic losses as possible. The Harvard Group provides no insight into how to eliminate these special interests in the creation of DCEs, and this cannot be ignored.

Determining causation via DCEs would still be expensive, because establishing causation would be an adversarial process. People refused recovery by a DCE administrator would appeal to an administrative panel or tribunal. They would hire legal representation to protect their rights and present the appeal, and the panel would more than likely have a representative for the no-fault insurance fund.(29)

Clearly, the DCE system would not be the simple, cost-efficient process the Harvard Group makes it out to be. There is a real possibility that this system could generate costs similar to those the current civil justice system generates.

Using DCEs to identify compensable damages would suppress investigation that would identify injuries caused by bad medical treatment. DCEs are based on established medical knowledge. Since no-fault eliminates incentives to investigate new theories of causation and potential new harms caused by bad medical treatment,(30) introduction of new scientific evidence would be hindered. Updating the DCE table would, therefore, be difficult, and injured parties would be penalized by a system that is resistant to change.

The two-month waiting period imposed on parties suffering iatrogenic injuries is overly restrictive. The Harvard Group's decision assumes that people do not suffer significant losses during the first two months of injury. A person incapacitated for 60 days would have to endure the loss of two month's pay in addition to any noneconomic losses without any recourse. The waiting period, which would lower costs by decreasing the number of recoverable claims, would intentionally leave people with significant losses without any means to recover.

The use of enterprise liability in the no-fault proposal would dilute the deterrent element of liability and would cause medical care institutions to change their relationship with affiliate physicians. Empirically, enterprise liability has consistently undercompensated major workers' compensation injuries, as well as contributed to dramatically rising costs in workers' compensation insurance.(31)

Creating liability insurance for health care institutions could prove to be difficult, because it would be hard to create actuarial rates for these institutions and underwrite policies accurately.(32)

Extending liability to all hospital affiliates not practicing on hospital premises would be difficult. Either a hospital would not be able to exercise any control over affiliate doctors, exposing itself to unchecked liability problems, or each hospital would have to create a managed care scheme and assert power and quality control in every doctor's office.

Neither outcome is promising for either the health care institution or the doctor. Either the hospital would be exposed to increased liability costs, or affiliated doctors would lose the ability to run their businesses as they see fit.(33)

No-fault medical malpractice insurance as a comprehensive overhaul is not a faster, less expensive means to recover the losses of negligently injured people. The Harvard proposal fails to achieve its goals.

* No-fault creates artificial barriers to recovery: the DCE table and a two-month waiting period would leave wrongfully injured people without a means to recover their losses.

* Establishing whether an injury is a DCE will create additional bureaucratic structures and slow an injured party's ability to recover, as seen in Florida and Virginia.

* Insurance premiums would be expensive and difficult to calculate due to increased liability caused by including physician affiliates under the enterprise liability theory.

* Consistent recovery of losses would not be guaranteed due to the subjective nature of the DCE table and of the program administrator.

No-fault medical malpractice does not offer any substantive advantage over the current civil justice system. But it does eliminate the opportunity for injured people to recover their losses fully. The tradeoff is unfair to health care consumers. C:

Notes

(1.) See generally Paul Weiler, The Case for No-Fault Liability, 52 MD. L. REV. 908 (1993).

(2.) The Bush administration proposed an aggressive plan to lower medical malpractice costs by capping punitive damages and limiting attorney fees. See William Winkenwerder, Health Care Plans: Which One Will Work? ATLANTA CONST., Oct. 25, 1992, at H4.

(3.) See Pa. H.R. 2210 (1996), which mandates that all medical malpractice claims must by certified by an expert.

(4.) See CAL. CIV. CODE [sections] 3333.2 (West 1996).

(5.) See, e.g., DEL. CODE ANN. tit. 18, [sections] 6865 (1989).

(6.) See, e.g., CAL. CIV. PROC. CODE [subsections] 364 & 425.13 (West 1996).

(7.) HARVARD MEDICAL PRACTICE STUDY GROUP, PATIENTS, DOCTORS, AND LAWYERS: MEDICAL INJURY, MALPRACTICE LITIGATION, AND PATIENT COMPENSATION IN NEW YORK (1990).

(8.) See generally Matthew K. Richards, The Utah Medical No-Fault Proposal: A Problem Fraught Rejection of the Current Tort System, 1996 BYU L. REV. 103, 112.

(9.) See Patricia M. Danzon, The Swedish Patient Compensation System, 15 ). LEGAL MED. 199 (1994).

(10.) Id.

(11.) Weiler, supra note 1, at 937.

(12.) Danzon, supra note 9, at 200.

(13.) Id. at 201.

(14.) See generally Larry M. Pollack, Medical Maloccurence Insurance: A First-Party, No-Fault Proposal for Resolving the Medical Malpractice Controversy, 23 TORT & INS. L.).552, 576 (1988).

(15.) See Weiler, supra note 1,at933.

(16.) Id. at 935.

(17.) Id. a t9 23.

(18.) Id. at 937.

(19.) Id. at 944.

(20.) Id.

(21.) Id. at 923.

(22.) Id at 924.

(23.) See generally Randall M. Bovbjerg et al., Valuing Life and Limb in Tort: Scheduling Pain and Suffering, 83 NW. U. L. REV. 908, 929 (1989).

(24.) See FLA. STAT. ANN. [subsections] 766.301-316 (West 1996); VA CODE ANN. [subsections] 38.2-5000-5021 (Michie 1994 & Supp. 1996).

(25.) Weiler, supra note 1, at 936.

(26.) Richards, supra note 8, at 108.

(27.) See Danzon, supra note 9, at 200.

(28.) Danzon, supra note 9, at 201.

(29.) See Richards, supra note 8, at 124.

(30.) See Bovbjerg, supra note 23, at 929.

(31.) Richards, supra note 8, at 117.

(32.) Id at 120.

(33.) Id. at 119.