PI Original Adam Doster Tuesday February 23rd, 2010, 3:18pm

Collateral Damage In The Medical Malpractice Fight

A recent Illinois Supreme Court ruling did away with a 2005 bill establishing caps on malpractice damages. But it also voided some crucial insurance reforms as well. Will legislators manage to reintstate the latter protections this year?

Whenever the topic in Springfield or Washington D.C. shifts to rising health care costs, the first thing Republicans always call for is "tort reform." Medical malpractice lawsuits are out of control, they claim, and this is purportedly causing doctors to pass along the cost of expensive insurance premiums and to conduct unnecessary procedures. They then go on to argue in favor of imposing caps on the amount of non-economic damages a plaintiff can receive.

Few health economists and law experts agree. Malpractice costs represent just a tiny proportion of total health care expenditures. And data proves that doctors' prescriptions are more influenced by the prevailing medical culture in their region, not the potential for lawsuits. "It's a red herring," says Tom Baker, a professor of law and health sciences at the University of Pennsylvania School of Law.

That didn't stop Illinois state lawmakers from crusading for caps in 2005, spending months conducting hearings and holding debates on the topic. Despite opposition from the Illinois Trial Lawyers Association (ILTLA), numerous labor unions, and plenty of Democrats, the General Assembly passed a relatively stringent package of malpractice reforms that capped non-economic damages at $500,000 for physicians and $1 million for hospitals. They also enhanced the state's certificate-of-merit clause, which required the plaintiff in a medical malpractice suit to obtain a certificate from a physician declaring that he or she has reviewed the case and believes the suit has merit.

The Illinois Supreme Court had already thrown out two similar laws for violating the separation of powers clause in the state constitution, which worried legislators who devoted time and energy debating the bill's merits. Proponents of the legislation were convinced they had adequately narrowed the scope of the reforms. So did the Illinois State Medical Society and the Illinois Hospital Association, both of whom supported passage.

They were wrong. Three weeks ago, the Illinois Supreme Court again struck down jury-award limits on medical malpractice suits for the same reasons. With the legislative session -- and general election season -- kicking into gear, medical tort reform is suddenly on the minds of a lot of folks in Springfield.

The immediate implications of the court ruling aren't exactly clear. A study released yesterday by Milliman Inc. -- a Seattle-based actuarial and consulting firm -- projects that malpractice insurance companies will now face higher costs for insurance claims and more people will sue their doctors. Those claims are flatly denied in a new white paper (PDF) from ILTLA. And even Milliman admits it can't predict how the decision will impact the insurance premiums doctors pay. "I don't know that anybody has been able to definitively say what the impact of caps has been," Heather Morton, a legislative analyst for the National Conference of State Legislatures, told the State Journal-Register. "Everybody has a position, and there are numbers to support both positions."

Experts in Springfield do agree that additional alterations to the Illinois Insurance Code, which were passed in the same 2005 bill that included the caps, have made a significant impact on curbing abuses in the medical malpractice system. These reforms forced large insurers to share more data with both consumers and competitors about how rates are established and enhanced the Department of Insurance' ability to police insurers. According to the state, those bills played a key role in trimming malpractice premiums for doctors and hospitals and increased competition in the market. But a provision in the statute said that if one portion of the bill was deemed unconstitutional, all of it would be void. So the high court's ruling inadvertently thrown the baby out with the bathwater. Watch Citizen Action/Illinois' William McNary explain the importance of those reforms below:

The Department of Insurance is urging the insurance companies to follow the guidelines voluntarily. But insurance companies aren't really known for acting on their morals. If the industry truly valued transparency, lawmakers wouldn't have needed to adopt the consumer safeguards in the first place. That means it's probably going to take another prolonged fight in Springfield, one that is needed but Republicans won't be to eager to participate in unless caps on damages are part of the equation.

Republican leadership is already making noise about a rewrite this session, but it might be impossible to craft a bill with language that's precise enough to avoid another Supreme Court dismissal. As an alternative, State Sen. Dave Luechtefeld (R-Okawville) filed a proposed constitutional amendment (SJRCA 103) preventing the Illinois Supreme Court from ruling against future legislative medical malpractice reforms. But that's not going to move, either. Placing a proposed amendment on the ballot requires a three-fifths majority, which will be hard to gather on an issue that's so controversial. Even if it somehow squeaked out of the Senate, House Speaker Michael Madigan (D-Chicago) has given no indication that he is interested in broaching the topic this year.

Ironically, it's probably in the GOP's political self-interest to save malpractice reforms until next spring. Even before the caps were struck down, Republican gubernatorial candidates were calling for stronger restrictions on the state's medical tort laws. Now they have a legitimate, timely reason to campaign on the issue. And the more vocal they are about it, the more dollars they can expect to take in from insurance companies, hospitals, and doctors organizations who support caps. It's probably no coincidence that Sens. Kirk Dillard, Bill Brady, and Randy Hultgren -- all of whom are seeking higher office -- count themselves among the six co-sponsors to Luechtefeld's amendment.

So while the GOP campaigns on caps, and ignores the need for common sense insurance reforms, its doctors and hospitals who will likely suffer.

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