Yesterday’s six hour “health care summit” between President Obama and Congressional leaders had its share of wonkish moments about interstate regulation of health care insurance. But it also featured a barn burning speech by Senator Dick Durbin about the Republicans’ plan for so-called medical malpractice “reform.”
Senator Durbin, himself a former medical malpractice lawyer, both on the defense side and the patient side, hammered home on several points that bear repeating because they are so surprising to most people.

• Even without new laws capping damages, medical malpractice lawsuits are dropping off dramatically. According to a study by the non-profit Kaiser Foundation (established by Henry J. Kaiser, the man who invented HMOs), the number of paid medical malpractice claims has declined by 50 percent over the last two decades. And between 2003 and 2008, the total amount paid out for medical malpractice claims – across the entire United States – was cut in half, from $8 billion to $4 billion.

• According to the Congressional Budget Office, the Republican plan for medical malpractice reform will save $5.4 billion dollars a year (out of a health care budget that is $2.5 trillion). But those savings will be offset, in whole or in part, by new costs: the cost of the deaths of people who are killed by medical malpractice reform. See, medical malpractice reform will make doctors feel a little bit more insulated from legal liability for their actions and, therefore, will make them a little bit more careless. It’s what economists call “moral hazard” – the excess risk that people take when they are not fully exposed to the risk of their actions. The Congressional Budget Office estimates that the extra careless by doctors will result in additional 4,800 medical malpractice deaths a year. That’s on top of the 100,000 deaths that the Journal of the American Medical Association says are caused by medical malpractice annually.

• The Republican plan for a $250,000 cap on damages for pain and suffering is an attempt to reduce health care costs by unfairly placing the price of those cuts on people whose lives have been ruined by medical malpractice. Sen. Durbin related an anecdote about one of his constituents: a woman whose face was burned off in the operating room when her oxygen supply caught fire. Is $250,000 in pain and suffering enough to compensate her? (As an aside, I’ve previously blogged about how these medical malpractice caps have not worked in the states that have adopted them)

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I also enjoyed Sen. Durbin’s singling out Dr. Atul Gawande for praise (some of Dr. Gawande’s research on medical malpractice reform was previously blogged about here). Dr. Gawande’s new book The Checklist Manifesto is about four books down on my nightstand.
But enough rehashing Senator Durbin’s speech. You need to watch his knockdown of the Republicans for yourself:

In June, Boston surgeon and man of many parts, Atul Gawande, published an article in the New Yorker magazine entitled: “The Cost Conundrum: What a Texas Town Can Teach Us About Health Care.” The article seized the attention of President Obama and other policymakers, leading President Obama to highlight the article in his June address to the American Medical Association.
This week the article attracted new attention: a critical piece in the New York Times and a follow-up New Yorker blog post by Gawande, rebutting the Times’ piece.
In light of the renewed coverage of Gawande’s piece, it’s worth revisiting the original article in case you missed it. The original article attempted to address a puzzle: if you look at Medicare data, McAllen, TX has the nation’s second-highest Medicare expenditures. (The leader is Miami, which is not too surprising).
Medicare spends $15,000 per patient annually in McAllen. About 800 miles north of McAllen is El Paso, TX. El Paso has similar demographics to McAllen but in El Paso Medicare costs run half as much – $7,500 per patient.
In addition, the healthcare in McAllen wasn’t particularly good. Some of the places with the best health care in America – Grand Junction, CO and Rochester, MN (where the Mayo Clinic is located) – spend the least on health care. (The Mayo Clinic is in the bottom 15 percent for health care costs, but among the tops in terms of results).
Gawande set out to investigate this puzzle and traveled to McAllen to talk to doctors there about why their health care cost so much. In the article Gawande took a bunch of McAllen doctors out to dinner and went around the table questioning the doctors about why their healthcare costs were so high.
One of the first villains singled out by the doctors was medical malpractice lawsuits. They were driving up the costs, the doctors said.
Dr. Gawande replied that this made no sense: six years earlier, Texas had adopted so-called medical malpractice reform legislation that capped pain-and-suffering awards at two hundred and fifty thousand dollars. The doctors at dinner with Gawande admitted that, because of the change in medical malpractice law, the lawsuits doctors faced had gone down “practically to zero.”
I’ll spare you the rest of Dr. Gawande’s dinner with McAllen doctors and skip to Dr. Gawande’s findings upon leaving McAllen. Health care costs had gotten so out-of-control in McAllen because a certain culture had taken hold. Doctors had begun to see themselves as businessman, instead of professionals. Gawande describes a series of doctor kickbacks in McAllen in everything from hospital admissions to home health care – kickbacks that would be perceived as unethical or at least unseemly in other cities.
Gawande suggests that part of the solution here is to change the incentives in health care: doctors who keep patients healthy should make more; let’s give doctors a financial incentive to engage in preventative care.
Another theme from Gawande’s article that bears emphasis is the surprise that McAllen doctors and hospital executives display when informed of the statistics about McAllen health care costs. Time and again, Gawande confronts doctors who were shocked to discover that McAllen was so much more expensive than other cities. Even hospital executives – the bean counters whom you would expect to know such figures – professed ignorance about how much Medicare was spending in McAllen.
Gawande explains that while hospital executives generally have a good grasp on data like their profitability, their market share, etc., they are ignorant of the “big picture” of health care costs in their city or county.
I think it’s this kind of ignorance about costs that drives doctors’ complaints about medical malpractice lawsuits. No one likes to pay an insurance bill. It seems like a nuisance cost, since most people get nothing out of their insurance policy (other than peace of mind). So doctors hone in on this cost and assume it’s important in the “big picture” of health care costs.
The result is terrible medical malpractice “reform” legislation like you see in Texas, legislation that believes the best approach to cutting health care costs is sticking the unfortunate few who are victims of medical malpractice with the bill for us all.

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