Freedom Line Blog

During today’s health care summit at Blair House, Wyoming Republican Senator John Barrasso (an orthopedic surgeon by trade) dropped the jaws of Democrats in attendance by declaring that individuals who only have “catastrophic care” health insurance (which Democrats had been spent all day citing as a moral failure) often make better medical decisions than people with more comprehensive plans. Barasso’s reason was simple — these consumers actually have to consider the cost of their treatments.

Though President Obama and Congressman Henry Waxman were quick to ridicule Barasso, he got to a truth that is at the very root of meaningful health care reform: the system can’t work as long as consumers are being insulated from costs.

Two economic maxims suffice to make the point: (1) “If you’re paying, I’ll have the steak” — There is no incentive to keep your spending under control when someone else is footing the bill (2) “No one washes a rental car” — Ownership is the best motivation for vigilance, because if something goes wrong, you’ll be the one eating the costs. Having someone else shield you from health care expenditures only weakens your incentive to be vigilant in regard to your own well-being

Earlier in the day’s proceedings, Obama and Democratic Senator Dick Durbin of Illinois rained on the tort reform parade by claiming that the $5 billion a year that could be saved by reforming the malpractice system would be a drop in the $2 trillion health care bucket (as an aside, I’ve always thought this is a bizarre rationale — how can anyone expect to realize large savings if they ignore all the incremental savings that will get them there?). Yet if tort reform was too picayune, why are Democrats ignoring Barrasso’s point, which got to the heart of what drives health care costs through the roof?

The problem with modern health care is that is built on a triangular model. In most cases, one person pays for the care (an employer), one person consumes the care (the patient) and one person provides the care (the doctor). This is a recipe for unhappiness and inflation, because the person who consumes is unaccountable to the person that pays, and the person that provides is unaccountable to the person they provide for (Harvard’s Regina Herzlinger has been invaluable on this point).

The Republican talking point is that health care needs to be reformed in small, incremental chunks. That may be a sound legislative strategy, but it’s not true as a matter of policy. The system needs to be fundamentally reformed and placed on a consumer-driven basis (and yes, conservatives, you can learn from Europe — Switzerland has a pretty good model. If you’re really in the mood for right-wing apostasy take a gander at Whole Foods’ ideas too). Subsidies are always going to be necessary for the indigent, but more far-reaching government control is not the answer. Comprehensive reform that makes health care market-driven is.

Over 90 percent of doctors admit to practicing defensive medicine – focusing just as much on preventing lawsuits as on preventing disease.  In last week’s Freedom Minute, CFIF’s Renee Giachino discussed the dire need for meaningful medical liability reform to reduce U.S. health care costs.

That’s the question Congressman Darrell  Issa (R-CA) is hoping to get answered with regard to President Obama’s promise, made during a speech before a joint session of Congress last September, to consider medical malpractice reform as a means of lowering U.S. health care costs.

During his nationally-televised September speech, Obama said:

Now, finally, many in this chamber – particularly on the Republican side of the aisle – have long insisted that reforming our medical malpractice laws can help bring down the cost of health care. … Now, I don’t believe malpractice reform is a silver bullet, but I’ve talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs. So I’m proposing that we move forward on a range of ideas about how to put patient safety first and let doctors focus on practicing medicine. I know that the Bush Administration considered authorizing demonstration projects in individual states to test these ideas. I think it’s a good idea, and I’m directing my Secretary of Health and Human Services to move forward on this initiative today.”

However, according to a House Oversight and Government Reform Committee report on the benefits of capping non-economic damages and passing other tort reform measures released last week, it appears the President wasn’t being sincere when he made that directive.  The report, on page 4, reads:

Committee staff inquired of HHS whether they had an updated figure [on how much the federal government spends annually for malpractice coverage and the costs of defensive medicine], but staff was told by personnel of the Office of the Assistant Secretary for Planning and Evaluation that the report in question involved medical litigation which ‘is not a priority for this Administration.’”  

“The first question I have for President Obama is if he still stands by his call for tort reform or was he just lying to Congress when he directed Secretary [Kathleen] Sebelius to pursue an initiative addressing the costs of defensive medicine,” Issa, who is the ranking Republican on the Oversight and Government Reform Committee, said in a statement released Monday. 

With all due respect Congressman, do you even have to ask?  The President’s commitment to meaningful tort reform is about as sincere as his commitment to bipartisanship.  Both are simply “not a priority for this Administration.”

The argument for tort reform usually goes something like this.  Doctors like to practice medicine.  In order to practice medicine they need to carry a certain amount of medical malpractice insurance to cover the costs of their mistakes.  The price of med-mal insurance has risen over the years because more doctors are getting sued. The main drivers increasing costs are juries that award huge damages amounts to patients.  The higher the cost of insurance, the more a doctor’s compensation goes to pay for the privilege of working.  Eventually, doctors will choose not to practice medicine in places that make it cost prohibitive.  Thus, the argument goes, we need tort reform to cap the amount of damages a jury can award to keep doctors’ insurance costs manageable.

Perhaps it’s time for public university administrators to get on the tort reform bandwagon.  With the recent decisions of two now former head football coaches to contest their firings in court, the state governments in Texas and Florida may want to consider the issue.  Both Mike Leach of Texas Tech and Jim Leavitt of South Florida are accused of mistreating players.  Both were fired for cause.  And both were owed in excess of $10 million on their remaining contracts because were long-tenured and quite successful.  That each has decided his best option is to litigate rather than try to land another job indicates the severity of their conduct (if true), and the unlikelihood of getting similar riches in a contracting economy.

But the fact remains that each man was a state employee when fired, and though they are alleging defamation and constitutional violations against school administrators, a future legislature could curtail their amount of recovery.  Certainly, it doesn’t benefit tax payers to foot the bill for protracted litigation that will undoubtedly raise the cost of hiring future coaches.  If disputing firings becomes a trend among coaches, legislatures and school officials may need to reconsider the value and necessity of subsidizing such a liability when higher education budgets are being slashed across the country.

Desperate to fend off challenges from both his left and right in his campaign to perpetuate a seemingly-endless Senate tenure, Senator Arlen Specter (Fair Weather Party – PA) has introduced legislation amounting to a trial lawyers’ bill of rights.

Last year, the United States Supreme Court issued an important but underreported decision requiring plaintiffs to state a plausible claim in order to proceed with burdensome litigation.  Namely, according to Justice Anthony Kennedy for the majority, there must be “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

That doesn’t sound like too much to ask of a litigant, does it?

After all, anyone who has found themselves individually named in a lawsuit after some ambulance-chasing plaintiffs’ attorney has cast the widest imaginable net in naming potential defendants can attest to the oft-abusive nature of our judicial system.  Even when the likelihood of ultimate liability is almost nonexistent, the sheer cost in terms of dollars, time and emotional energy to defend frivolous suits can be steep.

But even that minimal requirement is apparently intolerable to Senator Specter.  Or, more accurately, to the plaintiffs’ lawyers who can help save his hide from the electoral fire through campaign support.  He has therefore introduced the “Notice Pleading Restoration Act of 2009,” which would require a court to establish absolute metaphysical certainty that a claim won’t prevail before dismissing it.

Specter’s proposed bill is very, very dangerous, particularly at a time when tort reform and restraining unnecessary litigation costs are critical to our economic recovery and national well-being.  But to Senator Specter, that’s apparently a small price to pay to retain Senatorial privileges six more years.

There has been a great deal of debate over the relationship between tort reform (capping non-economic damages in lawsuits) and health care.

Well, the Congressional Budget Office (CBO) has provided some research to support the notion that tort reform would actually cut health care costs and reduce the budget deficit.

According to the CBO:

[I]mplementing a typical package of tort reform proposals nationwide would reduce total U.S. health care spending by about 0.5 percent (about $11 billion in 2009). That figure is the sum of a direct reduction in spending of 0.2 percent from lower medical liability premiums and an additional indirect reduction of 0.3 percent from slightly less utilization of health care services….  Enacting a typical set of proposals would reduce federal budget deficits by roughly $54 billion over the next 10 years, according to estimates by CBO and the staff of the Joint Committee of Taxation.”

Why is medical malpractice reform not in the health care reform bills making their way through Congress?  That’s a question many of us have been asking for months.  We now have the answer, care of Howard Dean and Congressman Jim Moran.

At a recent townhall meeting, Moran was asked by a constituent about the issue.  (That was after Moran forced the gentleman to show him his ID before asking the question.)  Howard Dean decided to take a first stab at answering by saying:

This is the answer from a doctor and a politician. … Here’s why tort reform is not in the bill.  When you go to pass a really enormous bill like that, the more stuff you put in it the more enemies you make.  Right.  And the reason why tort reform is not in the bill is because the people who wrote it did not want to take on the trial lawyers in addition to everybody else… And that is the plain and simple truth.

Congressman Moran followed up by saying, “That’s a very honest answer.”

In other words, President Obama and Congressional Democrats have no problem taking on the American people — the majority of whom are opposed to ObamaCare — but they wouldn’t dare take on their well-funded buddies in the trial bar.

Watch the video of the exchange below: