01/17/2005: Posner on Tort Reform
Judge Richard Posner offers up some skeptical thoughts on "tort reform" in medical malpractice cases.
A better reform would be to permit, encourage, or even require insurance companies to base malpractice premiums on the experience of the insured physician, much as automobile liability insurance is based on the driver’s experience of accidents. That would make malpractice liability a better engine for deterring malpractice—which in turn would reduce malpractice premiums by reducing the amount of malpractice. Capping judgments, in contrast, would reduce the incentive of insurance companies and their regulators to move to a system of experience-rated malpractice insurance.
In any event, there is no compelling case for federal limitations on malpractice liability. The issue belongs at the state level, and as reported in a New York Times article last Friday, a number of states have adopted or are seriously considering adopting the kind of caps being advocated in Congress. Federal legislation would simply stifle state experimentation with different methods of regulating physicians and prevent us from learning which is best.
See also comments by economist Gary Becker, his co-blogger.
“Compensatory” damages are supposed to compensate individuals for their losses from medical malpractice, and other careless or reckless behavior. In practice, they commonly refer to the loss of earnings due to injury or death from such actions. Yet the correct measure of compensatory damages should equal what individuals are willing to pay to avoid death or the injuries in question. The value placed on loss of life, or on substantial disabilities, are usually many times greater than the loss in earnings.
Critics of the American tort system generally neglect this tendency to underestimate compensatory damages. To be sure, this is not easily corrected by legislation, although it might be possible to have useful rules of thumb about the appropriate ratio of full damages to lost earnings. And greater recognition that compensatory damages are often much too low would be helpful to juries and judges.
Brock on 01.17.05 @ 10:05 AM CST