Excerpts From ATLA'S National College of Advocacy, Vol

William F. Gallagher

EDITOR'S COLUMN

Is it a Contract With America - or On America?

1. Is it a Contract With America - or On America?

Although the new Republican majority in Congress presents its 1995 agenda under the label "Contract with America," we see that portion calling for revision of established tort law as an "agreement" to end rules and practices developed and engrafted into law and the fabric of American society over the last fifty years. In this respect, it is indeed a Contract on America, in that it seeks to kill the structure of our legal system as it relates to tort liability, and replace it with "reforms" that benefit corporate America, the insurance industry, and the medical industry. No consumer organization in America supports any of the proposals because they realize that the proposals will shut courthouse doors to American consumers.

Americans live in the safest society in the world - in the home, in the work place, and in the environment - because through the civil justice system they can change conduct for the better.

2. The tort revision proposals in the Contract are anti-conservative.

When is a bill supported by some conservatives anti-conservative? When it's a bill that would take away the rights of states and of individuals, would allow some to escape their responsibility to others, and force taxpayers to bear those unmet burdens.

So why does the Contract with America call for radical changes to our country's state-based civil justice system? Certainly, most signers of the pledge did not make tort revision their first priority. And most have little familiarity with the laws of the various states, or with the longstanding effort to overturn those laws and impose Washington's views on the states.

An intensive education is called for, and quickly. Because the Contract calls for a vote on tort revision within the first one hundred days (even though three cut of four Americans don't care about this issue), before most Members will even know where their seats are, let alone where their constituents stand.

They should take notice of what the voters of Arizona and Michigan had to say when they were asked about tort revision. They soundly rejected attempts to limit accountability by wrongdoers and restrict access to the courts for individuals who are harmed, while corporations, whose suits against each other are responsible for the much discussed "litigation explosion," are not restricted at all. They voted against these referenda, even when they were promised reduced insurance rates, and even as they elected conservative Republican Governors, Senators and Representatives.

Why did voters reject attempts to change our civil justice system, in which individuals have the power to hold wrongdoers accountable? Because they saw, by margins of nearly two to one, that these limits would inevitably lead to more regulation, more burdensome government, and less responsible behavior by those who provide goods and services in our economy.

Our newly elected Congress should take a close look at those results. They will conclude that tort revision was no part at all of the mandate they claim to remake America. Informed voters are eager for change, but the kind of change our civil justice system exemplifies - positive change, for safer products, for responsible manufacturers. The power to effect that change rests in every individual, not in politicians.

What is the alternative to our civil justice system? It's intensive, pervasive regulation, government oversight, bureaucratic intervention. It was the private law enforcement of our system, not government regulators, that got back-up beepers put on trucks. It was lawsuits, not laws, that got garage-door openers to stop when they trapped children, after so many children were tragically and needlessly killed. It was plaintiffs, not politicians, who sued and made hotels, parking lots and shopping malls safer for all of us.

Americans voted for smaller, more efficient government, not for changes in our law to let wrongdoers escape responsibility. Congress should carefully examine the laws of the fifty states, see how they have worked to protect us all at little cost, and leave that power to improve America where it belongs - with the people.

3. Quick facts showing that the Contract's tort revisions are not for the benefit of the American consumer. They benefit corporate America, the insurance industry, or the medical industry.

(a) On civil litigation.

· Only 5 percent of civil cases (1 million out of 19.7 million cases filed in state court) are tort cases. Brian J. Ostrom, et al., State Court Caseload Statistics; Annual Report 1992, at 5, 16 (National Center for State Courts 1994).

· Tort case filings remained flat during the 1985-1990 period (p. 21) and have actually declined by 2 percent since 1990 (p. 16-17). Brian J. Ostrom, et al., State Court Caseload Statistics: Annual Report 1992, at 16-17, 21 (National Center for State Courts 1994).

· Business litigation (often businesses suing other businesses) and not injured people suing for damages in tort, comprises one of the fastest growing segments of civil case filings. In fact, contract disputes account for 50 percent of all civil cases filed annually in federal courts between 1985 and 1991. No proponent of civil justice "reform" has ever suggested limits on the kind of cases that truly have multiplied in recent years - businesses suing businesses. Even during the most recent debates in Congress on tort reform, limits were proposed on recovery for individuals that would not apply to commercial entities. See: Geyelin, Suits by Firms Exceed Those by Individuals, Wall St. J., December 3, 1993, at B1.

(b) On medical malpractice.

· Malpractice cases amounted to only 7 percent of tort cases filed in state court in 1992. Brian J. Ostrom, et al., State Court Caseload Statistics: Annual Report 1992, at 16

(National Center for State Courts 1994). That is 70,000 cases, compared to over 80,000 deaths annually and several hundred thousand serious injuries related to medical malpractice. Patricia Danzon, Medical Malpractice: Theory Evidence and Public Policy (Harvard University Press 1985) (statement of Patricia Danzon, an economist and expert on malpractice in the United States) (estimating that only about 10 percent of medical malpractice incidents result in a claim).

· Following an investigative study, the Office of Technology Assessment (OTA) reported that "their findings suggest that many physicians are more aggressive in diagnosis not because of fear of malpractice liability, but because they have come to believe that such practices are medically necessary."According to the OTA, "In clinical scenario surveys designed specifically to elicit a defensive response, malpractice concerns were occasionally cited as an important factor in clinical decisions; however, physicians' belief that a course of action is medically indicated was the most important determinant of physicians' clinical choices." U.S. Congress, Office of Technology Assessment, Defensive Medicine and Medical Malpractice, OTA-H-602, at 74 (Washington DC: U.S. Government Printing Office, July 1994).

(d) On product liability.

· Product liability cases amount to only about 4 percent of tort cases filed in state court (approximately 40,000) (Brian J. Ostrom, et al., State Court Caseload Statistics: Annual Report 1992, at 16 (National Center for States Courts 1994)), as compared to over 21,000 deaths annually and 28 million injuries (Consumer Product Safety Commission Interview with Public Information Office, November 18, 1994) arising from consumer products.

(e) On punitive damages.

· In the past twenty-five years, there have been only about 350 punitive damage verdicts in all product liability cases. Yet the risk of punitive damages is a major force in inducing investment in safety and deterring undesirable behavior. Thomas Koenig and Michael Rustad, "Demystifying the Functions of Punitive Damages in Products Liability: An Empirical Study of a Quarter Century of Verdicts," Executive Summary, at 11-15, 1. See also testimony of Professor Michael Rustad, Consumer Subcommittee Hearing on S. 640, September 19, 1991, transcript at 74-78.

· Punitive damage awards in medical malpractice cases are exceedingly rare - only 265 awards between 1963 and 1993 in the U.S., mainly involving such egregious behavior as sexual assault or deliberate injury. Thomas Koenig and Michael Rustad, His and Her Tort Reform: Gender Injustice in Disguise 85 (1994).

· The claimed $300 billion cost of the civil justice system (Marc Galanter, Pick a Number. Any Number, Legal Times, February 17, 1992 at 26) is a wholly made-up number. Well documented, however, is that the economic cost of preventable death and injury in America is more than $399 billion annually. National Safety Council, Accident Facts 2 (1993). That figure does not take into account the untold billions more in anguish and suffering causing by those injuries.

(f) On the contingent fee.

· One of the largest property casualty insurers in the United States, Aetna, recently stated, ". . . any abuses of the contingency fee system are best addressed through marketplace solutions (full disclosure to potential clients of the hours likely to be spent on the case, probability of success, probable recovery, and alternative fee arrangements) and when necessary, reduction of excessive fees by the courts. We do not support regulating fees" (emphasis added). Judith W. Pendall, Vice President, Law and Regulatory Affairs, Aetna, Letter to the Editor, New York Times, March 11, 1994.

· While contingent fees are under attack by "reformers," clients know that these fees, which are only paid if the suit is successful, are their keys to the courthouse. No limits on fees, or requirements for disclosure, have ever been proposed for fees incurred by the defense, although "reformers" now seek to force unsuccessful claimants to pay the defense fees as well.

4. The "English Fee-Shifting Rule" would prevent American consumers from holding powerful wrongdoers accountable. Under American law, all citizens have the power to enforce their rights without fear of having to bear the unpredictable legal fees and expenses of the other party. Some politicians have suggested changing this principle to follow the "English Rule," under which the unsuccessful litigant is forced to pay the costs of both sides, even if he lost due to a technicality, or in a very close case. This unfair change would prevent Americans from trying to hold more powerful wrongdoers accountable, because the risk of obtaining justice would be too great.

The American Rule and the contingent fee keep frivolous suits to a minimum. Those who propose the adoption of the English Rule for American courts claim that it is needed to prevent "frivolous" suits. But even the English have recognized that the rule deters sound claims, by keeping wronged consumers from vindicating their rights. The English are considering a move toward the American rule, and toward encouraging the contingent fee which enables U.S. consumers to hold wealthier wrongdoers accountable. Because the attorney in a contingent case is paid only if he is successful, the fee itself is a tremendous deterrent to speculative suits. It strikes the proper balance, unlike the English Rule, which forces citizens to choose between ensuring that responsibility for losses is borne by wrongdoers and risking a complete financial disaster.

Personal injury claims are a tiny percentage of cases in American courts, and results are fair and rational. Proponents of the English Rule claim that personal injury claims are a "lottery" or "bonanza" for those who have been harmed, and that the potential for huge awards with no risk of paying the other side's fees has caused the number of such suits to soar. The fact is, such claims are very rare - less than 5 percent of cases in state courts, where almost all such suits are filed. This number has been stable, not increasing. Further, all empirical studies of the civil justice system have found that juries make rational, fact-based decisions and that awards are usually directly related to the severity of the injury, not to the wealth of the defendant or to the emotional appeal of the victim. For example, the median award in medical malpractice cases is only about $36,500, according to a recent Duke University study of North Carolina suits.

The American Rule keeps tax burdens for legal fees to a minimum, and ensures access to justice for the middle class, unlike the English Rule. To adopt an English Rule in our country, we would need to fund a vastly expanded legal aid system like the English have. There, the cost of bringing a claim is reduced because publicly paid, tax-subsidized counsel are available to most low-income people. Many moderate-income people have access to legal assistance through trade unions. Still, many English citizens of middle income are foreclosed from enforcing their rights by the tremendous risk of having to pay the high, privately-paid legal fees of defendants, and because they are considered too wealthy for public assistance. We should not adopt a costly system that still would keep middle-class consumers from seeking justice.

Consumer organizations oppose imposition of the English Rule on American citizens. Consumer groups recognize that the civil justice system is the only means of compensation for those who are harmed by dangerous or defective goods or services. If this system is unavailable to consumers because of the risk of unreasonable or uncontrollable costs, those who are damaged will be left utterly without a remedy.

5. Joint and several liability ensures fair compensation for

consumers and accountability for wrongdoers.

Under American law, all citizens have the power to hold wrongdoers accountable. Voters have rights no politician should try to take away. A principle of our legal system called "joint and several liability" ensures that when we are injured, those who are found responsible will compensate us for our losses. This sound rule protects all citizens, and must not be taken away by Washington politicians.

Joint and several liability makes only those who are judged responsible pay for damages. Under the American rule all parties who are found liable, and none who are found not to have contributed to the loss, are responsible to pay for the loss. If more than one person is responsible, it is up to the guilty ones to apportion fault among themselves. It is not left up to the victim to decide which party should pay what share. This reasonable rule puts the burden of allocating damages where it belongs - on the wrongdoers.

Joint and several liability does not result in multiple or excess recovery for victims. Because the doctrine holds that all parties are responsible in full (because of the usual situation that fault cannot be calculated on a percentage basis), some have misconstrued the rule to mean that a plaintiff can recover in full more than once. This is simply not the case. Under current law, any wrongdoer who pays for the loss can seek funds from the other wrongdoers. Multiple wrongdoers, held responsible under the same cause of action, will not all pay in full for the same loss.

Joint and several liability ensures that wrongdoers, not victims, bear the cost of a loss. In some cases, one wrongdoer may be insolvent or unavailable. Because the doctrine requires the other wrongdoers to cover the cost of the loss, the victim is made whole. Only those who contributed to the loss must pay. Perhaps they will pay more than they might have had the other defendant paid their share. But if that share is not paid, it will be the victim who is made to suffer twice, and the wrongdoer who will not be held fully accountable. Our system has made the sound judgment that, where a burden must fall, it should fall on the one who has done wrong, not the one who has suffered the harm.

Abolishing joint and several liability for non-economic damages only would most harm the poor, the very young, the very old, and women. Such damages, which include intangibles like the loss of fertility, loss of the use of one's limbs or one's senses, excruciating lifelong pain and other "non-economic" losses, are undervalued if full recovery is not available. Such damages are most often suffered by the most vulnerable in society, and make up a greater percentage of the total loss than in the case of a wealthy person who suffers economic loss. To abolish the doctrine only for those who are weakest, as has been proposed, would further disadvantage them, making both access to justice and likelihood of full recovery less certain.

6. Punitive damages.

Civil juries rarely award punitive damages, simply because such awards are reserved for the most egregious misconduct. Punitive damages often are the only way individual Americans can force reckless or malicious defendants to change their conduct. The unpredictability of a punitive award - which nevertheless must be scrutinized by the courts for fairness - is sometimes the only factor that can prompt an arrogant wrongdoer to change its behavior.

Individual Americans, with guidance and review provided by the courts, must not be stripped of their ability to hold wrongdoers accountable and, when necessary, to punish the reckless or malicious. In America, the power to change dangerous behavior resides in individuals, not politicians or government regulators.

· Punitive damage awards punish abd deter only the most egregious misconduct. A 1991 study by Professor Michael Rustad of the Suffolk University Law School in Boston uncovered just 355 punitive awards in products liability cases between 1965 and 1990, an average of only 14 such awards each year.

· Over 50 percent of the punitive damage awards in Professor Rustad's study were reduced or reversed on appeal, while 35 percent of the cases were settled after the trial.

· More than 75 percent of the non-asbestos defendants subject to punitive damage awards between 1965 and 1990 took some sort of post-litigation step toward making their products safe, usually in the form of fortified warnings, product withdrawals or added safety features.

· Punitive damages are awarded in less than 5 percent of jury verdicts, according to a 1990 American Bar Foundation study of 25,000 jury verdicts in 11 states over a four-year period.

· Limiting punitive damages to an arbitrary level would undercut their deterrent effect since reckless or malicious defendants might find it more cost effective to continue their bad behavior and risk paying punitive damages.

· Americans would be much worse off if they were not able to hold wrongdoers accountable. The makers of asbestos certainly did not voluntarily assume responsibility for the harm they caused. A.H. Robins Company did not offer to compensate the thousands of women injured by the Dalkon Shield. It is only the civil justice system and punitive damages that have placed accountability where it belongs - at the door of the wrongdoer.

· Punitive damages have made Americans safer. A manufacturer of children's pajamas, the fabric of which was 100 percent untreated cotton flannelette, stopped making the highly flammable garment in 1980 after a Minnesota jury ordered the company to pay $750,000 in compensatory damages and $1 million in punitive damages to a 4-year old girl who had been badly burned when her pajama top caught fire.

· Punitive damages have also ensured healthier lives for women. Playtex voluntarily removed from the market tampons linked to toxic shock syndrome (TSS) after a federal court awarded compensatory damages and $10 million in punitive damages to the family of a woman who died from TSS. In addition, Playtex strengthened its warnings on other products about the association between tampons and TSS, and started an awareness program to alert the public about the dangers of TSS.

7. There is no need for the Congress to dictate medical malpractice rules to the states.

Voters have basic rights no politician should try to take away. In the ultimate display of "Washington Knows Best," some would have Congress override the carefully developed policies of state legislatures and state courts by taking the unprecedented step of federalizing the state tort system. Imposing congressionally mandated rules and restrictions on medical malpractice liability would be an unwise and unnecessary exercise in federal regulation, and would keep private citizens from holding wrongdoers accountable.

(a) The several states not only have a right to determine their own medical malpractice liability laws, they have carefully done so.

· Nearly every state in the Union, in response to particular needs and circumstances, has enacted various degrees of medical malpractice reform. Congress should not summarily overturn these carefully developed policies.

· Federalization of the medical liability system would interfere with the fundamental principle of federalism upon which our nation was founded. The framers of our Constitution never intended that a national tort compensation scheme be established. Under federalism, the states have developed their own tort compensation schemes, including medical liability systems, taking into account the culture and history of the individual state. Differences among the states are a source of pride and symbol of strength in our legal system.

(b) Federal limitations on the rights of health care consumers would undermine the important role of state tort systems in fostering better health care.

The tort system fosters better health care. Medical researchers and the medical establishment alike have acknowledged the deterrent effect of medical liability.

· "The advantage of the tort system is that it provides a continual, ongoing system of `regulation by incentives.' And it does not rely on enforcement by the medical profession, which, like any other profession, is notoriously reluctant to police its own members." (Testimony of Patricia M. Danzon, presented to the Committee on Labor and Human Resources, U.S. Senate, July 10, 1984)

· "It is sad but true that many physicians practice more carefully than they did in the past because they have one eye on the potential litigant . . . If the courts and insurance companies and the fear of malpractice become the most important disciplinary weapon in medicine - distasteful as the idea may be to physicians - so be it." (Robert S. Derbyshire, "Malpractice, Medical Discipline and the Public," 19 Hospital Practice 109, 216 (1984). See also William B. Schwartz and Neil K. Komesar, "Doctors, Damages and Deterrence: An Economic View of Medical Malpractice," 298 New England Journal of Medicine 1282 (1978).

· Only 5 percent of civil cases (one million out of 19.7 million cases filed in state court) are tort cases, of which medical cases are a subpart. Brian J. Ostrom, et al., State Court Caseload Statistics: Annual Report 1992, at 5, 16 (National Center for State Courts, 1994). Tort case filings remained flat during 1985-1990 (p. 21) and actually declined by 2 percent since 1985-1990 (p. 16-17).

· Since 1985 only 5 percent of all medical malpractice claims filed went to verdict. (Medical Economics, August 3, 1992 at 141).

· Businesses suing businesses in contract disputes constitute nearly half of all federal court cases filed between 1985 and 1991. (Milo Geyelin, "Suits by Firms Exceed Those by Individuals," Wall Street Journal, December 3, 1993, at B1).

· Awards in medical malpractice cases are not excessive - in fact, a recent Duke University study of such suits in North Carolina found that the median award is only $36,500. (Atlanta Constitution, 2/1/93).

8. There is no need for the Congress to dictate product liability rules to the states.

In the ultimate display of "Washington Knows Best," some would have the Congress emasculate the carefully developed policies of state legislatures and state courts by taking the unprecedented step of federalizing the state tort system.

(a) The several states not only have a right to determine their own products liability laws, they have carefully done so.

· Nearly every state in the Union, in response to particular needs and circumstances, has enacted various degrees of product liability reform. Congress should not summarily overturn these carefully developed policies.

· Even if one were willing to disrupt state law, there is little need to do so. State reform has been extensive. As one recent study concluded in surveying state punitive damage reforms: "There seems little left for federalization to accomplish." Koenig and Rustad, "The Quiet Revolution Revisited," The Justice System Journal, Vol. 16, No. 2 (1993).

· Long-standing state laws provide for uniformity and predictability. Businesses know can account for the settled laws of each state much in the way they now deal with state insurance, consumer protection and tax laws. A federalization of the tort system would lead to a chaotic mix of unpredictable judicial interpretations for years to come.

(b) Our settled state laws do not harm American competitiveness.

· In fact, the costs of our state tort system may be far less than the taxes and more imposing regulations that other countries impose on businesses as a substitute to a tort-based compensation system. See, "Not Guilty," The Economist, 2/13/93.

· While companies would ideally like to face no liability costs, total liability costs amount to less than 1 percent of total business costs for most industries. Jost, "The Liability and Competitiveness Myth," April 1992.

· The differences among the legal systems of this country and other countries does not provide any advantages or disadvantages; every company must comply with the liability

laws of the country in which its products are sold.

· Business leaders have acknowledged that U.S. liability laws provide an innovation incentive by encouraging U.S. businesses to develop safer, more reliable - and more competitive - products. See Weber, "Product Liability: The Corporate Response," The Conference Board.

· Product liability claims declined by 36 percent in the federal courts between 1985 and 1991, when one excludes the unique case of asbestos. Legal Times, 2/17/92.

· In the state courts, all tort cases amount to less than 10 percent of the total case load. Conference of State Court Administrators, 1990.

· The vast majority of states have reformed punitive damages rules. In any event, such damages are extremely rare. In the last twenty-five years, punitive damages have only been awarded 353 times in product liability cases (91 of which were asbestos cases); 25 percent of these awards were reversed or remanded on appeal. Rustad, "An Empirical Study of a Quarter Century of Verdicts [1965-1990]," 1991.

9. Do not restrict the rights of patients to hold medical providers accountable: Reduce injuries, not recoveries.

Patients have basic rights no politician should try to take away. All citizens, including consumers of medical care, have the power to hold wrongdoers accountable. True reform of the medical malpractice system will work to reduce injuries, not reduce compensation to those who are harmed.

(a) Every year, medical negligence injuries several hundred thousand Americans. Approximately twice as many people die as a result of such negligence than perish on our nation's highways.

· A recent Harvard University Study found that in New York alone, medical negligence caused approximately 7,000 deaths and 29,000 injuries in a single year. (New England Journal of Medicine, Vol. 325, No. 4, 7/25/91)

· Based on the Harvard evidence, a surgeon at the Harvard School of Public Health concluded that as many as 1.3 million patients are injured, and that 100,000 die, every year because of malpractice. (The Washington Post, 2/18/92). Based on the American Medical Association's estimate that 42,000 malpractice claims were filed in 1983, and malpractice expert and economist Patricia Danzon's estimate that only about 10 percent of actual incidents result in a claim, there would have been 420,000 malpractice incidents that year alone. By contrast, approximately 40,000 to 50,000 people die each year on our Nation's highways.

· According to a recent Rand Corporation study, anywhere from 12 percent to 27 percent of patient deaths could have been prevented absent sub-standard medical care. (Annals of Internal Medicine, Vol. 109, No. 7, 10/1/88).

(b) Despite an epidemic of sub-standard medical care, few malpractice victims actually sue and fewer recover.

· A recent Harvard Medical Practice Study concluded that fewer than 2 percent of medical malpractice victims ever file suit. (The New England Journal of Medicine, Vol. 325, No. 4, 7/25/91). This finding indicates that, if anything, our current malpractice system suffers from too few claims, not too many.

· Of the small percentage of malpractice victims that do sue, even fewer actually recover damages. For example, a comprehensive 1994 study of medical malpractice jury verdicts found that patients win fewer than one-third of malpractice lawsuits filed against doctors and hospitals. (USA Today, citing 1994 Jury Verdict Research Study, 4/4/94).

· Moreover, the rate of medical malpractice claims has "declined steadily" since 1985. (Consumer Reports, July 1992). Due in part to such a decrease in claims frequency, "the price of medical malpractice and professional liability [insurance] coverage for health care organizations remains stable and capacity is plentiful." (Business Insurance, 3/28/94).

· A recent Duke University study of 2,000 malpractice cases in North Carolina found a median malpractice award of only $36,500. (The Atlanta Constitution, 2/1/93). The Duke researchers also found that, contrary to popular belief, juries tend to be biased against plaintiffs and their lawyers, not doctors. (Judicature, October/November 1992).

· An American College of Physicians' study concluded that inappropriate and unjustified malpractice awards are "uncommon," and that the degree of physician negligence - not the degree of patient injury - was most closely correlated to the size of awards. (Annals of Internal Medicine, Vol. 117, No. 9, 1992).

· A recent study suggests that skyrocketing health care costs - not the current tort system - are responsible for any increases in size of medical malpractice awards over the years. Because of advances in medicine, more victims live - and live longer, thanks to costly care - which also drives up the size of awards. (Michael Saks, Ph.D., M.S.L., Law, Medicine and Health Care, Vol. 14, No. 2). Even so, the average cost per malpractice claim "for most health care organizations" has decreased in recent years. (Business Insurance, 3/28/94).

(d) Even the total elimination of all medical malpractice claims would save less than 1 percent of health care costs and would not reduce so called defensive medicine.

· The total amount of all liability premiums paid in the United States is approximately $4.8 billion. This amount represents only about 0.65 percent of U.S. health care costs. (Department of Health and Human Services, Office of the Actuary). On average, per-physician premiums (which in turn are inflated by questionable insurance industry practices - "Medical Malpractice Insurance 1985-1991 Calendar Year Expenses: National Insurance Consumer Organization, March 1993) amount to less than 4 percent of practice receipts." (Median Economics, November 4, 1991).

· Costly and unnecessary procedures are likely to be the result of physician profiteering. As Professor Paul Starr notes, doctors "generally make money off the procedures they perform, even if they do them defensively." Even if we eliminated malpractice claims, "by how much would physicians and hospitals voluntarily cut their present revenues?" (The Logic of Health Care Reform, 1992).

· A great number of physicians receive payments and profits for patient referrals and procedures. One recent study concluded that "physician self-referral may cost Americans $40 billion each year in fees for needless and excessive medical treatment." (Harvard Magazine, March/April 1993).

· A 1994 landmark study by the Congressional Office of Technology Assessment on "defensive medicine," the most comprehensive analysis of the issue to date, concludes that a small percentage of diagnostic procedures only are ordered primarily because of conscious concern about malpractice liability. The total direct costs of the medical malpractice system in its entirety represent less than 1 percent of overall U.S. health care costs. The OTA concludes that "most malpractice reforms are unlikely to have much effect on defensive medicine." (OTA Study, 7/21/94).

· Even the extreme cost estimates of doctor-funded studies regarding "defensive medicine" reflect a relatively minimal impact on health care costs. One such study estimated that malpractice reform could save as much as $7 billion a year in "defensive" medical costs (this of course is before deducting for procedures conducted due to profit motive) - only about 0.07 percent of our health care costs. (Lewin-VH1 Study, 1/27/93).

10. Patients injured by negligent medical care deserve full compensation - not caps on recovery.

(a) Awards are not excessive.

Despite questionable anecdotal evidence of uncontrolled jury verdicts, the hard facts show that caps on recovery are unnecessary because malpractice awards are rarely excessive. One recent study on recovery by Duke University found a median malpractice award of only $36,500. (Atlanta Constitution, 2/1/93).

(b) Caps do not lower costs.

Experience at the state level suggests that caps on recovery have virtually no impact on health care costs or doctors' insurance premiums. For example, Indiana's $750,000 cap on total damages and California's $250,000 cap on non-economic damages have not reduced health care costs in any significant way. Indiana's health care cost ranking nationwide was identical before and after a cap, while California's ranking has actually worsened since enactment of a cap. (Families USA Foundation, 1990). Moreover, the malpractice premiums in California increased by 191 percent during the 12 years following enactment of a cap in 1975. (California's MICRA: Profile of a Failed Experiment, 1993).

Despite having no impact on health care or insurance costs, caps on recovery do have a tremendously negative and unfair impact on those victims of malpractice who are most in need of financial protection and security - the permanently or catastrophically injured. Caps prevent these severely injured victims from receiving a fair and adequate level of compensation necessary to compensate them for their substantial loss. Thus, the only effect of caps is to shift the cost burden of severe medical malpractice away from the negligent providers and onto the shoulders of innocent victims.

(d) Caps are unfair.

Caps on non-economic damages have a disproportionately negative impact on women, minorities, the poor, the young, the elderly, the unemployed and other patients who often cannot show substantial economic loss. Since a greater proportion of such patient recoveries are often for non-economic losses, capping non-economic damage awards would have an especially harsh effect on these most vulnerable individuals.

(e) Non-economic damages are real losses.

It is untrue that non-economic damages are simply a way for juries to justify large awards to plaintiffs. The truth of the matter is that, although they may be harder to quantify and evaluate than economic damages, non-economic damages compensate victims of malpractice for real loss. Injuries resulting in loss of sight, disfigurement, the inability to bear children, loss of the senses, excruciating lifelong pain, or the loss of a limb, for example, cannot be measured in terms of lost wages or other economic calculations, but such injuries lead to genuine suffering for which the victim should be compensated.