Last night, the President made his State of the Union speech before both houses of Congress. Among the ideas he put forth were increased money for school drug testing (a pricey logistical nightmare even before considering civil liberties issues), greater Federal student aid for those who take tougher courses (great idea, except for that exacerbating the gap between suburban and inner-city schools which have no advanced programs), and a Federal ban on the use of performance enhancing drugs by professional athletes (never mind that as a part-owner of a baseball team, Mr. Bush knows full well all the leagues have rules which do not require Federal intervention). I will leave it to others to point out the logical and practical issues of these and other issues mentioned by the esteemed Mr. Bush.
I would like to focus your attention on these passages if I may:
Our agenda for jobs and growth must help small business owners and employees with relief from needless federal regulation, and protect them from junk and frivolous lawsuits….
To protect the doctor-patient relationship, and keep good doctors doing good work, we must eliminate wasteful and frivolous medical lawsuits…. By keeping costs under control, expanding access, and helping more Americans afford coverage, we will preserve the system of private medicine that makes America’s health care the best in the world.
It must seem odd that out of all the things said last night, I am focusing on 3 sentences. To be sure, there were intervening paragraphs, but make no mistake: these ideas are one and the same. Do you remember back in the early 90s, when “Health Care Reform” was discussed? Before the conversation went on too long, it was clear that the participants meant “health care insurance reform.” By the mid-90s, they meant little more than “HMO reform.” Another discussion is being fatally limited, as illustrated by the above 3 sentences.
Somehow, politicians and doctors both have gotten it into their heads that “tort reform” and “caps on non-economic damages” are the same thing. They are not. Tort reform is more than damage caps. It is both cynical and disingenuous to propose that a limit on the amount of money a doctor or business can lose in a court case will improve anything for the typical American. How can this be so? Let me count the ways.
1. Such a cap will not, contrary to AMA opinion, bring down liability insurance rates. When the AMA says that caps are “proven” tort reform, they are referring to California’s MICRA statute, which was enacted as part of a more comprehensive plan than a mere cap. Other states where they have enacted liability caps are still facing premium increases of 8-45%. Now, you don’t really think your doctor can afford to not raise prices when one of his largest non-employee expenses is out of control?
Insurance rates are more dependent on the investments of insurance companies than the claims they must pay. With interest rates this low, insurance companies have to raise rates. This is doubly true for publicly held insurance companies who must continually impress Wall Street. If you want lower insurance rates — not just liability, but home, life, health, and even auto insurance — re-mutualize insurance companies and hope Mr. Greenspan has to raise rates sooner rather than later.
2. Damage caps severely limit the rights of average Americans. Anybody can file a lawsuit, and that is truly a double edged sword. As one person put it, “Lawsuits by small people who’ve been injured by big companies is the one thing out there still protecting the little guy.”
Not only will damage caps harm the very people who have been most egregiously hurt through the negligence of others, they limit the ability of such people to obtain legal counsel. As long as lawyers can look forward to a percentage of the final take, there will of course be abuses. That problem is solved by looking at the way lawyers are paid, which is unlikely to happen inasmuch as most legislators are lawyers. Want to cut down truly frivolous lawsuits? Give every judge the authority to declare lawsuits frivolous and compel the plaintiff (or his attorney) to pick up everybody’s legal bill.
3. The much lambasted “mega-verdict” that damage caps seek to eliminate is a tool that juries need, and a tool that businesses need to fear. You don’t honestly think juries return such opinions because they just believe the victim deserves to be a millionaire, do you? They return such verdicts as a punishment to the defendant and a message to the defendant’s competitors: treat people this way and you will be crushed.
Fear of a large verdict actually helps the court system by encouraging out-of-court settlements. Interestingly enough, the poster child for tort reform is asbestos liability. Now, there is no debate that asbestiosis is really bad, but the business world feels that the lawsuits — now against the deepest available pockets — are out of hand. It is of course pure coincidence that Halliburton stands to gain from any tort reform that addresses asbestos.
4. Damage caps would be a boon for large corporations, but would still allow small businesses to be put out of business by lawsuits. Take, for example, the famous McDonalds Coffee Case. A $250,000 million damage cap is little more than a rounding error to a company the size of McDonalds, but it would put almost any corner diner you have ever eaten in out of business. Do you really want to send the message to America’s largest corporations, our largest polluters, our most abusive employers that they can do whatever they want, as long as they pay the $250,000 fine at the end of the trial?
I agree that we must take the Lotto mentality out of our civil courts, but damage caps are not the answer. Instead, make a large percentage of the non-economic damages payable directly to the jurisdiction of the court. The offender gets punished; the windfall is less motivating; and the city or state gets money they badly need. I can’t think of anything not to like about this plan.
Mr. Bush presents you, the voter and taxpayer, with a false “either-or”: either we enact damage caps or costs of everything will spiral out of control. Tort reform isn’t about keeping your family doctor delivering babies. It is about big business covering their assets.