Thursday, May 8, 2008

Medical Malpractice: Actors, Flaws, and Reform (III)

               Last week, I started this series on  medical malpractice litigation here and here.  This week, I continue with the flaws.

II.     Flaws (cont.)

Delay

               The uncertainty as to both liability and pain and suffering leads inevitably to delay.  As lawyers contest uncertain standards, time passes.  A recent study by a team of researchers from the Harvard School of Public Health considered a random sample of 1,452 close medical malpractice claims.  David M. Studdert et al., Claims, Errors, and Compensation Payments in Medical Malpractice Litigation, 354 New Eng. J. Med. 2024 (2006).  Of the claims examined, the average time between injury and resolution was five years, and one in three claims took six years or more to resolve.  Id. at 2031.  That’s a long time for an injured claimant—who may have medical bills and be out of work—to wait for compensation.  It’s also a long time for a physician to be distracted—via worry, depositions, etc.--from patient care.

Transaction Costs

               The uncertainty requires litigants to obtain costly assistance from lawyers and expert witnesses.  The delays in the resolution of claims ensure that litigants will pay these expenses for a considerable duration.  Thus, medical malpractice litigation has a third major flaw:  high transaction costs.

               On the plaintiff’s side, the contingent fee absorbs from 33% to 40% of the award.  On the defense side, insurers pay an hourly rate (which over the course of a case lasting several years can become significant).  Finally, in 2002, the late Professor Gary Schwartz estimated the total expenses for a malpractice action for a plaintiff (not including attorney’s fees) was at least $50,000 (mostly for expert witness fees).  Gary T. Schwartz, Empiricism and Tort Law, 2002 U. Ill. L. Rev. 1067, 1071. 

               In the 2006 study conducted at the Harvard School of Public Health, the authors analyzed the transaction costs as a percentage of the plaintiffs’ recovery in their sample of malpractice actions.  The combination of defense costs and standard contingency fees charged by plaintiffs’ attorneys (the latter estimated by the authors at 35 percent of the liability payment) brought the total costs of litigating the claims in the sample to 54 percent of the compensation paid to the plaintiff.  In other words, plaintiffs recovered only 46 percent of each dollar spent on their cases.  Studdert et al., 354 New Eng. J. Med. at 2031.

--CJR

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