December 31st 2024 | Sasha Kapur
Edited by Grace Gerber
Tort reform, which pertains to personal injury and medical malpractice cases, has long been a contentious issue in American legal and economic discourse. Advocates argue that limiting lawsuits and damage payouts that ensue from these suits is essential to curbing excessive litigation, reducing insurance premiums, and stabilizing the economy. Despite the widespread adoption of tort reform measures across the United States, there is little evidence to suggest that these reforms effectively achieve their stated goals. This article argues that the Michigan Model—a system implemented by the U-M Health System that focuses on improving communication between physicians and patients, increasing transparency, and applying a rational basis test to evaluate liability claims providesl— a more balanced and legally sound approach to tort reform. The approach can be summarized as “Apologize and learn when we’re wrong, explain and vigorously defend when we’re right, and view court as a last resort” [1]. To understand the potential of such a reform, it is important to first consider the current state of tort reform, its shortcomings, and the effectiveness of alternative approaches such as the Michigan model.
The current tort reform measures that have been enacted across the United States, particularly in industries like healthcare, have been attributed to perceived “runaway” lawsuits. According to attorney Michael Menapace, “Runaway litigation… [is when] insurers’ claims expenses [increase] faster than the general inflation, generally due to some combination of increased litigation costs, defense costs, a higher percentage of plaintiff verdicts, and… jury awards that are increased.” [2]. Throughout the past decades, new methods of reform have been attempted to reduce frivolous litigation. For example, damage caps, which are legislative limits placed on the amount of compensation a plaintiff can receive in a lawsuit, have been enacted particularly in personal injury cases to limit the excessive payouts. So far, 29 states in the country have implemented damage caps, under the premise that they reduce litigation costs and stabilize insurance premiums [3]. One example of this policy is the Texas 2003 Law HB4 Texas Civil Practice and Remedies Code section 74.301: it states that caps are set at $250,000 against each health care facility, not exceeding $500,000, and $250,000 against multiple individual health care providers [3].
Limiting punitive damages are another type of reform, as punitive damages are applied on top of compensatory damages, but they are less common. Some states have reformed liability standards to make it more difficult for plaintiffs to prove negligence or fault. For example, Florida statute §766.202 reforms include modifying the standards for medical malpractice claims, requiring that both parties to a potential lawsuit investigate the validity of a claim before being allowed to file a lawsuit. The statute explicitly defines “investigation” as the plaintiff’s “attorney [having] reviewed the case against each and every potential defendant and… consulted with a medical expert and… obtained a written opinion from said expert” [4]. These standards delay the process of people getting the case to court and obstruct their ability to get justice and the required money needed to cover damages.
Proponents of these reforms argue that by limiting the amount of compensation available to plaintiffs, insurance companies will be able to lower premiums for healthcare providers and other businesses, which reduces overall costs to consumers. However, the evidence in support of their effectiveness is mixed at best. For example, studies have shown that damage caps and limits on punitive damages do not always result in the expected reduction in insurance premiums; in some cases, insurers continue to raise premiums despite the implementation of these reforms. This can be seen when comparing the premium to cost ratio and the percentage change in the ratio from 1999-2001 to 2015-2017 in states that had old damage caps, new damage caps, or no damage caps. In the 1999-2001 baseline, the New-Cap States had an average ratio of 2.73, in-between the 2.30 average for the No-Cap States, and the 3.61 average for the Old-Cap States [5]. By 2015-2017, in contrast, the average ratio in the New-Cap States had risen by 211% to 8.49, which was far more than the 63% rise in the Old-Cap States or the 98% rise in the No-Cap States [5]. The substantial increase in New-Cap premium to cost ratios proves that there was significant growth in insurance premiums relative to costs, which was the opposite of what was intended. Meanwhile, the Old-Cap States, which already had caps in place, saw a more modest increase, suggesting that established caps may have helped stabilize the growth of premiums relative to costs, but they increased nonetheless. Notably, decrease in insurance premiums never occurred. Additionally, damage caps have faced challenges in the courts of nine states for potentially violating the constitutional rights of plaintiffs [3]. For example, in Florida’s McCall v. United States, a 2014 case following the tragic death of a 20-year-old student during childbirth, the court found that the statutory damage cap violates the Equal Protection Clause of the United States Constitution because the statute less favorably impacts circumstances when there are multiple claimants/survivors compared to cases when there is only a single claimant/survivor [3]. There is also concern that it violates the right to a trial by jury, guaranteed by The U.S. Constitution, as a cap violates the jury’s role in determining damages. In Kansas’s Hilburn v. Enerpipe LTD 2019 truck accident case, the Kansas Supreme Court found that Kan. Stat. Ann. 60-19a02 violates victims’ rights under section 5 of the Kansas Constitution Bill of Rights because it intrudes upon the jury’s ability to determine the amount of compensation required as appropriate compensation for pain and suffering damages [3]. Since the implementation of damage caps often limits the compensation available to victims of medical malpractice or other negligence, injured parties tend to be left with insufficient funds to cover their medical bills or lost wages. While tort reform may seem to offer a straightforward solution to the issues of litigation costs and economic instability, there is little empirical evidence to suggest that it effectively addresses these concerns.
Similarly, the claim that tort reform will stimulate economic growth is also not supported by solid evidence. Advocates argue that businesses will be more willing to invest, hire, and innovate by reducing the risk of large jury verdicts. However, there is no clear evidence to suggest that tort reform has a significant impact on overall economic growth. However there is evidence that high tort costs can cause losses within the state economy, yet it is unclear if tort reform has even rectified these losses. Instead, many studies have found that tort reform measures primarily benefit large corporations and insurers, as opposed to the broader economy. From 2000-2017, the average premiums in New-Cap States rose 19%, from $29,000 to $34,000, even though costs fell over this period by 63%, from $35,000 to $13,000 [5]. The damage cap reforms solely benefited insurers rather than patients or the economy.
The shortcomings of these reforms point to the need for a more balanced and nuanced approach. While it is clear that there are issues within the tort system, the solution does not lie in blanket damage caps or other restrictive measures that disproportionately harm plaintiffs.
One promising alternative to traditional tort reform is the Michigan Model. The Michigan Model has several key components that make it a more balanced and legally sound alternative approach to tort reform. One aspect of the model is improved physician-patient communication, since lack thereof is one of the primary drivers of medical malpractice lawsuits. The Michigan Model emphasizes improving these lines of communication by encouraging physicians to take the time to explain procedures, risks, and treatment options, as well as emphasizing the need to be more transparent about errors made during treatment to prevent lawsuits from occurring in the first place. When physicians acknowledge their mistakes and take responsibility, patients are often more inclined to accept an apology and move on, rather than pursue a lawsuit. This approach has been shown to reduce the number of malpractice claims and, thus, the cost of defending those claims in court. After the University of Michigan’s implementation in 2001, malpractice claims dropped by 36% through 2007, which led to attorney and patient compensation costs dropping by 59% [6]. The Michigan model also applies a rational basis test to evaluate liability claims which simply means evaluating if the law was out of its collective mind when it passed a law; if it was not, the courts will uphold the law at issue [7]. By applying a more rigorous and logical standard of proof, the Michigan model helps filter out frivolous or weak claims, while ensuring that legitimate claims still have a path to redress.
The Michigan model has demonstrated success in reducing malpractice lawsuits and improving patient satisfaction, all without resorting to drastic measures like damage caps. By focusing on prevention, communication, and fairness, the Michigan model offers a more comprehensive and equitable solution to the issues associated with tort reform.
As we confront the limitations of traditional tort reform, the Michigan Model is a transformative approach that balances patient rights, accountability, and legal efficiency. While caps and restrictive measures have aimed to control costs, evidence reveals they fall short of delivering these benefits and instead restrict patients’ access to fair compensation and constitutional rights. The Michigan Model provides a meaningful and ethically grounded alternative that mitigates litigation without undermining the rights of patients. This approach demonstrates the potential for a healthcare system that prioritizes patient well being and transparency. Moving forward, the expansion of this model could reshape the landscape of malpractice reform across the United States, and may promote a legal framework that serves not just economic stability, but the deeper trust and safety at the heart of the doctor-patient relationship.
Sources:
[1] “Michigan Model for Medical Malpractice and Patient Safety.” University of Michigan Health. Accessed November 8, 2024.
https://www.uofmhealth.org/michigan-model-medical-malpractice-and-patient safety-umhs.
[2] “Is Runaway Litigation a Real Issue? Three Experts Explain the Phenomenon and How It’s Affecting the Insurance Industry.” Risk & Insurance. Accessed November 8, 2024. https://riskandinsurance.com/is-runaway-litigation-a-real-issue-three-experts-explain-the-phenomenon-and-how-its-affecting-the-insurance-industry/
[3] “Medical Malpractice Damage Caps in Maryland.” Miller & Zois. Accessed November 8, 2024. https://www.millerandzois.com/medical malpractice/maryland-medical-malpractice-cap/malpractice-damage-caps/.
[4] “Neither Goose Nor Gander: Why Tort Reform Fails All.” The Florida Bar Journal. Accessed November 8, 2024. https://www.floridabar.org/the-florida-bar-journal/neither-goose-nor-gander-why-tort-reform-fails-all/#u6a59.
[5] Hyman, David A., and Charles Silver. “Out of Control? Comparing Medical Malpractice Systems in the United States, the United Kingdom, and Australia.” SSRN, July 25, 2022. https://ssrn.com/abstract=4151271.
[6] Sommers, Christina Hoff. “The Michigan Model for Malpractice Reform.” The Wall Street Journal, May 11, 2015. https://www.wsj.com/articles/the-michigan-model-for-malpractice-reform-1431300074.
[7] Maurer, William. “How the Rational Basis Test Protects Policing for Profit.” University of Michigan Journal of Law Reform, 2021. https://repository.law.umich.edu/cgi/viewcontent.cgi?article=2533&context=mjlr
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