Some Semi-Random Thoughts

One thing that comes to mind when issues regarding increased influence by the government in healthcare. Today there are no public hayrides. Why? Because somewhere someone decided they could sue if some rambunctious teenage got hurt during the ride … which mean insurance was required … which meant no more hayrides. How much public interest in health care of this sort not give increased impetus to control risk or other behavior deemed not necessary if that activity has but the smallest negative impact on public health and subsequently public insurance rates. Hayrides are harmless romantic fun that were once common in the New England autumn. Now they are only a private affair hidden from any organized groups that might be subject to suit.

There is a notion among so many today, and my impression is that this idea is found more on the left than the right, that if someone is injured especially badly then there is necessarily another at fault. Actual accidents do not exist in their world. And that it is right to use legal proceedings after any substantial injury to redress the wrong and to locate (or invent) a guilty party and get them to pay. This is, I think, quite a childish impulse. I don’t understand how an adult can act on such an idea in the absence of evidence or any suggestion of malfeasance or malice.

Negligence is often cited as a cause for accidents and used as a proxy for fault. Tiger Woods occasionally misses a nominally routine putt. Jose Calderon has an 2008/9 NBA free shooting percentage of 98.052%. Why not 100%? After all free throws are routine. The point is that humans performing any routine activities will occasionally fail or introduce a mistake. Accidents can occur which are not intentional and are not actionable. All too often an error is cause for suit even when it is an “honest” mistake. An obvious rejoinder is that this is what courts are for, to distinguish between honest mistakes and ones which arise from malice, greed, or other intentional errors. And yes, that is the case. But the courts should not be the place where this issue is explored, but the place where evidence of error is tried.

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15 comments

  1. I don’t think you’ll find anybody who disagrees.

  2. Boonton says:

    Technically you’re not really talking about gov’t involvement in healthcare. Lawsuits are actually more about private property rights. The legal concept of a tort is that one entity did something to violate your private property and you are seeking redress in the courts. Yes you can press the point, if you’re an anarchist type, that this is ‘government involvement’ but it would also be gov’t involvement when a clothing store calls the police because they caught a shoplifter.

    Perhaps the answer is to actually push for some gov’t intervention. How about a two track system. One would be mandatory insurance for professionals to cover ‘honest mistakes’. A bit like workman’s comp., if you’re injured by an ‘honest mistake’ you apply to it for compensation including lost wages, follow up medical care etc. Doctor’s would all be paying into the insurance bucket so the rates should be reasonable but you could allow the insurance companies to charge a penalty for doctors who amass a large number of ‘honest mistakes’. The other track would be the traditional tort system where you have more egregious conduct. These would include punative damages, a portion of which will be ‘taxed’ into the ‘honest mistake’ insurance pool to keep rates reasonable.

    Basically, if you’re hurt by an honest mistake you don’t have to bear the cost by yourself and you don’t need to file a million dollar lawsuit. I’m thinking this could be kind of similiar to ‘no-fault’ auto insurance where you give up your right to sue beyond ‘economic damages’ in exchange for lower rates.

  3. Boonton says:

    Something else, economically the lawsuits shouldn’t really be an issue. Say a certain type of medicine is high risk. Let’s say fertility treatment for women 45 and over. Let’s imagine two regimes taken by two different states both of which are generally free market. One state makes it very easy to sue and win if results end up badly. The other makes it very difficult.

    In the first state, doctors must asorb the losses which would result in higher insurance premiums and so on. But they would also respond by raising prices. Likewise, in the second state patients almost always asorb the costs when things end up badly. Doctors have lower costs and therefore presumably could charge lower rates.

    So who really pays? It depends on who really needs it bad. If patients really want this service no matter what, they will end up paying for it. They will either pay the higher rates (in which case the cost is just a pass through for the docs). Or they will pay by accepting the risk that they will have no recourse should things go badly. In this condition, doctors in both states make a nice income because they are providing a service that is highly demanded.

    Now imagine the patients are indifferent to this service but the doctors have few other options (say they undertook years of special training and now have student loans and few other fields they can transfer their skills too). In the first state the doctors must accept the higher insurance costs by lowering their income because they can’t effectively pass it onto the consumer. In the second state, doctors still have to ‘make up’ the additional risks consumers have by lowering their rates even more. (See for example how the car companies are offering ‘incentives’ that make your car payments if you loose your job. Legally if you loose your job you have no right to stop making your car payments. In real life the law is almost an afterthought compared to market conditions). Here doctors make lower income because they are providing a service that is not greatly demanded.

    This is very similiar to Coarse’s Theorem, which basically said as long as there’s a property right in the environment an optimal solution would be reached regardless of where the law decides to place that right.

  4. Mark says:

    JA,
    In part this arose from an old discussion with a liberal friend of mine (my boss actually) who thinks otherwise, i.e., that whenever there is an accident there is someone to blame or at fault and they should be liable.

    Boonton,
    And yes, I’m not specifically thinking about government and healthcare here.

    If I were to push for government involvement, I’d want more court officials and juries to have reasonable expectation (I termed it “adult” above) as to what constitutes grounds for suit and to act accordingly.

  5. Boonton says:

    Sure I think the law should be set up fairly, but it seems there’s a good economic argument from theory why this won’t actually do much good. The market is able to compensate pretty well (not perfectly of course) for out-of-balance legal systems.

  6. Mark,

    In part this arose from an old discussion with a liberal friend of mine (my boss actually) who thinks otherwise, i.e., that whenever there is an accident there is someone to blame or at fault and they should be liable.

    Well that’s obviously stupid. I’m inclined to give your liberal friend the benefit of the doubt though, because I’ve seen how you mangle things I’ve said even when they’re in writing and right in front of you. 😉

    But seriously, an honest (i.e. non-negligent) mistake shouldn’t be a crime or incur punitive damages. I do think there should be some reasonable way of spreading out the costs of those mistakes when possible (e.g. insurance, as Boonton points out.)

  7. Boonton says:

    Actually, it’s not impossible to imagine in our hypothetical world where it is very hard to sue doctors that the malpractice insurance companies wouldn’t respond by selling insurance directly to the patients. Doctor messes up, we’ll compensate you. In fact, such insurance might be demanded as part of normal health insurance the way American Express gives you automatic life insurance while travelling.

    But I don’t want JA to misunderstand me. I’m not saying we need a reasonable system. I’m saying even an unreasonable legal system, even one that is unfairly stacked against doctors or patients should fundamentally make little difference. The market should be able to compensate for either. This speaks wonders about the power of markets but it is kind of bad news because it says whatever merit there is to ‘fixing’ malpractice it isn’t any magic bullet as far as healthcare price or quality is concerned. It’s not going to make a difference.

  8. Mark says:

    Boonton,
    Your faith in the market is commendable, but needs adjustment. Illinois is very unfriendly to doctors vis a vis malpractice. There are 0 neurosurgeons south of Joliet in this State because the squeeze between insurance payouts for practice and insurance costs for malpractice caused a market adjustment. That market adjustment alas was … for the doctors to move to a different state. Illinois is a very big state and Joliet is far north. There are a lot of people who have no emergency specialists available in case of stroke.

    We have a severe shortage of OB/G doctors as well. With insurance making payments, shortages of doctors don’t affect price even if they should. So you get other shortages.

  9. Boonton says:

    There are 0 neurosurgeons south of Joliet in this State because the squeeze between insurance payouts for practice and insurance costs for malpractice caused a market adjustment.

    Or more exactly there are 0 neurosurgeons south of Joliet because demand for them is insufficient. As was pointed out, malpractice regime should not make much of a difference. The market is paying neurosurgeons more because they are getting two goods from them, surgery plus a type of insurance in the sense that the malpractice law makes it easier to collect if results are bad.

    What you propose as a ‘fix’ is to remove one of those goods. But if the patient is getting less for his money he is going to insist on paying less (or his insurance company will be less eager to reimburse neurosurgeons what they want to get paid considering that they will be stuck with the costs of botched operations).

    But what you haven’t done is show your ‘fix’ is more efficient than the markets. Market fixes can include labor substitution (use other specialists for most conditions, send paritents needing surgery to Chicago), drugs, or rigerous evidence based medicine to minimize risks of errors. Long and short is your fix may or may not result in neurosurgeons setting up shop south of Joliet. If that’s your measure of success, it’s probably more efficient to just fund one directly.

  10. Mark says:

    Boonton,
    ??!? Illinois has 12 million people, of which 5-6 million are in the Chicago area. That leaves quite a few not in the Chicago metro area … but I’ll be generous. Say there are only 1 or 2 million or so living south of Joliet. Do you pretend they never have strokes?

    Look you claimed

    This is very similiar to Coarse’s Theorem, which basically said as long as there’s a property right in the environment an optimal solution would be reached regardless of where the law decides to place that right.

    This is wrong. It hasn’t happened. And yes, the “send patients” to other locations (north to the Chicago metro area or out of state) necessarily occurs. You do know that strokes have a short time window for treatment, after which the effects are not reversible. So the fix is patients die or have irreversible damage. How is that “optimal?” The point is market cannot fix the environment resulting from any and all bad laws.

    The problem is bad malpractice law making an environment hostile to practicing law. You claim economic methods will overcome this. It hasn’t. The market fix is death and permanent damage.

    It isn’t a matter of demand. Insurance pays set amounts for services. Malpractice insurance costs certain amounts. That economic balance in Illinois means that there are no neurosurgeons working in the smaller hospitals in Illinois where the larger budget of a large teaching hospital in the metro area (with government support) can supplement the pay and attract a neurosurgeon.

    they want to get paid considering that they will be stuck with the costs of botched operations

    These aren’t botched operations. They are procedures that are risky. If a procedure has a 25% chance of success because it is hard to do, that doesn’t mean failure means it was botched. The fact that Tiger Woods has to putt on the green doesn’t mean he “botched” dropping it in the hole from 150 yards.

  11. Boonton says:

    That leaves quite a few not in the Chicago metro area … but I’ll be generous. Say there are only 1 or 2 million or so living south of Joliet. Do you pretend they never have strokes?

    Is a neurosurgeon the only option for proper stroke treatment?

    You do know that strokes have a short time window for treatment, after which the effects are not reversible. So the fix is patients die or have irreversible damage. How is that “optimal?” The point is market cannot fix the environment resulting from any and all bad laws.

    You seem to misunderstand my supposed ‘overfaith’ in markets and your own excessive faith in them. Markets efficiently balance supply and demand. It’s quite possible that even with several million people living south of Joilet there is simply not enough demand for neurosurgeons for them to set up a practice. It doesn’t matter that these people ‘need’ one. Your definition of need is not the market definition but the central planner’s definition (imagine a fat communist planner toiling away in some giant office building….’there shall be at least one neurosurgeon within any circle of radius 50 miles that holds at least 300,000 people’)

    Maybe this is the case and we should supplement the market result with a public allocation to provide for neurosurgeons in more rural areas.

    The problem is bad malpractice law making an environment hostile to practicing law. You claim economic methods will overcome this. It hasn’t. The market fix is death and permanent damage.

    YOu forget the model and argument. If demand from patients is high, which I would imagine it would be considering that when you have a stroke it’s very important to get treatment fast and there’s not a lot of competition between suppliers south of Joilet, the actual cost of the malpractice gets incurred on the part of the patients, not the doctor. The doctor simply acts as a pass through.

    These aren’t botched operations. They are procedures that are risky. If a procedure has a 25% chance of success because it is hard to do, that doesn’t mean failure means it was botched.

    It doesn’t really matter. Say the malpractice law gives you a 50-50 shot of successfully winning when the procedure goes bad. What you’re then talking about is for your money you are buying a procedure that has a 75% chance of success, a 12.5% chance of failure with compensation, and a 12.5% chance of failure with no compensation. If that changes because malpractice law is ‘fixed’, you have a product that has a 75% chance of success and a 25% chance of failure with no compensation. Clearly the second product is inferior and not worth as much money. Of course it sounds like a good deal to neurosurgeons. Because you’re essentially saying that you’re going to let them provide a lesser quality product but get paid the same amount. Well that would be a great deal for any of us (come to work 4 days a week instead of 5 but get paid the same!). But you’re assuming the world is static, it’s not. It is more dynamic and such a change in the product’s quality would be meet by a change in demand for it.

    Also I’m a bit surprised you want to make this your focal point. Don’t you think it’s kind of useful to have an economic incentive against procedures that tend to have unpredictable results? One of the great innovations has been moving away from having to depend on highly skilled surgeons who, like Tiger Woods, can often work wonders but sometimes fumble and towards other treatments like drugs and devices that can produce more consistent results with less inexplicable error.

  12. Boonton says:

    BTW,

    http://en.wikipedia.org/wiki/Neurosurgeon seems to imply that neurosurgeons do a lot more than simply treat strokes, which means it may not necessarily be irrational to find them mostly clustered around major health centers like Chicago. Surgery is a big deal and neurosurgery seems like a big deal in a big deal. I wouldn’t be surprised if this represents a very small group of elite doctors who would cluster in major medical centers, not scatter into numerous small towns and counties like general practitioners.

    http://en.wikipedia.org/wiki/Stroke#Diagnosis under ‘treatment’ seems to indicate that the best immediate treatment for stroke is not surgery but a ‘stroke unit’ in a hospital staffed by nurses and therapists trained in strokes. If this is the case, it again may be totally rational for neurosurgens to cluster near Chicago (receiving patients from around the area after they have been stablized in stroke centers)

    As for no neurologists south of Joilet?

    Well here’s Marion
    http://yp.yahoo.com/py/ypResults.py?&city=Marion&state=IL&zip=62959&uzip=62959&msa=0000&slt=37.730789&sln=-88.933029&cs=5&stx=92210560&stp=y&desc=Neurology&doprox=1&beyond=1&sorttype=distance&stat=ClkByndLower

    Peoria
    http://yp.yahoo.com/ypResults.py?stx=92210560&stp=y&desc=Neurology&city=Peoria&state=IL&uzip=61602&msa=6120&slt=40.692829&sln=-89.59053&cs=4

    Decatur
    http://yp.yahoo.com/ypResults.py?stx=92210560&stp=y&desc=Neurology&city=Decatur&state=IL&uzip=62523&msa=2040&slt=39.840229&sln=-88.954269&cs=4

    and Springfield
    http://yp.yahoo.com/ypResults.py?stx=92210560&stp=y&desc=Neurology&city=Springfield&state=IL&uzip=62701&msa=7880&slt=39.801479&sln=-89.64209&cs=4

    It would seem like the facts do not support your assertion.

  13. Boonton says:

    One thing that makes me skeptical of claims that malpractice is really The Problem (rather than just a problem in certain limited areas or cases), is that there hasn’t really been a lot of market response to it.

    I read not too long ago that many malpractice insurance companies have done very little data mining, little analysis…..their approach to setting premiums is basically straight forward simplistic calculations like “1 out of 100 results in a $5M settlement therefore the premium is $50,000”. Look at auto insurance. They have figured out not only what type of risks to expect based on driving records but also factored in credit scores, marriage status, occupation, and a whole bunch of other variables.

    Now imagine this: You’re having a high risk operation that has a 25% chance of a bad result. Sure you could sue for malpractice but it could take years and may result in nothing….just as much as it could result in a huge windfall. Suppose a malpractice firm offered insurance directly to the patients. If things go bad you get your medical bills paid for plus a set amount. Not as much as you would if you took it to trial and won big but you wouldn’t have to worry about winning or wait for a trial.

    The condition of this is that you waive the right to sue the doc for malpractice unless the insurance company agrees with you that he was at fault. (You could bring professional charges against him if you really feel he acted improperly, but you get no payout for that).

    In exchange for this the doctor can get lower malpractice premiums (fewer people will be able to sue him). To the degree that skill can lower the rate of problems doctors who achieve lower rates of bad results can boast that their patients can buy the policies for a lower premium.

  14. Mark says:

    Boonton,
    As I’ve pointed out, insurance practices today have disconnected in a large measure market forces from our health care economics. Recall that it is in the insurance companies long term interest for health care costs to rise not fall.

    I’ve offered in the past that I might waive my right to sue in return for not having to pay for coverage … but I was informed (by a lawyer friend) that it not possible to sign away or waive your right to suit. I didn’t press him for details of why that was the case. I would prefer that for myself, btw.

  15. Boonton says:

    I suspect it’s probably more that the other side isn’t going to buy that the waiver could stand up in court….there might also be professional codes here (basically you’re trying to sign a document that gives your doctor the green light to commit malpractice…I’m not sure that’s great public polic).

    The insurance, though, might be easier because you’re essentially buying the policy for the doctor rather than having the doctor buy the policy for himself. I don’t see an obvious reason why the market couldn’t create it and in some respects such policies already exist. For example, if you are carrying life insurance and/or disability insurance on yourself you can collect should a medical procedure go very badly. This would just make it a bit more explicit.

    AS for insurance companies having an interest in costs rising. I’m not sure I buy it.. I remember chatting with a friend’s husband once….he was an interesting character. He had a degree in chemical engineering but never used it. Like every other male member of his family he made a living buying and selling jewerly. I remember asking him how he felt about gold prices. Did he like them going up or down. He said down. He found it was easier to sell more items and make money rather than fewer items for a higher price.

    I don’t see why insurance companies wouldn’t follow the same logic. Look at auto insurance. If those companies have an interest in rising costs, they hide it well. They are always pushing for safer driving, better cars, and so on. The last big change in health insurance was the migration to managed care which is essentially about squeezing costs out of the system….which is why we have all these ‘networks’ of doctors.