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The Business Side of Medical-Liability Reform

June 13, 2003

When the Legislature meets in special session (June 16-19, 2003), to debate medical-liability insurance reforms, every business person in Florida should watch closely because medical malpractice is an issue that hits your bottom line.

We’ve all read the newspaper reports about doctors limiting or closing their practices and emergency rooms shutting their doors because of the high costs of medical-malpractice insurance. The medical-liability crisis diminishes the affordability of health care, and its availability, a consequence that concerns all employers.

Medical malpractice is a business issue for the following reasons:

  • Cost of Health Care. Employers provide most of the health insurance coverage enjoyed by Floridians. As the medical-liability crisis drives up the cost of health care, fewer employers will be able to afford the cost of health insurance. When the number of insured citizens grows, so do the indirect costs to employers who provide the bulk of the tax revenue that is spent on Medicaid and nonreimbursed care. In Florida health-care costs are also artificially inflated by the practice of defensive medicine, which is defined as treatment or care that is provided in order to shield the provider from liability rather than improving the health of the patient. Those costs are passed on to employers in the form of increased health insurance premiums.

  • Access to Quality Health Care. The medical-liability crisis is not an indicator of the quality of health care Floridians enjoy. In fact, this crisis threatens to dismantle a first-class system by driving out top notch physicians, who will be replaced by physicians with less experience and skill. In some parts of the state, doctor shortages in certain high-risk specialties — including obstetrics and neurosurgery — will leave patients without access to necessary care. Elsewhere, highly trained doctors will leave the state, only to be replaced by providers with inferior backgrounds, training, and professional reputations. In some parts of North Florida , residents will have to cross the border into Alabama or Georgia to obtain critical care.

  • Economic Development. Our state’s topnotch health-care system is an asset when employers are considering whether to relocate to the state or expand existing operations. Quality health care reduces costs for employers by reducing insurance premiums and by increasing worker productivity. World-class doctors and top-rated medical facilities attract high-income citizens from South America who spend enormous amounts of money for care that is unavailable in their home countries. The money they spend in Florida health-care facilities helps subsidize the benefits the rest of us enjoy. In addition, these overseas patients spend money on hotels, restaurants, and shopping while they are here, providing another economic boost. Health-care facilities in nearby states are actively competing with Florida for this much-desired source of revenue. They are also actively recruiting some of our best doctors to move out of state. When the best doctors leave, much of this medical-care business will follow, to the detriment of all of us who remain.

There is only one solution to the medical-liability crisis that can bring immediate and lasting relief and that is litigation reform. A study conducted in 1996 by two Stanford University researchers found that reducing exposure to medical-malpractice lawsuits resulted in reductions of five to nine percent in health-care expenditures without substantial effects on mortality and medical complications.

Governor Jeb Bush has released a medical-liability reform package that covers a broad array of recommended changes that can be divided into three broad categories: quality of care; insurance reform; and lawsuit reform (click here to view an outline of the proposal).

The two most important provisions that will promote access to and availability of health care are bad-faith reform and a cap on non-economic damages. The first of these will bring about an immediate reduction in premiums paid by doctors and the second will provide lasting relief from the steep upward ratcheting in the cost of insurance.

By no coincidence, those two provisions are the most controversial because they strike at the heart of the lucrative business of suing doctors. Reform opponents will claim that a cap on non-economic damages puts an artificial limit on the pain and suffering of victims of medical malpractice. That is true, but pain and suffering is, by definition, a highly subjective condition; how can anyone determine its depth, much less but a price tag on it?

In the final analysis, the cap on non-economic damages fulfills a greater public interest: ensuring access to and affordability of quality health. It is not intended to trivialize the suffering of malpractice victims, which is immeasurable, but to protect all of us who require a doctor’s care, now or in the future.

The bad-faith reforms proposed by the governor are designed to help reduce premiums paid by doctors right now. Florida ’s bad-faith law is decimating the malpractice-liability insurance market because it forces insurance companies to settle claims that they otherwise would take to trial. Florida ’s bad-faith law simply makes a court trial too risky, even if the insurance company has a good chance of winning the case. The governor’s bad-faith reform proposal simply restores Florida ’s law to the standards that currently prevail in other states.

We will be providing you with further analysis throughout the next week on the details of this complex and emotional issue, and the actions taken by the Florida Legislature.

Stay tuned and fasten your seat belts; it’s going to be a bumpy ride.