Kerry Tort Reform Roundup
After yesterday's "semi-seaky leaky" on Sen. Kerry's tort reform proposals we've seen a modest discussion about med mal reform from Medpundit, Declarations & Exclusions, and Overlawyered.
No one has mentioned the ironic quote "I bet most people in this room don't know that there is a policy." If there really was a policy before yesterday, wouldn't one think that there would have been a bigger roll out (hence the snarky "semi-seaky leaky" from above). I think the policy is in direct response to quotes like the following.
The choice of former personal injury trial lawyer John Edwards as Senator Kerry's running mate is a huge victory for personal injury lawyers and those who do not believe in personal responsibility," said Jeff Longstreth executive director for Ohio Citizens Against Lawsuit Abuse (OCALA), a non-profit, grassroots public education organization that represents over 6,000 Ohio citizens. (from CNSnnews)As a result we have the trumping of federalism by disbarring offensive lawyers (I think the states would be upset if the federal government started disbarring lawyers from practicing in state courts). And, we have the potential for a federal law on punitive damages (again something that has historically been the state's purview). Further, the Kerry policy statement clams that Sen. Kerry, if elected, will eliminate the "special privileges that allow insurance companies to fix prices and collude in ways that increase medical malpractice premiums." Congress has given the states the power to regulate state insurance prices. Congress also left it up to the states as to whether they wanted the insurance industry to be subject to the antitrust laws. One can argue whether the states do a good job at policing the insurance industry and one can argue whether the insurance industry should be policed; however, it is not clear that the medical malpractice problem is an insurance problem. It is difficult to price insurance if the risk of loss is unknown or unestimatable. If this was a typical insurance problem smart guys could come up with a pricing model that would generate competitive prices for med mal coverage. However, when there is legal uncertainty there is no model that can deal with a random and potential extreme value event. Hurricane and Earthquake pricing for homeowners insurance suffers from many of the same problems. (After a big hurricane or earthquake we hear the same type of complaints that we hear in med mal markets today.) Further, firms are leaving the med mal market. That doesn't sound like a business that people are just dying to enter to make more money. It might be true that there are barriers to entry in med mal--the barrier being that one understands the risks. Because of the legal uncertainty fewer firms are comfortable with taking on risks. This brings us back to the potential for reducing legal uncertainty which is likely best undertaken through tort reform, not insurance regulation. Again, the largest med mal providers in a given state tend to be owned by the docs. The doctors don't have the incentive to overcharge themselves and then complain about tort lawyers.
