Competition of Rules-Medical Malpractice is a State Issue

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During a recent speech in Collinsville, Illinois, President Bush told the story of Leslie Scariano, a local obstetrician/gynecologist whose malpractice premiums “have skyrocketed out of control.” He explained that “she couldn’t afford to stay in practice. She had a choice to make: quit practicing medicine or go broke.”

Actually, Scariano had a third option. “I don’t want to quit practicing medicine and I’m not going broke,” she told the president, “so I’m going to move to Colorado.” Bush estimated that “Leslie’s premiums will be about 80 percent lower in Colorado than here in Illinois.”


The anecdote was supposed to reinforce Bush’s call for national limits on medical liability. Instead, it suggested why federal action in this area is neither necessary nor appropriate. Scariano voted against Illinois liability law with her feet, and this is the sort of message a state ignores at its peril.

Under our federal system, each state decides for itself how to balance the interests of patients injured by medical malpractice against the interests of doctors and patients who suffer when damages are too high and too easy to win. If it gets the balance wrong, the consequences can be seen in escalating insurance premiums, defensive medicine (unnecessary tests and procedures motivated by fear of liability), rising health care costs, and specialist shortages. The state becomes a less attractive place for doctors, for employers, and for residents generally.

As Cato Institute senior fellow Robert A. Levy notes, Mississippi used to be known as a “judicial hellhole,” a state with such loose liability rules that the U.S. Chamber of Congress decried its “jackpot justice” and warned businesses to stay away. “Doctors fled or quit, and 71 insurance companies stopped doing business in the state,” Levy says. “The result: a new law that caps pain-and-suffering [awards], medical malpractice [judgments], and punitive damages.”

In other words, competition from other states with stricter rules led Mississippi to adopt reforms similar to the ones President Bush is pushing at the national level. That’s how federalism is supposed to work: When an experiment in one laboratory of democracy goes awry, legislators can copy the approach of other laboratories whose experiments seem to be more successful.

But if Mississippi’s reforms were a good idea, why shouldn’t Congress impose them on the whole country? Two reasons: First, the changes may create problems that are not immediately apparent, in which case it will be useful to have 49 other variations for comparison purposes. Second, the Constitution does not empower Congress to dictate how states adjudicate disputes between patients and doctors.

“When I was governor of Texas,” Bush said in his speech, “I felt that we could solve medical liability issues at the state level.” He said he changed his mind for two reasons.

“One is that a state would pass good medical liability reform, and all the trial lawyers would do is go to the state that has lousy medical liability law,” he said. “So you’re not solving the problem; you’re just shifting the problem.”

This is simply a description of how states compete with each other by offering different liability systems. A plaintiff’s paradise attracts trial lawyers, but it also tends to repel doctors, employers, and anyone else who worries about the availability and cost of health care.

Speaking of which, the other reason Bush offered for giving up on federalism was that overly generous malpractice rules raise the cost of federally funded health care programs. “The number of lawsuits, the defensive practice of medicine is driving up the cost to our taxpayers,” he said. “Medical liability reform is a national issue, and it requires a national solution.”

Leaving aside the fact that Medicare and Medicaid themselves are not authorized by the Constitution, this argument proves too much. It assumes anything that affects health care costs