March 2003 -- In her 1957 novel Atlas Shrugged , Ayn Rand imagined a monstrous world in which the laws and the political regime, rather than protecting productive individuals, actually make it easy and legal for the rapacious and the envious to steal from them. Not surprisingly, many producers drop out of this society. In response, politicians warn the remaining producers not to leave their jobs, claiming that it is their duty to serve society.
This nightmare scenario is now breaking out across the United States. The victims are physicians.
Faced with the high costs of malpractice insurance and bogus lawsuits, plus onerous government regulations and mountains of bureaucratic paperwork, many physicians are simply quitting their profession or giving up parts of their practices. Last year in Las Vegas, for instance, dozens of trauma surgeons resigned from hospitals over insurance costs. Other physicians are moving to states and counties that have more reasonable tort and regulatory regimes. According to the American Health Association, 27 percent of hospitals report doctors leaving or retiring, 25 percent report that it is difficult to find doctors, and 20 percent have cut back services. (The Politically Active Physicians Association in Pennsylvania maintains a Web site that lists all doctors who retire or leave the state, as well as hospital service cutbacks and closings.)
In an even more dramatic move, physicians are going on strike. In West Virginia, dozens of top-flight surgeons at four hospitals began a thirty-day work stoppage on January 1 because of soaring insurance costs. One of the doctors has seen his annual insurance premiums triple in seven years, although not a single suit has been filed against him. In Pennsylvania, a wider strike was threatened for the same day, but the work stoppage was averted just hours before it was scheduled to begin when Governor Ed Rendell promised to fight in the legislature for a relief package. Late in January, the Medical Society of New Jersey backed a doctors' work stoppage that could bring routine checkups and non-emergency services to a halt. And on February 3, an estimated 70 percent of that state's 22,000 physicians participated in a work stoppage that cancelled nearly all but emergency services.
The immediate cause of physician strikes has been the skyrocketing cost of malpractice insurance. For example, a Philadelphia-area orthopedic surgeon found his annual rates jumping from $65,000 to $130,000 in two years. A Neptune, New Jersey, obstetrician-gynecologist (OBGYN) faced rates that would triple in 2003, to $170,000 annually. According to the Medical Liability Monitor, average annual rates for OBGYNs in 2002 rose 19.6 percent; those for internists increased 24.6 percent; and those for general surgeons rose 25 percent. In Detroit, in 2002, general surgeons paid on average $107,000 for insurance, while in Miami the rate was $174,000. Cleveland OBGYNs paid $156,000, while their colleagues in Miami paid $210,000. One New Jersey obstetrician faced a rate of $563,000.
Those high costs are not due to an increase in physician errors or to degeneration in surgeons' skills, contrary to the claims of lawyers, Naderites, and the Leftist media. Nor is the problem due to insurance companies' raising rates on doctors to make up for money lost in the stock market, as also claimed by these critics. Malpractice insurance rates differ greatly from state to state, yet lower stock prices affect all states and all insurance companies. Rather, the cause is a legal system that facilitates theft, government regulations, and the rise of a new predator class in the legal profession.
In a free society, the legitimate function of tort law is to allow someone to recover damages if he is harmed by the accidental or negligent behavior of another. Insurance is the principal way that responsible individuals undertake to cover the costs of their rare, harmful actions. Certainly, there are real cases of malpractice in the medical profession that should be covered by insurance of some sort.
The problem is that tort law makes it easy for professionals such as doctors to be sued. In the United States, in contrast to many other countries, losing plaintiffs do not have to cover the legal bills of defendants whom they sue unsuccessfully. There is thus little downside—and a significant upside—to filing a weak suit. Consequently, insurance companies often settle with plaintiffs even though their clients are innocent, as long as the settlement is substantially less than the projected cost of mounting a defense. According to a 1990 study published in the New England Journal of Medicine that examined the treatment of more than 30,000 New York patients, in almost 20 percent of the lawsuits filed against physicians the patient's treatment had not led to any adverse consequence. Nevertheless, these baseless suits were settled for an average payment of just under $29,000, and, naturally, those costs are passed along to all of the insurance company's physician-clients, even to those who have never been sued.
Beyond the system's structural flaws lie moral flaws. In recent decades, Americans have become much less willing to bear responsibility for themselves and to accept the misfortunes of life. Even when the injuries that befall them are no one's fault, many seek someone to blame and sue. Doctors are frequently targeted in such suits because their reputation prompts juries to demand from them god-like perfection. According to the study of New York patients, in lawsuits involving a patient who had suffered an adverse consequence, that consequence was the result of substandard treatment less than 20 percent of the time. Yet, fully half of these "adverse result" cases were bought off, for an average payment of $98,000. Obviously, suing those who do their best to cure us is the ultimate act of moral ingratitude.
The combination of defective laws and immoral individuals has given rise to a new predator class: plaintiffs' lawyers. (For an in-depth treatment of this problem, see Walter K. Olson, The Rule of Lawyers, St. Martin's Press, 2003.) Rather than merely helping individuals collect just compensation for injuries, these attorneys are systematically targeting the most productive and wealthiest members of society for the same reason that bank robbers rob banks: that's where the money is. And because no objective limits exist for "pain and suffering" damages or punitive damages, a plaintiff lawyer's cut of his client's award can be huge indeed. In the years 1994 to 1996, 34 percent of malpractice awards exceeded $1 million; by 1999 to 2000, 52 percent reached that level.
The harm wrought by these predators is not confined to looting doctors. For example, in the 1990s plaintiff lawyers launched a campaign against silicone breast implants, claiming the product was defective. In the end, they extorted a $4.3 billion settlement out of manufacturer Dow Corning, with $1 billion of that sum going to the lawyers. But as Marcia Angell of the New England Journal of Medicine showed in her book Science on Trial, medical evidence did not establish a connection between the implants and the illnesses that the lawyers claimed they caused. Still, Dow Corning went bankrupt, and women who wanted reconstructive surgery after mastectomies were denied the silicone option.
Or consider this case: until the mid-1970s, the Dalkon Shield was a popular and effective form of birth control. But following a study that alleged the device increased the risk of uterine infection and other health problems, an assault led by plaintiff lawyers netted them about $1 billion in fees and drove manufacturer A.H. Robins out of business. Later studies showed the damning study failed to meet scientific standards.
Perhaps the most repulsive element of the assault on doctors is that the predatory lawyers try to give their efforts the sheen of moral superiority by claiming to help "little guys" who suffer injuries at the hands of the greedy rich. Naturally, the plaintiff bar is a major donor to the Democratic Party, which specializes in loot-the-rich rhetoric and supports laws that make possible such predation.
Governments contribute to the assault on physicians in ways other than the judicial system. For example, most doctors need to maintain some relationship with a hospital to practice their trade, and many are required to provide their services at certain times to patients who come in through the emergency room rather then through their own private practices. In 1986, Congress passed the Emergency Medical Treatment and Labor Act (EMTALA), which requires all general hospitals to have emergency rooms that provide emergency services in every specialty that practices at that hospital. These emergency rooms are required to treat all patients who come in, whether they can pay their bills or not. And it makes no provision for compensating hospitals or physicians for patients who cannot pay. As a result, border-state hospitals are being flooded with immigrants, legal and illegal, who receive expensive services and do not pay their bills. In poor neighborhoods, hospitals and doctors face similar problems. In other words, the federal government virtually forces doctors to provide services, and if the patient cannot pay—too bad! That is a backhanded form of conscription and slavery.
The federal government also hinders physicians through the sheer volume of its Medicare and Medicaid regulations. Doctors spend a great deal of time filling out paperwork, and not a few find themselves facing huge fines and even prison as the result of innocent mistakes made in trying to understand federal rate-tables and regulations. As attorney Jonathan Emord showed in his article "Murder by Medicare" (Regulation, vol. 21, no. 3; Summer 1998), many solo or smaller medical practices have folded under this regulatory burden.
In addition, the 1986 changes to the Civil False Claims Act had a particularly pernicious effect on physicians. That act allows private parties to file actions against anyone who innocently runs afoul of even the most innocuous bit of federal red tape—and to collect part of the fine. Madeleine Cosman has pointed out that physicians have been hit especially hard by bounty hunters looking to enrich themselves by stealing from the productive members of society.
In response to government oppression, Atlas is shrugging—and the reaction from politicians has been as appalling as anything Ayn Rand predicted.
On December 20, Pennsylvania's secretary of the commonwealth, C. Michael Weaver, sent a letter to the state's physicians threatening that a work stoppage would be detrimental to "your practice…as well as your license should your conduct be found to constitute abandonment." Remember that doctors are barred from practicing without malpractice insurance, and that Pennsylvania's dysfunctional laws make it costly and difficult for physicians to acquire such insurance. Now one of that state's top politicians is maintaining that physicians are in effect feudal serfs chained to the jobs the state makes it impossible for them to perform.
Other politicians no doubt will be tempted to resort to similar strong-arm tactics. A spokesman for New Jersey governor James McGreevey, for example, called a proposed strike by doctors in his state "irresponsible." Few would deny to auto mechanics, steelworkers, or other citizens the right to strike. But doctors, precisely because their services are so valuable, are to be denied this right.
The current assault on doctors is a moral outrage. Phoenix-area general surgeon Jeff Singer observes that he and many of his colleagues became physicians because of a fascination with medicine and biology, the pleasure of dealing with people, the challenge and fulfillment of healing the sick, and the chance to open their own practice and to be their own boss. Now many doctors find themselves spending much of their time trying to get paid; keeping up with the regulations of Medicare, Medicaid, OSHA, and the Health Insurance Portability and Accountability Act; and trying to keep out of jail when they run afoul of such regulations. They no longer enjoy their work, and many are trying to make enough money to be able to quit their practice and retire early. In other words, the best men and women in our society are being driven out of it.
President Bush has proposed a cap on payments for pain and suffering in malpractice suits as a means to hold down the insurance costs of physicians. Such caps make sense. According to the Medical Liability Monitor, the nineteen states with caps on non-economic damages have insurance rates that are, on average, lower than those in states without such caps. A cap on pain and suffering payments would still allow injured patients to be fully compensated for all actual harm, but awards that gratuitously drive up insurance costs would be limited.
Unquestionably, such arbitrary caps could create injustices. For example, a woman recently opted for a double mastectomy after a lab mixed up her results with another patient's. With a cap on awards for pain and suffering, this victim might not receive the large award she should undoubtedly be paid. But, if so, she would not be a victim of the arbitrary cap itself, but of the rampant subjectivism in tort law that has made such arbitrary caps necessary.
The Bush proposals also raise some serious questions about federalism. After all, the Constitution does not grant the federal government jurisdiction over tort law and insurance. These matters are traditionally reserved for state and local governments, and if states and counties lose their doctors and hospitals because of bad local laws, it is up to local voters to throw out the politicians who maintain the dysfunctional system. But President Bush is right to call attention to the serious problem of law gone bad.
It is also time for physicians to call attention to the problem and to take the moral high ground when they do so. They toil for years to acquire the skills necessary to save lives, cure diseases, and alleviate pain and suffering. Their challenging work demands the best within them—high levels of intelligence, dedication, and endurance—and it makes them prosperous, as well it should.
Physicians should reject the notion that their importance, status, or wealth binds them to serve under a legal and political regime that punishes them for their virtues. They should resolve to offer their services only in a system that grants them the freedom owed to all productive persons, that compensates patients only for acts of genuine negligence, and that protects physicians from the pseudo-judicial predation of the envious.
Edward Hudgins is research director at the Heartland Institute and former director of advocacy and senior scholar at The Atlas Society.