Malpractice MessDo the Swedes have a faultless fix?

It's not a good sign that the current malpractice crisis—real, even if exaggerated by Mr. Bush—is America's third in as many decades. Even less promising are the solutions proposed (caps on awards, screening panels to filter out spurious claims, tougher standards of proof in court), which resemble prior fixes. Arguments over how to tweak our malpractice system—really a hodgepodge of state laws—amount to bickering about how to fix a machine of spectacularly bad design. Our current system purportedly seeks to a) compensate those injured by medical care, and b) improve health care by discouraging error.

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It falls well short of both goals. Only 1 of 8 victims of avoidable medical injury sue, and only 1 of 15—about 7 percent—receive any compensation. And while the threat of suit indeed terrifies doctors, terror doesn't reduce mistakes. Studies have found that doctors in countries where they can't get sued (such as New Zealand) do not err more frequently or egregiously than they do here. The fear of suit actually encourages doctors and hospitals to obscure mundane but serious problems such as poor systems for communicating and confirming drug orders. Finally, the present system subjects caregivers to sudden, unpredictable rises in malpractice premiums, which lately have doubled and even tripled in some states. According to the Congressional Budget Office report, these spikes stem less from increasing malpractice claims than from business cycles in the insurance industry. (Click here to read more.)

Can we fix this mess? It might be that we must create an alternative to our present lawsuit-oriented malpractice system. Perhaps the most intriguing possibility is what malpractice wonks call a "no-fault" system. A no-fault system would compensate those who have been harmed without assigning blame—a process easier for patients and less traumatic for doctors. In our present system, to win restitution, a harmed patient must prove not just that a doctor or hospital erred, but that the error was caused by neglect or incompetence so severe it amounts to a breach of the doctor's or hospital's legal duty of care. In short, the patient must prove not only an avoidable error but gross negligence or incompetence. In a no-fault system, the patient need prove only the avoidable error. The question of whether the doctor was negligent or incompetent—the accusatory crux of our present system, and the part that so humiliates and infuriates doctors—would not pertain. A separate disciplinary agency or panel would handle cases of gross negligence, incompetence, or breach of duty.

Sweden, Denmark, Finland, and New Zealand have used no-fault malpractice systems for 20 to 30 years, with admittedly mixed results. Yet several academics, most notably Harvard's David Studdert and Troyen Brennan, have studied these countries' systems and concluded that a U.S. system modeled on that of Sweden could more consistently compensate victims of avoidable mishaps and more effectively reduce error and incompetence—all for the same cost. No-fault would also make doctors and patients allies rather than adversaries when something goes awry.

In Sweden, when a patient suffers avoidable injury, whether through gross negligence, such as a botched surgery, or through a more understandable but avoidable mistake, such as a misdiagnosis or medication error, the patient—usually with help from the doctor's office—fills out a form requesting compensation. That request, along with relevant doctor and hospital staff reports, gets reviewed by an adjuster who decides whether the injury might have been avoided had treatment differed. If the claim passes that hurdle, a panel of legal and medical experts considers it. If the panel decides the injury rose from avoidable error, the patient is compensated. The award varies according to the nature of injury, the degree and duration of the patient's disability, the expenses incurred, and other factors; it may also include compensation for pain and suffering. The entire process usually takes less than six months. Patients who feel unfairly denied or undercompensated can appeal, but they cannot sue. The system is funded by premiums charged to regional organizations of medical facilities and physicians. These premiums are substantially lower and more stable than malpractice premiums in a tort system.

Such a system would generate more claims than does our present malpractice system—indeed, compensating more of the injured is part of the point. The system would save money, however, by eliminating punitive damages and legal costs. The legal and administrative costs of our present system (lawyers' fees, court costs, paid experts) account for 60 percent of the estimated $24 billion the malpractice system consumes each year. A no-fault system would cut that to 20 percent or 30 percent, roughly doubling the money available for the injured.

Would those savings cover the increase in claims? That would depend on eligibility thresholds. If the United States used Sweden's eligibility guidelines, which cover any missed work or extra hospitalization, it would cause the total amount we spend on medical injury to rise 30 percent to 100 percent, increasing total health-care costs between 1 percent and 2 percent. Studdert and Brennan, however, calculate that a no-fault system using a qualification threshold of an extra 10 days of hospitalization and/or 30 days of missed work would create costs roughly equal to those of our present system. When they applied these standards to all medical injuries and malpractice suits settled in Colorado and Utah in 1992, they indeed found more people would be compensated and at a lower cost. (Click here to read more about their findings.)

A no-fault system would almost surely face steep obstacles in the United States. For one thing, Americans are used to blaming someone—in this case, doctors—when something goes wrong. And the trial-lawyer lobby would vigorously oppose such a system. The question of funding will also have to be settled. Studdert and Brennan propose an "enterprise liability" system similar to that of Sweden, in which regional affiliations of hospitals, clinics, medical boards, and local or regional doctors' groups fund administration and compensation via premiums that are set according to payouts (an incentive to keep claims and costs down).

This is not something we'll likely see legislated by the U.S. Congress. But because states set most malpractice law, some savvy governor and legislature could launch a voluntary no-fault pilot program. Interested hospitals and physician groups could offer patients a no-fault medical-error insurance that gave the patients a near-guarantee of compensation for avoidable injury in exchange for agreeing not to sue. If well-designed and operated, such a system would almost surely prove attractive to both patients and the medical establishment. If that happened, the market might start to make its own case. And if there's a political force that can overcome the momentum of our legal system and the power of the trial-lawyer lobby, it's the aura of the market.

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