Why Federal "Tort Reform" Is an Unconservative Idea

Captain Ed wrote an enthusiastic post regarding President Bush's plans for tort reform in his coming second term.  This is one plank of the Bush platform to which I am opposed and, rather than continuing to take up Ed's bandwidth with my comments, I thought that I would post something about it here.

The article that Captain Ed cites could have been written by the Bush Administration, as it parrots a number of his talking points without any sort of critical analysis.  For example, there is this very misleading statistical pronouncement:

Strikingly, plaintiffs received less than half the money awarded by the courts in 2002, while 54 per cent – or $126 billion - went to the lawyers and to pay administrative costs. As a result, doctors and hospitals are weighed down by expensive insurance policies that further inflate medical costs for Americans.

For one thing, there is no connection at all between the two propositions found in these sentences.  The fact that plaintiffs actually receive less than half the average award has nothing to do with the cost of insurance policies.  But importantly, the two propositions, by themselves, are presented in a manner that is, at best, highly misleading.

The first sentence suggests, without really saying, that plaintiffs are being unfairly deprived of more than half of the average damage award, and that the lawyers pretty much pocket the rest.  This is wrong.  A lawyer's typical contingency fee is from 30% to 40% of the award after costs have been deducted.  Costs include such things as expert fees (which can be extraordinary in med mal and complex tort cases), court reporter fees, transcripts, filing fees, travel costs (many people don't realize how many depositions have to be taken in far flung locations to prepare a case for trial).

Also, in the typical personal injury case and med mal cases, insurers are entitled to collect on monies paid out to the plaintiff by right of subrogation.  Medicare, for example, is entitled to be repaid 100% of what it may have paid out to care for a patient who is suffering the results of medical negligence.

Let's say that you have an award after trial of $1 million.  The plaintiff's lawyer might easily have about $100k in costs sunk into that, so those costs come off the top right away,  reducing the total award to $900k.  The attorney takes (typically after trial) 40% of that, reducing the plaintiff's collection to about $540k.  But then an insurer might have the right to collect $200k from the plaintiff by right of subrogation, thus reducing the plaintiff's take to $340k.

This easily shows how a plaintiff can end up taking much less than half of an award.  But it's not due to those evil, greedy lawyers.

Ed suggests that plaintiffs have to then pay income tax on the remainder.  This is simply untrue.  Tort damage awards are not taxed, at least not by the IRS (some states might, but I doubt it).

Placing caps on damages, or limits on contingency fees, will not make things any more just for plaintiff, either.

First, a cap on non-economic damages simply makes no sense.  As I wrote in Ed's comments section, what if, for example, you lose your family jewels due to medical negligence? Or what if (like what happened to my mother) a woman loses her uterus because of a defective IUD?  What would be the economic damages arising from such an event? Practically nil, assuming that you had proper post operative care and suffered no medical complications. Your damages would axiomatically be, almost exclusively, non-economic.  Would you feel justly compensated for such an error by a cap of $250k?

Maybe some guys would, but I think most wouldn't.

It's getting late, so the rest of my comments I'll simply borrow from what I wrote in Ed's comments section:

It's popular among conservatives to beat up on trial lawyers, but if there's one thing that conservatives should be able to understand is how people monetize risk when entering into a business transaction. A complicated med-mal or products liability case can cost a plaintiff's lawyer up to $100k or more out of his own pocket. Even relatively simple cases will cost a plaintiff's lawyer tens of thousands of his own office and staff time, expert fees, and so forth, all of which has to be fronted by him.

The high fees that are taken by plaintiff's lawyers in this country are a result of a system that gives tort plaintiffs access to the courts that is absolutely unparalleled anywhere in the world, and all for absolutely no risk or up-front cost to the plaintiff!

If you start to take away the incentive for a plaintiff's lawyer to represent average people who have been wronged and injured by the acts or omissions of another, then those people simply will not have access to the courts.

The notion that med mal reform reduces med mal insurance rates is simply a non-starter: it has been proven to be a bogus argument.  For example, California has one of the most restrictive med mal liability laws in the country, and its med mal rates are not significantly lower.  It's now impossible to go forward in Florida without first getting an affidavit from a medical expert attesting to an opinion that the plaintiff's injury was the result of malpractice. This can only occur after the expert has reviewed the plaintiff's file. Also, the expert affidavit has to be tendered to the physician (or his attorneys), and the physician has 90 days to respond before you can file suit. If the physician admits to liability, then you have to proceed to binding arbitration where the plaintiff is limited to $250k in non-economic damages. Only if the physician fails to admit, or refuses to admit, liability in that 90-day window can you then file suit in court.  Yet none of this seemed to lower med mal rates, and more recently a constitutional referendum passed capping lawyers' contingency fees.  As noted above, this will only have the effect of limiting people's access to the courts.

As well, I have serious federalism concerns when it comes to the notion of a one-size-fits-all, federal tort reform.  Our federal system was supposed to allow the various states to function as laboratories of democracy, where different solutions to problems could be tried.  For example, if State A's tort system is too unfriendly to business, then State B might have an incentive to develop amore business-friendly law.  North Carolina, for example, has some of the most business-friendly environmental laws, and people there are hopping mad that they can't protect themselves from the environmental depradations of the large, industrial pig farms.

Federalism is something that conservatives should hold dear.  It would be a pity if they threw away that principle on the altar of what would undoubtedly turn out to be a very dubious tort reform effort.

As a lawyer who sometimes does maritime personal injury defense, I have seen plaintiff's lawyers abusing the system, and I have seen clients offer unreasonably large settlements in order to avoid unwanted publicity.  But these sorts of abuses could be more justly curbed by the most desirable "tort reform" of all:  a system of judicial appointments that would place judges on the bench who are unafraid to dismiss, or grant summary judgment on, meritless cases.

That is something worthy of another post, altogether.

UPDATE:  Econopundit writes that I am "way, way off the mark," but then launches into a discussion of relative societal costs that my post did not address at all:

To get a grip on the issue go through the following simple thought experiment. Imagine how a single bicycle is manufactured in China, then imagine how it would be manufactured in the US. The materials are identical. The actual physical process of putting the thing together is vitually identical in both countries. The actual physical cost of getting a bicycle made is virtually the same in the US and China. What differs is the hourly cost of labor and the general cost of society itself.

I haven't asserted that tort litigation does not cost society something.  I agree that it does.  Whether that is a good thing or a bad thing depends on where you sit.  For example, I know of a case of a man who was helping a tech inflate the tires on an electric wheelchair when the wheel blew up in his face, destroying one eye and causing permanent damage to his orbital socket.  It turned out that the manufacturer knew of this defect, yet continued to place the product on the market.  Who should bear the risk of injury in such a situation?  How much do you compensate a man for the loss of an eye?  Do you trust the federal government to determine a flat rate compensation scheme for such a scenario?

And if you're a Chinese citizen who is injured by a defectively manufactured product in China, good luck getting access to the courts for redress of your injury.

ANOTHER UPDATE:  Slammed by Ramesh Ponnuru, who seems to take me to task in part for not having read other "careful work in this area."  Well, excuse me for hashing out my thoughts near midnight after putting the baby to bed and having a long conversation with my mother-in-law (in the Czech language, which is tiring enough) about the problems of socialist democracy.  I have a day job.  These things happen.

Actually, based on the substance of Ramesh's post, there is not a huge degree of difference in our opinions -- he actually agrees that there may be federalism problems with federal med mal reform, but he disagrees as to other tort reform.  I agree that it's a debatable issue given post-New Deal Commerce Clause jurisdprudence.

Ramesh mischaracterizes my argument as being that tort reform is bad "because high fees for plaintiffs' lawyers are the price of having such a wonderful legal system."  I am not so sure that our legal system is "wonderful," but just that it is better than all others I have encountered.  Contingency fees allow individuals with nothing to have their day in court.  That is a remarkable thing that should not go unappreciated.  That there are those who abuse this privilege should not be a reason to throw out the baby with the bath water.

STILL ANOTHER UPDATE:  Reader Bryan sends this authoritative-sounding correction to my assertion that tort awards are not taxed:

Compensatory awards for physical injury are not taxed, but punitive damage awards, lost wages and mental anguish are.

If you turn your bible to IRC section 104(a)(2) you read:

"Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include--

(1) amounts received under workmen's compensation acts as
     compensation for personal injuries or sickness;
 
(2) the amount of any damages (other than punitive damages) received
     (whether by suit or agreement and whether as lump sums or as periodic
     payments) on account of personal physical injuries or physical
     sickness;

[snip]"

And it goes on to list exceptions, but translated into English, generally only damage awards for personal physical injury are excludable.  In a bizarre example, suppose Bob wins a lawsuit against Multinational Inc..  He receives the following damages:

Lost Wages $100,000
Mental Anguish from Racial Discrimination $100,000
Physical Harm $200,000
Pain & Suffering $100,000
Punitive $3,000,000

It seems Multinational Inc. has been a bad boy.  Regardless, only the $200,000 for physical harm is excludable from income; Bob would treat as taxable income the remaining $3.3 million of the settlement.

It could be worse.  In some states, the contingency fee is not excludable from income either.  Here is a link to some footnotes.

Let's think about what this means.  Suppose Bob Lives in one of those states where the fees are not excludable.  He gets his $3.3 million (lets exclude the physical harm bit here) from Multinational Inc., and pays $300,000 in expenses, leaving $3.0 million.   $1.2 million (or 40%) goes to the (hardworking I'm sure) lawyers.  He then has to pay taxes on the remaining 1.8 million.  Sure, he can deduct the $1.2 million as a miscellaneous itemized deduction, but not for AMT purposes, so he will pay AMT on the entire 3.0 million.  The AMT is essentially a 28% rate for 2004 so he pays about $800,000 in AMT.  So the actual amount he receives is $1.0 million of the $3.3 million, or about 30 cents on the dollar of the verdict.

Regardless, I'm sure that the statement "Tort damage awards are not taxed, at least not by the IRS (some states might, but I doubt it)" is not an accurate statement.

I stand corrected.

Comments

[Cincinnatus]

I've got a better idea for a post: Why George W. Bush isn't a conservative President. Basically, everything you say about his stance re tort reform can be said about all his policies. . . . W makes Clinton look like Barry Goldwater.

[dwshelf]

The most meaningful form of tort reform would involve some form of renumeration to the defendant when the plaintiff does not prevail. Something which would make valid defense more attractive than settling a nusiance suit.

For example, if filing a lawsuit implied posting a $10,000 bond, with said bond to be awarded to the defendant under nearly all circumstances where the defendant prevails, or essentially prevails, truly frivolous lawsuits would disappear overnight. Win less than $10,000, and the defendant gets to keep the difference. Win $10k or more, and you get your bond back. Organizations, or even businesses would appear, willing to put up the bond for valid cases.

Even better: if the bond were 10% of the sought after remedy. Sue for $1million, you've got to put up $100k, and win $100k just to break even.

[garrett]

couple of thoughts here.

In your example, the lawyer gets $400,000.

The plantiff does not know ahead of time that they will only get 35% of the take if they win.

I contend that right there are two economic incentives for making more lawsuits.

Next. As a personal example, I work at a hospital in Kentucky. I was eating lunch with the CFO and we were discussing the high cost of our health insurance. The Kentucky Constitution prohibits jury award caps, so our insurance is much higher than say, Indiana. I specifically asked, so if I had a job at Hospital X in Indiana, where there are damage caps from malpractice awards, then the cost of health insurance would be say $300 less (I just picked a number out of thin air) per month? The response was, "Yes."

I am not saying that $250,000 is great for non-economic awards, but as fasr as I can tell, it's the only plan being offered right now.

[Abu Qa'Qa]

Are you saying that plaintiff's attorneys in med mal suits have chosen to close down operations in Florida and California because of the $250k cap? That ordinary citizens are now being denied access?

I have no specific information to dispute you, but IMHO trial lawyers are just as plentiful in those two states today as before the restrictions.

I'm for denying class action suits as well.

Old George is on to something when the lawyers start squealing.

[Felicia Kleland]

I disagree with your suggestion there is "no connection". The best you can say is that there is no *direct* connection. It takes very little critical analysis (which ironically you accuse The Telegraph and Captain Ed of lacking) to draw quite satisfactory connections.

Courts, juries, and lawyers do not operate in a vacuum. High percentage splits for attorneys fees spur on lawyers to seek awards in an ever expanding range of cases, of ever higher amounts. Courts and juries are prone to increase awards, in the knowledge that little trickles down to the meritorious plaintiff.

Jurisprudence has expanded beyond any sensible boundaries the scope of "non-economic damages" to encompass a great deal that is *anything but* fair and reasonable compensation for injury. However, at the same time, the definition of economic damages has been much more stable.

No doubt, the cap on "non-economic" would be Procrustean in a number of cases that a trial lawyer like yourself could elucidate, or demagogue upon endlessly, but do not blame the Bush Administration for settling upon this remedy.

In the face of decades of judicial activism, and a legal profession enjoying the strictures of professional licensure -- reducing entry and facilitating rent seeking behaviors opposed to the common interest -- clear cut legislative boundaries are needed.

Bush is on the right track here. At the same time, I fully expect the legal profession to haul burn victims, the wheelchair bound, disfigured children and other fearsome sights in front of the relevant Congressional committees, to play upon the nation's emotion and crowd-out rational discussion of reform.

The idea that it's the *pro*-reform side that's lacking in critical analysis here is ridiculous.

Just how would you, sir, craft a federal proposal that would reduce by 2/3rds the aggregate awards paid out by the health care industry, and better target the dispersal to meritorious plaintiffs?

[John Tabin]

A $250,000 reward for non-economic damages isn't enough? Why on earth not? No amount of money is going to bring a uterus back (and if it could, then that would become an economic damage, right?). But $250K is a huge chunk of change (an annual income of $293,000 or more puts you in the top 1% of earners, last I checked).

[tyree]

A friend of mine works part time for a malpractice lawyer. The lawyer is thinking about buying a private jet, a Boeing 727. Another friend is a former docter who is living on Social Security because malpractice insurance premiums ruined his practice. Another friend is a doctor who had to take a pay cut last year because of high insurance costs. If Federal tort reform is not the answer then maybe we could provide the leadership to get the states to reform the system. Making it possible for doctors to practice independent of HMO's and insurance company oversight is a conservative idea.

[Leo]

Well, I'm not averse to loser pays, but where is the federal jurisdiction to pass that sort of legislation?

Admittedly, no one pays attention to that sort of thing anymore, but I do wonder.

[Matt]

I think what a lot of people don't realize is that med mal happens -- it happens a lot -- and when it does, it can be absolutely devastating.

Let's argue about tort reform, sure -- but let's keep in mind the positive effect of *legitimate* cases: keeping the pressure on hospitals to institute procedures that help the most.

These guys spoil it for everyone. Here's a case where no one in the administration did anything to stop this doctor from doing continuously sloppy work. This pathologist failed to catch cancer diagnoses on more than one occasion, and worse -- called for hysterectomies in patients who had no cancer at all. People's lives are ruined because of this man, and the system did nothing to stop him.

The question really becomes: will reducing awards do anything to help this situation? Will anything that's currently proposed? This isn't all about the insurance companies. Terrible things happen when doctors get careless, and it's to everyone's benefit to institute some policy that will address not only the frivolous lawsuits that are screwing everyone, but also punish the doctors who continually screw up (like this one) and the administrations that refuse to deal with it.

[Dave Johnston]

Unfortunately for them, heavy regulation is coming directly at the trial bar. For years, the vast majority of tort firms - represented by the likes of the ATLA - have supported political players who side with those who seek to heavily regulate business. For years, these same players have built obstacles to a truly free market. It is now sweet irony to see Tort, Inc. staring directly at similiar boundaries to their "free market" of lawsuits. All of a sudden, regulation is "unconservative" and anathema to the business of tort law.

Well, you're exactly right. It is anathema to a free market for med mal cases, et. al. But this is simply years of abusing the market by both political and judicial means coming back around to smack this 'industry' right in the face. The cost to society is becoming too high in relation to the perceived benefit. When lawsuits put whole professions out of business - all in the name of 'recourse' - eventually people notice.

Tort awards in this country exceed $200 billion annually - more than 2% of GDP...which is completely ridiculous. That number is growing at nearly 15% per year. Medical malpractice insurance premiums have risen an average of 35% per anum since 2000. And you say there is no correlation? HOW CAN YOU DENY A DIRECT CORRELATION? Some states are in full OB/GYN crisis.

Unecessary tests, needless referrals to specialists, etc. etc. all so doctors can overcompensate for fear of a lawsuit. Meanwhile some just call it quits and refuse to treat high-risk patients.

There's an elephant in the room, and nobody with an ATLA membership card wants to glance at it.

But it's too late, tort reform is going to happen.

[Scott Pierce]

"Looser pays" has to be part of the equation. There has to be disincentives. To say that plaintiffs will not be represented is foolhardy as the market will always pony up someone to take the case. Lawyers today are setting policy and it isn't right (and I'm not talking about laywer/politicians but trial lawyers).

[Mike K]

I am a retired surgeon who has reviewed med-mal cases for lawyers, both plaintiff and defense for 30 years in California. You are mostly wrong with a few things right. The California reforms of 1975 got one big thing right. What insurance can't handle is uncertainty. Once the caps on non-economic damages held up (It took 10 years of appeals) premiums went down and stayed down. In 1972 my malpractice premium was $3500. In 1974 it went to $35,000 and my former carrier went into bankruptcy. I had been "going bare" and didn't know it. All the commercial carriers left California or went broke. Why is a long story but the crisis was real. The reforms have worked. Maybe the cap is too low now but no one wants to start the battle again except your pals in ATLA.

The other part of the crisis now is the limits on physician gross income because of managed care. Docs can no longer raise fees to pay higher premiums.

The present system of contingency fees has one big negative. What about the plaintiff who has a bad outcome but doesn't have a lot of damages? No one will take the case. Instead, we see TV ads trolling for parents of cerebral palsy babies when all the science says that cerebral palsy is NOT a birth injury. Ask John Edwards how rich you can get by fooling juries. The state medical board in California is a joke. There is almost no enforcement except by plaintiff lawyers. I know lots of honest ones and they are not the ones getting rich.

The great abuse is in class action. The asbestos thing is a travesty. I hope there is a God and a hell for those lawyers. The silicone thing is mostly gone now but it damaged medicine seriously. 25 years from now silicone breast implants will be back and no one will remember the controversy except historians of public delusions. Tobacco has very little science behind the class action suits. The danger of tobacco was known after 1950. Anyone who took up smoking after that should be on his or her own.

Tort reform is coming and it's about time. It probably won't hurt the worthy plaintiff if done right. Unfortunately, most legislators are lawyers. If they get it right it will be a miracle.

[Sydney T]

As a former claims adjuster, risk manager and Plaintiff's PI lawyer, I agree with just about everything you say. But there is more. If you cap benefits for a plaintiff, the badly injured plaintiff has no choice but to rely on social security and other tax programs for survival. The tort system is designed to relieve the taxpayer of that burden and place it where it belongs. Capping benefits will result in foisting that burden back on the tax payer who is already paying for it with the price of medical care. And we all know that cost is not going down.

[Stacy]

You present the empirical evidence that states with strong tort reform laws don't seem to have lower insurance rates. But another empirical fact that goes in the other direction is that some areas (such as suburban Maryland) are rapidly losing certain categories of doctors because they're driven out of business by high insurance premiums (over $70K a year for OB/GYNs, for example) These costs are passed on to patients through higher direct charges and health insurance premiums, so when you consider tort reform limiting people's access to the courts, the other side of that coin is that high damage awards and the resulting insurance premiums severely limit people's access to health care. It's a double whammy: medical services become more expensive due to the higher costs of a single category of insurance, and then prices are driven up further by practitioners getting out of the business, resulting in more patients chasing fewer doctors.

[Shannon Love]

The major problem with the current tort system is accuracy. There is little connection between whether one caused harm and whether one gets sued or not. Asbestos and Silicone breast implants are just to glaring examples where junk science leads to industry destroying awards.

I think our current system relies to heavily on lay people judging the actions of those working in heavily technical fields. We would think it madness to 12 lay people make technical decisions (like your medical treatment) before hand, so how can we rely on them to judge the quality of the decisions post facto?

Presenting dueling "expert" witnesses is pointless. How can lay people reliably decide between conflicting experts? If an individual has no specialized background in a field, how do they tell when expert is shoveling BS?

We should get juries out the business of making technical judgments. Expert witness should be appointed by the courts. Juries can then make decisions based on advice from neutral 3rd party.

[Sammler]

A cap on damages would be worthwhile if it reduced the incentives for plaintiffs' lawyers to search for gold mines. I have posted some interesting advice from the American Bar Association under "Swinging from the Heels" (linked).

[MaxPower]

Nobody wants to see a case where medical incompetence results in a 6 year old with brain damage get stuck with a $250k cap.

On the other hand, your colleagues are consistently gaming the system re: class action, venue and frivolous actions.

If the lawyers don't fix this themselves, the government will. There are cases out there awarding millions in dart-out cases where little kids ran out from between parked cars under the trailer wheels of a tractor-trailer.

Companies that built machinery in the 1930's are subject to product liability suits today.

There are abuses and overreaching on both sides.

[Tartan69]

Let's say that you have an award after trial of $1 million. The plaintiff's lawyer might easily have about $100k in costs sunk into that, so those costs come off the top right away, reducing the total award to $900k. The attorney takes (typically after trial) 40% of that, reducing the plaintiff's collection to about $540k. But then an insurer might have the right to collect $200k from the plaintiff by right of subrogation, thus reducing the plaintiff's take to $340k.

So, assuming your numbers are ballpark accurate, what you are telling me is that the attorney is being paid $460,000 on costs of $100,000? That equates to a profit margin of 360%.....just a RIDICULOUSLY high number.

This is the spot where the current system should be fixed...the cap should be on the attorney fees, not on the plaintiff award.

[sarnac]

There's a positive-feedback-loop on uncapped damages:

no-damage-cap leads to high damages
which leads to higher premiums
which leads to MDs stopping their practices
which leads to fewer MDs _in_ or _entering_ a particular field in a particular state
which leads to higher workloads
which leads to more mistakes
which leads to more lawsuits
which leads to higher premiums (LOOP!)

Logically, this will lead to the elimination of entire medical-care-categories in certain states.

=-=-=-=

In bad situations, sometimes there are only bad answers since _every_ answer has negative consequences.

In this case, loss of entire medical fields is a _very_bad_consequence_.

Society has a decision to make ... a political decision ... on the relative value of our existing tort system or the existence of our medical system.

An argument can be made that Society made that decision in 2004 given the current debate on tort reform, the presence of a trial-lawyer on an all-lawyer presidential ticket and the whole-hearted financial support of trial lawyers for that campaign team. By my recollection, tort reform was a campaign issue, and by that standard, the lawyer's side lost.

/\/\
\/\/

[Rich LaRocco]

I have a few common questions that I never see addressed. It's my first time on this blog and you all seem to have a serious grasp of all of the details that would never make it onto the local news.

Dave Johnston said:
"Tort awards in this country exceed $200 billion annually - That number is growing at nearly 15% per year. Medical malpractice insurance premiums have risen an average of 35% per anum since 2000."

Dave - Why are rate increases growing (up 35%) faster than awards (up 15%)?

The insurers, the ones that remain in a risky and competitive business, are still making a profit. It seems like the rate increases are gratuitous when the insurer is profitable.

I understand about running a business, I run one myself, but why is a rate increase of 50k driving an OB/GYN who is making 300k out of business? Are the doctors actually making NO money or LESS money than before. I have nothing against docs making a good living, but it muddies the water about why docs are going out of business.

[Matt]

Hi. My first visit here. Good post.

A couple things: First (and this only strengthens your argument) most personal injury lawyers take their share of the recovery (say 40 percent, as in your example) and then reimburse themselves for out-of-pocket expenses. So in your example, the million drops to $600,000, then the $100,000 in expenses comes off; so your plaintiff is down to $500,000 (before paying off the medical liens, as you note).

Second: One of the commenters notes that malpractice insurance may cost an Indiana doctor a few hundred dollars less per year than a Kentucky doctor. That's a societal cost to Kentuckians, to be sure. But Indiana has a system that makes California's look drunkenly generous. Indiana caps ALL damages; I think the current cap is $1.5 million. Heaven forbid that malpractice causes your child to be born severely handicapped and in need of decades of intensive medical and personal care. $1.5 million (or the portion of it you'd get after fees, costs and pre-existing medical liens) wouldn't even get you out of the starting gate. If you're not exceedingly wealthy to start with, you're screwed, and that's a societal cost, too.

[js]

Tartan 69 --

The lawyer's costs are not $100K. Those are his out-of-pocket costs. There is also the cost of his time and his overhead. All of that is paid for often years before any money comes in.

And then you need to recognize that he is also assuming the risk of losing -- writing off his time and the money he's advanced -- or winning and being unable to collect on the judgment.

Which points out the flaw in the loser pays argument. An attorney who brings losing cases does pay. He's out his time, his overhead, and his case specific costs. Those can amount to hundreds of thousands of dollars in a med-mal case. Bringing frivolous cases is a great way to go broke.

[Tartan69]

js:

Thanks for that explanation. I mistakenly inferred the $100k included the attorney's hourly billing rate (as well as overhead costs for paralegal time, support staff, etc).

Based on those ballpark numbers, I wonder what level of staff the additional $360k (minus profit margin) would support based on the attorney's billing rate plus the billing rates for associates, paralegals, and support staff? And for how long?

[Harkonnendog]

"Strikingly, plaintiffs received less than half the money awarded by the courts in 2002, while 54 per cent – or $126 billion - went to the lawyers and to pay administrative costs. As a result, doctors and hospitals are weighed down by expensive insurance policies that further inflate medical costs for Americans."

This quote is very persuasive to me, and should be to everyone. On the one hand you are saying tort reform is bad because the current system puts money where it should go- to the wronged. But imagine a charity in which over 50% of the donations went to administrative costs.

[Matt]

Harkonnendog,

If, as is the case (as explained in the original post), a big chunk of recoveries goes to pay the plaintiff's medical bills --- either to the health care providers themselves, or to, say, the plaintiff's health insurance company (which paid the bills in the first place and is not entitled to reimbursement) --- it seems a bit illogical to suggest this is driving up health care costs.