Malpractice Solved
by John Goodman
Issue 101 - February 13, 2008

You are going to be a Good Samaritan. You are about to become a kidney donor so that someone else can live. The odds are in your favor. Only about 2 out of 10,000 fail to survive the operation.

Still, what if you were one of the two? What happens then? Under the current system, there are only two options. Neither is very attractive.

On one hand, your spouse, children, heirs, et al., could hire a lawyer, subpoena documents and take depositions to see if malpractice has occurred and compensation is due them. Or they could accept the financial and emotional loss stoically - forever wondering if your death was preventable.

Fortunately, your friends at the National Center for Policy Analysis have discovered a new and better alternative. Prior to your surgery, you are asked to sign a contract with these terms:

1. You agree to waive your right to pursue any malpractice claim.
2. If you fail to survive the operation, your family gets a check for $1 million. No lawyers, no courtroom, no judges, no jurors - just a cool million, no questions asked.
3. For pennies on the dollar (out of your pocket), you can make the compensation even larger, say, $2, $3 or $4 million.
4. The hospital pledges to make all safety records public; and to facilitate comparisons, they are available at a special Web site.

Voila! Problem solved. Can it get any better than that?...Well...as it turns out...it can.

You go to the Web site and compare. There you discover that other hospitals offer larger amounts of compensation in case of an adverse event. In fact, Hospital B offers $2 million if you fail to survive. Upon further investigation, you learn why. Your chances of dying at Hospital A (your original choice) are twice as high as at B. So if Hospital B pays the same insurance premium as Hospital A, it can offer twice as much.

You have your procedure done at Hospital B. Fortunately, it's a success and another five months go by. Then out of mere curiosity you return to the Web site and make an amazing discovery. All the hospitals are now offering the same compensation for kidney transplant fatalities. The reason: they now all have the same safety record.

Think about that. In less than six months, market incentives have accomplished what all the RWJ demo projects, Commonwealth studies, Health Systems Change conferences, HHS press releases, Newt-Hillary political alliances, and hectoring, harping, bullying, shaming, niggling, nagging speeches, editorials and op-ed pieces have not been able to accomplish since the dawn of time. (Okay, it only seems that long.)

Here's the basic idea: hospitals and doctors can get out of the malpractice system completely (other than for gross negligence) by agreeing to compensate patients for rare, unexpected adverse health events. The legislature decides (or sets up a procedure for deciding) in advance what the minimum compensation must be. To pay off the claims, providers purchase episode-specific insurance. The insurers (not bureaucrats, not lawyers, not even patients) then become the true monitors of safety - charging premiums that accurately reflect expected outcomes.

In no time at all, bad doctors and bad medical practices will vanish. They will be priced out of the market by insurance premiums they cannot afford to pay. Malpractice becomes very rare; high quality and safety become the norm; patients and their families get compensated, regardless of the cause of their injuries; and trial lawyers can go earn an honest living.