Charles Silver

Will Tort Reform Bend the Cost Curve? Evidence from Texas

Will tort reform “bend the cost curve?” Health-care providers and tort reform advocates insist the answer is “yes.” They claim that defensive medicine is responsible for hundreds of billions of dollars in health-care spending every year. If providers and reform advocates are right, once damages are capped and lawsuits are otherwise restricted, defensive medicine, and thus overall health-care spending, will fall substantially. We study how Medicare spending changed after Texas adopted comprehensive tort reform in 2003, including a strict damages cap. We compare Medicare spending in Texas counties with high claim rates (high risk) to spending in Texas counties with low claim rates (low risk), since tort reform should have a greater impact on physician incentives in high-risk counties. Pre-reform, Medicare spending levels and trends were similar in high- and low-risk counties. Post-reform, we find no evidence that spending levels or trends in high-risk counties declined relative to low-risk counties and some evidence of increased physician spending in high-risk counties. We also compare spending trends in Texas to national trends, and find no evidence of reduced spending in Texas post-reform, and some evidence that physician spending rose in Texas relative to control states. In sum, we find no evidence that Texas’s tort reforms bent the cost curve downward.

Just what the patient ordered: The case for result-based compensation arrangements

or more than twenty years, Opinion 6.01 of the American Medical Association’s (AMA) Code of F Medical Ethics has specified that “a physician’s fee for medical services should be based on the value of the service provided by the physician to the patient.” In 1994, the AMA amended Opinion 6.01, adding a new statement that “a physician’s fee should not be made contingent on the successful outcome of medical treatment.” We believe that the amendment is wholly indefensible. Therefore, in this essay, we argue that the AMA should lift this prohibition and encourage the use of result-based compensation for medical services in appropriate circumstances. The 1994 amendment dramatically changed the significance and scope of Opinion 6.01. Result-based compensation arrangements clearly satisfy the original version of Opinion 6.01 because they base compensation on the “value of the services provided . . . to the patient.” Yet, it is equally clear that result-based compensation arrangements violate the amended version of Opinion 6.01 because they necessarily make compensation “contingent on the successful outcome of medical treatment.” The AMAs Council on Ethical and Judicial Affairs did not prepare the usual background memorandum explaining the grounds for amending the Code of Medical Ethics; nor did it publicly offer any rationale for dramatically changing the scope of Opinion 6.01. The only justification for the amendment appears in its text, which asserts that contingent fees “imply that successful outcomes from treatment are guaranteed, thus creating unrealistic expectations of medicine and false promises to consumers.” The AMAS assertion reflects a fundamental misunderstanding of result-based compensation. Principals use con-

Public opinion and the federal judiciary: Crime, punishment, and demographic constraints

In this article the causal connection between public opinion and law is examined and the representative model of judicial behavior is reappraised. After a description of some of the important linkages between public sentiments and judicial behavior, the empirical relationship between public attitudes toward criminal punishment and the sentences imposed for different crimes by the federal district courts is assessed during the period from 1970 to 1980. Inconsistent responses by the judiciary are found, which lead to a revision of the representative model. It is argued that this model must take into account demographic and other constraints on judicial action, as well as the salience of political issues.

The Economics of Plaintiff-Side Personal Injury Practice

Little is known about the economics of plaintiff-side law firms, which typically work on a contingency fee basis. We begin here to fill that gap. We report on the fees received by 124 plaintiff-side personal injury firms located in four states (Illinois, Texas, and two additional undisclosed states), and estimate the impact of various statutory fee caps on those firms. At all of the firms, cases with modest fees may help to keep the lights on, but occasional “blockbuster” cases account for an overwhelming percentage of earned fees. A one-third contingency fee is the most common arrangement, but is not always collected ex post; when recoveries are low, firms often reduce or waive their fee. The estimated effect of caps on contingency fees varies, depending on cap design and the mix of cases a firm handles. But many fee caps dramatically affect the economics of plaintiff-side personal injury practice.

Elmer's case: A legal positivist replies to Dworkin

ConclusionI have argued that Legal Positivism can accommodate the existence oftheoretical disagreements in law and that Ronald Dworkin is wrongto claim otherwise. As far as Legal Positivists are concerned, evenjudges who differ over both the truth of propositions of law and thegrounds or sources of law can have a legal duty to resolve their dis-agreements on the basis of legal arguments. The duty exists whenconventional legal practice creates it. Moreover, all Anglo-Americanlegal systems impose the duty on judges because all such systemscontain legal practices of the right sort: practices creating expectationsthat cases will be decided on the law even when they raise doubtsabout the content or proper formulation of a rule of recognition.Thus, Elmers Case poses no threat to Legal Positivism. To the con-trary, it reveals the richness of that theory as few other cases can.Only if Elmers Case is detached from the context of Anglo-American adjudication can it be said to undermine Legal Positivism.But then no theory of positive law could withstand its challenge.

IVF shared-risk programs.

to charge higher premiums. NYSA-ILA Medical and Clinical Services Fund v. Axelrod, 27 F.3d 823,827 (2d Cir. 1994). The decisive matter is how expansively and literally to read the “relates to” clause of section 5 14(a) of ERISA. Shaw v. Delta Airlines, Inc., 463 U.S. 85, 97 (1983), held that a state law “relates to” an ERISA plan “if it has a connection with or reference to such a plan.” Shaw set a strong precedent in maintaining, through a careful analysis of the statute and its legislative history, that Congress intended the preemption clause to pertain even to state laws that were not specifically created to affect employee benefit plans. In 1995, the Supreme Court reduced Shaw’s effect in New York State Conference of Blue Cross 6 Blue Shield Plans v. Travelers Insurance Co., 5 14 U.S. 645 (1995). Travelers held that ERISA did not preempt a New York statute that collected surcharges from hospital patients covered by commercial insurers but not from Blue Cross/ Blue Shield hospital patients. FOCUSing on the intent of the preemption clause-facilitating uniformity in interstate benefit plans-the Court held that the surcharges’ “indirect economic effect” on benefit plans would not cause particular structural or administrative choices that would affect uniformity. Id. at 659. Such cost variations were a far cry from the “‘conflicting directives’ from which Congress meant to insulate ERISA plans.” Id. at 661 (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990)). After handing down the Travelers opinion, the Supreme Court remanded DeBuono to the court of appeals, with instructions to reconsider it in light of Travelers. O n remand, the appellate court reinstated its original judgment. It distinguished Travelers on the ground that its surcharge was on insurers and thus only indirectly affected the decisions of ERISA plan administrators, while in DeBuono the HFA tax was direct: it was placed directly on ERISA services. O n appeal, the Supreme Court agreed that the HFA state tax was “related to” benefit plans in the broadest sense, by affecting the relative costs of various health insurance packages. However, the Supreme Court denied the appellate court’s distinction between Travelers and DeBuono. It noted that although the level of coverage was affected here, simply because the Fund set up separate hospitals for ERISAcovered employees, any state tax that affects employee benefits will affect the level of coverage. On that basis, the Court ruled that the indirect/direct impact distinction cannot withstand scrutiny. The Court redefined what it meant by “indirect economic effect” in Travelers by emphasizing that it is the economic effect itself that is indirect. DeBuono follows Traveler’s lead in limiting the Court’s broad understanding of ERISA’s preemption clause. It not only allows for nonsubstantial economic impacts that do not interfere with Congress’s intent to facilitate uniform interstate benefit plans, but also looks further into protecting states’ right to regulate health plans: “The historic police powers of the State include the regulation of matters of health and safety.” DeBuono, 117 S. Ct. at 1751. The Court is radically moving away from its previous broad understanding under Shaw of “relates to” by holding that a state law of general applicability should not be presumed to be preempted even i f it imposes a direct burden on the administration of ERISA plans. Pamela Laufer Correspondence

Regulating pharmaceutical companies’ financial largesse

Nissanholtz-Gannot and Yenkellevich (NGY) explore the impact of a 2010 amendment to the Israeli National Health Insurance Law that requires annual reporting of payments from pharmaceutical companies (PCs) to doctors and healthcare organizations. The amendment was adopted to ensure transparency and to facilitate appropriate regulation of interest conflicts. To learn whether the amendment was having the desired effects, NGY interviewed multiple representatives of an assortment of stakeholders. They found broad agreement among the respondents that financial relationships between PCs and physicians should be transparent. But they also discovered that ignorance of the 2010 amendment was widespread, especially among physicians, and that knowledgeable respondents thought loopholes rendered the law ineffective. Lastly, NGY found that the improvement in the transparency culture has more to do with pressure put by international and non-Israeli national actors on the multi-national PCs operating in Israel than with the Israeli new law.In this short paper we critically review NGY’s study. We are much less optimistic than they are about the situation in Israel. For example, we show that the new law has not increased transparency vis-à-vis the patients as virtually all reports to the government specify only the institutions receiving them and not individual physicians’ names. We are skeptical of the effectiveness of self-regulation or government regulation. Instead, we propose some ways to increase patients’ oversight, such as facilitation of class actions to enforce fiduciary duties and disclosures, as well as structuring co-payments for drugs in ways which will signal to the patients their relative efficacy.

Economics of health law

For this two-volume collection, Professors Avraham, Hyman and Silver have selected seminal contributions by eminent scholars in the fields of law, economics and medicine. The first volume explores the effects of access to healthcare on mortality and clinical outcomes, the financing of healthcare (including payment to providers, expanding costs, health insurance and the provision of long-term care), distribution of spending and expansion of provision. The second volume covers the regulation of healthcare practice, medical malpractice and liability, public health and ethical issues.