Nowhere is this legal free spending more rampant than in healthcare. Lawsuits have forced malpractice premiums for MD’s as high as $200,000 a year, and even higher for surgeons. In medical malpractice cases, plaintiffs receive average awards of $1.2 million.

Sometimes, it is more than just money. Take Putnam County. Putnam is a small, rural county of 55,000 residents in West Virginia. Until recently, this county was served almost exclusively by Putnam General Hospital, which is owned by national health care provider Hospital Corporation of America, Inc. (HCA). Yet the hospital is scheduled to shut its doors for good soon. In fact, they’ve already stopped admitting parents. Why? There is only one reason. Well, more like hundreds of reasons – the number of predatory lawsuits filed by local lawyers.

What happened you ask? The issue surrounds the strange case of Dr. John King, who allegedly mishandled dozens of surgeries during his six-month stint at Putnam. Clearly, something went wrong here, and no one is arguing for anything less than a full airing of the facts and for any injured parties to be made as whole as possible. But that is not what local lawyers had in mind, and instead came a barrage of lawsuits for billions of dollars! Not millions, but billions!!!

Here’s the bottom line: Whatever happened at Putnam related to Dr. King, whatever role there is for the courts in this circumstance, the litigation has gone too far, because more than 55,000 West Virginians will soon live without nearby doctors, nurses, trauma centers or emergency rooms. This is a triumph for justice?

If trial lawyers really want reform then they’ll call on the state of West Virginia and dozens of other states to change the way they license their doctors, because Dr. King was fully licensed to practice medicine in West Virginia. Further, Putnam General Hospital revoked Dr. King’s privileges after just 7 months and before a single lawsuit was filed.

The costs of malpractice insurance are simply passed along to the consumer/taxpayer, along with the other increases in medical care cost. In all but the most egregious cases, this arrangement isolates doctors and medical institutions from the financial consequences of mistakes and/or outright malpractice.

Doctors and hospitals can afford to be sloppy as long as their malpractice insurance covers the cost of the resulting lawsuits. (Like a car company paying civil damages as long as it’s less expensive than retooling for a gas tank design problem.) They remain in practice or in business unless they do something bad enough to lose their license, with no real incentive to improve. So in the current scenario, the classical economic forces – the ones that would tend to reduce errors by bankrupting the really sloppy practitioners and institutions – are confounded.

This isn’t much different from the way medical costs in general are allowed to soar: there’s an insurance company “middleman” confounding the classical economic forces that are normally in control of the service provider / consumer relationship. The consumer has no direct economic influence over what the provider charges, unlike other markets where the provider competes via lower prices.

Justin (if you’re checking in here) – check this out vis-a-vis our previous discussion regarding group medical insurance:

http://tinyurl.com/9p5gb

Problem is, the studies (IOM for example) that product many of our statistics look very suspicious, and it is difficult to get two studies to match.

We need better definitions, leading to better research, leading to better answers, then we can reduce medical errors.