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Politics and Practicalities Norman D. Tucker The Politics In addition to the legal and factual hurdles a patient and her attorney must negotiate to pursue a medical malpractice case in Michigan, there other behind the scenes maneuverings that the public seldom appreciates. Daily, there is an ongoing, sophisticated media effort by the US and Michigan Chambers of Commerce, or their spin off organizations, to mold public opinion to serve their ends – to make it more and more difficult for negligently injured parties to seek compensation. Supported by large liability insurance companies, the medical profession and big business, they are daily telling the public that there is a litigation crisis. These pro business, anti-consumer lobbying organizations have given birth to a cottage industry of experts and consultants who use focus groups and linguist to recommend the language that will persuade the public that they should give up their rights to be compensated if injured by medical negligence. The words that they found to work are daily repeated on television, radio and in news print. It has been demonstrated that if they keep repeating these word, soon people accept these as fact: “tort reform…litigation crisis…frivolous lawsuits…doctors are leaving the state…lawsuits are driving up the cost of health care…tort reform will attract new business…lawsuit lottery….trial lawyers…contingent fees…lawyers get half of all the recoveries and the lawsuit tax.” These talking points are still being repeated today, 14 years after Michigan passed some of the most severe medical malpractice legislation in the US. Why do they still sing this mantra of crisis? One reason we continue to hear the same theme, lawsuits are bad, is that selling this to the public has become big business. This cottage industry of lobbyist has grown at an unprecedented rate in the 1990’s and has spawned books about how big money buys special legislation. The latest is by Wall Street Journal columnist, Thomas Frank. Frank summarizes the phenomenon: The reason companies started buying, in other words, was that Congress began selling. Special interest earmarks in legislation by members of Congress have exploded in number, while careers in elected or appointed office are apprenticeships for the lobbying jobs. The enormity of the business lobby is reflected in the wealthiest counties in the US. No longer does the Silicon Valley high tech areas, or even the oil rich Houston counties make claim to this title. Today, the 3 wealthiest counties in the country are the suburbs of Washington DC, in Virginia. This is due, in no small part, to the invasion of highly paid special interest lobbyist. John Engler is the closest example of an elected official becoming a high priced lobbyist. After being Governor of Michigan from 1991 to 2003, he became President of the National Manufacturer’s Association with a reported yearly income in 2005 of $1,200,000. Some say this high paying position was due to the fact that while Governor he demonstrated how to pass pro business legislation. All the tort reform of the 1990’s was passed while he was Governor. The next closest example is Dan Pero. Pero served as Chief of Staff and Campaign Manager for Governor John Engler. After leaving the Governor’s staff, he became President of the American Justice Partnership, a nationwide coalition to advocate for legal reform at the state level, and an affiliate of the National Manufacturers Association. He is also a founding partner of Sterling Corporation, a public affairs, issues management and political consulting firm based in Lansing, MI. His clients include the Michigan Chamber of Commerce, SBC Ameritech, Johnson Controls, Pfizer, and Blue Cross Blue Shield. Part of Pero’s job is to keep in front of the public the buzz words that convince citizens that there should be more and more restrictive legislation. And, this is in Michigan where drug companies have immunity from being sued, and where there are very few products liability cases that can be filed. In addition, the owner of a premises, whether home or business, has no duty to remove dangers as long as these are “open and obvious”. In medical malpractice, the cases filed today are down 75% from the 1996 filing numbers. The right to compensation for negligent injuries is an “endangered species” in Michigan. Nevertheless, Pero’s letter to the Lansing State Journal still uses the buzz words that fires the agenda of more special legislation for corporate Michigan. Here are just a few of these phrases he manages to squeeze into an article of only 530 words:
Why does one still write such articles in 2007 when some of the most restrictive tort laws laws in the nations were enacted in Michigan in 1994-96.? There are 3 simple reasons:
While the claim is that lawyers spend endless sums of money to affect the legal process, what all the lawyers contributed in 2006 pales in comparison to the US Chamber of Commerce. In 2006, lawyers in the US contributed $8.3 million; the Chamber spent $72.7 million. The Practicalities The law, like medicine, is a profession, but it is also a business. If a business cannot make money at what it does, it does something else or goes out of business. The corporate lobbyist who advocate more “tort reform” understand the business of the law. Many of the laws passed and proposed are conceived with the specific intent of make the handling of such cases unprofitable. If particular types of cases are unprofitable, no attorney will take the cases – the effect is immunity. Immunity from responsibility for ones negligent conduct is not a popular concept so the reforms that work best attack some other perceived unpopular issue and, if that produces immunity, it is a win – win for the “tort reformers”. To appreciate how politics uses the practicalities of the business of the law to limit medical malpractice claims, one needs a basic understanding of how the practice of handling such claims works. Most people injured from medical care do not have the money to hire a lawyer. Attorneys doing trial work today charge anywhere from $250 to $700 per hour, depending on their experience and the complexity of the case. The solution to this problem has traditionally been the contingent fee. If the attorney, after investigating the case and having it reviewed by experts decides to file the case, he or she will asked the client to sign a contingent fee agreement (assuming the client cannot afford to pay by the hour, which is an option, but one that seldom, if every, occurs). The contingent fee arrangement basically states that the attorney will represent the client, will advance the costs of handling the case, and if there is a recovery, the attorney fee will be a percentage of the recovery after deducting the costs. If there is no recovery, there is no fee, but the client ethically is obligated to pay the costs, win or lose. Both the fee and the advancing of costs are dictated by court rules and attorney ethical guidelines. The relevant portions of the Michigan Courts Rules that control contingent fees states, Rule 8.121 Contingent Fees in Claims or Actions for Personal Injury and Wrongful Death
The maximum 1/3 attorney fee became effective July 9, 1981. This fee has not been changed in the last 27 years. The thought at the time was that this may not need to be adjusted upward to fairly compensate the attorney as the value of cases would also increase with time. The opposite has occurred. Caps have been placed on non-economic damages and the attorney fee has remained the same. A common misunderstanding with many clients is that they have no risk; if the case is lost, the attorney absorbs the cost. Cost in medical malpractice cases, if the case goes to trial, usually exceed $100,000, and can be as high as $250,000. If an attorney tells a prospective client they have no responsibility for the costs, they should consult the Michigan Rules of Professional conduct. Rule: 1.8 Conflict of Interest: Prohibited Transactions
Legally the client is responsible for the costs of hiring experts, obtaining medical records, the cost of depositions of witnesses, etc. As a practical matter, few clients have the money to pay these costs. They go to an attorney because they have been injured, cannot work, and have huge medical bills. The practicality – you cannot get blood out of a stone, so no one bothers trying to collect hundreds of thousands of dollars from a destitute client. Therefore, as a practical matter, and a matter of good business practice, an attorney can only take a case where he is likely to win, and the win will pay for the cost of advancing the case, and a reasonable fee for his time based on 1/3 of the likely recovery. With this background, it is easy to see that the overused “frivolous lawsuit” is a seldom seen anomaly in medical malpractice. A frivolous lawsuit is defined as a case without legal or factual basis. Under Michigan law, that case is dismissed by the court on motion by the defendant. Why would an attorney spend the 50 to 100 hours of lawyer time to prepare a frivolous case for filing. In addition, to file the case requires at least 1 expert to sign the AOM. Assuming one could get an expert on a case with no merit (unlikely as it is difficult to get an expert on a case with merit) why would one waste $3000 to $4000 to have the expert review the case, give an opinion and then sign the AOM, only to have the case dismissed? Contrary to the urban myth that insurance companies pay on cases with no merit, they do not; they force a plaintiff to trial on those cases. The bottom line – one cannot afford to take cases with no merit on the hope that someday someone will settle the case. What cases can an attorney afford to take? When making this decision, the attorney looks at 3 factors:
In the last 14 years 2 factors have changed the analysis in step (1) – value of the case. When evaluating the potential recovery, or the damages, there are basic elements that make up any case: medical expenses and lost wages, past and future for both, and what are called the noneconomic injuries. The law includes in noneconomic injuries: physical pain and suffering, mental anguish, fright and shock, denial of social pleasure and enjoyments, embarrassment, and humiliation or mortification. A person who has been sentenced to a wheelchair for the rest of their life, or who is in constant pain, or who can no longer enjoy their life, has lost a large portion of what it means to live – that has value and the law recognizes it. Unlike economic damages, such as medical bills and wages, the value of noneconomic damages are more difficult to evaluate. This is left to the jury’s good judgement. For a child who has been crippled for life, will never marry, will have to be cared for the rest of their life, the value could be well into the millions of dollars. In 1994, this evaluation process changed when the Michigan legislature capped noneconomic damages at 2 levels. These caps change yearly based on the consumer price index. As stated in the previous materials, today the maximum amount one can presently recover under the lower cap is $401,500, or $717,000 under the higher cap. Those promoting and passing this legislation knew that in the market system, this was effectively “price controls” on the profits lawyers could make on a given case. With caps, attorneys had to recalculate what cases they could handle without loosing money. Before caps, the estate of a woman who died as a result of undiagnosed breast cancer may have had a value of $1 to $2 million dollars, depending on her age, the number of children, and lost wages, if any. Usually medical bills in a cancer case are less of a consideration as if these are paid by an insurance company, that company is entitled to reimbursement for what they paid. If the woman was not working, then the primary damage would be the noneconomic damages which would be capped at $401,500. With the above background, one can now appreciate the analysis the attorney must go thorough on a case like the above, and why it is very risky to take such a case, even if there is clear negligence and proximate cause. The analysis would like be as follows:
The question then becomes, is it a good business decision to invest $120,000 in a case where one has about a 33% of getting the costs back and, and even if you do, the compensation for ones time would be, at best, $12,500 per year, and before taxes. Investing the $120,000 at 5% would produce $6000 per year, or about half the fee earned, but with out risking the costs on a 33% if come, and with no time spend working on the case. Due to the above analysis, most lawyers will not even consider a med mal case that is valued at $400,000 or less. It is a bad business decision. The “tort reformers” understood the above analysis well before they passed the med mal legislation of 1994. They knew with price caps, there would be fewer and fewer cases an attorney could economically undertake. This is the primary reason the number of medical malpractice cases filed has fallen by 75% between 1996 and 2006. It is estimated that when the 2008 figures become available, the fall off in filings will be over 80%. The goal of tort reformers is to pass laws that make it look like people have rights, but actually give many doctors and hospital “economic immunity” from suit as attorneys cannot afford to handle the cases where the only recovery is the lower cap. Why does Dan Pero now talk about greater limits on contingency fees given the fact that under the present system one cannot economically handle a $400,000 case? Because he knows if he lowers the attorney fees, the above analysis will raise the bar even higher for what cases can be taken. Today, most attorneys are reluctant to take on a case unless it has the potential for a $1 million dollar recovery. If the legislature passed lower contingent fees, in conjunction with caps, there would be absolute immunity for medical negligence in Michigan, only by a different name – tort reform. |
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