September 15, 2003

RALEIGH — The medical-malpractice legislation likely to emerge from the North Carolina Senate this week “is a mixed bag” from the standpoint of reformers, according to a preliminary analysis by a Raleigh-based policy analyst. Dr. Roy Cordato, economist and vice president for research at the John Locke Foundation, authored a study earlier this year that examined the various proposals to address North Carolina’s malpractice crisis, and recommended ideas such as a “loser-pay rule” to discourage plaintiffs from filing frivolous lawsuits.

Now, Cordato said Tuesday, it looks like senators may embrace a version of the idea, along with some less-desirable measures.

“The bill’s establishment of an expert panel to review malpractice claims, and the associated possibility that plaintiffs may have to pay the legal bills of defendants if they subsequently lose in court, represent a good first step towards reform,” Cordato said. “Expert review and a loser-pay rule would shift the risks and responsibility of going to court back to each side equally, and away from the current bias in favor of plaintiffs and their attorneys.”

The legislation would require that a panel of three expert referees be chosen for each medical malpractice case. Each side in the case would choose one of the experts and a third would be chosen either jointly or by the judge. After reviewing the case the panel would either recommend to the defendant that the case be settled, if they thought it had merit, or that the plaintiff drop the case, if it was deemed frivolous. If either plaintiffs or defendants proceeded to trial against the recommendation of the panel, and then lost, they would have to pay the opposing party’s legal fees and court costs.

“While somewhat cumbersome, this provision would at least introduce some responsibility to avoid costly and pointless litigation — especially for plaintiffs, since defendants are already often at risk for lawyers’ fees if they lose,” Cordato said.

The idea of instituting a loser-pays principle for North Carolina medical malpractice cases was first suggested by Cordato in a John Locke Foundation Spotlight briefing paper published earlier this year. Cordato wrote that “the current system, which is very costly for the defendants, has an inherent bias in favor of a settlement. This is because defendants have to bear the cost of their defense even if they win the case.” Cordato concluded in the paper that “loser-pays will reduce frivolous lawsuits and malpractice costs overall. In addition it levels the playing field, making the entire process more equitable.”

On Tuesday, Cordato argued that this provision was the “only significant bright spot in the legislation.” The bill would establish a $20 million fund, initially using taxpayer money, to subsidize doctor’s malpractice insurance costs over and above a basic amount that would be required for all doctors. This fund would be replenished over ten years by mandatory payments into the fund made by all doctors. This provision “does nothing but socialize the costs of malpractice insurance and it will not reduce the actual costs of the system,” Cordato said.

He observed that the initial $20 million will have to be paid for with either higher taxes or reduced spending in other areas of the budget. “The money to replace the fund will come from an added tax on doctors,” which he concluded “amounts to an unfair penalty on the most responsible doctors or those that are in the least-risky specialties.”

Please call Dr. Cordato at 919-828-3876 for more information on medical malpractice or click here to read a PDF of his latest Spotlight briefiing paper on the medical malpractice legislation.