NCPA - National Center for Policy Analysis


November 25, 2008

Under the traditional tort system, most hospitals and doctors ask their patients to sign a form at the time of treatment releasing the provider from any legal liability in case of negligence.  However, this has had an unfortunate side effect: doctors and patients are unable to avoid the costs of the malpractice system through any contract whatsoever.  A reformed system could give patients and doctors other options while still protecting patients when they are least able to negotiate contracts, says John C. Goodman, president and CEO of the National Center for Policy Analysis (NCPA).

One answer is for the legislature to decide what will constitute an enforceable contract.  Patients would not be required to agree to such contracts as a condition of treatment, but if they voluntarily signed the agreement, it would be binding, says Goodman.

The following are some provisions that should be considered for inclusion in such contracts:

  • Compensation without fault.
  • Adjustment for risk.
  • Full disclosure.
  • Patient compliance.
  • Additional insurance options.

A liability-by-contract system along these lines would have a number of compelling advantages, says Goodman:

  • Insurers (rather than patients) would become the primary monitors of health care quality.
  • Medical providers would face strong financial incentives to improve quality, and multiple parties on the medical side would have strong incentives to cooperate in improving quality.
  • Patients will receive cash compensation (a check) for unexpected outcomes without the stress or expense of a lawsuit, and patients and their families could self-insure for additional compensation.
  • Since the check writing process requires fewer resources, health care costs for patients would likely be reduced.

Therefore, the social cost of a liability-by-contract system is likely to be much lower than the cost of the current system, and is a socially better way of handling sympathetic cases, says Goodman.

Source: John C. Goodman, "Malpractice Reform: Five Steps to Liability by Contract," Health Care News (Heartland Institute), December 2008; based upon: John C. Goodman, et al., "The Handbook on State Health Care Reform," National Center for Policy Analysis, 2007.


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