Graham, Chambliss seek to address medical malpractice with "Loser Pays" amendment

Submitted by Sen. Chambliss' office

WASHINGTON — United States Senators Lindsey Graham (R-South Carolina) and Saxby Chambliss (R-Georgia) last week introduced their ‘Loser Pays’ legislation as an amendment to the health care bill. The amendment would decrease the number of frivolous lawsuits that increase the cost of medical care for all Americans.

“Reform of medical malpractice is one of the key, missing ingredients from the health care reform proposals being debated in Congress,” said Senator Graham “A ‘Loser Pays’ system is one of the best devices available to prevent frivolous lawsuits from costing all of us. When both parties in a lawsuit are subject to financial penalty, people think longer and harder about bringing a questionable case forward. Most western nations already have a ‘Loser Pays’ rule, and it is time our own country adopts this concept. The Senate debate on health care is among the most important debates we have had. I hope we have a chance to vote on our important amendment.”

“Necessary for any reform proposal to our nation’s health care system is the inclusion of a ‘loser pays’ system for medical malpractice suits,” said Chambliss. “Deterring frivolous lawsuits reduces health care costs for all Americans. We can preserve a fair legal process while eliminating the presence of questionable lawsuits that are currently clogging our judicial system.”

In a letter of support to the Senators, the United States Chamber of Commerce stated the provision, “represents a positive and significant step toward providing a more reliable justice system for the victims of medical malpractice.” The Chamber noted that the amendment “encourages the states to establish alternative methods for resolving medical liability claims and provides them with the latitude to develop unique approaches that fit the needs of their diverse populations.”

Graham-Chambliss ‘Loser Pays’ amendment would create a system of preliminary, non-binding arbitration for medical malpractice claims before they ever enter a courtroom. If one or both of the parties involved rejects the arbitrator’s decision, they can take the claim to court but are then subject to the ‘Loser Pays’ rule. Additionally, states will have the option to create their own alternative dispute resolution system, with the freedom to tailor procedures as they see fit.

Graham-Chambliss ‘Loser Pays’ Amendment

The Problem

· The direct cost of tort litigation in the United States was $247 billion in 2006 or $825 per person.

· Tort costs have grown more quickly than the rest of the economy, at an average annual rate of 9.2 percent between 1951 and 2006.

· In 2003, direct tort litigation costs accounted for 2.2 percent of GDP, at least double the percentage of Canada, the United Kingdom, Germany, France, and Australia, all of which have a “loser pays” system.

· Alaska has had a modified “loser pays” system since 1884. Although the system does not fully compensate prevailing parties for their litigation costs, tort claims constitute a smaller share of total litigation than the national average – about 5 percent of civil cases, as opposed to 10 percent nationally.

· Florida applied a “loser pays” rule exclusively to medical malpractice claims from 1980 to 1985. In that time:

o 54 percent of plaintiffs voluntarily dropped their suits, whereas 44 percent did so before and after “loser pays.”

o The percentage of malpractice suits that went to trial decreased from 11 percent to 6 percent.

o The average trial award nearly tripled and plaintiffs prevailed at trial more often as many weak cases were eliminated under “loser pays.”

The Solution

· Instituting mandatory non-binding arbitration for medical malpractice claims involving defendants who take Medicare patients as at least 25 percent of their total patients.

o Parties would have the opportunity to accept or reject the arbitrator’s decision.

o If one or more of the parties rejects the arbitrator’s decision, the case may continue to court. The party or parties who rejected the arbitrator’s decision is subject to a “loser pays” rule.

o If the court judgment is not more favorable to the rejecting party than the arbitrator’s decision, the rejecting party pays the opposing party’s attorneys’ fees from the date of the arbitrator’s decision, absent a finding that requiring the payment would be manifestly unjust.

· Provides a broad outline for states to use to create their alternative dispute resolution system, with the freedom to tailor the procedures as they see fit.

· Studies of the effectiveness of private litigation systems in providing affordable access to courts, evaluates the merit of prospective claims, and ensures that prevailing parties in “loser pays” systems are reimbursed for attorneys’ fees.