There is a serious mismatch of injuries to claims which indicates that the system is ineffective. “The evidence from 1974 suggests that almost 1 percent of hospital admissions resulted in a mishap due to negligence, and that only 1 in 25 of these patients was compensated through the tort system. (Danzon, 1985, p222).
The costs of litigation and uncertainty over the outcome will deter many people with small but potentially meritous claims. The likelihood of getting a positive result is often influenced by the quality of the litigation and this is influenced by money and time.
Juries do not have perfect information about individual cases and indeed about what is the socially optimal level of care. Juries can be inconsistent on the size of damages that are applicable to certain injuries are even more so on the appropriate level of damages for intangible losses such as ‘pain and suffering’. Juries are also inconsistent on whether the size of damages is dependant on the severity of injury to the claimant or on the degree of negligence by the health professional, which brings further uncertainty to a potential claimant.
These inconsistencies undermine the whole system and lead to even more litigation as there are no clear boundaries and little regularity of decisions. “The efficiency of tort as a compulsory insurance system would be increased by replacing individualized awards with scheduled benefits in order to reduce uncertainty.” (Danzon, 1985, 223).
The long time period of many claims under the current system can have negative effects in 3 ways. Firstly, the obvious monetary costs incurred and the delaying of compensation payments, secondly the inconvenience, mental pain and injustice suffered by the claimant and thirdly the encouragement of patient malingering and an unwillingness to ‘get well’ until the case is closed.
The final issue over the current system is focused on the supposed key advantage of it, the deterrence to physicians from committing future negligence caused by the monetary loss and damage to reputation caused by a successful claim. It is claimed that physicians may be encouraged to practice ‘defensive medicine’ and go way beyond the socially optimal level of precaution, usually in attempt to prevent the damage to their reputation, as this cannot be covered by insurance. A study by the Hudson Institute of hospitals in Indiana (as cited in Cooter and Ulen, 2000, p366) found that defensive medicine and other direct costs of malpractice liability raised total medical costs by 5.3% . However, a study of obstetricians in Florida hospitals “Failed to reveal that obstetricians practice more ‘defensively’ in areas with relatively high suit rates.” (Sloan et al, 1997, p255) and this remains a very contentious issue.
A No-Fault System – The Theory
‘No-fault’ schemes such as the ones already in operation in Sweden, Norway, Finland and New Zealand differ from the UK’s current system in a number of ways. The fundamental difference is that a claimant does not have to prove negligence on behalf of the medical practitioner, merely that their injury was caused by the medical treatment that they received. These schemes are not a ‘strict liability’ form of tort law, they are truly ‘no-fault’. The Swedish model “eliminates all reference or inquiry into fault, requires no proof of negligence by an individual provider, and entails neither financial nor reputational consequences for the provider.” (Danzon, 1994, p90)
Under a no-fault scheme ‘normal risks’ of medical practices are excluded from claims, as are pre-existing injuries. Severity of injury serves as the only determinant for size of compensation and most proposals specify compensation to be paid over a period of time rather than in a lump sum. Compensation can be claimed without litigation and it is from the medical institution (e.g. hospital), rather than the individual physician. Deterrence measures, which would also be directed at institutions rather than individuals, would be separated from the compensation procedure in order to speed up both processes and maintain a no-fault regime.
Economically, the no fault system should result in the socially optimal level of care being provided (X* in Figure 1) as doctors and medical institutions will still seek to minimize their total costs of prevention and compensation. Note that if an efficient level of care is taken then under this regime injurers (medical institutions) bear all the costs, whereas under the negligence regime victims would bear the costs.
Therefore, despite a different distribution of risk, wealth and costs, both schemes should, theoretically result in the socially optimal level of care, and hence the socially optimal level of accidents.
Evaluation of a No Fault System
Promoters of a no-fault scheme argue that it offers improvements in all three aspects of tort law; compensation, deterrence and justice.
Under no-fault more people would receive compensation payments and the mismatch between injuries and claims would be reduced; “Because, a) coverage extends to medical injuries caused by medical acts or omissions that are not demonstrably negligent, and b) the cost of bringing a claim in time, dollars and adversarial tension is reduced.” (Bovbjerg & Sloan, 1998, p70)
No Litigation means lower overhead costs, a quicker process and a smaller percentage of payouts being swallowed up by administrative expenses. As compensation is paid over a period of time it is “better tailored to individual needs because payments are made as needs arise…..(and it)…provides a form of insurance protection against unanticipated changes in needs.” (Bovbjerg & Sloan, 1998, p71)
It is argued that a no-fault scheme provides superior deterrence measures to the current scheme as more claims are processed and hence a greater body of knowledge over the cause of accidents, and hence how to prevent than can be compiled. Also, a no-fault scheme removes the incentives for physicians to practice defensive medicine as their personal reputation is no longer under threat and the consistent, regular results of a no-fault system provide clearer boundaries of what is acceptable and what is not, than the ‘haphazard’ negligence system.
Justice is improved, it is argued, by simply rewarding a larger number of valid claims and by improving the consistency of rulings and awards.
However, there are many potential problems with a no-fault system. It may be deemed a ‘victim of its own success’ as the huge increase in the number of cases processed may in fact lead to an increase in administration costs and result in an equally slow system.
There is also an argument that ‘free-riders’ will be encouraged and that there will be much debate over what are pre-existing injuries and what level of injuries can be attributed to ‘normal risk’. “as long as a line is to be drawn between compensable and noncompensable cases, litigation over borderline cases will remain.” (Danzon, 1985, p215).
The fact that most no-fault proposals do not offer compensation for non-pecuniary losses sucha s ‘pain and suffering’ and the restrictive nature of the payment of damages in installments are cited as weaknesses of the scheme.
Opponents of the scheme would argue that justice is ‘compromised’ as each case is not thoroughly investigated on individual merits and individually negligent physicians are not exposed and punished. It is thought that more effective and satisfying claimant retribution can be found under the current scheme.
The final argument, once again, centers on deterrence, “The elimination of fault would reduce useful incentives to avoid negligence.” (Danzon, 1985, 216). This may lead to a less than socially optimal level of care being taken and hence unnecessary accidents occurring.
Conclusions
It is clear that both schemes have potential advantages and disadvantages, and that without experience it is hard to know exactly what the impact of introducing a no-fault policy into the UK would be. The major advantage of the current negligence system is clearly deterrence, assuming of course that defensive medicine is not a major problem. The no-fault system has serious benefits with regard to quick, easy compensation and access to justice to a greater number. However, there are concerns that ‘true ‘ justice is compromised and that overall costs will rise due to the huge increase in claims.
“Whether or not the loss in deterrence outweighs the reduction in litigation costs is an empirical question.” (Danzon, 1994, p91), as yet we do not have this evidence available, and the answer to this question may vary from country to country and may never be universally accepted.
There are a number of intermediary proposals, such as a partial no-fault scheme where certain events (injuries or medical procedures) are designated as compensable under a no-fault scheme whilst all others remain in the old system, or a scheme where individuals can opt-into a no-fault policy with their health insurance providers.
These kind of schemes may provide the long term solution for the UK, although it is not clear whether any scheme can overcome the difficulties of the imperfect information available to patients, courts and physicians which is the essence of the current problems.
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Bibliography
Bovbjerg, R, Sloan, F (1998), ‘No fault for medical injury: theory and evidence’, University of Cincinnati Law Review, 67 (1) 53-123.
Cooter, R, Ulen, T (2000), ‘Law and Economics’, Third Edition, Addison Wesley Longman, Reading.
Danzon, P (1994), ‘Tort reform: the case of medical malpractice’, Oxford Review of Economic Policy, 10: 84-98.
Danzon, P (1985), ‘Medical Malpractice, Theory, Evidence and Public Policy’, Harvard University Press, Massachusetts
Sloan, F, Entman S, Reilly, B, Glass, C, Hickson, G, Zhang, H (1997), ‘Tort liability and obstetricians care levels’, International Review of Law and Economics, 17: 245-260.
![Negligence Case. The victims in this problem may have a claim in tort of negligence, where a duty of care was established by Lord Atkin based on the neighbour principle in Donoghue v Stevenson[1].](https://mbt-essays-prod-public.s3.eu-west-1.amazonaws.com/892881/listing/892881_1.jpg)
