Gov. Perry on Health Care and Tort Reform

Interview with Texas Gov. Rick Perry
By Lou Dobbs Tonight

DOBBS: Conservative voting power can make the difference at upcoming key elections across the country. Here comes November 3rd. A new Gallup poll shows the number of Americans as describing themselves as conservative outnumber both moderates and liberals in this country. The trend could benefit Texas Governor Rick Perry. He's caught up in a tough primary battle to remain his party's electorate. Governor Perry joins us here now. Good to have you with us. Are you surprised by that poll, the Gallup poll showing conservatives overwhelming both moderates and liberals?

GOV. RICK PERRY (R), TEXAS: No, it doesn't necessarily surprise me. We go back and forth in this country, back and forth, hope and change gets people's attention and then we look at policies and people go, wait a minute, that wasn't the hope --

DOBBS: Need a little more change.

PERRY: The change we were hoping for. It's out there and people are looking for folks to stand up and say, here's what I believe in, here's what I'm going to do, or to have a record to look at.

DOBBS: You say Texans are so fed up with big government that the state may want to succeed. The federal government certainly hasn't become any smaller. What do you think about the necessity of succession?

PERRY: I don't think that's exactly the quote that I made. But let's just say that people are fed up with big government. There is a reason that Republicans are not in power in Washington, D.C. a lot of folks put their hands up and say, listen, elect me and I want to go be a Republican and then they went up and they voted like Democrats. And people kicked them out. People are fed up with government spending our kids' future. These $1 trillion deficits are scaring people. Health care bills that have $1 trillion attachments to them, people are just fed up with that.

DOBBS: You and Kay Bailey Hutchison are tied in a -- statistically tied in a recent Rasmussen poll. What's your plan to win the primary?

PERRY: I just run on my record. When you look at a state that's got 1,000 a people a day moving to it, a place with more than fortune 500 companies, inarguably Texas is the envy of the other 49 states economically. I'll put that record up against anybody.

DOBBS: You have five patrolled ports of entry into the state, as you know. Do you think homeland security Janet Napolitano is doing enough to secure the borders? And we'll limit that just to the state of Texas.

PERRY: And neither did the previous homeland security director.

DOBBS: Michael Chertoff.

PERRY: Neither one are doing enough. We've asked this administration for 1,000 National Guard troops to come, put boots on the ground. We haven't gotten an answer. There's a conflict between the department of defense and homeland security about who's going to pay for it. I don't care who's going to pay for it, just get the troops on the ground. Let's use the technology available. Why not fly predator drones up and down that border region. They're training drones anyway. They're practicing for the real deal. Let's use them, take that data, use it to help on our homeland security.

DOBBS: What's the number one issue for the state of Texas in the next five to ten years? And what are you doing about it?

PERRY: Making sure we keep the economy going. There's nothing more important than any governor does. I like to see states compete against states. So keeping that economic climate very positive in the state of Texas so that people know they can keep more of their money, they can have the type of quality of life, they can have the freedoms that they desire. If states get focused on the tenth amendment, if we continue to make Texas a place where people want to live, obviously, when there's 1,000 a day coming there, there's a reason for it, and it's the economy, stupid.

DOBBS: All right. Well, we're going end to with you calling me stupid. Governor, good to have you with us.

PERRY: Good, Lou.

DOBBS: Governor Rick Perry, good to have you here.

A full accounting of medical malpractice reforms shows the benefits would be $242 billion a year.

Earlier this month, the Congressional Budget Office (CBO) said medical-liability reforms could save about $11 billion annually. This assessment is a gross underestimate of the potential benefits of reform and was intended to give cover to congressional Democrats who say malpractice-liability costs are trifling. But a full accounting shows the benefits would be a hefty $242 billion a year, more than 10 percent of America's health expenditures.

Last year alone, damage awards for medical-malpractice claims reached $5.9 billion. Adding in legal costs, underwriting costs, and administrative expenses, total med-mal tort costs were nearly three times higher — $16 billion. From 1986 through 2002, the average insurance payment for a malpractice claim more than tripled to $320,000. The average jury award for medical liability was $637,134 in 2006.

Getting sued is now part of the job description for physicians. Each year, up to 25 percent of them face lawsuits. Doctors are found innocent in 90 percent of cases, but they lose even then — average defense costs per claim approach $100,000. Fear of lawsuits causes most doctors to practice "defensive medicine," meaning they order unnecessary tests, referrals, and procedures to protect themselves against allegations of medical negligence.

A recent survey of doctors published in the Journal of the American Medical Association found that 93 percent of physicians admit to practicing defensive medicine. A 2008 survey by the Massachusetts Medical Society found that about 25 percent of medical procedures are defensive in nature.

Defensive medicine wastes patients' and doctors' time and costs $191 billion annually, according to the best scholarly research. Such waste drives up the cost of medical care and the price of health insurance. In fact, by making health insurance more expensive, defensive medicine adds at least 3.4 million Americans to the rolls of the uninsured, and reduced productivity and annual output by more than $41 billion in 2008. To ease the burdens of malpractice lawsuits, jury awards should be capped for impossible-to-quantify "pain and suffering," so-called non-economic damages.

According to my study "Tort Law Tally," capping awards in med-mal lawsuits cuts losses an average of 39 percent and annual insurance premiums by 13 percent. But the most important benefit from caps is better access to care. States with caps have 12 percent more physicians per capita than states without caps, according to a study published by the U.S. Department of Health and Human Services.

Non-economic-damage caps were an integral part of the malpractice reforms adopted in Missouri in 2005. Skyrocketing malpractice premiums had caused shortages of specialists, and patients had problems getting treatment. Thanks to the reforms, med-mal claims in Missouri are at a 30-year low. Average payouts are $50,000 lower than they were in 2005, before the caps went into effect.

Texas capped non-economic damages in 2003 as part of a broader tort-reform package, and since then, more than 16,500 doctors have flooded into Texas, many to previously underserved rural and minority communities. Texas has jumped six spots in the American Medical Association's ranking of doctors per capita. Nearly 430,000 Texans have health insurance today as a result of the medical liability reforms, says the Perryman Group.

Rising liability costs are causing hospitals to close; doctors to flee states; maternity centers, trauma centers, and clinics to shut down; and patients to travel long distances due to chronic shortages of providers in some communities. Congressional testimony relates the cases of Tony Dyess, who is brain-damaged, and Fred Andricks, who died, because lawyers drove neurologists out of their local areas, forcing long delays in treatment while being airlifted.

Despite these grim realities, Senate Majority Leader Harry Reid, a Nevada Democrat, claims: "The whole premise of a medical malpractice 'crisis' is unfounded." The senator is wrong, and so are those, including the CBO, who minimize the burdens.

Effective malpractice reforms would allow doctors to spend more time with patients, not attorneys, increase access to health insurance and local providers, and provide benefits of at least $242 billion a year. Less spending on wasteful litigation means better patient care and lower costs for all Americans.

Mr. McQuillan is director of business and economic studies at the Pacific Research Institute and coauthor of "The Facts about Medical Malpractice Liability Costs" and "Tort Law Tally."

The Obama administration wants to spend $25 million to figure out best practices in tort reform. A better idea would be to save the money and just adopt what Texas did six years ago to solve its medical malpractice lawsuit overabundance.

Tort reform is a term commonly used by the media, people at town hall meetings and now President Obama, but it is not clear whether everyone is referring to the same thing. Tort reform means eliminating frivolous lawsuits against physicians and hospitals.

The Texas Legislature in 2003 adopted sweeping changes to its civil justice system that significantly altered when, where and how many lawsuits could be filed. In the medical malpractice area, those reforms were basically threefold.

First, to sustain a lawsuit against the medical care provider, an expert report was required within 120 days of filing the suit stating that the doctor being sued committed a medical error that caused injuries.

Prior to 2003, such reports were left to the discretion of the judge handling the case. The Legislature made it mandatory and defined an expert to be someone actually practicing medicine in the same field as the doctor being sued, or a similar field.

The effect of this simple reform has been to discourage many frivolous lawsuits. Previously, a litigant could simply bring a lawsuit without any medical evidence to support the suit. Doctors were then forced to defend themselves in court at an average cost of more than $50,000 per suit. With one in five doctors being sued each year, the expense of frivolous suits was staggering.

Second, noneconomic damages were capped to control arbitrary awards on pain and suffering or loss of consortium. Though 30 states now have a cap on noneconomic damages, noneconomic damages now make up more than two-thirds of jury verdicts.

The Texas cap only applies to those damages that are not capable of an objective value, letting claimants still receive full compensation for out-of-pocket expenses, medical expenses, lost income and future expenses.

The combination of prohibiting doctors and health care providers from being exposed to unlimited and arbitrary awards, and requiring an actual medical report at the outset, have cut the number of medical malpractice lawsuits in Texas in half.

The third significant tort reform was to prohibit the introduction into evidence of phantom damages. The Texas rule of evidence, which previously allowed for the recovery of "reasonable and necessary" medical expenses, was being misused. The actual expenses were often much less than the billed charges, in the same way that no one pays the manufacturer's suggested retail price of an automobile.

Accordingly, the legislature changed the law to require that the damages are to be the actual expenses "paid or incurred" by the claimant. With the elimination of phantom damages, the law now requires the actual cost associated with any medical mistake be reimbursed.

These common-sense reforms have led to a massive increase in the accessibility of health care in Texas, huge growth in the capital infrastructure of hospitals and clinics, hundreds of millions of dollars more each year in charity care and Texas' adding more than 16,000 new doctors in just six years.

And in reducing the actual number of suits to those in which claims are meritorious — a recent Harvard study concluded that up to 85% of all lawsuits brought against medical providers were frivolous — we have created a more equitable system of justice.

So when people speak of tort reform, know that the effective reforms they should be talking about include expert reports, a cap on noneconomic damages and truth in expenses. These common-sense reforms are what have helped Texas bring fairness to its civil justice system.

President Obama, save our money. Follow Texas' lead.

• Nixon, an attorney, served six terms in the Texas House of Representatives, where he chaired the Committee on Civil Practices his last two terms. Considered the architect of Texas' medical malpractice reforms, he is now a senior fellow at the Texas Public Policy Foundation.