American health care is falling to pieces before our very eyes. Earlier this month, 20,000 General Electric employees staged a nationwide strike over plans to make them pay 10% of health-care cost increases. Their concern is understandable––GE’s health-care costs rose 45% in the last three years. On Jan. 1, surgeons in West Virginia walked out in protest over malpractice insurance premiums that, for some, now exceed $150,000 annually. Meanwhile, there’s an epidemic of medical errors, according to recent reports by the Institute of Medicine, the health-care policy arm of the National Academy of Science, caused in part by a culture of concealment and legal fear.

Pain and Suffering
The main culprit in each of these cases is our legal system. In his State of the Union address tomorrow night, President Bush will call on Congress to cap "pain and suffering" damages, correctly noting the link between unaffordable malpractice premiums and the fact that the average size of jury verdicts tripled over the last 10 years. Something has to be done, he will say, and it must be done soon.

Unfortunately, the president’s reforms aren’t ambitious enough. American health care will continue to hurtle toward new crises unless our reform agenda is more aggressive. Limiting one category of damages, while providing important relief to beleaguered doctors, only treats a symptom. Broader legal reform is needed to restore order to a system that is careening wildly.

Health-care costs have surpassed our powers of prediction, in part because doctors and other providers no longer feel comfortable making sensible judgments. Most doctors admit to regularly ordering unnecessary tests and procedures just to provide a possible defense in case there is a lawsuit. The trend will only accelerate as doctors worry about keeping up with what others do––the number of possible tests for any given patient is almost endless. The gargantuan total of malpractice premiums and legal costs, over $10 billion per year, is dwarfed by the waste attributed to legal fear. Some economists estimate that the cost of "defensive medicine" now exceeds $100 billion.

Pervasive distrust also impairs the quality of care. Candid give-and-take among professionals, vital to good health care, is chilled by fears that anything said might be used later in court. Innovation is stifled because of fear of the legal consequences of anything new and uncertain. Perhaps worst, legal fear places barriers between caregiver and patient in situations when what’s needed most is human empathy.

Trial lawyers argue that the threat of lawsuits promotes better care and assures accountability. But those incentives are aligned only when the legal system reliably distinguishes between good care and bad care. Justice today, studies show, is worse than random. Most errors go uncompensated; but 80% of lawsuits do not involve any negligence at all. Juries often let off the hook a doctor who made a mistake; but one in four cases results in payments where experts believe the doctor did nothing wrong. Lawsuits go on for years, with the truth obscured by technical jargon and experts-for-hire, a nightmare both for those injured by malpractice and for physicians unfairly charged.

There’s only one cure for America’s ailing health-care system: We must create a reliable system of medical justice. Only then can we restore the trust essential to making sensible health-care choices. What’s required is not a thick rule book, but the key element of any effective legal system: a public institution with the authority to make rulings of right and wrong.

Who’s in charge today? No one. No judge, legislature, or agency is making deliberate judgments of what is reasonable care and what is not. No one is making rulings of who can sue for what. No one is balancing the needs of a victim against the needs of the rest of society. No one even acknowledges the interest of the common good––that every award to a victim raises the costs (or reduces the care) to sick people in a comparable amount.

Bringing order to American health care will require many difficult social choices. Disagreement is inevitable, but not making choices is the worst choice because it infects daily decisions with debilitating distrust. Without authoritative guidance, all participants––doctors, patients, HMOs, lawyers––are led to pursue their selfish interests or to wallow in doubt and fear.

America’s system of health care is, literally, out of control. Costs are rising at unsustainable rates: This year the cost of health care in America is expected to be $1.4 trillion, over $5,000 per person. Notwithstanding all this money, Americans’ access to health care is contracting: The number of Americans without health insurance has risen to over 41 million. Quality has become a bipolar phenomenon: Scientific advances in medicine give us miracle cures, yet one out of five prescriptions in the U.S. are administered incorrectly in antiquated delivery systems that no official body exists to fix.

Health care is falling apart, like a car wreck in slow motion, because no one is at the wheel. Law is supposed to provide deliberate judgments of right and wrong, so people know where they stand. America’s legal system today is more like a free-for-all. Want to sue for $2 million? Why not add a zero and make it $20 million? Leaving individual disputes to changeable rulings of juries is not the rule of law, but the opposite, a kind of law a la carte. Without red lights and green lights, people start to creep through the day, fearful of being blindsided.

Fair Compensation
America needs a special medical court or tribunal, just as we have separate courts for patents and other specialized problems. Sensible judgments will be possible only when doctors, hospitals and other providers feel that justice will reliably distinguish between right and wrong, make predictable judgments about fair compensation, and provide the right incentives for overall quality of health care. A trusted system of justice is the key. Without it, health care will continue to careen downwards, driven by legal fear instead of humane care.

This article originally appeared in the Wall Street Journal on January 27, 2003.