Is Texas tort reform working?

November 17, 2006

Perspective

Supporters of tort reform have been pointing to Texas with all the unabashed pride of new parents.

In 2003, lawmakers in the Lone Star State passed one of the toughest legal reform packages in the nation, which included a $250,000 cap on noneconomic damages. (If the case also involves hospitals or similar institutions, there's another $250,000 liability limit for the first defendant, and up to $500,000 for two or more defendants, for a total cap of $750,000.)

Following passage of the legislation, its proponents, including the Texas Medical Association, took an extra step. Fearing that the trial attorneys would tie up the new law in the courts, as they had similar legislation in Texas and other states, supporters placed Proposition 12 before voters. This public referendum gave lawmakers the constitutional authority to do what they'd already done.

Earlier in the year, Texans who favored stricter liability laws had another reason to cheer. In May, the San Francisco-based Pacific Research Institute, the self-proclaimed "free-market think tank," rated Texas first on its 2006 US Tort Liability Index, which presumably makes it a great place to do business or to practice medicine. The authors of the study praised the state's "relatively low monetary tort losses" and its "recent tort reforms," including its cap in medical malpractice suits.

But not everyone sees the state's strict liability limits or top PRI ranking as something to crow about. "We've seen people who've had the courthouse doors closed in front of them," says N. Alex Winslow, executive director of the Austin-based Texas Watch, a nonpartisan advocacy organization.

The reason, Winslow argues, is that the $250,000 cap makes it financially impractical for attorneys to accept an expensive malpractice case. (He calls the $750,000 total cap a "complete fiction" and impossible to achieve.) Without help slogging through the civil litigation morass, he says, "folks who've been harmed don't have the chance to determine whether their injury was the result of physician negligence or not."

Winslow takes issue with other pro-tort reform claims. For one, he disputes the contention that the new law has had much of an impact on physician supply. Relying on Texas Medical Board data, he points to a steady increase in the number of new doctors to the state, averaging around 2 percent each year since 1997. After a slight uptick in 2004 and 2005 (3.5 and 2.4 percent, respectively), 2006 is back to the average. Says Winslow: "Prop 12 hasn't had a sustained effect on the overall trend one way or the other."

Nor has it had a huge impact, he says, on insurance premiums. "Premiums have come down somewhat since Prop 12"-like the TMA, he estimates an average for most doctors of around 20 percent-"but they'd shot up by triple digits immediately before Prop 12." In short, Texas physicians still pay a ton for their coverage.

The back and forth between those for and against Texas-style tort reform is likely to continue. Meanwhile, premiums in many places across the nation have started to moderate, a sign of fluctuating market conditions as much as anything else.