ACTION MEMORANDUM

TO: All Presidential Candidates

FROM: David Kendall

DATE: January 1, 2008

SUBJECT: Health Care Costs and Malpractice Reform

To win the presidency in November, you must master the issue of rising health care costs. No domestic political issue is more important to the electorate, as workers see their health benefits erode or disappear and CEOs increasingly fear the competitive implications of rising costs. Just sounding sympathetic is not enough: You need a powerful and practical idea that will make a real difference.

The reasons for rising health care costs are many, and most elude simple political solutions. But one significant source of rising costs can be identified and tamed: the dysfunctional way we deal with medical malpractice. You should propose a dramatic reform to replace the current malpractice legal system with specialized health courts. These specialized courts would be administrative in design, similar to other long-standing, effective alternatives to traditional courts, such as the procedures used in workers’ compensation cases. This reform would win the support of virtually all medical professionals, and once the doctors are on your side, your broader health care reform plan will have the credibility it needs to gain broad public support. This memo describes the current mess, and proposes a solution for it.

Headline-grabbing, multimillion-dollar jury awards depict injured patients as though they were lottery winners. It’s just not so: Far more often than not, patients are twice victimized, first by the medical system that caused their injury and then by a legal system that turns the pursuit of justice into a lengthy and often futile ordeal. The ordeal would be worth it for many if they could have confidence that their patience and perseverance helped others, but there is no evidence that they do.

Here are the five key facts which show that the malpractice system as it exists today not only fails to achieve the basic goals of a tort system—just compensation and effective deterrence—but also contributes to both rising health care costs and poor quality care.

First, injured patients rarely seek compensation. Only about 2 percent of patients injured by substandard medical care file a malpractice claim. Why so few? Some patients are satisfied if a doctor openly discusses a problem with them. In other words, they take “sorry” for an answer. Fearing lawsuits, however, most doctors do not reveal mistakes to their patients, leading many patients to assume that their injury is just a case of bad luck. If patients nevertheless suspect professional wrongdoing, they find that no lawyer will take their case unless their injury is severe enough to cover the high...