Behavioral Economics
Medical Malpractice Reform
Ten Principles of a Rational Tort System
Posted November 26, 2012
The medical malpractice system in the United States has a poor track record and imposes heavy social costs—up to $2,500 per household, including defensive medicine. In a recent blog post, I proposed a voluntary, contractual, no-fault alternative to the current system.
Here, I name some of the principles that should guide tort reform.
Principle #1: Victims of torts should be fully compensated—no more, and no less.
Principle #2: Those who commit torts should pay the full cost of their harmful acts—no more, no less.
Principle #3: Whenever possible, damages should be determined in the marketplace (e.g., the market price to repair the damage).
Principle #4: Structured awards are generally preferable to lump sum awards.
Principle #5: Parties should always be free to alter by contract a court- determined award.
Principle #6: Reasonable limits should be set on damages for pain and suffering, subject to market-based rebuttable evidence.
Principle #7: Punitive damages are justified only if there are social costs over and above the victim’s private costs.
Principle #8: Contingency fees should be paid entirely by the defen- dants, with meritorious exceptions.
Principle #9: Attorney’s fees should be awarded in cases of bad faith.
Principle #10: The first nine principles do not apply to settlements.
Source: Priceless: Curing the Healthcare Crisis, by John C. Goodman (Oakland, Calif.: The Independent Institute), p. 191.