Tort Reform

Tort Reform is a pre-requisite to repairing our Health Care System

Tort reform is never discussed in specific terms.  This subject eludes our representative. Workmans comp is a tort process, where the employees receive a specific set of benefits in the event of a job related injury. In exchange for this set of benefits the worker waives his right to sue his employer. That is what workers’ compensation is and this is what a tort process is about.

Workers’ compensation is a successful tort process. It is successful but not perfect. The cost structure has a significant effect on the cost of labor in our blue collar industries and needs to be addressed.

However, the cost allocation of a medical tort process would be level for all participants who receive any outpatient care. It would be charged to the patient in the form of a tax, similar to a sales tax. Hence, we propose that this tort process which is effective between the employer and the employee be retrofitted and applied to the Medical provider/patient relationship. The purpose of the tax is to eliminate malpractice premiums for all out-patient procedures, (for more information on this subject please read “Healthcare, Our Solution”).

I hope the information below will assist you in understanding of what worker’s compensation is. In addition, I hope this will help you understand our proposal.

Medical Tort Reform

Worker Compensation is a set of laws that prohibit an employee from suing his employer. This is a type of tort reform!  It takes care of the employee in the event that he or she is involved in a work related accident.  It provides the following coverage:

  1. Replacement for loss of income (66% while recovering from a work related injury).
  2. A settlement to compensate in the event there is a permanent physical injury.
  3. Unlimited medical coverage for the injury.

This is an effective and successful program; however, the cost is skewed.

The second part of this section focuses on the cost distribution of workers compensation and is not pertinent to a medical tort reform. However it important to us to take the time and illustrate how the cost of social insurances effects the creation of jobs, particularly amongst Americas’ labor force. I think you see that when we discuss the cost of labor that employers are not complaining about wage of American worker but employers are outraged at the cost of benefits programs and the rampant abuses of these programs.

The price of compensation for many labor classes is between $10 and $15 per hundred dollars of payroll.  For example, if a truck driver earns $50,000 per year, the cost to his employer for workers’ compensation may be as much as $7,500 annually (rates vary from state to state).  On the other hand, the cost of workers’ compensation for an office personel may be .24 per hundred dollar of payroll.  That is $120 annually for the office worker and $7,500 for the truck driver, assuming they both make $50,000 per year.

The difference of cost is associated with the risk of that occupation.  Therefore, in some ways you could say that it is fair distribution of cost.  Unfortunately, the result is that some employers are being squeezed out of business and can’t survive.

If workman’s comp is highly utilized (in terms of dollar amount paid for claims), the employer can be subjected to an additional surcharge of up to 30%.

In most cases, employees, executives, and politicians are oblivious of the cost impact of this program on our labor force.

The only way to lower the cost of worker compensation insurance for these trades is to increase the waiting period required “to be entitled to the benefit” (this is a sequel to increasing a deductible).  In Maryland we have a 7 day waiting period: should this be increased to 2 weeks or even one month? What size deductible will bring the cost down to where employers are willing to participate?

A second cost-cutting tool is to have employees share in the cost of compensation insurance, (50% employer and 50% employee). The cost can not be of the magnitude that  employers elect to “not hire” employees, but instead hire workers as subcontractors.

This result has already happened in the non-union residential remodeling and residential construction industries. This change happened prior to the collapse of our residential construction.

In our proposed solution to our health care system; we recommend that this tort process be applied to all out patient procedures only. By  instituting this tort process it is our intention to eliminate the need for malpractice insurance for all out patient procedures.

It is our opinion that to apply this tort process to the entire medical industry would create financial havoc on the medical industry.