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Document No.
CA
THE WHITE HOUSE OFFICE OF CABINET AFFAIRS
STAFFING MEMORANDUM
December 11, 1990
Date:
Due by:
Domestic Policy Council Meeting WITH THE PRESIDENT, Thursday,
December 13, 1990 at 2:00 P.M. in the Cabinet Room (FOR PRINCIPALS
Subject:
ONLY),
Richard W. Porter
From:
Executive Secretary, Domestic Policy Council
Action
FYI
Action
FYI
ALL CABINET MEMBERS
CIA
Vice President
CEA
Agriculture
CEQ
Commerce
EPA
Defense
GSA
Education
NASA
Energy
National Science Foundation
HHS
ONDCP
HUD
OPM
Interior
OSTP
Justice
SBA
Labor
UN
OMB
Cicconi (For WH Staffing)
State
Transportation
Treasury
USTR
Veterans
COMMENTS: The Domestic Policy Council will hold a meeting WITH THE
PRESIDENT on Thursday, December 13, 1990 from 2:00 to 3:00 P.M. in the
Cabinet Room to discuss the third National Drug Control Strategy
(Strategy III).
Attached is an agenda for the meeting and a revised version of the
options paper entitled, "The Third National Drug Control Strategy
(Strategy III): Issues for Domestic Policy Council Consideration. "
Please confirm your attendance with Honor Willson Ingersoll (456-2800)
by noon, Wednesday, December 12.
THE WHITE HOUSE
WASHINGTON
December 11, 1990
MEMORANDUM FOR THE DOMESTIC POLICY COUNCIL
FROM:
RICHARD W. PORTER KWP
Executive Secretary
SUBJECT:
Domestic Policy Council Meeting with the
President, Thursday, December 13, 1990 at 2:00
P.M. in the Cabinet Room
The Domestic Policy Council will hold a meeting with the
President for principals only on Thursday, December 13, 1990 from
2:00 to 3:00 P.M. in the Cabinet Room. The purpose of this
meeting is to discuss the third National Drug Control Strategy.
John Walters, Acting Director of the Office of National Drug
Control Policy, will make the presentation.
Attached is an agenda for the meeting and a revised version
of the options paper entitled, "The Third National Drug Control
Strategy (Strategy III): Issues for Domestic Policy Council
Consideration." The paper has been revised to reflect the
discussion in Monday's DPC meeting. You have also previously
received a full draft text of Strategy III.
Please confirm your attendance with Honor Willson Ingersoll
(456-2800) by noon, Wednesday, December 12.
Attachment
THE WHITE HOUSE
WASHINGTON
MEETING OF THE DOMESTIC POLICY COUNCIL
WITH THE PRESIDENT
2:00 P.M., Thursday, December 13, 1990
The Cabinet Room
Third National Drug Control Strategy
AGENDA
1.
Opening
The President
(1 minute)
2.
Introduction
Attorney General Thornburgh
(3 minutes)
3.
Presentation
John Walters, Acting Director
Ofc. of National Drug Control
Policy
(10 minutes)
4.
Discussion
All Participants
(45 minutes)
5.
Conclusion
Attorney General Thornburgh
(2 minutes)
CLOSE HOLD
December 11, 1990
THE THIRD NATIONAL DRUG CONTROL STRATEGY (STRATEGY III):
ISSUES FOR DOMESTIC POLICY COUNCIL CONSIDERATION -- REVISED
Background:
The Anti-Drug Abuse Act of 1988 (P.L. 100-690) requires that
a National Drug Control Strategy be transmitted to Congress not
later than February 1 each year. Accordingly, the Office of
National Drug Control Policy (ONDCP) has drafted for Domestic
Policy Council consideration the third National Drug Control
Strategy (Strategy III).
The President announced the first National Drug Control
Strategy (Strategy I) on September 5, 1989. The second National
Drug Control Strategy (Strategy II) was transmitted to Congress
on January 25, 1990. Strategy III will be transmitted to
Congress concurrently with the President's Fiscal Year 1992
Budget. (This schedule conforms to statutory requirements.)
Strategy III stays the course charted in Strategies I and
II. It further refines the blueprint laid out in Strategy II
with respect to the activities and responsibilities of Federal
departments and agencies; specific initiatives to begin in this
fiscal year; and the funding and legislation necessary to carry
out the Administration's policy.
In summary, the approach laid out in the two previous
Strategies seems to be the right one and seems to be working;
none of the major policy directions in Strategies I and II is
reversed in Strategy III.
The structure of Strategy III maintains that of Strategies I
and II. Following the Introduction, seven chapters examine the
"fronts" on which the drug war must continue to be waged:
Criminal Justice; Drug Treatment; Education, Community Action,
and the Workplace; International Initiatives; Border Interdiction
and Security; Research; and Intelligence.
Several Appendices are included with the Strategy: High
Intensity Drug Trafficking Areas (Appendix A); Resource
Requirements (Appendix B); Management (Appendix C); and
Recommended State Legislation (Appendix D).
Progress In the War on Drugs:
We are now turning the corner in the war on drugs. Cocaine,
for example, is harder to find, more expensive, and less pure
2
today than it was one year ago. Drug use is down. The Federal
government has provided unprecedented funding through State block
grants for drug treatment, prevention, and State and local law
enforcement.
Asset forfeiture collections have also been enhanced -- in
FY90, collections increased 28 percent to $460 million. An
agreement between the Drug Enforcement Administration and Customs
cross-designating an additional 1,000 Customs agents in the
effort to investigate drug and money-laundering cases has been
implemented. The U.S. signed the Document of Cartagena
establishing drug control cooperation with Peru, Bolivia, and
Colombia.
ONDCP released three "white papers" in 1990: 1) a paper on
leading drug indicators, showing significant declines in drug use
from 1988 to 1989; 2) a paper explaining how effective drug
treatment works; and 3) a paper on State drug control policy and
activity, including recommendations for State drug-free workplace
statutes.
Working Group Consideration:
The DPC Working Group on Anti-Drug Policy reviewed early
drafts of Strategy III. During Working Group consideration,
numerous issues were addressed and resolved between ONDCP and the
agencies. Budget levels in Strategy III (Appendix B) will be
addressed in the FY92 Budget review process. The International
chapter was discussed in the NSC process, and a declassified
version of the International chapter is included in Strategy III.
Highlights of Strategy III:
Strategy III includes some follow-up on three major policy
issues addressed in previous Strategies:
1. Tying Federal highway funds to State drivers' license
revocation laws. Strategy I urged States to adopt laws revoking
the drivers' licenses of convicted drug offenders. The President
decided that the Administration would not propose to sanction
Federal highway funds going to States that had not enacted such
laws.
The FY91 Transportation appropriations bill included a
provision that requires 5 percent of a State's Federal highway
funds to be withheld if the State has not enacted a revocation
law within two years. After four years, 10 percent of Federal
highway funds will be withheld. States must revoke a driver's
license for 6 months after a drug conviction. (This pertains to
any drug conviction -- the offense does not have to be related to
3
driving.) The only exception for a State is to certify that it
officially considered revocation laws and rejected them.
Strategy III does not further address this controversial
issue.
2. High Intensity Drug Trafficking Areas. The law authorizes
the designation of certain localities in the United States as
high intensity drug trafficking areas. Strategy II designated
New York City, Miami, Houston, Los Angeles, and the Southwest
Border as high intensity drug trafficking areas.
In FY90, the five areas received $25 million for use by
Federal law enforcement agencies. The Administration requested
$50 million for FY91, but Congress appropriated $82 million --
earmarking the additional $32 million for direct State and local
law enforcement funding assistance. Funding for designated high
intensity drug trafficking areas was intended to be seed money to
aid stepped up local efforts by an enhanced Federal presence.
Strategy III (Appendix A, p. 188) maintains the designation
of the five areas as high intensity drug trafficking areas.
ONDCP is required to report to Congress by March 1, 1991, on the
effectiveness of and need for such designations.
The appropriate FY92 funding level for high intensity drug
trafficking areas as well as the proper funding mechanism (i.e.,
whether to provide funding through ONDCP or through normal budget
channels at the Departments of Treasury and Justice) are
questions expected to be addressed in the FY92 budget review
process.
3. National Drug Intelligence Center. A proposal for the
National Drug Intelligence Center (NDIC) was highlighted as an
Administration priority in previous Strategies. Congress
rejected the Administration's proposal and instead included $10
million in the FY91 Defense appropriations bill for a National
Drug Intelligence Center to be located in Pennsylvania and
operated by the Department of Defense. This was done by Rep.
John Murtha (D-Pennsylvania). It is not clear that the
Department of Defense has legal authority to operate such a
Center. No work has begun in setting up the NDIC; the Department
of Defense and ONDCP are still studying the statutory language
and the conference report. Some members of Congress seem to
disapprove of the $10 million NDIC appropriation and may alter
the law in the next Congress.
Moreover, in the Commerce, State, Justice appropriation bill
for FY91, Congress directed that no funds be spent by the Justice
Department for any activity called a National Drug Intelligence
Center, yet the involvement of Justice is essential.
4
As the Administration seeks to resolve with Congress the
question of creating a National Drug Intelligence Center,
Strategy III (p. 178) calls for continued improvements in our
capability to produce strategic intelligence on drug trafficking
organizations. The Attorney General will create and chair a Law
Enforcement Drug Intelligence Committee (LEDIC) to coordinate the
development of drug intelligence collection. As one of its
initial tasks, the LEDIC will explore alternate means to
accomplish NDIC's primary missions, such as enhancements to or
expansions of existing drug intelligence entities.
Major Policy Issues Requiring DPC Consideration:
The Working Group on Anti-Drug Policy has identified the
following issues for DPC consideration. (Budgetary implications
related to the following issues will be decided in the FY92
budget review process and are not addressed here.)
1. Treatment capacity. The major emphasis in Strategy III is
the commitment to treatment. HHS now estimates 6 million
Americans need and could benefit from drug treatment. This
constitutes an increase of 2 million persons over earlier
Administration estimates, due to efforts to count certain
populations (e.g., prisoners, the homeless) not previously
included in the total.
In any given year, about half of this group -- or 3 million
people -- will be induced into treatment. Because the number of
Americans using drugs continues to decline, the 3 million persons
who could be induced into treatment is expected to drop to 2.5
million in the next few years. The current treatment system
(public and private) can absorb up to 1.7 million people.
HHS data also show that while the number of treatment slots
in certain urban areas is inadequate, treatment capacity in other
geographical areas goes unused. Thus, despite the perception of
a national shortage of treatment capacity in all regions, only 80
percent of the slots are used. This geographical mismatch
between the supply of and demand for treatment slots is but one
example of how the way treatment is currently funded fails to
reach everyone in need. The lack of State treatment action
plans, well-trained staff, and new sites for program expansions
has also frustrated plans for growth in treatment.
Strategy III (p. 65) proposes to expand or redirect
treatment capacity so that by 1994 treatment is available to all
those who need treatment and could benefit from it (i.e., 2.5
million people). Strategy III proposes to increase the size of
the Alcohol, Drug Abuse, and Mental Health Services (ADMS) block
grant to achieve this goal. Depending on budgetary decisions
made in the FY92 budget review process, this may not be possible.
5
However, a variety of other funding alternatives are possible,
such as (among others) 1) altering the allocation formula to
direct treatment funds to States with greater need or to greater
areas of need within States; and 2) targeting discretionary
grants to areas with particular treatment needs.
It must be emphasized that any approach chosen (such as
those mentioned above) will entail costs -- both political and
fiscal. For instance, altering the allocation formula to direct
treatment funds to States with greater need involves shifting
funds from rural, primarily western States to more urban States.
Targeting may involve recreating categorical programs that at the
Reagan Administration's request were combined to form the block
grant in 1981.
To better analyze and rationalize the implications of a
decision to expand treatment, the Director of OMB has agreed to
convene the affected agencies (HHS, ONDCP, OMB, OPD) to explore
options.
Question: Should Strategy III have as one of its primary
objectives the expansion of treatment availability to all those
who need treatment and could benefit from it -- by 1994 (provided
offsets, if necessary, can be found to support the proposal)
Pros:
0
A plan to make treatment available within three years to all
those who could benefit visibly demonstrates the
Administration's commitment to treatment.
O
Some Democrats have attempted to criticize the
Administration in previous Strategies for emphasizing law
enforcement at the expense of treatment.
Cons:
O
The goal of making treatment available to all those who
could benefit by 1994 may be unachievable for both
programmatic and budgetary reasons. Five years instead of
three may be more reasonable.
O
A Federal commitment to make treatment available to all who
could benefit is largely meaningless because States will
have to bear the larger responsibility in funding treatment
expansion.
o
The funding alternatives mentioned above, such as changing
the allocation formula for the block grant, might have
political disadvantages. Intense Congressional opposition,
especially in the Senate, can be expected to any proposal
that would reduce block grant funds going to rural States or
6
that would direct new funds to populous States.
2. Numerical objectives. The law requires two-year and ten-
year numerical goals in each Strategy. Strategy I first laid out
a set of nine quantified goals that were subsequently revised in
Strategy II. Most of the goals are based on National Household
Survey data from the National Institute on Drug Abuse (NIDA) and
are directly related to drug use. Various data indicate some
success in the drug war (cocaine prices and purity, cocaine-
related deaths, etc.) and many of the two-year goals specified in
previous Strategies have already been met.
Strategy III (p. 4) again revises the two-year and ten-year
numerical objectives, making them more ambitious in light of
recent progress in the war on drugs. For example, Strategy III
sets a goal of a 20 percent reduction (from the 1988 level) for
current overall drug use by 1993 and a 60 percent reduction by
2001. Some of the goals are even more ambitious: Strategy III
aims at a 60 percent reduction (from the 1988 level) in the
number of adolescents reporting past month cocaine use by 1993
and a 75 percent reduction by 2001.
Question: Does the DPC approve the more ambitious numerical two-
and ten-year objectives included in Strategy III?
Pros:
O
More ambitious goals highlight that progress in the war on
drugs is being made.
Unless we revise some of the goals, we will establish goals
that are below what we have already achieved.
Holding ourselves to more stringent goals is consistent with
the accountability theme that pervades other Administration
policies, such as the National Education Goals.
O
The Administration risks looking insincere if it maintains
that progress is being made, but insists on a relatively
less stringent set of goals for itself.
Cons:
Reductions in drug use indicators as measured by the
Household Survey might be reflecting the hardening of social
attitudes; respondents could be simply less likely to admit
drug use than they were in past surveys.
o
After initial precipitous reductions in reported drug use,
subsequent marginal reductions become much more difficult to
achieve.
7
3.
National standards for drug testing labs: Drug testing in
the workplace is becoming more and more a common practice. In
fact, a growing number of employers have begun to institute
testing for broader categories of employees. Public support for
drug testing programs depends in large part on high standards of
accuracy of the tests. False-positive results from any single
poor quality lab can endanger the credibility of drug testing
programs generally.
Strategy III (p. 106) calls for the development of national
drug testing legislation for lab certification only, thus
separating the narrower question of lab certification from the
broad range of employer needs and employee rights. Strategy III
otherwise maintains current policy of encouraging States to adopt
their own drug-free workplace policies.
Question: Should Strategy III call for development of national
drug testing legislation for lab certification that would preempt
State legislation?
Pros:
O
Preemption of State law for certification of drug testing
laboratories would not be as significant a departure from
general Administration policy as would overall national drug
testing legislation.
National legislation will promote consistently high-quality
drug testing programs, thus minimizing the credibility
damage resulting from a few isolated labs producing poor
results.
There are problems with varying degrees of quality among
laboratories. National legislation would remove the problem
of conflicting quality standards for companies operating in
more than one State.
Business groups would likely support legislation providing
consistency across State lines.
HHS currently certifies some medical laboratories for
certain purposes. The approach would be consistent with
1988 legislation regarding clinical laboratories.
Cons:
O
National drug testing legislation would preempt State
legislation and private testing practices, thus running
counter to the principle of Federalism and opening the door
8
to preemption in other areas. Administration policy has
generally been not to preempt State laws.
States are better suited to judge what particular
adjustments must be made to address the needs of their
populations.
O
"Federalizing" drug testing legislation could make the
Federal government liable to a new round of costly
litigation.
ONDCP has already released a "white paper" recommending
model State legislation for building a drug-free workforce.
Administration-sponsored legislation preempting States in
the relatively narrow area of lab certification will give
Congress an opportunity to expand the scope of the
legislation and more broadly preempt State laws.
THE WHITE HOUSE
WASHINGTON
DOMESTIC POLICY COUNCIL
Wednesday, July 25, 1990
3:30 P.M.
Roosevelt Room
AGENDA
1. Low Income Opportunity Strategy
Document No.
CA
THE WHITE HOUSE OFFICE OF CABINET AFFAIRS
STAFFING MEMORANDUM
Date: July 20, 1990
Due by:
Domestic Policy Council Meeting, Wednesday, July 25, 1990 from
Subject: 3:30 to 4:30 PM in the Roosevelt Room (for PRINCIPALS ONLY).
Kenneth P. Yale, Executive Secretary
From:
Domestic Policy Council
Action
FYI
Action
FYI
ALL CABINET MEMBERS
CIA
Vice President
CEA
Agriculture
CEQ
Commerce
EPA
Defense
GSA
Education
NASA
Energy
National Science Foundation
HHS
ONDCP
HUD
OPM
Interior
OSTP
Justice
SBA
Labor
UN
OMB
Cicconi (For WH Staffing)
State
Transportation
Treasury
USTR
Veterans
COMMENTS:
The Domestic Policy Council will hold a meeting for PRINCIPALS
ONLY on Wednesday, July 25, 1990 from 3:30 to 4:30 PM in the Roosevelt
Room. The subject of this meeting is Low Income Opportunity Strategy.
Attached are (1) an agenda and (2) a final draft options paper on the
subject of Low Income. This paper is extremely sensitive in nature and
should be treated as very close hold. Please refrain from making any
additional copies.
Please inform Honor Willson (456-2800) by C.O.B. Tuesday, July 24, 1990
as to whether or not you plan to attend this meeting.
7/20 accepted to Cawlin
THE WHITE HOUSE
WASHINGTON
July 20, 1990
MEMORANDUM FOR THE DOMESTIC POLICY COUNCIL
FROM:
KENNETH P. YALE
Executive Secretar Ky
SUBJECT:
Meeting of the Domestic Policy Council, Wednesday,
July 25, 1990 at 3:30 P.M. in the Roosevelt Room
The Domestic Policy Council will hold a meeting for
principals only, on Wednesday, July 25, 1990 from 3:30 to 4:30
P.M. in the Roosevelt Room. The subject of this meeting is the
Administration's Low Income Opportunity Strategy. Charles Kolb,
Chairman of the Low Income Opportunity Board, will make the
presentation.
Attached for your review prior to Wednesday's meeting is a
final draft options paper on the low income opportunity strategy.
It should be noted that this paper is sensitive in nature and
should be treated as a close hold document. Please refrain from
making any additional copies.
Please inform Honor Willson (456-2800) by C.O.B. Tuesday,
July 24, as to whether or not you plan to attend this meeting.
Attachment
THE WHITE HOUSE
WASHINGTON
DOMESTIC POLICY COUNCIL
Wednesday, July 25, 1990
3:30 P.M.
Roosevelt Room
AGENDA
1. Low Income Opportunity Strategy
CLOSE HOLD
July 20, 1990
MEMORANDUM
SUBJECT:
An Administration Low Income Opportunity Strategy
BACKGROUND:
Since July 1989, the Domestic Policy Council (DPC) has met
seven times on the subject of low income opportunity. On
September 14, 1989, the President approved a DPC memorandum in
part directing the Low Income Opportunity Board (LIOB) to
develop, within 90 days, the principles of a conservative
anti-poverty agenda. The DPC then decided to ask the LIOB to
take additional time to provide some original thinking on a
broad, comprehensive low income opportunity strategy.
DPC interest in the issue has been extremely strong. The
Attorney General and several other DPC members regard the low
income discussions as related to current civil rights concerns.
The first war on poverty was intimately linked with the civil
rights movement in the 1960's. Political enfranchisement was
supposed to go hand in hand with economic enfranchisement. The
political goals of the civil rights movement were largely
achieved, but since economic empowerment does not come from
government handouts, the war on poverty essentially bogged down.
Although it alleviated some of the worst symptoms of poverty, the
war on poverty could not succeed in reducing poverty because it
was based on a philosophy of redistributionism and promoted
dependency.
It is time now for phase two of the war on poverty --
economic empowerment -- the logical next step for true civil
rights enfranchisement. Economic empowerment comes from wealth
expansion; a strong social fabric; and access to education, jobs,
and opportunity. That is why a conservative war on poverty has
every chance of succeeding where its predecessor failed. Our
anti-poverty efforts must be redirected with that overarching
principle in mind.
This paper outlines a comprehensive, long-term anti-poverty
strategy for the Administration. It begins with a description of
what an effective anti-poverty policy would achieve, presents the
successes and failures of current anti-poverty efforts, provides
a set of principles to guide future policy decisions, and
2
presents a set of strategic options for consideration. The
DPC recommends an approach that builds on current efforts through
enhanced targeting of resources and better integration of
services to make government work better in promoting economic
independence and self-sufficiency.
I. What would an effective anti-poverty strategy do?
The principal goal of an effective anti-poverty system
should be to assist families in taking responsibility for their
own lives and to provide economic empowerment for American
families that enables them to participate fully in the mainstream
of the economy. An effective welfare system consistent with this
goal would operate not merely as a safety net, but rather as a
trampoline. It would help the poor achieve the dignity and self-
respect that flow from economic self-sufficiency, and it would
function as a long-term safety net only for those unable to
achieve self-sufficiency. The outcomes of such a system might
include:
Low unemployment; few working poor. Those who are willing
and able to work can find employment that does not leave
their families poor.
O
Few disadvantaged children. All children receive good
health care, attend well-functioning schools, and have a
sense of being part of society and responsible to it.
Communities that work. Cities and neighborhoods are
healthy, both economically and socially. Local institutions
-- including schools, public service providers, and the
health care and criminal justice systems -- operate
effectively.
Families function effectively. Family members recognize and
carry out their responsibilities to provide economic and
personal support to each other; children receive support
from both parents, even if those parents live apart.
Little welfare dependence. Public assistance mainly
provides short-term aid to those who are poor and gives
people the tools to escape poverty. But individuals who are
unable to achieve economic self-sufficiency, such as the
elderly or the permanently and severely disabled, have the
resources necessary to live adequately.
Private sector efforts complement government efforts to
reduce dependency and promote self-sufficiency. Many for-
profit and nonprofit organizations, as well as individual
citizens, work together to help disadvantaged Americans.
3
II. Where are we now?
A.
Problems with current anti-poverty efforts.
Our present anti-poverty system often does not function
effectively -- certainly not effectively enough to produce the
outcomes described above. The focus of most existing programs
has been to provide income supplements (either in cash or in-
kind), not to foster economic self-sufficiency. Additionally,
many non-working individuals often face disincentives to work.
The current system of anti-poverty programs is fragmented,
inefficient, and often includes disincentives to self-
sufficiency. Programs are poorly coordinated; eligibility rules
are occasionally conflicting, generally confusing, and not
standardized.
B.
The current face of poverty.
Poverty among children was sharply higher in the 1980s than
in the previous decade. In 1988, almost one child in five lived
in a poor family. This problem is closely related to the growth
of single-parent families, who are less likely to work, often
have only low-wage jobs, and cannot rely on a spouse for
additional earnings. More than half of all poor children live in
such families.
A significant portion of the poor actually work full-time
but remain poor. Sixteen percent of all poor families have at
least one full-time, year-round worker. Long-term poverty and
long-term dependence on government assistance also continue. Poor
people in some areas suffer from the breakdown of the entire
range of social institutions, from family and schools, to the
overcrowded criminal justice system.
C.
Poverty in the midst of a growing economy.
Despite eight years of sustained economic growth, poverty
rates have not fallen as rapidly as historical experience would
have predicted. This is partially due to slower growth in the
demand for less-skilled workers as well as to the changing
composition of the poor, especially the growth in female-headed
households. Slower labor force growth in the 1990s as the baby
boom ages means that the greater challenge will not be to create
jobs, but to assure that workers have the needed skills to fill
the jobs available.
III. How do we get there from here?
The DPC proposes the following strategic principles to guide
the development of the Administration's economic empowerment
policies:
4
1.
The government must maintain a healthy, growing economy.
Economic growth has done more to reduce poverty and economic need
over the past century than any specifically designed anti-poverty
policy.
2.
Employment should be the central objective of an economic
empowerment strategy. Employment is the best way to reduce
poverty and welfare dependence among families with an able-
bodied, non-elderly adult. Getting a job -- even a low-skilled
job -- provides work experience and encourages good work habits.
3.
The design, implementation, and evaluation of the entire
range of programs and policies that affect low income Americans
should be better targeted and better coordinated. Coordination
across Departments and levels of government is essential, so that
schools, public assistance programs, the criminal justice system,
drug abuse programs, the health care system, housing programs,
and economic development policies all work together. Program
coordination requires administrative leadership from Federal,
State, and local officials. Given scarce resources, we also need
to review whether existing programs are targeted on those who
need them most. Thus, a national low income opportunity strategy
is required, one that pays close attention to how programs work
together.
4.
Anti-poverty programs should enforce the mutual obligations
and responsibilities of individuals and public institutions.
Governments are responsible for operating schools that work,
maintaining a healthy economy, preventing crime, and assisting
those who find themselves in need. An individual should be
expected to take advantage of available opportunities for
education and employment, to obey the law, and to nurture his or
her children so that they too can become responsible citizens. An
effective anti-poverty system must acknowledge and enforce these
obligations, and hold both institutions and individuals
accountable.
5.
Social programs and institutions should empower individuals
and communities. Public programs should seek to give individuals
greater control over their lives, enhancing personal autonomy and
dignity. A strong emphasis on choice and responsibility can
foster the values that are central to economic self-sufficiency.
6.
Financing and decision-making need to be appropriately
shared between local, State and Federal entities. Decisions that
are more appropriately made by local and State communities should
not be usurped by the Federal government. But the Federal
government must hold State and local institutions accountable for
effective delivery of services and programs, particularly those
supported by Federal funds.
5
7. The private sector is an essential partner with government
in economic empowerment efforts. Because of a shrinking pool of
entry-level workers, employers will have incentives to invest in
training low-skilled workers. These efforts need to be
encouraged and the partnership between the public and private
sectors strengthened, with each sector doing what it does best.
8. The public system of anti-poverty programs should encourage
innovation and experimentation, particularly among State and
local governments that want to design programs to fit their
populations.
ISSUES FOR PRESIDENTIAL DECISION:
In outlining an Administration low income opportunity
strategy, the DPC presents five issues for consideration:
1) articulating our current activities in terms of an overall
high-profile strategy; 2) expanding the role of the Low Income
Opportunity Board; 3) building on current innovative efforts;
4) analyzing the distributional effects of current programs; and
5) integrating services.
1. Through a high-profile effort, clearly articulate and
announce the Administration's anti-poverty strategy, principles,
and agenda. A "kinder, gentler America" must include a concern
for the economic difficulties low income persons experience in
trying to achieve the American dream. The Administration has
already begun to address this concern through a series of
initiatives from Head Start expansion and new literacy and job-
training initiatives to new homeownership and housing strategies,
from undertaking a comprehensive look at health care to
developing a new agenda to end homelessness and articulating the
National Education Goals. The public, however, is only dimly
aware of many of these initiatives, and is certainly not aware of
them as part of a comprehensive low income opportunity strategy.
Cabinet members will be charged with the responsibility of
articulating the eight principles outlined above and focusing
attention on current Administration anti-poverty efforts -- some
new, some incremental. Wherever possible, the Administration's
commitment should be made clear through specific, quantifiable
goals, such as: the 90 percent high school graduation rate by
the year 2000; a million new homeowners; ending homelessness in
the 1990's; a half-million new minority and low income area
entrepreneurs; and other appropriate goals as determined by the
Cabinet Secretaries.
6
Pros:
O
Having a clearly defined rationale for a particular
anti-poverty agenda makes it easier to oppose proposals the
Administration thinks are misdirected.
O
A major Administration anti-poverty emphasis is consistent
with other efforts to increase investment in America's
future.
O
Polls consistently show that the public is very sympathetic
to helping the poor but unsympathetic to welfare and welfare
recipients. An economic empowerment strategy of promoting
jobs and opportunity rather than welfare takes the moral
high ground of reducing poverty rather than maintaining a
permanently poor welfare population.
Cons:
O
Administration statements that articulate an anti-poverty
strategy may be viewed as purely rhetorical and may not be
given serious public attention.
Adopting a major public commitment to economic empowerment
may create significant pressure to increase spending and to
demonstrate concrete success by 1992.
2.a. Expand the Low Income Opportunity Board. The chairperson of
the LIOB would be given primary responsibility, under the
continued direct oversight of the Domestic Policy Council, for
coordinating Federal efforts to eliminate poverty. This could
include responsibility for implementing the principles that
underlie the anti-poverty strategy; ensuring coordination in the
array of public assistance programs; and developing an evaluation
strategy to measure the performance of the entire welfare system.
In its expanded role, the LIOB will include other
representatives (e.g., tax experts from Treasury) outside of the
traditional Federal welfare agencies that comprise the Board.
The LIOB staff may have to be increased from its current level
(one staff member) to 2 - 3 staff members in order to handle all
the work associated with the expanded LIOB role proposed in this
option, especially if option 4 below is also approved. It is
expected that these additional assignments would be handled by
detailing employees from agencies represented on the LIOB and by
drawing upon agency expertise under LIOB coordination.
7
Pros:
A strong LIOB could provide the leadership necessary to
coordinate anti-poverty activities crossing the
jurisdictions of several Federal agencies.
Some coordinating entity outside of the agencies is required
to avoid "capture" by particular programmatic interests.
The Administration would be seen by Congress and the public
to be speaking with one coherent voice on this issue.
Cons:
Providing leadership and several staff positions for the
LIOB might require an increase in current resources,
especially if detailees were not feasible.
Giving poverty-related problems greater visibility may
encourage Congress to develop initiatives the Administration
considers counter-productive or too expensive.
Some may criticize an expanded LIOB as inadequate, citing
the need for a full-fledged "poverty czar" with sufficient
stature to compel cooperation among Federal agencies.
2.b. Expand the Low Income Opportunity Board, with a Cabinet
Secretary as the Chair. Even with increased resources, the LIOB
may not have sufficient "clout" to pursue a high-profile anti-
poverty strategy outside the Administration. One way to ensure
that a leader of sufficient stature and authority heads the
effort is to appoint a Cabinet Secretary to coordinate the low
income opportunity strategy, with the strengthened LIOB operating
as a staff-level interagency coordinator.
Pros:
O
An effort led by a Cabinet Secretary ensures high-level
visibility, interagency cooperation, and commitment.
O
Placing a Cabinet Secretary in the lead role provides a
recognized spokesperson for anti-poverty strategy and will
help to persuade critics of the importance of this issue
within the Administration.
Cons:
O
Visible Cabinet-level leadership raises public expectations
of success.
8
A Cabinet Secretary may become a target/lightning rod for
Congressional and media criticism of Administration policy
toward the poor.
3.
Direct Cabinet Secretaries to review current innovative
program efforts within their purview, and frame them within the
economic empowerment strategy. Current Administration efforts,
rather than new categorical initiatives, should form the
foundation of the low income opportunity strategy. Several major
new initiatives (such as joint HHS-HUD efforts on homeless
programs or job training and public housing linkages currently
being developed by HUD and Labor) could be announced and
implemented almost immediately. This could also include
modifications which build upon current efforts, subject to
budgetary constraints and policy review, such as:
--
Expand the Earned Income Tax Credit (EITC). The EITC could
be adjusted by number of children, expanded to workers
without children, or the dollar amount could be increased.
Propose health care initiatives based on the current HHS
review of alternatives relating to improved access to health
care, with particular attention to the need for adequate
insurance for the uninsured.
Expand the Administration's current housing initiatives,
including HOPE and enterprise zones, designed to help many
low income families move toward self-sufficiency.
--
Continue to expand Head Start and use Head Start as a means
to influence low income families with young children. Head
Start should also be better coordinated with Even Start and
Chapter 1 administered by the Department of Education.
Improve health services for infants and pregnant women. This
may include expansion of WIC and other nutrition programs,
drug abuse initiatives targeted at pregnant women and
mothers, and immunization programs for children.
Find ways to promote volunteerism and individual giving. For
instance, HHS' Administration on Aging could expand programs
that promote intergenerational volunteer efforts to bring
needy children together with older adults.
Emphasize educational results, not resources, as a way to
improve our education deficit. Empowerment programs such as
choice could be promoted as a key strategy for helping
achieve the six education goals.
9
Pros:
O
Builds upon efforts the Administration has already
recognized as effective.
O
Targets problems widely recognized among the public as
important (health insurance, infant health, housing
affordability).
Cons:
O
With deficit-reduction still a high priority, there is a
budgetary risk to encouraging expansionary pressures.
O
Proposed directive may focus public and Congressional debate
on dollars rather than on the underlying effort to promote
self-sufficiency and reduce poverty.
O
Only addresses those problems that are targeted by existing
initiatives; does not by itself promote comprehensive
reformation or systemic renovation.
4.
Analyzing the distributional effects of existing programs.
The LIOB (assuming expansion of current LIOB staff to 2 - 3 staff
persons) and the agencies would be instructed to conduct a full-
scale analysis of all Federal programs (not just welfare
programs) to examine the effectiveness of programs in reaching
the poor.
The ultimate aim would be to develop a legislative and
administrative package to retarget program dollars to the most
disadvantaged populations and areas. This may involve
reconsidering Federal matching formulas and reallocating Federal
moneys to the most needy areas, as the Administration has
proposed in the Community Development Block Grant. In addition,
it may require reallocation in traditional welfare and other
programs, including housing, agriculture, entitlements, and
certain tax expenditures.
Pros:
O
Allows the Administration to take the high ground by
asserting that it is trying to target funds to the most
needy.
O
Information produced from such an analysis would be
extremely useful; current data regarding the recipients of
funds from some Federal programs are incomplete.
O
Limiting tax expenditures can reduce tax-induced distortions
in the market.
10
Cons:
O
Cutting benefits to any group or area is politically
difficult. Thus, even conducting the analysis is likely to
be strongly opposed by those who may ultimately lose Federal
funding.
O
May prove futile; historical attempts to retarget funds have
rarely been successful.
O
Altering Federal policies may adversely affect those who
made long-term plans based on current law.
5.
Integrating services. Provide Federally-funded social and
welfare services in a "client-centered" approach. This could
include: 1) unifying eligibility requirements and streamlining
application procedures across programs; 2) establishing "one-
stop shopping" in one location; 3) encouraging effective case
management; 4) designating single "lead" Federal agencies to deal
with State agencies; 5) scrubbing existing programs to identify
and eliminate disincentives to self-sufficiency; and 6)
developing client participation and feedback mechanisms, such as
beneficiaries councils, to empower and involve clients in
effective program operation.
Pros:
O
Should significantly decrease administrative costs by
reducing the duplication and complexity of program
administration.
Provides better and less degrading services to clients by
promoting greater communication, cooperation, and
coordination among agencies responsible for providing
different services to the same population.
May reduce welfare costs if integration of welfare services
with employment and education services results in more
welfare clients becoming self-sufficient.
Cons:
Program unification alone will not get at any of the
underlying causes of poverty; it simply makes the welfare
system run more efficiently.
May be strongly opposed by congressional committees as well
as by those who view this as a serious threat to employment
and "turf" among existing program bureaucracies.
11
Simplifying and unifying welfare services may increase
participation, thereby increasing costs and possibly
increasing welfare dependency.
Where current eligibility requirements are inconsistent,
Congress is likely to avoid reducing eligibility or benefits
and may select the most expansive definition. This would
increase costs.
RECOMMENDATION:
The Domestic Policy Council recommends approval of an
outline of a low income opportunity strategy for the
Administration with the following features: 1) articulation of
principles in a high-profile effort; 2) an expanded role for the
Low Income Opportunity Board; 3) current efforts as the
foundation; 4) a comprehensive distributional analysis of Federal
programs; and 5) an emphasis on integrating services.
It should be emphasized that options 4 and 5 are not ends in
themselves, but rather means to help us achieve the ends of our
overall strategy, namely, equal opportunity through economic
empowerment of all Americans.
If this comprehensive approach is approved, the efforts
associated with options 1, 2, and 3 will begin immediately. If
options 4 and 5 are also approved, it would be appropriate to
direct the Domestic Policy Council to oversee the LIOB's efforts
and to report back within six months on the efforts underway to
integrate services among Departments, and within one year on the
results of the comprehensive distributional analyses of Federal
programs. The distributional analyses could result in several
legislative proposals to alter existing formula grant programs to
permit improved targeting. These proposals could be considered
in the context of the Fiscal Year 1993 budget development
process.
THE WHITE HOUSE
WASHINGTON
DOMESTIC POLICY COUNCIL
Friday, June 22, 1990
10:00 A.M.
Cabinet Room
AGENDA
1. Violent Crime and Savings and
Loan Enforcement Briefing --
The Attorney General
2. Status Report on Implementation of
the National Drug Control Strategy --
Director Bennett
FACT SHEET
UPDATE ON THE FIGHT AGAINST
FINANCIAL INSTITUTION FRAUD
This Administration has aggressively pursued financial
institution fraud. In February 1989, during the first month of
the Administration, the Attorney General identified fraud against
financial institutions as one of the Department of Justice's
highest enforcement priorities. That same month, the President
proposed a major financial fraud legislative initiative which
included stronger civil and criminal tools and major increases in
penalties. The following month, March 1989, the President
submitted a $36.8 million supplemental budget request for FY 1989
to meet the escalating problem of financial institution fraud.
Congress twice denied the extra funding.
Prosecution Efforts Against
Financial Institution Fraud
Even without new resources, the Department of Justice has
aggressively pursued financial institution fraud achieving
impressive results:
791 major fraud (losses over
$100,000) convictions for financial
institutions fraud in 1989,
including both banks and savings
and loans.
530 active FBI investigations of
failed financial institutions in
1990, an increase of 88% from 1987.
In 1987, the Department had established the Dallas Task
Force, using existing Criminal Division resources and the
resources of other agencies to supplement the work of the U.S.
Attorney's Office. Today, the Task Force consists of 22
Assistant U.S. Attorneys and Fraud Section attorneys, 3 Tax
Division lawyers, 36 FBI agents, 16 IRS Special Agents, and 3
Office of Thrift Supervision examiners.
In three years, the Task Force has achieved substantial
results. It has:
brought criminal charges against 77 persons
obtained 52 convictions, 40 of which relate
to savings and loan institutions.
It currently has 42 separate savings and loan associations and
560 persons under investigation. Based on the success of the
- 2 -
Dallas Task Force, the Attorney General is expanding the task
force concept to a total of 27 cities.
In late November, 1989, the Congress appropriated almost $50
million, which the President had sought earlier that year. As
the Department has received these additional resources, it has
increased its enforcement efforts and worked to ensure that
sufficient resources are focused on the most important cases --
those involving high losses, the weakening or failure of an
institution or potential insider fraud. These funds will
support:
153 FBI agents.
118 Assistant U.S. Attorneys.
24 Fraud Section attorneys.
100 accounting technicians.
In addition, the FBI has already shifted 49 agents to
augment the FIRREA financial institution effort and 18 more
agents are in the process of being shifted. Thus, a total of 220
agents are being added to the fight against financial institution
fraud.
Additional Administrative Efforts
Against Financial Institution Fraud
The Attorney General has taken additional administrative
steps to address this important problem. He has established the
position of Special Counsel for Financial Institutions, reporting
to the Deputy Attorney General. The Special Counsel's sole
responsibility is to coordinate all matters concerning the
investigation and prosecution of financial institution fraud.
Additionally, the Special Counsel will ensure that the resources
are properly allocated to the most significant financial
institution fraud cases. The Attorney General directed the
creation of a Financial Fraud Coordinating Unit within the Deputy
Attorney Counsel. General's Office to support the work of the Special
The Attorney General and Secretary of the Treasury have
formed an interagency group of senior officials from the
Department of Justice, Department of Treasury, Federal Bureau of
Investigation, Office of Thrift Supervision, Federal Deposit
Insurance Corporation, Comptroller of the Currency, Board of
Governors of the Federal Reserve System, Resolution Trust
Corporation, the National Credit Union Administration, and the
Attorney General's Advisory Committee of U.S. Attorneys. This
group will prioritize the significant savings and loan cases to
- 3 -
be investigated and prosecuted. Chaired by the Special Counsel,
this group will enhance interagency coordination and assist in
accelerating the investigation and prosecution of these financial
institution fraud cases.
To further assist in this effort, the Attorney General and
Secretary of the Treasury have directed the creation of a "flying
squad" of specialized attorneys and auditors drawn from the
Department's Civil and Criminal Divisions, the Office of Thrift
Supervision, the Office of the Comptroller of the Currency, the
FDIC, and the RTC to concentrate immediate and joint enforcement
efforts on selected financial institutions victimized by
potentially criminal activity. Upon short notification, this
squad will take all appropriate action to preserve assets of an
institution, protect the vital documents and records, and
undertake an immediate investigation.
The resources of other agencies will also be brought to bear
on this problem. The Resolution Trust Corporation has
established an Office of Investigations and a national network of
investigative teams. Approximately 300 new investigative staff
will be added by the end of this year. The IRS will continue to
prosecute aggressively individuals who commit tax fraud involving
failed financial institutions. The Office of Thrift Supervision
has recently opened a new regional enforcement office sited in
its Jersey City, New Jersey, office to enhance its enforcement
capabilities. OTS intends to open at least two additional
regional enforcement offices before the end of 1990.
Additional Legislative Efforts
Against Financial Institution Fraud
The Administration supports the package of legislative
proposals that provide important additional enforcement tools to
attack, civilly and criminally, financial institution fraud. The
Departments of Justice and Treasury worked closely with the
legislative sponsors in the development of these measures. The
proposals will mobilize government-wide resources by allowing the
Department of Justice to use, without reimbursement, attorneys,
investigators, accountants, and other personnel from appropriate
agencies. Also included is a provision to allow law enforcement
agencies to request court-authorized wiretaps to investigate bank
fraud, false statements to financial institutions, bribery of
bank officials, and related offenses for which wiretap authority
is not presently available.
The legislative package contains other significant measures.
Cases brought by the FDIC and the RTC will receive priority
consideration by the courts. Also, procedures for expedited
appeals of these cases will be established. The Department of
Justice, the FDIC, the RTC and Office of Thrift Supervision will
- 4 -
be authorized to seek court orders to freeze the corporate and
personal debts of defendants in civil financial institution fraud
cases. In addition, the claims of the Federal Government will
receive priority over those of creditors in bankruptcy and other
claimants in suits against parties responsible for losses due to
financial institution fraud.
Victims of financial institution fraud will receive enhanced
protections when the legislation is enacted. The legislation
authorizes courts to order payment of restitution to all victims
of financial institution fraud schemes even where they were not
identified in the charges underlying the conviction.
Perpetrators of financial institution fraud will be prohibited
from using the bankruptcy laws to avoid payment of damages,
penalties and forfeitures that are used to reimburse victims.
These new measures will be especially effective when
combined with the authority granted in FIRREA. Enacted in August
1989, FIRREA authorized a number of expanded enforcement powers,
increased penalties, and procedural improvements to facilitate
financial institution investigations and prosecutions. The new
law provided (a) increased and expanded civil penalties of up to
$1 million (with $5 million for continuing violations) and
criminal penalties of up to 20 years' imprisonment; (b) extended
forfeiture authority to 18 financial institution related
offenses; (c) amended grand jury secrecy protections to
facilitate the use of grand jury information in seeking civil
actions related to financial institution offenses; (d) made bank
fraud a RICO predicate offense; and (e) amended the Right to
Financial Privacy Act to prohibit financial institutions from
disclosing that records were being sought pursuant to a grand
jury subpoena related to financial institution offenses.
June 22, 1990
FACT SHEET
COMBATTING VIOLENT CRIME
The President has articulated the four fundamental
principles which guide all of our efforts to combat violent
crime.
A primary purpose of government is to protect citizens and
their property. Americans deserve to live in a society in
which they are safe and feel secure.
Those who commit criminal offenses should, and must, be held
accountable for their actions.
Our criminal justice system must have as its objective the
swift and certain apprehension, prosecution, and
incarceration of those who break the law.
Success in accomplishing our criminal justice system goals
requires a sustained, cooperative effort by federal, state
and local law enforcement authorities.
The President's program includes legislative proposals and
other initiatives to strengthen federal, state, and local laws;
enhance cooperative law enforcement efforts; increase prison
capacity; and reform the nation's criminal justice system to
ensure both the certainty and severity of punishment for violent
criminals.
Violent Crime in America
The chance of being a violent crime victim in the United
States continues to be greater than that of being injured in a
traffic accident. Approximately 6 million Americans were victims
of violent crime in 1989.
The violent crime situation in general has improved
significantly since its peak in 1981, and remained relatively
stable since 1988. Although, the number of murders rose from
1988 to 1989, it remains well below the 1980 figure. In short,
we are keeping the lid on violent crime, but the situation is a
highly volatile one, and the nation's criminal justice system is
being stressed to its limits and in need of fundamental reforms.
Administration Action
The Attorney General, Treasury Secretary Brady, and other
Administration officials have taken action to implement each step
of the President's plan which was not dependent upon legislative
action.
1
2
The President's Proposals Passed by Congress
The Administration convinced Congress to fund:
Significant Increases for Enforcement
300 FBI positions to implement their violent crime and
repeat offender program;
150 positions to enhance the U.S. Marshals Service's
fugitive apprehension efforts;
109 positions to INS and 38 new Immigration Judges to
expedite deportation of criminal aliens.
Significant Increases for Prosecution
1,375 new positions for U.S. Attorneys Offices;
$45.9 million for the Judiciary for pre-trial services,
probation, juror fees, court security and court
administration.
Significant Increases for Federal Prisons
$1.4 billion for 24,500 new bed spaces -- a 77%
increase. Federal prison capacity is being more than
doubled at President Bush's initiative.
Footdragging by Congress
The Congress has failed to adopt other parts of the
President's Comprehensive Violent Crime Control bill including
key provisions to:
restore an enforceable death penalty for the most
aggravated Federal crimes and extend capital punishment
to a number of new offenses, such as murder for hire;
reform Habeas Corpus to curb abuse and eliminate the
seemingly endless process of repetitive appeals and
reviews which serve no purpose but to delay justice;
reform the Exclusionary Rule to assure that legal
technicalities do not prevent the truth from being
heard in court or to allow the guilty to go unpunished;
make drug testing a mandatory condition of Federal
probation, parole or supervised release;
3
enhance Federal penalties for firearms violations and
provide a bonus to states for doing the same;
restrict gun magazines of over 15 rounds; and
limit access to firearms by criminals by closing
loopholes in current laws.
What Needs to be Done
Every effort should be made to push aggressively for the
enactment of the fundamental criminal justice reforms embodied in
the President's own violent crime and drug control proposals.
"Sound-alikes" or quick fixes won't suffice.
Because violent crime is primarily a state and local
responsibility, attention must be focused on the need for
adopting comparable reforms and making adequate resource
commitments at the state and local levels. Federal efforts to
combat violent crime should continue to be directed primarily on
its interstate and international aspects; improving law
enforcement cooperation and coordination, training and technical
assistance; data collection and intelligence sharing; and
leadership.
DRUG POLICY UPDATE
I. WHAT'S BEEN ACCOMPLISHED IN 16 MONTHS
A.
Formulated first National Strategy, September 1989
*
First nationally-televised speech by the President. One of his highest
priorities. ("This scourge will end" -- A quote from the inaugural.)
*
Our Strategy brought together the efforts of Federal, State and local
governments, and those of the private sector, schools, communities,
and volunteers, into the first truly national strategy.
*
Brought together nearly 50 Federal agencies and State and local
governments into a working relationship based on a common set of
goals and objectives.
*
We've raised awareness among the American people that drugs are
a major problem in our schools and communities requiring their
involvement.
B.
Developed and Published second National Strategy, January 1990
*
Built on the first. No strong criticism from the Hill Democrats. The
issue is ours.
C.
Begun implementing Strategies I and II.
D.
Increased Federal funding for drugs
*
$10.6 billion proposed drug budget for FY 91.
*
The FY 91 request is a 69 percent increase since Bush took office.
*
Largest growth of any major Federal program. Examples:
-- Law Enforcement:
up 60 percent
-- Treatment:
up 68 percent
-- Education/Prevention:
up 83 percent
-- International Programs:
up 127 percent
-- Research:
up 66 percent
--
Drug Intelligence:
up 225 percent
*
More funding for State & local drug initiatives.
--
Requested over $2.6 billion for State and local drug grant
programs for FY 1991, a $1.4 billion, 109 percent, increase over
the FY 1989 level. Most of this is for "demand-side" programs.
II. KEY PRINCIPLES OF THE STRATEGIES
A.
User Accountability
*
People must be held accountable for their own drug use. Drug users
are not "victims". They are law violators.
B.
Strong Law Enforcement
*
Increase the risk of punishment; broaden the array of sanctions.
C.
Effective Treatment - Treatment that works
*
We'll help people who need help kicking the drug habit. But our help
is going to be tough and demanding. We're not interested in coddling
drug users. Make treatment accountable. We want treatment that
works.
*
We're asking Congress for approximately $350 million in FY 91 for
programs to help pregnant women and babies affected by drugs.
D.
Innovative Prevention
*
We'll do all we can to mobilize our schools, communities, and
workplaces to work together to make drug use unacceptable,
unattractive, and uncommon.
E.
Broader Involvement of the States
*
We're working with the States to increase and improve their efforts,
and better coordinate their efforts with ours. Example: State and
local Drug Czar Conference, May 1990.
F.
International Cooperation
*
We're working to win the full cooperation and participation of other
countries in the drug war. The United States cannot win it alone.
Examples of U.S. activity: Andean Strategy, Cartagena Summit and
seven bilateral side agreements, and the linkage of U.S economic
assistance to Andean drug control efforts.
2
III. WHAT ADDITIONAL TOOLS ARE NEEDED - OUR LEGISLATIVE PROPOSALS
A.
Proposals Congress approved last year:
*
Drug Free Schools.
-- Congress approved our proposal last fall to require drug free
policies in all primary and secondary schools, colleges and
universities.
-- Congress also approved our proposal for emergency grants to
urban and rural schools in areas hardest hit by the drug
problem.
B.
Additional proposals we're seeking this year:
*
Accountability.
--
Drug Testing.
*
Require States to establish a drug testing policy in
their Criminal Justice Systems as a condition of
receiving Federal BJA grants. (Originally submitted
following Strategy I.)
*
Establish a nationwide program of drug testing for
Federal offenders on post-conviction release.
--
Statewide Treatment Plans.
*
Require States to develop a Statewide Treatment Plan
as a condition of receiving the drug portion of Federal
ADAMHA grants. (Originally submitted following
Strategy I.)
*
The Plan must describe ways to expand capacity,
assess need, improve client referrals, provide in-
service staff training, coordinate with other services,
and expand and improve services for pregnant women
and drug-affected newborns.
*
It must also include a drug testing component.
-- Maintenance of Effort.
*
Prohibit States from using Federal ADAMHA grants to
reduce their own expenditures for drug activities.
3
*
Death Penalty for Drug Kingpins.
--
Permit the sanction of death:
*
For major drug kingpins,
*
For drug kingpins who attempt a killing to obstruct an
investigation or prosecution of a drug offense, and
*
For traffickers who engage in a federal drug felony that
results in a death.
*
International Programs.
-- Provide certain waivers to facilitate the provision of
assistance critical to the implementation of the Andean
Initiative. (Some of these were originally submitted following
Strategy I.)
--
Provide the Secretary of State the discretion to order the
extradition of a U.S. citizen to a foreign country even if the
terms of the applicable treaty do not obligate the U.S to
extradite.
*
Criminal Justice System Improvements.
-- Immigration System Improvements.
*
Provide INS agents and officers authority to make
arrests for non-immigration offenses committed in
their presence.
*
Expedite the procedures to exclude or deport criminal
aliens and restrict the appeal rights of such
individuals.
-- Protection of Judges, Jurors and Witnesses.
Provide stronger penalties for obstruction of justice offenses
against court officers and jurors. Penalties would be similar
to those that exist for obstruction of justice offenses against
witnesses, victims and informants.
--
Drug-Related Public Corruption.
Punish drug-related public corruption with up to 25 years
imprisonment.
4
-- Drug Paraphernalia.
Allow forfeiture of assets and add civil penalties for
violations of the drug paraphernalia statute.
-- Sanctions for Failure to Land or Bring To.
*
Make it a criminal offense to fail to obey the order of
an authorized Federal law enforcement officer to land
an aircraft or bring-to a vessel,
*
Provide for revocation of operator's licenses for failure
to obey the order, and
*
Provide Coast Guard specific authority to engage in air
interdiction over U.S. waters and the high seas.
-- Asset Forfeiture and Money Laundering Amendments.
Provide for quarterly (instead of annual) transfer of funds
from the DOJ Forfeiture Fund to ONDCP's Forfeiture Fund,
allow for forfeiture of vehicles with concealed compartments,
and make other conforming amendments.
IV.
KEY INDICATORS
A.
Casual use is down sharply
*
High School Senior Survey.
-- Prior year use of illicit drugs by high school seniors has
declined from 38.5 percent in 1988 to 35.4 percent in 1989,
continuing a decline that began in 1985. Disapproval of drug
use by high school seniors is very high and increasing.
*
Household Survey.
-- Current (30 day) users of illicit drugs decreased from 23
million in 1985 to 14.5 million in 1988.
-- Current cocaine users declined from 5.8 million in 1985 to 2.9
million in 1988.
-- Current use of marijuana decreased from 18 million in 1985
to 11.6 million in 1988.
5
-- We need to keep these trends heading south. We expect the
data from the next Household Survey in December.
B.
Hard-core use may be declining
*
Drug Abuse Warning Network (DAWN).
--
Since such information has been collected, huge yearly
increases in the number of emergency room mentions of
cocaine, heroin, and marijuana have been the norm.
*
1989 is the first break in that sharp increase, the last
quarter of 1989 actually showed a decline - -- the first
major decline since 1985.
-- Although still preliminary for 1989, it looks like medical
examiner mentions of illegal drugs will follow the pattern
seen in emergency rooms.
-- Although it is too early to declare a downward trend, the
initial report is encouraging.
C.
Drug availability may also be declining
*
Cocaine purity is down. In 1988, the average purity for a "street"
gram was 70 percent. Average purity fell to 66 percent in 1989, and
in the first four months of 1990, it dropped even further to 55
percent.
*
U.S. cocaine prices are going up. Nationwide, the average
wholesale price for a kilogram of cocaine remains within the
$11,000 to $35,000 range. But in most cities, prices are moving
toward the higher end of the range.
--
In New York, for example, the average price increased from
$19,000 in the second quarter of 1989 to $24,000 in the first
quarter of 1990. In Los Angeles, average kilo prices have
risen from $13,500 to $17,000.
*
Coca leaf prices are down. In Bolivia, a major source country, the
break-even point for coca farmers is about $30 per 100 pounds of
coca leaf. Last year, they were able to get as much as $90 per 100
pounds. This year, prices range from $10 to $80.
6
June 22
Document No.
CA
THE WHITE HOUSE OFFICE OF CABINET AFFAIRS
STAFFING MEMORANDUM
Date: June 20, 1990
Due by:
Meeting of the Domestic Policy Council with the President, Friday
Subject: June 22, 1990 at 10:00 A.M. in the Cabinet Room.
Kenneth P. Yale
From: Executive Secretary, Domestic Policy Council
Action
FYI
Action
FYI
ALL CABINET MEMBERS
CIA
Vice President
CEA
Agriculture
CEQ
Commerce
EPA
Defense
GSA
Education
NASA
Energy
National Science Foundation
HHS
ONDCP
HUD
OPM
Interior
OSTP
Justice
SBA
Labor
UN
OMB
Cicconi (For WH Staffing)
State
Transportation
Treasury
USTR
Veterans
COMMENTS: The Domestic Policy Council will hold a meeting for principals
only on Friday, June 22, 1990 from 10:00 to 11:00 A.M. in the Cabinet Room.
The President will chair this meeting of the Council. Attached for your
information is an agenda. The briefings will be on (1) Crime Statistics;
and (2) a Status Report on Implementation of the National Drug Control
Strategy.
Please inform Honor Willson (456-2800) by C.O.B. Thursday, June 21
regarding your attendance at this meeting.
THE WHITE HOUSE
WASHINGTON
June 20, 1990
MEMORANDUM FOR THE DOMESTIC POLICY COUNCIL
FROM:
KENNETH P. YALE
Executive Secretary Ky
SUBJECT:
Meeting of the Domestic Policy Council with the
President, Friday, June 22, 1990 at 10:00 A.M. in
the Cabinet Room
The Domestic Policy Council will hold a meeting for
principals only on Friday, June 22, 1990 from 10:00 to 11:00 A.M.
in the Cabinet Room. The President will chair this meeting of
the Council.
There will be two topics for Friday's meeting: (1) a
briefing by the Attorney General on violent crime and savings and
loan enforcement; and (2) a status report on the implementation
of the National Drug Control Strategy given by Director Bennett
of the Office of National Drug Control Policy.
Please inform Honor Willson (456-2800) by C.O.B. Thursday,
June 21 regarding your attendance at this meeting.
Attachments
THE WHITE HOUSE
WASHINGTON
DOMESTIC POLICY COUNCIL
Friday, June 22, 1990
10:00 A.M.
Cabinet Room
AGENDA
1. Violent Crime and Savings and
Loan Enforcement Briefing --
The Attorney General
2. Status Report on Implementation of
the National Drug Control Strategy --
Director Bennett
THE WHITE HOUSE
WASHINGTON
CABINET AFFAIRS STAFFING MEMORANDUM
Date: April 19, 1990 Number:
Due By:
Subject: Meeting of the Domestic Policy Council, Tuesday, April 24, 1990 from
10:30 AM to 12:00 Noon in the Roosevelt Room. (PRINCIPALS ONLY PLEASE)
Action
FYI
Action
FYI
ALL CABINET MEMBERS
CEA
CEQ
Vice President
OSTP
P
State
Treasury
Defense
Justice
Interior
Agriculture
Commerce
Scowcroft
Labor
Porter
HHS
Breeden
HUD
Cicconi (For WH Staffing)
Transportation
Energy
Education
Veterans
OMB
USTR
Chief of Staff
UN
Executive Secretary for:
DPC
CIA
EPC
National Drug Policy
EPA
F
GSA
NASA
OPM
National Science Foundation
SBA
The Domestic Policy Council will hold a meeting for principals
REMARKS: only on Tuesday, April 24, 1990 from 10:30 AM to 12:00 Noon in
the Roosevelt Room. Attached are an agenda, as well as discussion papers
on Volunteer Liability and Medical Professional Liability. Please note
that these documents are sensitive in nature and should be treated as
close hold documents. Please refrain from making copies.
Please inform Honor Willson (456-2800) by COB, Monday, April 23, as to
whether or not you plan to attend this meeting.
RETURN TO:
David Q. Bates
Associate Director
Cabinet Secretary
Office of Cabinet Affairs
456-2174
456-2800
(1st Floor, West Wing)
(Room 235, OEOB)
THE WHITE HOUSE
WASHINGTON
April 20, 1990
MEMORANDUM FOR THE DOMESTIC POLICY COUNCIL
FROM:
KENNETH P. YALE Jy
Executive Secretary
SUBJECT:
Meeting of the Domestic Policy Council, Tuesday,
April 24, 1990 at 10:30 A.M. in the Roosevelt Room
The Domestic Policy Council will hold a meeting, for
principals only, on Tuesday, April 24, 1990 from 10:30 A.M. to
12:00 Noon in the Roosevelt Room. The topics for discussion will
be Volunteer Liability and Medical Professional Liability.
Attached for your review prior to the meeting are an agenda,
as well as discussion papers on Volunteer Liability and Medical
Professional Liability. Please note that these documents are
sensitive in nature and should be treated as close hold
documents. Please refrain from making additional copies.
Presentation of the papers on Volunteer Liability and
Medical Professional Liability will be made by Stuart M. Gerson,
Assistant Attorney General of the Civil Division at the
Department of Justice.
Please inform Honor Willson (456-2800) by C.O.B. Monday,
April 23, as to whether or not you plan to attend this meeting.
Attachments - 3
DOMESTIC POLICY COUNCIL
Tuesday, April 24, 1990
10:30 A.M.
Roosevelt Room
AGENDA
1. Volunteer Liability
2. Medical Professional Liability
U.S. Department of Justice
Civil Division
Office of the Assistant Attorney General
Washington, D.C. 20530
April 17, 1990
MEMORANDUM FOR THE DOMESTIC POLICY COUNCIL
FROM:
The Tort Law Reform Working Group
Domestic Policy Council smycione
SUBJECT: Tort Liability and Volunteers
ISSUE:
What actions should be taken to implement the three
recommendations of the Working Group for an
Administration initiative to assist volunteerism
activities?
BACKGROUND
At its meeting held December 21, 1989, the Domestic Policy
Council (DPC) directed the Tort Law Reform Working Group to
suggest specific actions to implement the following
recommendations for an Administration initiative to assist
volunteerism activities:
Establish a National Volunteerism Center to serve as
focus for nonprofits to work together in anticipating
and solving their liability and insurance problems;
Promulgate a model state statute aimed at diminishing
volunteers' liability; and
Amend the federal Risk Retention Act to allow easier
access by volunteer organizations to insurance
coverage.
Based upon its subsequent activities and study, the working
group now suggests to the DPC the following:
A. National Volunteerism Center
I. Structure of Center
On January 19, 1990 the President approved further
development of a concept to establish a privately funded National
Volunteerism Center to address the concerns of volunteer
organizations about tort liability and other issues affecting
incentives to volunteer.
2
- 2 -
The following were possible structures for a National
Volunteerism Center to be proposed to the President by the DPC:
1. A federally chartered private organization;
2. A coalition of nonprofits (informally endorsed by
the President);
3. A national trust;
4. A federal corporation.
The working group now recommends that the National
Volunteerism Center be established by a federal charter and be a
private corporation.
PROS AND CONS FOR A FEDERAL CHARTER
Pros: .
A federal charter will demonstrate the national
importance of the Center.
Establishment of the Center by federal charter would
permit the bringing together of broad based private
support of volunteerism activities that presently
exists.
Use of a federal charter will enable the Center to
include provisions in its charter that may be of value
as a model, e.g., programs regarding insurance for
member organizations.
Cons:
Legislation takes time to enact. This may delay the
starting date for the Center's operations (though the
momentum that this approach already has gained suggests
that the Center can begin before legislation is
passed).
Congress may amend the legislation to include
undesirable provisions.
II. Activities
1. Charterers/First Board of Directors.
An original charterer from each state would be named by the
President to serve as the Center's first Board of Directors. The
Board would determine how successor Directors would be selected.
We recommend, however, that each state should have one (and only
one) director.
- 3 -
2. Executive Committee.
The Board of Directors would appoint an Executive Committee
to carry out its policies. The President would not be involved
in the selection of the Executive Committee or in the ongoing
activities of this private but federally chartered organization.
3. Membership.
The statutory charter should be broadly written. Precise
membership criteria should be left for the directors to
determine. The membership should include a broad spectrum of
volunteer organizations and volunteers.
4. Limitation of Liability.
The charter could include provisions limiting the liability
of Officers and Directors and volunteers serving the Center, in
accordance with the proposed model state statute described below.
5. Powers.
The powers of the Center would include, inter alia,
a. Providing quality assurance and standards as
to the activities of volunteers;
b. Offering informational services and
coordination in sharing liability-related
information among volunteer organizations;
C. Initiating insurance programs.
6. Start of operations.
An Executive Director should be appointed with authority to
ensure the proper commencement of operations. All possible
sources of funding from private organizations should be examined
in order to obtain sufficient resources to commence operations
immediately.
III. Funding.
Funding would come from private sources and from federal
grants for which the Center would be eligible on a competitive
basis. This proposal would require no new appropriations of
federal funds.
- 4 -
PROS AND CONS
Pros:
Funding from private sources would instill
confidence in the private sector that this was not
just another federal give-away program.
This approach is consistent with the concept of
volunteerism, i.e., the Center is a private
activity not a government program.
Cons:
Not having federal seed money could slow the
Center's start-up activities.
Failure to provide federal seed money could be
taken as lack of Administration support.
B. PROMULGATE A MODEL STATE STATUTE
I. Review of State Legislation
The proposed model state volunteer legislation would
encourage states to grant specific immunities from or limits on
liability for individual volunteers. Research revealed that no
model statute had been drafted.
II. State Statutes
1. Delaware Act
The Delaware statute, enacted in 1986, provides volunteers
of 501 (c) organizations with almost absolute immunity from
liability for ordinary negligence (except in the operation of
motor vehicles, in which case the volunteer is liable up to the
amount of his insurance coverage). Under the Delaware statute a
"volunteer" is defined as any "trustee, director, officer, agent
or worker who is engaged in any activity without compensation."
Excluded from "compensation" are reimbursement for actual costs
incurred as well as "prerequisites in the form of access to
services of the organization at no or reduced cost."
Delaware, however, does not immunize the volunteer
organization. The statute expressly attributes the otherwise
immunized actions of the volunteer to the volunteer organization
under the doctrine of respondeat superior.
1
1 This approach would require liability insurance to be
carried by the volunteer organization. Actions to assist
volunteer organizations to obtain insurance at affordable cost
are objectives of the proposed amendments to the Federal Risk
Retention Act and of the National Volunteerism Center.
- 5 -
2. South Dakota Act
The South Dakota statute establishes the same immunity
provisions of the Delaware Act for volunteers of 501 (c)
organizations with almost absolute immunity from liability for
ordinary negligence (except in the operation of a motor vehicle,
wherein liability for the volunteer is covered up to the amount
of his insurance) while it also creates immunity for
"governmental entities." Under the South Dakota Act a
"governmental entity" is defined as "any county, municipality,
township, school district, chartered governmental units or other
special districts, or any association, authority, board,
commission, division, office, officer, task force or other agency
of the state of South Dakota."
As in Delaware the "volunteer" in South Dakota is similarly
defined as an individual performing services "without
compensation, other than reimbursement for actual expenses
incurred."
PROS AND CONS OF THE DELAWARE AND SOUTH DAKOTA MODELS
Pros:
Promulgation of the Delaware and South Dakota
approaches as a model act would provide clear
leadership and is congruent with federalism
principles.
The statutes are simple. (Note, there are no reported
cases interpreting them.)
Cons:
The statutes might be viewed as insufficient, inasmuch
as they still leaves volunteer organizations open to
litigation.
The Delaware model leaves governmental volunteers
unprotected.
3. Texas Act
The Texas statute was enacted in 1987. It applies to
charitable organizations as defined under section 501 (a) of the
Internal Revenue Code. Volunteers are defined as persons
rendering services for a charitable organization without
compensation except for reimbursement of expenses. It excludes
from coverage organizations formed to dispose of hazardous waste.
It does not apply to a government unit. It establishes a ceiling
on the liabilities of both charities and employees, provided the
charity obtains liability insurance up to the maximum amount of
potential liability.
- 6 -
PROS AND CONS OF THE TEXAS MODEL
Pros:
The Texas model established limits of recovery
against a charitable organization to the extent
liability insurance is required under the Act.
It provides immunity for volunteer liability,
shifting liability claims to the organization.
Cons:
The Act is complex.
It ties in immunity for volunteer organizations to
insurance coverage, which might not be available.
IV. Delaware/South Dakota Model Preferred
The Working Group concluded that the model volunteer statute
should be based on the Delaware and South Dakota laws because of
their simplicity and reasonableness.
C. AMEND THE FEDERAL RISK RETENTION ACT
The Liability Risk Retention Act provides an alternative
means by which entities both for-profit and nonprofit -- can
obtain liability insurance. Reports that nonprofits have been
inhibited by some states from forming groups led the DPC to
request a report on the reasons the Risk Retention Act might need
amendment.
I. Background of the Act
The Liability Risk Retention Act was enacted in 1986 in
response to the "crisis" in the availability of liability
insurance. The Act permits entities with similar liabilities to
self-insure as a group by forming so-called risk retention
groups. The Act also permits the formation of purchasing groups
for the purchase of liability insurance.
II. The Efficacy of the Act
Over 60 risk retention and 300 purchasing groups have been
formed since 1986. Risk retention groups have over 11,000 insured
and about $269 million in premiums. Purchasing groups have over
315,000 insured with $575 million in premiums.
Some nonprofit groups are already using the Act to obtain
liability coverage. According to the Risk Retention Reporter, a
resource publication, both risk retention groups and purchasing
groups have been formed by nonprofit organizations.
- 7 -
III. Problems in the Operation of the Act Which
Inhibit Group Formation
The federal Act creates an alternative method of obtaining
liability insurance that is otherwise unavailable or unaffordable
to what are considered more volatile risks. The Act reserves to
the states the regulation of the risk retention groups,
purchasing groups and insurers and there has been a great deal of
resistance on the part of many regulators, particularly to the
operations of insurers of purchasing groups. Furthermore,
inattention on the part of the regulators has sometimes led to
instances of undercapitalized, badly managed insurers creating,
marketing and insuring large numbers of purchasing groups.
To address these problems the Department of Commerce has
recommended that the Act be amended to ensure that members of
purchasing groups and risk retention groups maintain control over
their organizations. It calls for the users of the Act to
establish an accreditation program to be established to ensure
the solidity of the insurance written and to build the confidence
of members, regulators, reinsurers, and the public with regard to
groups operating under the Act.
IV. Recommendations
The working group concludes that the Act could provide an
important means of alternative liability coverage for non-profit
entities if it is amended and its availability made known to
nonprofit groups. The following recommendations are consistent
with recommendations previously made by the Department of
Commerce:
1. The Administration should seek Congressional
amendment of the Act to: 1) assure that risk
retention groups and purchasing groups are
controlled by their members; 2) subject purchasing
groups and their insurers to single-state
regulation; 3) regulate the provision of insurance
to purchasing groups; and 4) strengthen notice and
reporting requirements for risk retention groups,
purchasing groups and purchasing group insurers.
2. The Administration should encourage the
enhancement of state regulatory activities
through: 1) more-effective regulatory monitoring
of entities created under the Act; 2) strengthened
solvency regulation; and 3) establishment of a
central coordinating office.
3.
The Office of Private Sector Initiatives (OPSI)
and The Thousand Points of Light Initiative
Foundation (TPLIF) and The National Volunteerism
- 8 -
Liability Center should publicize the availability
and applicability of the Act to nonprofit
entities;
4.
As part of their educational outreach campaigns,
OPSI and TPLIF should also remind volunteers that
many of their activities as volunteers are already
covered under their own homeowners' insurance
policies.
PROS AND CONS
Pros:
Amendment would permit the Act to reach its full
potential to address insurance affordability and
availability problems.
Amendment would help guarantee that insurance is being
written by solvent insurers.
Publicizing the existence of the Act would benefit
volunteers.
Cons:
The National Association of Insurance Commissioners,
strong opponents of the Act, might mount an active
campaign in Congress to prevent amendments from being
enacted.
The Act would not help those volunteer organizations
that have no resources available for insurance.
THE WHITE HOUSE
WASHINGTON
April 23, 1990
MEMORANDUM FOR THE DOMESTIC POLICY COUNCIL
FROM:
KENNETH P. YALE KY
Special Assistant ato the President
and Executive Secretary
SUBJECT:
Tort Liability and Volunteers
This past Friday, April 20, you were sent materials on tort
liability and volunteers for a meeting of the Domestic Policy
Council scheduled for Tuesday, April 24. This is to provide you
with additional material that you may find useful.
At the last meeting of the Domestic Policy Council on this
issue, the Tort Law Reform Working Group was asked to provide
guidance on implementing the DPC recommendations to the President
on Federal actions to address concerns about liability problems
faced by volunteer organizations. The paper you received on Friday
is the Working Group's response to that request and, except for the
issue of a proposed National Center, lays out in some detail the
options considered, with pros and cons for each.
With respect to the issue of a National Center, however, the
full range of options were not outlined in the paper because they
had been dealt with in some detail in the December 21, 1989 meeting
paper on the subject. To encourage full debate on the issues, a
copy of the relevant pages of the December 21 paper is enclosed.
OPTIONS
The Working Group considered many approaches to alleviate
the chilling effect on volunteerism caused by excessive exposure
to the threat of tort liability. Any tort reform initiative
would need to address the issues of insurance coverage of
volunteer organizations, as well as scope and extent of liability
for volunteers and volunteer organizations. Furthermore, any
initiative which includes a proposal for federal legislation
would need to take federalism concerns into account. The range
of potential options includes:
I. Establishment of a National Center to assist
non-profits;
II. Promulgation of a model state statute;
III. Review of the federal Risk Retention Act; and
IV. Placing limits on the tort liability of
individual volunteers and volunteer
organizations having a federal nexus.
The Working Group believes that Options I, II and III offer
the most useful responses to the problem. For the sake of
completeness, we included Option IV, for which some support
existed among the Working Group. Other options such as federal
preemption of state tort law through grants of immunity to
volunteers and limits on liability, federal regulation of the
insurance industry, and federally subsidized insurance for
volunteers were considered but received no support from any of
the agencies represented on the Working Group. As a result,
these options have been excluded from the Options list.
OPTION I:
ESTABLISH A NATIONAL CENTER TO ASSIST
NONPROFITS WITH LIABILITY CONCERNS
Explanation: This would entail establishment of a broad-
based National Center to address the concerns of volunteer
organizations. The Center's functions could include insurance
cost containment, risk management and quality assurance services
and a range of training and technical assistance related to the
liability and insurance needs of volunteer activities. The
Working Group recommends establishing the Center with private
funds.
- 4 -
PURPOSES
(1) To act as a national clearing house for liability-related
information.
(2) To analyze and propose means of addressing insurance needs.
(3) To assist nonprofits in reducing their exposure to legal
liability.
(4) To promote and develop risk management programs for
nonprofits.
(5) To increase the quality, quantity and availability of
centralized information on nonprofits' claims and insurance data.
(6) To act as an advocate for nonprofits, e.g., in negotiating
with the insurance industry and lobbying state legislature and
Congress for reforms.
(7) To establish insurance programs and risk retention or
purchasing groups to reduce costs and increase insurance
availability.
FUNDING
The National Center could be funded through a number of
private sources including (a) foundation grants, (b) corporate
contributions, (c) membership dues, and (d) income generated from
the sale of its publications and fees for training programs.
Federal "seed" funds could be sought to help initial
establishment although this approach might over federalize the
concept and would have budgetary consequences.
A. PROS AND CONS FOR ESTABLISHING A NATIONAL CENTER
Pros:
The action would be highly visible.
This proposal is flexible and could focus on
the main problem areas specific to volunteer
liability, including incorporation of other
suggestions discussed below without substan-
tial governmental involvement.
A National Center may increase the
availability of insurance coverage through
pooling agreements and risk management for
all volunteer organizations but particularly
for new, small or other hard-to-insure
organizations.
- 5 -
Dending on its structure, a National Center
could be viewed as a complement to the
Thousand Points of Light Foundation.
Cons:
The National Center, depending on the
structure chosen, may appear inconsistent
with the President's volunteer principles
since it may be viewed as a federal rather
than a volunteer initiated effort.
Across-the-board tort reformers would see
this option as a very narrowly tailored
proposal and would prefer more direct,
preemptive federal action.
Funding questions have not been clarified.
The attractiveness of this option may depend
on whether any federal funding is available
and if so, how much. No funds are identified
for this on the fiscal year 1991 budget. If
the DPC decides to recommend federal funding,
the initiative would have to be postponed
until fiscal year 1992 and a funding source
would have to be identified.
Some may view a separate National Center as
competing against the interest and attention
given to the Thousand Points of Light
Foundation.
B. POSSIBLE OPTIONS AS TO STRUCTURE OF A NATIONAL CENTER
The question of an appropriate structure depends heavily
upon the functions the DPC recommends for the Center. Several
structure options are outlined below:
Structure 1: A Coalition of Nonprofits (Encouraged By The
President: No Legislation)
Several organizations, such as United Way, have expressed an
interest in participating in an umbrella coalition. This
coalition would be completely private in structure as well as
funding. An expression of executive support could act as a
catalyst. Such an expression of support would strengthen the
nonprofits' efforts to seek private funding.
Pros:
This approach is likely to be tailored to
the organizations' own perceived needs.
- 6 -
Federal involvement would be minimized.
The coalition would fit well with the
Thousand Points of Light Foundation.
Cons:
This approach may appear not to represent a
sufficiently strong Administration commitment
to aiding volunteer organizations.
The umbrella organization may become a
captive of larger groups to the detriment of
smaller organizations.
Without legislation, the coalition may be
less effective.
Structure 2: A Federally Chartered Organization
This model would require federal legislation establishing a
federal charter. Although the Center would be established by a
federal charter, it would remain completely private in nature.
While such legislation affords a symbolic acknowledgement of the
worthiness of an organization's activities, it alone confers no
legal benefits.
Pros:
This initiative would create a degree of
public visibility and would result in
concrete action.
The organization could be tailored to serve
only those purposes deemed to be worthwhile.
The new entity would be able to chart its own
course within broad limits.
Cons:
Failure of the entity could embarrass the
Administration.
Any insurance functions proposed would
compete with insurers who do not have the
advantage of a federal charter.
Once chartered the organization would not be
subject to federal controls even though it
would benefit from the aura of federal
approval.
Under present rules, a federal charter would
require a waiver of the ten year state
charter requirement.
- 7 -
Structure 3: An Adjunct To An Existing Federal Agency
The entity's operations could be folded into the operations
of another agency, under existing statutory authorities and using
currently available funds. This proposal would not require new
legislation. For example, if the entity functioned only as an
information clearing house, it could be folded into the
operations of the Commerce Department or the Small Business
Administration. Folding it into the operations of ACTION might
also be a possibility.
Pros:
The new entity could benefit from the
agency's established methods of implementing
programs.
The entity could be established without new
legislation.
The entity would have a secure base within
the existing structure of government.
The entity's operations could readily be
monitored and controlled.
Cons:
This could over-federalize the assistance of
volunteerism.
This would be a drain on the agency's budget
and divert funds from other equally
worthwhile activities.
Coordination of private and governmental
roles within the entity would be difficult.
It is not clear that an existing agency would
have the funds or the authority to accomplish
these goals.
Structure 4: An Adjunct To The Thousand Points of
Light Foundation.
Depending on the functions assigned to it, the Center could
serve as a useful complement to the activities of the Thousand
Points of Light Foundation.
Pros:
The Foundation and the Center concept could
be drafted to supplement each other, at least
insofar as the dissemination of information
is conceived.
This structure would avoid promulgation of
two separate related initiatives in the same
- 8 -
general issue area and thus could reduce the
potential for possible confusion.
The entity could benefit from the groundwork
that has been done to establish the
Foundation.
Cons:
The purposes of the Foundation and the
National Center fill different needs and do
not fit well together within a single
organization.
of the purposes suggested for the National
Center, only purpose (1) would be compatible
with the Foundation's goals.
Some of the functions that the proposed
National Center could carry out, such as
developing a working relationship with the
insurance sector, may not be appropriate for
a Foundation in which the President is
substantially involved.
NT COUNTRY
U.S. Department of Justice
-
Civil Division
Office of the Assistant Attorney General
Washington, D.C. 20530
April 24, 1990
MEMORANDUM FOR THE DOMESTIC POLICY COUNCIL
SMG
FROM:
Stuart M. Gerson, Chairman
Tort Law Reform Working Group
SUBJECT: Medical Malpractice Reform
Attached for your review is a Memorandum with attachments
detailing the status of actions of the Tort Law Reform Working
Group regarding Medical Malpractice Reform.
i
INDEX
Executive Summary
1
Discussion
2
Background
2
I.
Federal Pilot Projects
4
A.
Option I--Federal Employees Health
Benefits Pilot Project
4
B.
Option II--OB-GYN Community Clinics
Pilot Project
5
II. Broad-Based National Reforms
7
A.
Findings of Data Research Group
7
B.
Findings of the Court Reform Subgroup
8
C.
Options for Broad-Based Reform
9
1.
State Law Reforms
9
a.
Limit recovery through legislation
by placing a cap on total damage
awards or by placing separate caps
on awards for economic and non-
economic damages at a reasonable
limit
9
b.
Prohibit double compensation by
eliminating the collateral source
rule
10
C.
Require structured judgments in
some cases
10
d.
Shorten the statutes of limitations .
11
e.
Eliminate joint and several
liability
12
f.
Prohibit use of ad damnum clauses
13
ii
g.
Alternative dispute resolution
13
Arbitration
13
Mediation
14
Mini-trials
14
Pretrial Screening Panels
14
Mandatory Notice to Clients of
ADR Options Instead of Trial
15
Mandatory Settlement Conferences
15
No Fault System (O'Connell)
15
Certificates of Merit
16
Offers of Judgment
16
2.
Incentives For State Reforms
16
3.
Quality Assurance Programs
20
4.
Federal Reforms Through Amendments To
The Federal Tort Claims Act
24
PRELIMINARY INTERIM REPORT
EXECUTIVE SUMMARY
After the DPC considered the Tort Law Reform Working Group's
January 12, 1990 Memorandum describing various issues related to
medical malpractice insurance and litigation, the DPC requested
that the working group develop plans of action that might be
taken pursuant to several groups of options. The following
outlines the activities and analyses that ensued (with relevant
subgroup reports attached at designated tabs), and seeks further
direction for the completion of the matter.
The working group has now developed interim recommendations
for action in three areas:
a. Federal pilot projects;
b. Amendments to the Federal Tort Claims Act (FTCA) ;
and
C. Broad-based national reforms.
The pilot projects considered include a Federal Employees
Health Benefits Plan package offering an alternate disputes
resolution (ADR) process to replace costly and time-consuming
traditional litigation. We also describe an OB-GYN Community
Clinics Pilot Project directed at providing obstetrical and
gynecological services in designated rural and urban areas.
Whereas the first of these projects has an obvious
connection with litigation and related factors that have
increased insurance premium costs, the second is premised upon
the assumption that the status quo has so limited the access of
the urban and rural poor to physicians in a critical medical
specialty that an alternative method of service delivery is the
only effective short-term response. The other options pursued
work to address tort reform and insurance issues directly.
Our approaches to possible amendments to the Federal Tort
Claims Act and broader based state reform are essentially the
same, the principal matters of distinction being the extent of
effect and methods of adoption (purely federal or state-law
adoptive or preemptive). Among the reforms here considered are
limitations of non-economic damages, caps on awards and
deductions for payments from collateral sources. To the extent
that the DPC might seek to have the states alter their laws, we
discuss several forms of incentives that might encourage or
coerce such tort reform.
We also tie our discussion of process-based reforms to
enhanced modes of quality assurance. Here we are motivated both
by a pure desire to improve the quality of medical services and
by the recognition that the current tort law system is justified
- 2 -
by many (although, as we show, the evidence does not support
them) as an incentive (threat) to providers to avoid negligence.
Besides considering the options and activities we discuss,
the working group would appreciate direction from the DPC
concerning several overarching questions:
1. Whether significant preemption of state law through
federal legislation (a problematic approach) should continue as a
viable option (see II. C. 1 and 2 for discussion of tort reforms
and incentives to states) ;
2. Whether coercive reforms tied to existing programs
administered by the Department of Health and Human Services are
suitable options for further consideration (see II. C. 2 to
compare the range of incentives) ; and
3. Whether the incentives to the states must be budget
neutral, and if not, to what extent they should involve new
budget commitments (see I. B. and II. C. 2 and 3).
DISCUSSION
BACKGROUND
Since the mid-1970's there has been growing public concern
over the effects of medical malpractice litigation. The past
twenty years have seen a substantial increase in claim frequency,
claim severity and medical liability insurance. During the mid-
1980's medical liability was the fastest growing component of
physicians' practice expenses, rising at an average annual rate
of 21.9%. The rising costs of malpractice liability and the fear
of suit have resulted in a concomitant increase in the cost of
health care. Some physicians have responded to the threat of
liability by performing arguably unnecessary procedures and by
practicing defensive medicine. Others, especially in the field
of obstetrics, have either changed specialties, moved to less
costly areas of the country, or simply left the practice of
medicine. The problem is particularly acute in the inner city
and in rural areas. The result of the increased threat of
liability, the increased cost of liability insurance and the
defensive use of medicine has been an unprecedented escalation in
the cost of health care for the average American.
The present medical liability system causes both direct and
indirect costs. Direct costs include malpractice insurance,
legal fees, and awards not covered by insurance. Indirect costs
arise from professional services and tests that are not medically
necessary, i.e., defensive medicine. The largest direct cost is
malpractice insurance. Nationwide premiums for physicians
totaled $3 billion in 1984, being 4% of total spending for
physician services. The adverse impact of unwarranted or
- 3 -
exaggerated medical liability concern is preventing the nation
from having a health care system that produces the best outcomes
at the least cost.
In an efficient world, damage awards would equal actual
costs, individuals who were liable would pay those costs, and no
physician would be induced by liability concerns to deliver more
services than are medically necessary. In this ideal world the
tort system would act as a deterrent to medical malpractice. Our
research suggests, however, that at present the tort system does
not deter medical malpractice because of certain inefficiencies.
The ways the current world differs from the most efficient
include:
Insurance insulates liable individuals from the costs
of their actions;
Liable individuals have the ability to pass on those
costs to third parties, usually insurers.
(Availability of obstetric services appear affected by
medical liability for women to whom costs can not be
passed along -- Medicaid recipients.)
Among physicians there is widespread belief that awards
are random. This is supported by a study by the
Harvard School of Public Health which reviewed a large
number of hospital records for evidence of negligence.
Of the liability claims arising from the same universe
of claims, one-half of those leading to awards were not
among those the reviewers identified as instances of
negligence.
When adverse medical outcomes are observable,
negligence is usually not. Even if we videotaped all
patient/physician encounters, no template could be
placed on the screen to see if the care was negligent.
Any adjudication system must turn to observable like
case notes and x-rays in deciding if negligence
contributed to the adverse outcome.
To address these defects in the present system, the Working
group examined several options, including federal pilot projects
as well as model legislation backed by incentives for states to
adopt the proposed reforms.
- 4 -
I. FEDERAL PILOT PROJECTS
A.
Option I--Federal Employees Health Benefits Pilot Project
Establish a pilot project within the Federal Employees
Health Benefits Program (FEHBP) offering an Alternative Disputes
Resolution (ADR) process instead of costly and time-consuming
litigation.
Tab A provides additional details.
Explanation
The FEHBP would offer a health-benefit package that would mandate
the use of ADR as an alternative to litigation. This ADR process
would require any enrollee (or any representative of the
enrollee) seeking damages for alleged negligent medical treatment
or care under an FEHBP contract to submit his or her claim for
damages to binding arbitration or other ADR methods.
Theoretically, the incentive for the enrollee would be lower
premiums and immediate resolution of malpractice complaints. A
neutral arbitrator would conduct a hearing and issue a decision
binding on both the provider of medical services and the
enrollee.
Purposes
This pilot project would test whether an ADR approach would
result in beneficial effects such as the potential for a quicker,
less costly resolution to claims, as well as a lowering of
malpractice premiums for providers. In turn, whatever savings
are achieved can be passed on to enrollees in the form of lower
health insurance premiums.
PROS AND CONS
Pros:
Because arbitration is currently used in the private
sector, establishing its use through a pilot project
within the FEHBP can be done with relative ease.
The visibility of a pilot project will demonstrate the
Administration's concern about the adverse effects of
protracted litigation on providers and enrollees.
A pilot project would advance the President's interest
in lowering the cost of health care.
Cons:
ADR may be viewed by enrollees as taking away some of
their legal rights.
- 5 -
The effects on defensive medicine will be difficult to
measure.
It is not certain that the benefits of ADR will result
in a significant lowering of premiums such that
enrollees will be willing to participate.
B.
OPTION II--OB-GYN COMMUNITY CLINICS PILOT PROJECT
Background
The January 11, 1990 paper presented to the Domestic Policy
Council tasked the Tort Reform Working Group with
[Developing] Special Measures to Mitigate [the] Impact of
High Malpractice Premium Costs on Access to Obstetrical
Care
The paper states further, "DHHS would develop policy options
and demonstration proposals involving limited non-preemptive
Federal intervention where the high cost of liability insurance,
coupled with inadequate reimbursement or a small client base
(such as in isolated rural areas), is impeding access to
obstetrical care."
Causes of the Problem
The task, described above, suggests that liability insurance
costs alone are the principal reason that rural and urban low
income woman may have difficulty finding adequate obstetrical
care. While it is generally true that Ob/Gyns have either quit
practicing or shifted to other areas of practice, we found other,
more compelling reasons, why obstetrical care is inaccessible in
certain areas of the country. For example, the isolation in
rural areas makes it difficult for patients to find any medical
care. In turn, women who do not have good prenatal care place
themselves at greater risk of having an unhealthy baby or
difficult birth. Women in rural areas live miles from an
obstetrician and must travel distances for medical care and bear
the added costs.
The Pilot Project
A pilot project in selected communities could coordinate and
consolidate the existing diverse health and social services under
one roof as easily accessible clinics. Their location could be
near public housing which could increase the number of low income
women who receive early and comprehensive care, thereby improving
their health status and pregnancy outcomes.
A pilot project at the community level could require private
sector funding as well as federal government monies and the use
- 6 -
of private and public sector facilities. A facility could
assemble a team of mid-level practitioners such as nurse mid-
wives, physician assistants, and nutritionists. Practitioners
would be available twelve hours a day, seven days a week and take
part in an on-call rotation for emergencies.
An obstetrician could attend at least once a week and
identify those births which could be handled at that site and
those which would have to be moved to more technically
sophisticated sites. Communities would be made aware of the
Georgia state model which has five regional centers for referral
of difficult deliveries. There, expectant mothers are
helicoptered to the hospital in emergency situations.
Summary of Proposal
The pilot project could:
Expand the number of services the mid-level
practitioners can safely provide to pregnant women;
Locate facilities in Physician Manpower Shortage areas;
Strengthen outreach and accessibility of services
through publicity campaigns, indigenous workers, and
volunteers;
Link specialized services such as mental health
services and substance abuse prevention to obstetrical
care program;
Provide education efforts regarding risk factors
associated with births;
Establish incentives, including office space for
physicians, grants or loan forgiveness) to attract
private sector health care providers to obstetrical
care sites.
Utilize volunteers;
Institute transportation or referral services for
likely high risk babies;
Seek National Health Service Corps persons.
Tab B provides additional details.
- 7 -
Incentives for Participation
A significant consideration for those who participate in
this pilot project would be providing a means for reducing
potential liability to tort claims. Participation could be
encouraged through a variety of means including--
a. Designing the program to make use of one or more
attractive Alternative Dispute Resolution techniques (see
discussion at C (1) (g) below) i
b. Making HHS grant funds available (see Tab B) ; and
C. Utilizing existing resources with HHS acting as a
catalyst for improved efficiency.
PROS AND CONS
Pros: o
The pilot project could target resources to areas in
greatest need and give visibility to communities
striving to redress the problem.
It could provide a catalyst for communities to
coordinate services and resources in addressing the
complex causes of inaccessible obstetrical care.
It relies on appropriate principles of federalism.
Cons:
The pilot project is a limited approach.
If money is not specifically budgeted it could divert
funds from other planned federal efforts.
The approach does not address liability insurance or
tort reform; it assumes that the status quo has created
an identifiable need so severe that an alternative
medical delivery system is the only reasonable short-
term solution as broader tort reforms are encouraged
and allowed to evolve.
II. BROAD-BASED NATIONAL REFORMS
A. Findings of Data Research Group
The Data Research Subgroup has completed an examination of
state medical liability tort reform statutes and their impact on
claim frequency, claim severity and insurance premiums. Based on
available data, two reforms appear to be most effective. The
first is capping placing a limit -- on either total damages or
on non-economic damages such as pain and suffering (for example,
the California statute has capped damages for non-economic losses
- 8 -
in medical malpractice cases at $250,000). The second is
reducing the amounts awarded by collateral payments attributable
to the injury. Studies assessing the impact of state legislated
reforms have found that limiting total recoveries is a most
effective intervention, leading to drops in costs per claim of
between 23% and 39%. Limiting non-economic costs -- "pain and
suffering" -- has cut costs by up to 31%. Requiring offsets
against amounts paid by other sources -- health insurance,
workmen's compensation, etc. -- has been found to reduce costs by
11% to 21% and reduce the frequency of claims by 14%.
A condensed version of the Data Research Subgroup's findings
is attached at Tab C.
In addition to capping awards and reducing awards by
applying collateral sources, other reforms (such as Arbitration
and Pre-trial Screening) also appear to be effective in reducing
the amount awarded per claim. Care must be taken, however. Some
variations of these reforms may actually increase the total
payouts because they increase the ease of filing and obtaining
resolution of claims.
Some reforms, while useful at the state level, may be
counterproductive in practice if tied to federal statutes. Thus,
the Federal Tort Claims Act -- the vehicle for recovering damages
for medical malpractice claims arising from acts or omissions of
government doctors -- could be adversely impacted if there were a
prohibition on pleading the amount sought in complaints.
Finally, opinion surveys indicate that an elimination of joint
and several liability may have such an impact.
B. Findings of the Court Reform Subgroup
Numerous potential tort reforms have been reviewed by the
Court Reform Subgroup. Three questions pertain to selection of
the best reforms: (1) Which reforms work most effectively? (2)
What mechanisms are most appropriate vehicles for implementation
of reforms? and (3) What improvements in medical care can be
linked with tort reforms?
The Court Reform Subgroup has approached its analysis by
making a basic distinction between reforms which can be adopted
as a matter of federal law and state law reforms. Of course,
federal law reforms would in many instances not impact medical
costs tied to insurance rates since the reforms would be effected
only for claims against the United States.
- 9 -
C. Options for Broad-Based Reform
1. STATE LAW REFORMS
The following reforms could be included in a model state
statute that could be promoted by incentives outlined in Part 2:
"Incentives for state law reforms."
a. Limit recovery through legislation by placing a
cap on total damage awards or by placing separate
caps on awards for economic and non-economic
damages at a reasonable limit.
Damage awards for medical malpractice usually consist of two
components: recovery for pecuniary losses, such as medical
expenses and lost income, and compensation for non-economic
damages, such as pain and suffering, loss of enjoyment of life
and loss of consortium. Some jurisdictions also allow punitive
damages in medical malpractice cases. Some states have placed
caps on total recovery; others have placed separate caps on
economic and non-economic damages.
PROS AND CONS
Pros:
Experience indicates that this reform can
significantly reduce medical malpractice
awards.
This reform should materially affect the
willingness of insurers to provide coverage
at a reasonable costs.
Twenty-nine states have passed laws limiting total
damages or non-economic damages. Only six were
declared unconstitutional by the relevant state supreme
courts. Of those six states, three have passed revised
legislation that has not been contested. Five states
limit total damages: Colorado, Indiana, Virginia,
Nebraska, South Dakota, and Ohio. The first three have
upheld the constitutionality of the limits.
Cons:
A similar proposal was rejected by the
Administration in recent product liability
legislation. (Product Liability Reform Act,
S. 1400)
Capping awards strikes some persons as too
extreme a course of action since it is viewed
as denying a person full recovery of
compensatory damages.
- 10 -
b. Prohibit double compensation by eliminating
the collateral source rule.
Award damages reduced by the amount of compensation a person
is entitled to receive from other sources, e.g., Social Security
Disability, Medicare or Workmens Compensation.
The collateral source rule provides that benefits received
by an injured party from sources other than the defendant (e.g.
Workmen's Compensation) may not be used to offset the damage
recovery from the defendant. This permits the plaintiff to
obtain double recovery of certain components of damages. The
rule has been accepted by almost all jurisdictions and has been
applied both as a rule of evidence and as a rule of damages. The
rationale for the collateral source rule is that a wrongdoer
should not be relieved of paying a tort injury simply because the
plaintiff had access to other resources.
PROS AND CONS
Pros:
Elimination of public payments from medical
malpractice tort awards is more reasonable
than permitting plaintiffs to obtain a double
payment for the same damages.
Reduction of damages by the amount of
payments from public sources can have a
substantial impact on damage awards.
Cons:
Enactment of this modification in the
collateral source rule may only have a
marginal impact on medical malpractice
insurance rates.
The proposal might require modification of
enactments benefiting the Social Security
Trust Funds.
C.
Require structured judgments in some cases.
Require or permit courts to award damages in the form of
structured payments in some cases either for all damages or for
damages attributable to future payments and costs.
Traditionally, medical malpractice judgments and settlements
are paid in lump sums. These payments often include compensation
for anticipated future medical expenses or lost earnings. The
premature death of the claimant often creates a windfall for the
heirs if a significant portion of the judgment or settlement is
based upon future damages.
- 11 -
PROS AND CONS
Pros:
Structuring future payments will prevent
windfalls.
The provision for payments over time may
assist in risk assessment and insurance
underwriting.
Cons:
These provisions may be used as an excuse for
introduction of evidence of very speculative
damages.
Structured payment provisions may inhibit
careful post-trial and appellate review of
the amounts of damages awarded.
d.
Shorten the statutes of limitations.
Limit the period in which the statute of limitations can be
tolled due to minority, enact a reasonable discovery rule and
enact a statute of repose.
The primary purpose of a statute of limitations is to
prevent the prosecution of stale claims. With the passage of
time, evidence may be lost and witnesses may disappear. Many
courts felt that the traditional statute of limitation rules were
too harsh in medical malpractice actions and they fashioned what
is commonly known as the discovery rule. Under the discovery
rule, the patient's statute of limitations period does not begin
to run until he or she discovers or reasonably should have
discovered the medical injury. This open-ended discovery
principle, however, created problems for health care providers
and insurers. The uncertain and potentially long period within
which a medical malpractice action could be brought made it
difficult for insurers to develop actuarial estimates upon which
to base medical malpractice premiums.
PROS AND CONS
Pros:
Limitation provisions have almost been
disregarded because of the numerous escape
valves in current law; the reforms will
provide more of a legal basis for applying
reasonable reforms.
Fraudulent claims and claims pursued tardily
when the evidence to rebut the claims is lost
will be limited.
- 12 -
Many state laws on their face permit too many
exceptions.
Cons:
Reform of limitations will cause uncertainty
in areas where the law is currently settled.
The effect of these reforms on medical
malpractice costs will be seen only after
years have past.
e.
Eliminate joint and several liability.
Eliminate joint and several liability for non-economic
damages (pain and suffering and emotional distress) only.
Under the rule of joint and several liability, plaintiffs
may require any one of two or more defendants to pay the full
amount of a judgment. In most jurisdictions, the paying
defendant frequently has a right to recover from the co-
defendants. However, if the non-paying defendants are insolvent,
this right of recovery is meaningless. As a result, in many
cases the defendant with the most limited role in causing the
injury but with the deepest pocket bears the greatest share of
the damage award.
PROS AND CONS
Pros:
o
This reform is in concert with recent
Administration proposals in product liability
legislation. (Product Liability Reform Act,
S. 1400)
This reform builds upon recent state (e.g.
California) reforms.
Cons:
Only tackles a fraction of the problem caused
by malpractice liability.
Does not have a strong theoretical basis,
i.e., all forms of "compensatory" damages
rationally should be treated in the same
manner within the judicial system.
Limitations that only apply to joint and
several liability for non-economic damages
can be evaded by increasing economic damages
without regard to the damages actually
proved.
- 13 -
f.
Prohibit use of ad damnum clauses.
Prohibit specific monetary requests in pleadings.
An ad damnum clause in a complaint states the amount of
recovery sought by plaintiff. In medical malpractice actions,
the amounts of damages claimed may be greatly inflated. As a
result, the insertion of a large ad damnum in the complaint can
condition the public to accept extremely large sums as
appropriate measures of damages.
PROS AND CONS
Pros:
Prohibiting use of ad damnum clauses will
limit somewhat unfair publicity when a suit
is filed.
By limiting the publicity value of a large ad
damnum, physicians' fears may be reduced.
Cons:
The abolition of ad damnum clauses will not
have any effect on medical malpractice costs.
There is no benefit to the government in
elimination of ad damnum clauses.
g.
Alternative dispute resolution.
The following is a list of alternate dispute resolution
(ADR) techniques that could be incorporated, in whole or part, as
part of the tort reforms to be enacted by the states.
Arbitration
PROS AND CONS
Pros:
o
A neutral opinion can effect a reasonable resolution
without the expense incident to trial.
Arbitration permits speedy resolution of claims.
Cons:
Litigants will want their "day in court."
Arbitration procedures will not permit full development
of the relevant facts bearing on liability and damages.
- 14 -
Mediation
Pros:
Mediation may enable parties to arrange a settlement
more readily than would otherwise be the case.
Mediation is not coercive in the sense that it
contemplates that the parties will need to mutually
agree to any resolution and will themselves design the
parameters of any settlement (with the mediator's
assistance).
Cons:
Mediation may not be effective since there is no
sanction attached to failure to proceed reasonably.
Mediation does not work as well until after a
substantial effort has been expended in litigation
through the discovery process.
Mini-trials
PROS AND CONS
Pros:
A mini-trial permits the fact finding process to be
brought to bear on a claim while avoiding expenditures
necessitated by a full trial.
Some cases can be settled after a mini-trial.
Cons:
Mini-trials require a substantial expenditure of
resources.
By adding still another procedural vehicle to the
litigation process, mini-trials may delay and make more
expensive the already drawn out litigation process.
Pretrial screening panels
PROS AND CONS
Pros:
The Maryland experience and some others indicate that
this reform can be effective in reducing liability
costs.
Pretrial screening is readily tied to quality of care
reform.
Cons:
Pretrial screening is frequently viewed as physician
controlled.
Pretrial screening is sometimes viewed as just another
- 15 -
procedural addition adding to the complexity and cost
of litigation.
Mandatory notice to clients of ADR options instead of trial
PROS AND CONS
Pros:
Notice assures that the client has the final say before
drawn out litigation proceeds.
Notice is not coercive--it is informative.
Cons:
This reform may not produce any material effect on the
litigation process.
The notice requirement is dependent upon the
development of attractive options.
Mandatory settlement conferences
PROS AND CONS
Pros:
The pros for mediation apply here.
Cons:
The cons for mediation apply here.
No Fault System (O'Connell)
PROS AND CONS
Pros:
o
Provides a way out of the tort system that could
benefit all concerned. Claimants could receive
compensation more rapidly. Putative defendants could
on the average pay less.
o
The decision to offer a payment rests with the person
who can otherwise anticipate suit.
The adverse political baggage of other, exclusive
remedy type reforms may not be present.
Cons:
It may be over-optimistic. Prospective defendants may
utilize this approach only when they are clearly liable
and damages can be ascertained at an early date.
It may prove to be difficult to purchase insurance
covering all future economic losses when the losses are
debatable or uncertain.
Efforts to perfect this reform may detract from other
needed reforms.
- 16 -
Certificates of Merit 1
PROS AND CONS
Pros:
Maryland's experience indicates that this requirement
reduces the number of claims.
Screens claims that are devoid of merit out of the
litigation process.
Cons:
This requirement may prove too onerous if the sanction
closes the courthouse door to an injured person.
The requirement might be so broadly drawn as to invite
a "conspiracy of silence" argument from opponents.
Offers of Judgment
PROS AND CONS
Pros:
Offers of judgment force parties to assess the
strengths and weaknesses of their cases soberly.
If settlement is unreasonably refused, costs are
shifted to the unreasonable party.
Cons:
Offers of judgment are available to defendants in many
instances already.
The threat of shifting costs may be ephemeral to a
plaintiff who has no assets.
2. INCENTIVES FOR STATE REFORMS
Selection of the best tort reforms depends, not only upon
the intrinsic merit of each reform, but also upon the mechanism
utilized to adopt the reform. While amendment of the Federal
Tort Claims Act is feasible, that approach will not affect
medical costs, insurance availability or availability of medical
care. State reforms will be necessary to accomplish these ends.
Mechanisms vary for adoption of state reforms; these
mechanisms carry baggage that may not be desirable for policy
reasons separate from the effects of the reforms on the medical
1 This is not technically an ADR method. However, it has
been used successfully in Maryland and other states with various
ADR approaches.
- 17 -
care/tort systems. Pros and cons of a coercive, preemptive type
of mechanism include--
PROS AND CONS
Pros:
A preemptive approach will not be subject to
invalidation on state constitutional grounds.
Preemptive legislation need only be enacted by one
legislature--the Congress--rather than by 50 different
legislatures in each state.
The Administration can control reforms most directly
through selection of preemptive mechanisms.
A preemptive approach will be effective in reducing
medical malpractice costs.
Cons:
Use of preemptive mechanisms to impose tort law upon
states may be difficult to reconcile with federalism
principles.
Even limited preemptive mechanisms will require
legislation; it will be very difficult if not
impossible to obtain effective legislative action at
least in the immediate future.
Utilization of preemptive mechanisms tied to
availability of other federal programs/funds may be
perceived to be harmful to the programs' beneficiaries.
The limited scope of some preemptive measures would
result in reforms being only partially effective.
Incentive Options
The following incentives could be used to encourage states
to adopt malpractice reforms. They are listed in descending
order from the most preemptive to the least.
(1) If states fail to enact minimal malpractice and quality of
care reforms within a specified period of time, state medical
malpractice tort laws could be preempted by federal law.
PROS AND CONS
Pros:
This option is the most straightforward, and the
option most likely to lead to rapid compliance.
Preemption could be coupled with a specific exclusion
for states meeting federal standards in their own law
- 18 -
and practice--this approach has been used successfully
in other cases (occupational safety and air pollution
control).
Does not involve the political risk inherent in
incentives that involve cutting off federal benefits.
Cons:
Difficult to reconcile with Federalism principles.
May conflict with view that preemption should be
reserved as a measure of last resort for special cases.
Would require a detailed specification of how federal
laws would preempt state laws in the event of a state's
failure to act.
Would be politically impractical. The proposal would
be referred to judiciary committees, which are likely
to be less receptive than health committees.
(2) If states fail to enact malpractice and quality of care
reforms that meet minimum standards within a specified period of
time, HHS could discontinue certain discretionary funding for
those states.
PROS AND CONS
Pros: o
Could be effective since few states are likely to risk
the penalty involved.
Could be characterized as necessary to help reduce
adverse impact of "defensive medicine" costs on health
care programs.
Cons:
O
Could give the appearance of depriving innocent
beneficiaries of medical care or of using trust funds
for unrelated "political" purposes.
States may not be willing to try to pursue goals and
objectives required by the Federal government.
Places the Secretary of HHS in the position of
withholding funds from a large segment of the
population.
- 19 -
(3) If states fail to enact malpractice and quality of care
reforms that meet minimum standards within a specified period of
time, a surcharge may be imposed on Medicare premiums in those
states.
PROS AND CONS
Pros:
By enlisting political support of elderly groups at
state level, may help to ensure that states enact
desired reforms.
A modest 5-10% surcharge could be justified by
assumption of higher costs to Medicare due to defensive
medicine in states that have not enacted the minimum
reforms.
Avoids the negative impact of threatening to terminate
Medicaid or Medicare benefits.
Cons:
Enactment of a surcharge at the federal level is likely
to be strongly opposed by elderly groups.
May be somewhat less effective in ensuring state
compliance than other stronger incentives.
Would penalize elderly groups and is not directly
related to Medicare program.
(4) If states fail to enact malpractice reforms that meet
minimum standards within a specified period of time, Medicare
payments to hospitals and physicians could be reduced by 5
percent to offset higher costs of defensive medicine.
PROS AND CONS
Pros:
Provides added political pressure at state level to
enact reforms.
Does not involve the political risk inherent in
incentives that involve cutting off federal benefits.
Cons:
May be perceived by health care providers as an unfair
approach.
May put Medicare beneficiaries at risk.
(5) Positive incentives, such as technical assistance,
planning grants, and start-up grants to states willing to
enact reforms, should be created.
- 20 -
PROS AND CONS
Pros:
Demonstrated benefits of reform in an increasing number
of states would, over time, create the political
climate for reform in other states and even for
enforceable penalties for a small number of
recalcitrant states.
Would not penalize indigent or elderly persons.
Would be directly related to reforms.
Would not run counter to federalism principles.
Cons:
To be effective, incentives would have to be of
sufficient magnitude to cause states to enact reforms.
This would have negative budgetary implications.
The "carrots/sticks," described above, will be implemented if the
states succeed/fail in adopting the proceeding court reforms and
the following quality of care reforms. These proposals have not
been fully developed, but represent a prototype of a possible
malpractice/quality of care reform proposal.
3.
QUALITY ASSURANCE PROGRAMS
Any state reforms would need to be accompanied by
appropriate quality assurance programs. The working group needs
to study this area further. In particular, the Data Research
Subgroup is gathering data to ascertain the effectiveness of
quality assurance and state licensure mechanisms in bringing down
the incidents of medical malpractice. The working group is
exploring the following options.
Quality Assurance Options
In order to improve the quality of care and reduce the
incidence of malpractice, states could be required to adopt the
following quality of care reforms:
1. Require professional society review of malpractice
complaints (either liability actions or complaints made to state
boards) against member physicians to ascertain whether the
allegations of malpractice have merit. If so, expulsion from the
professional society should be the potential penalty.
- 21 -
PROS AND CONS
Pros:
o
Professional societies are best able to determine
whether malpractice has occurred.
Membership in professional societies is extremely
important to most physician--far more physicians belong
to professional societies than medical associations.
The threat of a negative report or termination from the
professional society will have an impact on physicians.
It is in the professional societies' best interest to
ensure that their members are providing quality care to
their patients and to remove those physicians that are
providing substandard care.
Cons:
Professional societies may be reluctant to expel their
own members.
Expulsion from professional societies does not
necessarily result in the loss of a medical license.
2.
Expand membership of the governing councils of state medical
licensing boards to include a majority of non-physicians.
PRO AND CONS
Pros:
This proposal is advocated by the American Medical
Association's fault-based administrative system
proposal.
Could make medical licensing boards more responsive to
public concerns.
Cons:
Could increase fiscal burden on some states.
Mandated funding or staffing might be used
ineffectively.
May be difficult to be sure that funding reaches actual
entity that is responsible for investigating and taking
disciplinary action.
- 22 -
3.
Require periodic re-examination of physicians.
PROS AND CONS
Pros:
Could strengthen public confidence in the profession.
Could assess knowledge base needed for competency
Could provide strong incentives for physicians to be
serious about continuing education.
Cons:
Written examinations cannot test manual skills and
character traits needed for competency. May favor
physicians newly admitted to practice who are familiar
with test-taking and discriminate against physicians
who have not taken written examinations for a number of
years.
Could be difficult to develop fair traits.
Could be perceived as a new form of bureaucracy.
4.
Require collection of patient outcome statistics by state
boards to facilitate monitoring of quality and targeting of
corrective action.
PROS AND CONS
Pros:
Could assist disciplinary entities by providing access
to quality of care statistics.
Would permit state boards to monitor quality of care,
and target investigations and corrective actions more
effectively.
Builds on systems being developed to monitor quality of
care for Medicare.
Data gathering is also needed to conduct effectiveness
and outcomes research.
Cons:
A substantial cost could be imposed on state boards or
on hospitals; question whether clerical personnel would
be able to review and abstract clinical and outcomes
data from hospital medical records.
Question whether extending data system from Medicare to
all patients would yield sufficient additional
information to justify the added cost.
- 23 -
Could create presumption of liability if quality of
care standard is not met, but negligence has not
occurred.
Could be perceived as a new bureaucratic organization.
Unfunded mandate imposed upon the states.
5.
Require state boards to conduct ongoing reviews of hospital
and physician office records to detect quality of care problems
(similar to the Medicare PRO program). .
PROS AND CONS
Pros:
Boards would become more proactive and would search out
quality of care problems.
Hospitals have the greatest leverage over physicians.
Fear of losing hospital privileges should have a
significant impact on physician behavior.
Would be similar to Medicare PRO reviews.
Cons:
Could be very expensive.
Dilemma of whether to disclose findings of review to
patient in cases where substandard care is detected.
Might increase transaction costs for physician.
Would be extremely difficult to review all physician
office records. Could discourage record-keeping.
Imposes an unfunded mandate on the states.
- 24 -
6. Apply organizational liability to hospitals and managed care
providers. (Hold organization primarily liable for actions of
physicians.)
PROS AND CONS
Pros:
Could create strong incentives for more effective
institutional oversight of physician practice and
effectively ensure quality control.
Could reduce the burden of high insurance premiums on
individual practitioners.
Would reduce "finger-pointing" between physicians and
hospital personnel during malpractice litigation and
help reduce transaction costs.
Cons:
Could lead same hospitals to inappropriately narrow
their range of services, with a tendency to reduce high
risk procedures.
Could intensify anti-competitive tendencies that could
come into play in the process of extending medical
staff privileges.
Likely to be opposed by physicians because of a fear of
loss of control and autonomy.
Likely to be opposed by hospitals and managed care
providers because of the cost of extending liability
coverage.
Third-party payers would need to readjust payment rates
for hospital and physician services. This might be a
fairly complex undertaking.
4.
FEDERAL REFORMS THROUGH AMENDMENTS TO THE FEDERAL TORT
CLAIMS ACT
The same reforms listed in the "State Law Reforms" section
above could be enacted through the Federal Tort Claims Act
(FTCA). This would mean that the reforms would apply in cases
where the government is sued in tort. Such an approach could
provide a laboratory within which to ascertain the effectiveness
of each reform. It would provide a model for the states in a
less preemptive fashion than described above.
- 25 -
PROS AND CONS
Pros: o
A federal enactment would encourage state
legislatures to follow the same course.
A federal enactment would apply only to tort suits
against the government and would be less preemptive.
Cons:
o
Amendment of the FTCA will not affect
malpractice insurance rates.
Amendment of the FTCA will not affect the
physicians' liability since payments under
the FTCA do not come from physicians or from
agency appropriations.
Since the impact of amendments to the FTCA is limited to the
effect of the amendments on the federal treasury (judgments and
settlements are not paid from agency funds but instead are paid
from the general government-wide Judgment Fund), any reforms to
the FTCA will not affect medical malpractice insurance costs or
defensive medicine practices either in the federal government or
privately. There will be no constituency for any such
amendments. However, such amendments might serve as a model for
state reforms.
Alternative Disputes Resolution
Option 1 - Federal Pilot Project
Establish a pilot project within the Federal Employees Health
Benefits Program (FEHBP) using an Alternative Disputes Resolution
(ADR) process as an alternative to litigation.
Explanation
The FEHBP would offer a health-benefit package which would
mandate the use of ADR as an alternative to litigation. This ADR
process would require any enrollee (or any representative of the
enrollee) who is seeking damages for alleged negligent medical
treatment or care under an FEHBP contract to submit that claim
for damages to binding arbitration. Theoretically, the incentive
for the enrollee would be lower premiums and immediate resolution
of malpractice complaints. A neutral arbitrator would conduct a
hearing and issue a decision binding on both the provider of
medical services and the enrollee. The pilot project would be
limited at first to staff model health maintenance organizations
(HMO) and their enrollees because of the direct providing of
medical services inherent in the nature of an HMO. Later, we
would consider expanding the scope to other plans, including fee
for service, although the fee for service plans present unique
and difficult legal questions.
Purposes
This pilot project would test whether an ADR approach would have
some beneficial effects on resolving serious disputes regarding
the providing of medical services. The more immediate effect is
the potential for a quicker, less costly (both in terms of
administrative to the provider and personal to the enrollee), and
less traumatic resolution to these types of disputes. The less
immediate and more difficult to measure effect is the potential
for this process to result in lower malpractice premiums for
providers which, in turn, can be passed on to enrollees in the
form of lower health insurance premiums. An even more indirect
effect is the potential for a decrease in the practice of
defensive medicine e.g. unnecessary testing and hospital stays,
of providers which could also translate into premiums savings.
Pros and Cons
Pros:
- Because arbitration is currently used in the private sector,
the establishment of a pilot project within the FEHBP can be
done with relative ease.
- The visibility of the pilot project will demonstrate the
administration's concern about the adverse effects of
protracted litigation on providers and enrollees.
- The pilot project would advance the President's interest in
lowering the cost of health care.
Cons:
- ADR may be viewed by enrollees as taking away some of their
legal rights.
- The effects on defensive medicine will be difficult to
measure.
- It is not certain that the benefits of ADR will result in a
significant lowering of premiums such that enrollees will be
willing to participate.
- 2 -
04/03/90
07:56
202 633 1071
CIVIL DIV. DOJ
1
002
04. 02. 90 05:22 PM *OGC IMMEDIATE OFFICE P01
DEPARTMENT OF HEALTH & HUMAN SERVICES
Office of the Secretary
Office of the General Counsel
Washington, D.C. 20201
April 2, 1990
TO:
Stuart M. Gerson
Assistant Attorney General
Department of Justice
Chairman, Tort Reform Working Group
FROM:
Grover G. Hankins
sow 4/2/90
Principal Deputy General Counsel
RE:
Draft Status Memorandum
Earlier today I forwarded a copy of the Report of Subgroup 2
(hereafter "the Report") on Access to Obstetrical Care to Steve
Brandsorfer for review and comment. The Report has not received
the Department's official blessing end must be reviewed by the
Department's Policy Council before it can be viewed as the
Department's position on the matter.
MEVICES
HUMAN
&
DEPARTMENT OF HEALTH & HUMAN SERVICES
Office of the Secretary
MEALTH
8
Office of the General Counsel
Washington, D.C. 20201
TO:
Stuart M. Gerson
Assistant Attorney General, DOJ
Chairman, Tort Reform Working Group
Grover G. Hankins Grovel He shim Entt
FROM:
Principal Deputy General Counsel
Chair, Option 2 Subgroup
SUBJECT: Report of Subgroup 2 on Access to Obstetrical Care
This report describes the purpose of our subgroup work, discusses
for inadequate obstetrical care, and presents our
reasons proposed pilot project, including a discussion of its merits current and
faults. In an attachment we provide a brief overview of to
and planned DHHS activities on issues related to access
obstetrical care and describe a few state programs.
The proposal has not yet been reviewed by the Policy Council at of
the Department of Health and Human Services, largely because not
time constraints. We are preparing for that meeting but do
expect it before the Domestic Policy Council meets.
PURPOSE
The purpose of our effort was defined by the Tort Reform Working
Group as Option 2 in the January 11, 1990 paper to the Domestic
Policy Council.
[Develop] Special Measures to Mitigate [the] Impact of High
Malpractice Premium Costs on Access to Obstetrical Care
The paper states further, "DHHS would develop policy options and
demonstration proposals involving limited non-preemptive Federal
intervention where the high cost of liability insurance, coupled in
with inadequate reimbursement or a small client base (such as "
isolated rural areas), is impeding access to obstetrical care.
REASONS FOR THE PROBLEM
The above description of the task suggests that liability
insurance costs alone are the principal reason the rural and
urban low income woman may have difficulty finding adequate
obstetrical care. We found other, more compelling reasons that
obstetrical care is inaccessible. For example, the isolation in
rural areas makes it difficult for patients to find any medical
2
care. In turn, women who do not have good prenatal care place
themselves at greater risk of having an unhealthy baby or
difficult birth.
Women in rural areas live miles from an obstetrician and must
travel distances for medical care and bear the added costs.
The problem of inaccessible medical care generally due to
isolation is exacerbated by several factors: (1) low Medicaid
reimbursement rates and (2) trends in birth rates. The decrease
in births of middle-income infants and increase in those of lower
income may be discouraging medical students from entering the
obstetrical specialty. In addition, reference is often made to
the high cost of malpractice insurance.
Because of the number of persistent and long-standing conditions
that could cause shortages of obstetrical care, we defined the
task as one of improving access to prenatal and obstetrical care,
and not on ways to pay for liability insurance. The reasoning is
that if we improve the likelihood of a healthy baby we reduce the
opportunities for suit and need for liability insurance.
Furthermore, because of the minor role insurance plays, the
Department considers it unsound public policy to pay liability
insurance premiums of one or a particular group of physicians.
Subsidizing a group of non federal physicians would set the wrong
precedent.
As indicated in the attachment, the Federal, State and community
governments have been innovative in recruiting more obstetricians
and related providers, in financing medical care and in educating
low income women so as to get the necessary perinatal care to
make deliveries less troublesome. These efforts should begin to
alleviate the problems despite the complexity of causes.
PILOT PROJECT
Increasing Service Delivery in Shortage Areas.
General Description.
Low income women and their babies are at high risk for adverse
outcome, due in part to their failure to receive proper medical
treatment, poor nutrition, opportunities for drug and alcohol
use, erratic employment patterns and a host of other social
factors. They need, and are eligible for a variety of health and
social services. These services may be available from multiple
public and private agencies but they have different and confusing
requirements. In addition, the splintered services make travel
to numerous sites a necessity. The time and effort necessary to
find the services create additional barriers to the use of the
services.
The concept and components of this proposed demonstration project
would coordinate health and social services as feasible. We
3
think that coordination of health services, for example, near
public housing will increase the number of low income women who
receive early and comprehensive care, thereby improving their
health status and pregnancy outcomes.
The pilot project at the community level would require private
sector funding as well as federal government monies and the use
of private and public sector facilities. The facility would
assemble a team of mid-level practitioners such as nurse mid-
wives, physician assistants, and nutritionists. Practitioners
would be available twelve hours a day, seven days a week and take
part in an on-call rotation for emergencies.
An obstetrician would attend at least once a week and identify
those births which could be handled at that site and those which
would have to move to more technically sophisticated sites.
Communities would be made aware of the Georgia state model which
has five regional centers for referral of difficult deliveries.
There, expectant mothers are helicoptered to the hospital in
emergency situations.
Outreach
A number of demonstrations have confirmed that community based
comprehensive programs are highly beneficial for the underserved.
Outreach, case management, and tracking systems for the high-
risk woman are key components of a successful effort.
Successful outreach requires a variety of activities, including
information campaigns. The use of indigenous workers and/or
volunteers could also help.
Location
An excellent location would be near public housing so as to
minimize the transportation difficulties. Sites which have
existing outreach services and emphasize primary care would also
be good. Other good candidates include sites where state or
community and private funds are already involved or where
particular efforts service minority populations.
The site must be within one of the nearly 2000 areas identified
in the (primary physician) Manpower Shortage Areas list.
Funding
The federal government will make available grant funds to
communities that can assemble the practitioners identified above
and can demonstrate that the community leaders are committed to
its success. Under Section 339 and 340 of the Public Health
Service, funds have already been designated for community health
centers.
4
States and communities are encouraged to integrate the use of
funding authorities already in existence such as block grants,
categorical grants, entitlement programs and research and
demonstration authorities.
The Use of Volunteers
There are numbers of federal volunteer programs which might be
tapped for use at the sites. These include ACTION, VISTA, Foster
Grandparents, and Retired Senior Volunteer Program.
Volunteers from community based groups might also be available
and should be considered.
Adjudicating Malpractice Liability Claims
The willingness of the community to set up arbitration or pre-
trial screening panels is required. Arbitration is an
alternative to and in lieu of trial by jury: it is not merely a
condition precedent to trial. In addition, any subsequent
judicial review of the claim is limited. In these elements it is
distinguished from pretrial screening panels.
Arbitration could be elected by the injured party or heirs by
means of a contract, executed either before or after filing a
claim, or it could be statutorily mandated. Medical liability
claims currently can be arbitrated in most states under the
general arbitration statutes of those states.
Some advantages of arbitration are:
For the patient, the claim should be resolved more
quickly.
More patients could file a claim and receive
compensation. Currently lawyers are reluctant or
unwilling to handle small claims because there is
little or no revenue for them.
For providers, arbitration is a less visible
process and less damaging to their reputations.
For providers the decision is less emotional and
more likely to be determined on the basis of
technically correct information.
Pre-trial Screening Panels. These are non judicial mechanisms
which hear the merits of medical injury cases and conclude with
an opinion. They are different from arbitration because they
precede a trial and are not in lieu of it. Unlike arbitration,
the panel's decisions are not binding. Although the results may
be used in court, the panel's findings are not binding upon the
5
court.
No Fault Liability Model Under this model, a provider would have
180 days to offer a settlement to a patient. Such a settlement
would be limited to economic losses and would not include payment
for pain and suffering or punitive damages. In response to a
timely offer, a patient could request an administrative hearing
to determine the sufficiency of the settlement, but would be
foreclosed from going to court.
Federalization of Health Care Professionals High risk health
care zones would be established for purposes of meeting
obstetrical care needs. Criteria to establish theses zones would
include but are not exclusive to high incidence of low birth
weight babies and babies that evidence complications pre, during,
and post delivery. Once a community is designated as a high risk
zone, health care professionals in or near the area in question
may be "deputized" to work in the zones under the umbrella of the
Federal Torts Claim Act.
General Criteria for Selection
Because of the diversity of geographic areas and available
resources, the following features would be given priority. These
are adapted from the Community Based Infant Health Initiative,
previously sent to the Domestic Policy Council.
Expand the number of services the midlevel
practitioners can safely provide to pregnant women.
Locate the facility in one of the Physician manpower
Shortage areas.
Strengthen outreach and accessibility of services
through publicity campaigns, indigenous workers, and
volunteers.
Link specialized services such as mental health
services and substance abuse prevention to obstetrical
care program.
Provide education efforts regarding risk factors
associated with births.
Establish incentives to attract private sector health
care providers through creation of obstetrical care
sites. Incentives could include: provision of office
space to physicians, grants or loan forgiveness.
Utilize volunteers.
Institute transportation or referral services for
6
likely high risk babies.
Seek National Health Service Corps persons.
Pros
Targets resources to areas in greatest need and gives
visibility to communities striving to redress the
problem.
Provides a catalyst for communities to coordinate
services and resources in addressing the complex causes
of inaccessible obstetrical care.
Relies on appropriate principles of federalism.
7
Should reduce malpractice suits and the threat of suit,
thus allowing liability premiums to stabilize.
Reducing the threat of suit should improve the patient
doctor relationship.
Cons
Is a limited approach.
Unless $6 - $10 million is specifically budgeted for
this effort, it could divert funds from other planned
Federal efforts.
8
Attachment A
FEDERAL GOVERNMENT ACTIVITIES
On-going Efforts Related to Obstetrical Care
In fiscal year 1990, The Department of Health and Human Services
will spend more than a quarter billion dollars in a number of
programs and block grants to help the underserved pregnant woman.
For example, the Maternal and Child Health Block Grant
will spend $554 million this year. States have
discretion to apportion those funds according to the
particular health needs in their jurisdictions.
An additional $516 million is earmarked for the
Community Health Center and Migrant health Center
(C/MHC) Programs some of which will serve pregnant
women. These programs provide primary care to about
5.5 million people, many of whom are low-income women.
In fiscal year 1989, an estimated $2.8 billion and $2.2
billion was spent by Federal and state governments,
respectively, on Medicaid-reimbursed services to
infants and pregnant women. of the total, $3 billion
was spent for pregnant women.
Planned Activities
The Departmental has proposed three initiatives related to
obstetrical care: two, Access to Care and Minority Health, would
highlight ways to remedy access to care generally; the third,
Infant Mortality, deals directly with the problems of the
pregnant woman.
Task Force on Infant Mortality: Domestic Policy Council
Working Group on Health Policy
Because infant mortality is an issue which cuts across many
areas of Federal responsibility in addition to the
Department of Health and Human Services, a task force on
infant mortality was created in July 1989 at the request of
the Domestic Policy Council Working Group on Health Policy.
It was charged with assessing the nature and causes of
infant mortality and proposing actions that would have the
potential for reducing infant mortality and improving
maternal and child health.
The Task Force included representatives from nine
9
departments and one agency of the Federal government and six
offices within the Office of the President and was chaired
by Dr. James O. Mason, Assistant Secretary for Health. A
draft report containing policy options was presented by the
Secretary to the Domestic Policy Council on November 30,
1989.
The general approach taken by the Task Force was to expand
access to prenatal care. The recommendations can be divided
into three categories: service delivery, financing, and
information and education. Since the service delivery
options are relevant to Option 2, some are listed below.
1.
To increase support for C/MHCs and the Maternal and
Child Health Block Grant.
2. To develop research and demonstrations on medical
malpractice related matters including the examination
of barriers facing midlevel providers of obstetric
care.
3.
To organize and deliver services that would provide
comprehensive prenatal care services to women at risk.
The projects would utilize resources from the Federal,
State and community governments and the private sector.
Specific options include:
The Domestic Policy Council was concerned with the likely costs
of the proposals and asked the Task Force to develop additional
information about the costs and benefits and resubmit the
proposals later in 1990. Work is underway.
O
Secretary's Access Initiative
The Secretary's access initiative is one of five DHHS
initiatives and is directed specifically at low-income and
minority pregnant women and infants. It is seen as the
first step in a broader effort to expand access to health
care. That broader effort is the subject of the Under
Secretary's Health Policy Task Force. The major theme of
the initiative is "Making HHS User Friendly" to users and
potential users of our services.
The six components or objectives of the initiative are:
-- Outreach and Support Services
-- One-Stop Shopping
-- Availability of Health Care Providers
-- Substance Abuse Prevention and Treatment
-- Medicaid Eligibility and Reimbursement
-- Annual Secretarial Conference on Access to
Care/Directory of Federal Assistance
The President's FY 1991 budget requests an increase of $363
10
million to reduce infant mortality. This includes $300
million to the Health Care Financing Administration to
expand Medicaid eligibility, as specified in OBRA 1989, and
$63 million for Public Health Service activities. Included
in the request for $63 million is:
a $10 million addition to C/MHCs to recruit and
retain additional obstetrical personnel;
$4 million for their expanded use of case managed
services for pregnant women
and $2 million to support the operation of "Mom
Vans" to provide outreach services to bring women
into care.
Minority Health Initiative
The FY 1991 budget requests $117 million in new funds to be
devoted to improving minority health. Several of the
component parts of this initiative are related to Option 2's
mission:
1.
Expand the National Health Service Corps. A $55
million expansion of the NHSC would include funds
for NHSC loan repayment and scholarships. The
purpose is to recruit more doctors by increasing
the numbers of areas where they may serve.
2.
Provide scholarships through "community service"
private organizations. Five million dollars is
proposed for this program in the FY 1991 budget.
This is a new program which would help community
organizations support health professions students
of their choice who would owe the community
organization a service obligation upon completion
of their education.
3.
Provide health and other services at locations
convenient to public housing. $35 million is
requested. This might be a possible source for
funding innovative service delivery demonstrations
STATE ACTIVITIES
A sample of efforts by states to assure the availability of
primary care physicians and other providers of obstetrical care
for the underserved populations reveals a number of innovations.
The following are illustrative.
New Jersey. In May, 1990 New Jersey will launch a program
of universal access to prenatal care. The Maternity
Outreach and Managed Services program, known as MOMs is
11
targeted at the estimated 10,500 women in the state above
the poverty level. The new program will expand and link two
existing ones. The state's 18-month old Health Start for
Medicaid eligible women provides free prenatal care and
preventive care for children under age 2. The special trust
fund which reimburses hospitals for medical care provided to
those who cannot pay their bills will provide funding for
the new program. The program could save $4 million if the
number of low birth-weight babies could be reduced by one-
third.
Small towns in Maine. Six towns in Maine where the combined
population is 3500 assured themselves of a physician by
paying tuition costs for Roger Pelli to the New England
College of Osteopathic Medicine. Dr. Pelli promised to give
back to the communities two years of service for each year
of schooling they paid for. The townspeople paid the
tuition from property taxes, averaging $5 per year for each
man, woman and child. Dr. Pelli has completed college,
internship and residency, and is pleased to be serving the
townspeople of the six communities.
In Kentucky and California there are programs to supplement
physician manpower with physician extenders. There are
three types of extenders -- physicians' assistants, nurse
practitioners, and Medex. Physician's assistants generally
have health care experience as military corpsmen, nurses or
allied health workers, about two years of classroom and
clinical training and some on-the-job training. Medex have
extensive medical experience, usually as military corpsmen,
and a year of training, generally under the preceptorship of
a physician. The most common PEs are nurse practitioners -
- registered nurses who usually receive an additional year
of classroom and clinical training relating to primary care.
STATE MEDICAL LIABILITY TORT REFORM STATUTES
AND THEIR IMPACT ON CLAIM FREQUENCY,
CLAIM SEVERITY AND INSURANCE PREMIUMS
Prepared for:
Domestic Policy Council
Tort Reform Working Group
State Medical Liability Tort Reform Statutes
and Their Impact on Claim Frequency,
Claim Severity and Insurance Premiums
Overview
Since the mid-1970's there has been growing public concern
over the effects of medical malpractice litigation. The past
twenty years have seen a substantial increase in claim frequency,
claim severity and medical liability insurance. During the mid-
1980's medical liability was the fastest growing component of
physicians' practice expenses, rising at an average annual rate
of 21.9%. 1 The rising costs of malpractice liability and the
fear of suit have resulted in a concomitant increase in the cost
of health care. Some physicians have responded to the threat of
liability by performing arguably unnecessary procedures and by
practicing defensive medicine. 2 Others, especially in the field
of obstetrics, have either changed specialties, moved to less
costly areas of the country, or simply left the practice of
1 Gonzalez, M., "Trends in Physicians' Professional
Liability Claims and Insurance Premiums." In: Gonzalez, M., et
al., Socioeconomic Aspects of Medical Practice, American Medical
Association, 1987.
2 "Patients, Doctors, and Lawyers: Medical Injury,
Malpractice Litigation, and Patient Compensation in New York,"
Report by Harvard Medical Practice Study (1990), at 9-11;
Reynolds, et al., "The Cost of Medical Professional Liability,"
257 Journal of the American Medical Association 2776 (May 1987) ;
Editorial, "Defensive Medicine: It Costs, But Does It Work?,"
257 Journal of the American Medical Association 2801 (1987) ;
Schwartz, et al., "Doctor, Damages and Deterrence," 298 N. Engl.
J. Med. 1282 (1978).
- 2 -
medicine. 3 The problem is particularly acute in the inner city
and in rural areas. The result of the increased threat of
liability, the increased cost of liability insurance and the
defensive use of medicine has been an unprecedented escalation in
the cost of health care for the average American.
By the close of 1986, all fifty states and the District of
Columbia had either adopted or were considering new tort reforms
designed to curb the rise in claims frequency and claims severity
in medical malpractice litigation. It was generally believed
that such reductions would ultimately reduce the cost of medical
malpractice insurance premiums. It was also believed that such
reforms would reduce the time and cost associated with resolving
claims. The ultimate goal, of course, was to decrease the
overall cost of health care.
Most, if not all, of these statutes were proposed and passed
in the 1970s without any empirical evidence that the reforms
would have any impact on claim frequency, claim severity or
insurance premiums. Subsequent to the passage of much of this
legislation, a few empirical and opinion survey studies have been
conducted to assess the impact of these reforms. This paper
summarizes the findings of these studies.
3 Rosenblatt, et al., "Rising Malpractice Premiums and
Obstetric Practice Patterns, 146 Western Journal of Medicine 246
(February 1987) ; Rosenblatt, et al., "Changing Patterns of
Obstetric Practice in Washington State: The Impact of Tort
Reform," 20 Family Medicine 101 (1988).
- 3 -
Impact of Specific Tort Reform Provisions on Claim
Frequency, Claim Severity and Insurance Premiums
The various empirical and opinion studies surveyed strongly
suggest that limitations on damages, especially on total damages,
have a significant impact on claim frequency, claim severity as
well as on insurance premiums. Caps on total recovery were the
most effective, with caps on noneconomic damages "pain and
suffering" rating second. Estimates of the percentage decrease
in claims severity, as a result of caps on total recovery, vary
ranging from 23% to a high of 39%. The figures for noneconomic
damages range from 12% to 31%.
Other reforms that achieved visible results in reducing
claims severity and frequency were mandatory collateral source
offsets, elimination of ad damnum clauses, and periodic payments.
The studies also suggest that these same reforms have had or will
have a significant impact on insurance premiums. Although no
empirical data exists, some opinion studies suggest that the
elimination of joint and several liability as well as shortening
statutes of limitation will have an impact on claims severity and
frequency in the future.
On the other hand, other reforms have had either a limited
impact or no impact on claim frequency, claim severity and
insurance premiums. 4
4 A chart summarizing the conclusions of the empirical
studies that analyzed the impact of specific types of tort reform
statutes on claim frequency, claim severity and insurance
premiums is attached hereto as Attachment A.
- 4 -
State Legislative Tort Reforms
I. Review of the Most Effective Reforms: Elimination
of Ad Damnum Clauses, Elimination of Collateral
Source Rule, Limitation on Damages and Periodic Payments
A. Ad Damnum Clauses
An ad damnum clause in a complaint states the amount of
recovery sought by plaintiff. In medical malpractice actions,
the amounts of damages claimed may be greatly inflated. As a
result, the insertion of a large ad damnum in the complaint can
condition the public to accept extremely large sums as
appropriate measures of damages.
Effectiveness of the Reform
Statutes eliminating ad damnum clauses may have an impact on
claim frequency and severity as well as on reducing the time from
filing to closing. The problem in estimating the actual or
predicted impact is the conflicting conclusions reached by the
two leading empirical studies, Danzon's 1982 study and Sloan's
1989 study.
In her earlier study, Danzon (1982) found that eliminating
the ad damnum clause could result in a decrease in total claim
costs. Id. at 342. Similarly, Danzon and Lillard (1982)
surmised that elimination of the ad damnum clause by some states
contributed to reducing claims severity and frequency. Id. at
26.
Sloan (1989), however, found that the effect of the ad
damnum clause was only significant with respect to the time from
filing to closing. Id. at 677.
- 5 -
B. Collateral Source Rule
The collateral source rule provides that benefits received
by an injured party from sources other than the defendant (e.g.
workmen's compensation) may not be used to offset the damage
recovery from the defendant. This permits the plaintiff to
obtain double recovery of certain components of damages. The
rule has been accepted by almost all jurisdictions and has been
applied both as a rule of evidence and as a rule of damages. The
rationale for the collateral source rule is that a wrongdoer
should not be relieved of paying a tort injury simply because the
plaintiff had access to other resources.
Effectiveness of the Reform
Second to limitations on damages, requiring the mandatory
offset of collateral sources has had the most impact on claim
severity; it has also had a significant impact on claim
frequency. In 1982, Danzon found that mandatory offset of
collateral source benefits reduced claim severity by 50%, whereas
discretionary offset statutes had no impact. Id. at 30. In
1986, Danzon found that permitting or mandating the offset of
collateral source benefits reduced malpractice claim severity by
11 to 18% and claims frequency by 14%, relative to comparable
states without collateral source offset. The difference between
Danzon's 1982 and 1986 findings is that she pooled the figures
for mandatory and discretionary offsets in the 1986 study.
Sloan (1989) found that statutes requiring offset for
collateral sources reduced payments by 21% on average and
- 6 -
decreased the proportion of claims in which compensation was
awarded. Mandatory offsets, however, somewhat increased delay to
closure of the claim. Id. at 678. Milliman and Robertson (1985)
predicted that collateral source offsets should reduce medical
malpractice costs by 8%. Id. at 3. The data on the impact on
insurance premiums are not as concrete as they are on claim
severity and claim frequency.
Modification of the collateral source rule has been endorsed
by the Tort Policy Working Group, the DHHS Task Force, the
American Medical Association, and the American Hospital
Association. In addition, a public opinion poll conducted by
Louis Harris and Associates, Inc. regarding adult Americans'
attitudes toward the civil justice system and tort reform found
that 67% of Americans favor requiring the trial judge to reduce
the damages awarded by a jury by subtracting other compensation
already received by the victim from other sources.
C. Limitations on Recovery
Damage awards for medical malpractice usually consist of two
components: recovery for pecuniary losses, such as medical
expenses and lost income, and compensation for non-economic
damages, such as pain and suffering, loss of enjoyment of life
and loss of consortium. Some jurisdictions also allow punitive
damages in medical malpractice cases. Some state have placed
caps on total recovery; others have placed separate caps on
economic and noneconomic damages.
- 7 -
Effectiveness of the Reform
A large consensus exists among special interest groups, and
the empirical evidence supports these groups, that limitations on
damages have had a major impact on claim severity and, therefore,
on insurance premiums. The studies convincingly demonstrate that
caps on damages are the most effective tort reform to reduce
claim severity and insurance premiums. The effectiveness of caps
varies depending on the type of cap and the number of exceptions
allowed for in the statute.
Danzon (1986) found that limits of awards reduced claim
severity by 23%. She observed that the majority of cases would
be unaffected by most caps, so the affect on a few large awards
would be substantially greater than the average over all cases.
Because large awards account for a disproportionate fraction of
total dollars, caps that severely reduce the few very large
dollar awards can greatly influence the average and total payout.
Id. at 26.
Milliman and Robertson (1985) predicted that a $250,000 cap
on non-economic damages would save 12% in medical liability
costs. Id. at 3. The Urban Institute (1989) found that
limitations on damages could ultimately reduce premiums by 34%.
Id. at 25. GAO (1986) found that a majority of health care
providers believed that caps on awards have had a major impact on
decreasing the size of awards and settlements. Id. at 18. GAO
(1987) found that groups surveyed in Indiana and California
believed that their states' tort reforms on damage awards had a
- 8 -
major stabilizing effect on premiums. Id. at 2. The Insurance
Services Office Study (1987) predicted that caps of $250,000 on
non-economic damages could have an impact on claim payments. Id.
at 3.
Sloan (1989) found that limitations on payments,
particularly caps on total payment, generated substantial
savings. He estimated an average savings of 38 to 39% for caps
on total awards. Limitations on non-economic damages above
reduced payments by 31%. Limits on punitive damages had no
impact on awards. Id. at 678.
The idea of caps on recovery is supported by the DHHS Task
Force, the Tort Policy Working Group, the American Medical
Association, and the American Hospital Association. According to
the Harris poll cited earlier, 66% of Americans favor a $250,000
cap on "pain and suffering" and other non-economic damages in all
civil cases.
D. Periodic Payments
Traditionally, medical malpractice judgments and settlements
are paid in lump sums. These payments often include compensation
for anticipated future medical expenses or lost earnings. The
premature death of the claimant often creates a windfall for the
heirs if a significant portion of the judgment or settlement is
based upon future damages.
- 9 -
Effectiveness of the Reform
Although the empirical data is inconclusive, there is strong
politic support for this reform. Many states enacted periodic
payment reforms and several special interest groups have proposed
the use of periodic payments. GAO (1986) found that a majority
of health care providers believed that periodic payments have had
a major impact on decreasing total malpractice costs. Id. at 18.
Milliman and Robertson (1985) predicted that use of periodic
payments would save 6% in medical liability costs. Id. at 3.
Danzon testified before the Senate Subcommittee on the
Judiciary that periodic payments could cut the average settlement
by 25%, raise the proportion of cases dropped from 43% to 48% and
reduce the share of cases going to verdict by 5.1% to 4.6%.
(Testimony before Senate Subcommittee on the Judiciary, March 26,
1986.)
In contrast, Sloan (1989) found that requiring periodic
payments reduced the time to closure by half a year but "contrary
to conventional wisdom, it had no statistically significant
effects on payment size. Discretionary periodic payments
increased the proportion of claims in which compensation was
awarded although they decreased the time to closure slightly."
Id. at 678.
Finally, Danzon and Lillard (1982) found that laws either
allowing or requiring periodic payments, together with caps on
awards and the elimination of ad damnum clauses, helped reduce
- 10 -
settlement size by 25%, verdict size by 30%, and the volume of
cases dropped or taken to verdict. Id. at 26.
The DHHS Task Force urged states to provide that, at either
the plaintiff's or the defendant's request, future economic
damages awarded in malpractice cases that exceed a predetermined
figure such as $100,000 may be paid periodically. The Tort
Policy Working Group similarly recommended that defendants be
allowed to pay future economic damages over time. The American
Medical Association and the American Hospital Association have
also advocated periodic payments.
II. Review of Other Reforms
A. Joint and Several Liability
Under the rule of joint and several liability, plaintiffs
may require any one of two or more defendants to pay the full
amount of a judgment. In most jurisdictions, the paying
defendant frequently has a right to recover from the co-
defendants. However, if the non-paying defendants are insolvent,
this right of recovery is meaningless. As a result, in many
cases the defendant with the most limited role in causing the
injury but with the deepest pocket bears the greatest share of
the damage award.
Effectiveness of the Reform
At this time, the only study addressing the impact of
abolishing joint and several liability is the Insurance Services
Office Study (1987). This opinion study predicted that
abolishing joint and several liability could have an impact on
- 11 -
claim severity. Id. at 7. Elimination of joint and several
liability, however, should lend additional predictability to the
system.
B. Statutes of Limitations
The primary purpose of a statute of limitations is to
prevent the prosecution of stale claims. With the passage of
time, evidence may be lost and witnesses may disappear. Many
courts felt that the traditional statute of limitation rules were
too harsh in medical malpractice actions and they fashioned what
is commonly known as the discovery rule. Under the discovery
rule, the patient's statute of limitations period does not begin
to run until he or she discovers or reasonably should have
discovered the medical injury. This open-ended discovery
principle, however, created problems for health care providers
and insurers. The uncertain and potentially long period within
which a medical malpractice action could be brought made it
difficult for insurers to develop actuarial estimates upon which
to base medical malpractice premiums.
Effectiveness of the Reform
The opinion evidence strongly suggests that reducing
statutes of limitations will reduce claim frequency but will have
a limited impact on claim severity. Similarly, the empirical
evidence found that states enacting shorter statutes of
limitations experienced some reduction in claims frequency.
Specifically, reducing statutes of limitations for adults by one
- 12 -
year decreased the total claims frequency by 8% and the frequency
of paid claims by 6-7%.
III. Alternatives To The Traditional Tort System
Some believe that piecemeal tort reforms are not a solution
but rather part of the problem. For example, Professors Moore
and O'Connell state that the medical malpractice tort system,
"based on adversarial contests between healers and patients to
determine and allocate fault, fails to serve the best interests
of patients, those who are for them, and the public at large."
Moore and O'Connell, "Foreclosing Medical Malpractice Claims by
Prompt Tender of Economic Loss," 44 Louisiana Law Review 1267
(1984).
The report of the Harvard Medical Practice Study of New York
reached similar conclusions. Patients, Doctors, and Lawyers:
Medical Injury, Malpractice Litigation, and Patient Compensation
in New York (1990). The Harvard study found numerous problems
with the current tort system. First, the study found that in a
substantial portion of claims filed there was no evidence of
medical negligence. Thus, the tort system imposes a cost on
providers to defend meritless claims. On the other hand, many
meritorious claims are not paid. The study estimates that "about
16 times as many patients suffered an injury from negligence as
received compensation from the tort liability system." Id.
"Executive Summary," page 6. Second, the study was unable to
confirm that the tort system has any effect on deterring medical
malpractice. Indeed, the study concluded that the more relevant
- 13 -
question was to ascertain the amount of deterrence under other
systems, e.g., a no fault system with provisions for quality
assurance. Third, the study questioned the goal of the present
tort system. If that goal is to compensate injured parties, then
that goal is not served. The study demonstrated that a large
majority of patients who are injured due to no one's fault are
receiving no compensation. In conclusion, the Harvard Group
recommends that the current tort system is not working and should
be replaced by no-fault system that would compensate certain
economic losses (excluding non-economic damages) flowing out of
an adverse event resulting from medical intervention. The study
projects that the cost of the no-fault system would be equal to
or less than total malpractice costs.
CONCLUSION
The weight of the empirical evidence strongly suggests that
a few tort reforms -- limitations on damages, mandatory
collateral offset, eliminating ad damnum clauses and periodic
payments -- have or could have a significant impact on claim
frequency and claim severity. Insurance groups in Georgia and
California believe that tort reform measures have stabilized
premium rates in their states. On the other hand, segments of
the insurance industry have conspicuously avoided claiming that
tort reform would reduce rates.
- 14 -
SUMMARY OF STUDIES ASSESSING IMPACT
OF SPECIFIC TORT REFORM STATUTES ON
CLAIM FREQUENCY, CLAIM SEVERITY AND
INSURANCE RATES*
DANZON and
MILLIMAN and
3
4
STUDIES
1
2
ROBERTSON (1985)
SLOAN (1985)
REFORMS
DANZON (1982)
LILLARD (1982)
Possible negative effect on
Reduced settlement and verdict
No impact on premiums
AD DAMNUM
claim costs, but not on claim
size. Decreased number of cases
frequency or severity
brought to trial
No impact on premiums
ARBITRATION
No impact on claim frequency
50% of out-of-court awards
claim severity reduced
or severity
averaged $26,000
Modified rules reduced awards
Offsets reduced costs
No impact on premiums
COLLATERAL
Mandatory offset reduced claim
SOURCE
severity by 50%, discretionary
by 18%
by 8%
offset had no impact
Out-of-court settlement sizes
Predicts reduced liability
No impact on premiums
CONTINGENCY
Had small impact on lowering
reduced by 9%, cases litigated
costs of 9%
FEE
claims severity and total
awards
until verdict reduced by 1.5%
No impact on premiums
EXPERT
No serious impact on claim
WITNESS
frequency and severity
FRIVOLOUS
SUIT
JOINT & SEVERAL
LIABILITY
Limitations (with ad damnum
12% in liability costs saved
No impact on premiums
LIMITATION ON
Lowered awards by 18% (low
RECOVERY
and periodic payment cap
by a $250, 000 cap on non-
estimate because many claims
predate reforms)
reforms) reduced verdicts and
economic damages
settlement size by 30% and 25%
No impact on premiums
PATIENT COMP
FUND
Periodic payments (with ad
Predicts 6% in
PERIODIC
No impact on claim frequency
damnum and cap reforms)
liability costs
PAYMENT
or severity
reduced verdicts and settle-
ments by 30% and 25%
Had impact on lowering
PRETRIAL
No impact on claim frequency
premiums
SCREENING
or severity
No impact on premiums
STATUTE OF
No impact of post-1975
LIMITATIONS
reductions
*
This chart summarizes those studies that attempt to predict or analyze specific related types to of specific tort reform types statutes of tort based reforms. upon Accordingly, empirical data. this
Conclusions chart does not regarding include impact the two of GAO tort opinion reform surveys measures (1986, are noted 1989) only of special where they interest groups, nor does it include conclusions about the
impact of the tort reforms in general.
1
Examined impact of reforms on claim frequency and claim severity.
2
Examined 1974-1976 closed claims to assess impact of certain tort reforms.
3
Predicted potential impact of AMA tort reform proposal on premiums.
4
Examined impact of certain reforms on premiums.
Page 2
8
6
7
5
ISO (1987)
Sloan (1989)
Urban Institute (1989)
Danzon (1986)
AD DAMNUM
Average severity reduced by
Impact on filing to
closing time only
23%
No impact on premiums,
ARBITRATION
Reduced claims severity,
reduced claim frequency,
increase in costs and
faster dispute resolutions
frequency of claims
Offsets reduced payments
Mandatory offsets
Offset reduced claim
Offset should have
impact on claim
by 21%, reduced proportion
reduced claims frequency
COLLATERAL
SOURCE
severity by 11 to 18%
severity
of compensation awarded
and severity
and claim frequency by 14%
claims
Small impact on increasing
Reduces filing of claims
CONTINGENCY
No effect on claim
time to filing and
FEE
frequency and award
decreasing filing to
size
closing time
No impact on payment,
EXPERT
delayed filing time to
WITNESS
4 month average
To avoid risk of losing
FRIVOLOUS
at trial and liability
SUIT
for costs, claimants
file quicker
Predicts impact on
JOINT & SEVERAL
claim severity
LIABILITY
Caps reduced claim severity
General surgery premiums
LIMITATION ON
Reduced average claims
$250,000 cap on non-
by 38 to 39% on average;
reduced by 13% after caps
severity by 23% (had
economic damages
could have impact
non-economic damage limita-
are establ ished ultimate
RECOVERY
impact mostly on few
on payments
tions alone reduced payment
reduction by 34%
large awards, not on
by 31%
majority of cases)
PATIENT COMP
FUND
No effect on payment size,
PERIODIC
reduced time to closure by
PAYMENT
half a year
No effect on payment
Reduced OB/GYN premiums
PRETRIAL
No impact on reducing
probability or size
by 7% to 20%
SCREENING
claim severity or
reduced filing to closing
frequency
time by half a year
One year reduction
One year reduction cuts
STATUTE OF
One year reduction reduced
lowered mean delay to
general surgery premiums
LIMITATIONS
claims frequency by 8% and
filing by one month
by 3.7%
paid claims frequency by
6-7%
5
Examined impact of post-1975 tort reforms on claim frequency and severity using 1975-1984 data.
6
Expert opinion study estimating impact of 1986 reforms on indemnity payments in 24 states.
7
Examined closed claims data to assess impact of tort reforms on claim frequency, claim severity and transaction costs.
8
Opinion survey of 14 medical malpractice insurers to estimate impact of tort reforms on premiums.