Administration of Medical 'No-Fault': Goals and Achievements

Posted: 18 Feb 1999

See all articles by Randall R. Bovbjerg

Randall R. Bovbjerg

The Urban Institute

Frank A. Sloan

Duke University - Center for Health Policy, Law and Management; Duke University, Fuqua School of Business-Economics Group; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Peter J. Rankin

Duke University - Graduate School

Abstract

"No-fault" is the leading alternative to traditional liability systems for resolving medically caused injuries, but the U.S. has only two operational examples: In the late 1980s, Virginia and Florida created non-tort compensation systems for newborns with severe birth-related neurological impairments, largely on the model of Workers Compensation. This paper offers the first detailed evidence on the administrative performance of these pioneering programs over seven years. For both states, it presents results from legislative history, executive interviews, as well as administrative and claims data. Using Florida's unusual data base on closed malpractice claims, it also compares no-fault speed of resolution and level of administrative cost with those of similar obstetrical tort cases. Key empirical findings are that < Both programs are small relative either to predictions or to injuries < Many Florida cases featured little dispute, but half involved major issues of eligibility/severity of injury or causality < No fault cases are resolved a third faster than tort, saving a full year < All of the time savings occur after filing, not before; it appears that lawyers take just as long to file no-fault as tort cases < No fault's "overhead" costs above benefits payments and reserves are far lower than tort's, especially with regard to attorneys' fees on both sides.

Based on its qualitative and quantitative review, the paper concludes that: 1. No-fault operations are feasible even in this contentious area of tort, notwithstanding the predictions of some no-fault opponents. 2. Even with limited scope, the programs achieve major gains in efficiency compared with tort (speed and cost). 3. Reaching the eligible population requires more than just legislating benefits and a claims process; outreach is needed, and attention must be paid to administrative mechanisms, incentives, and financing. 4. The survival of tort remedies is an Achilles heel for no-fault. 5. An expanded no-fault program could be more satisfactory in terms of compensation and injury prevention. 6. Larger no-fault programs, however, would have to operate under more formal rules and would face more attacks from the trial bar and more judicial scrutiny. Larger size could achieve some new economies of scale, but there might also be new costs of inevitable bureaucratization.

Note: Most data were complete through 1996; claims rates were updated as of early 1998 (note 102, page 88). The law review date ran a year behind actual chronological appearance.

Suggested Citation

Bovbjerg, Randall R. and Sloan, Frank A. and Rankin, Peter J., Administration of Medical 'No-Fault': Goals and Achievements. Available at SSRN: https://ssrn.com/abstract=149038

Randall R. Bovbjerg (Contact Author)

The Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
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Frank A. Sloan

Duke University - Center for Health Policy, Law and Management ( email )

Box 90253
Durham, NC 27708
United States
919-684-8047 (Phone)
919-684-6246 (Fax)

Duke University, Fuqua School of Business-Economics Group ( email )

Box 90097
Durham, NC 27708-0097
United States

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter J. Rankin

Duke University - Graduate School

Durham, NC 27708-0097
United States
703-979-1033 (Phone)

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