The same week Congress rejected energy legislation stuffed with as much to regret as to cheer, it also served up a Medicare-reform bill brimming with heartburn. The measures had more in common than timing and complexity.
Squirming among the roots of these unrelated initiatives was a national problem no one wanted to address before an election year: the burgeoning cost of litigation. Lawsuits—and the fear of them—loom too large in American life and politics.
Concern by refiners over proliferating lawsuits involving methyl tertiary butyl ether influenced omnibus energy legislation more than it should have. The gasoline additive, which raises octane and provides the oxygen required by law and regulation, moves readily underground and has found its way into municipal water supplies. Smelling money, and claiming to smell MTBE in drinking water, utilities and state and local governments have sued refiners and MTBE makers across the country.
Legal frenzy
With good reason, refiners worry that MTBE litigation will become their industry's version of the legal frenzy over asbestos, which forced at least 27 US companies into bankruptcy during 2000-02. An energy bill priority of many oil companies thus became protection against defective-product lawsuits involving a substance they made and processed into gasoline in response to regulation. Pursuit of that objective dissipated what should have been uniform industry opposition to one of the energy bill's worst features, a mandatory leap in the ethanol content of gasoline.
An energy bill shouldn't force oil companies to trade their customers' interests for lawsuit repellant. This wouldn't have happened if the US had a rational tort system. But that system has become a money machine for plaintiffs and their lawyers. In its hunger for billion-dollar judgments, the machine handily overlooks questions such as how much MTBE is in defendants' water and whether it's causing real problems. In most places, detected MTBE levels are negligible and the associated problems minor if they exist at all. In court, however, any level of MTBE constitutes "contamination," and somebody—whoever has the most money—must pay.
Refiners need and deserve relief from this abuse. The energy bill reported out of conference provided it, which helps explain why the legislation failed its first test on the Senate floor (see related story, p. 27). That tort reform became a pivotal issue of energy legislation is bizarre and wrong.
A similar dynamic contorted Medicare-reform legislation on which House and Senate negotiators agreed in principle Nov. 15. The aim was to restore the system's financial health. What emerged, however, were an expensive drug entitlement and relegation of partial privatization to a pilot program likely to fail. Congressional liberals deplored the coupling of governmental health care with free enterprise. And conservatives hated the drug subsidy. As they did with the energy bill, however, lawmakers thought they had to pass something, however messy.
With Medicare reform, they were just shuffling superficialities. The real problem is a medical industry choking on costs of litigation. Because lawsuits have become so numerous and judgments so high, malpractice insurance is too expensive for many physicians. And because of litigation risk, doctors say they alter care. According US Department of Health and Human Services data cited in a recent report by the Manhattan Institute for Policy Research, nearly 80% of doctors report ordering unnecessary tests. And 74% say they refer patients unnecessarily to specialists. The practices raise health-care costs by $60-108 billion/year. Pharmaceutical companies, too, are under litigious siege. Their problems further raise the costs of health care by making drugs more expensive than they need to be.
So far, Congress has refused to treat America's plague of litigation. In July it rejected a bill that would have capped damages in malpractice suits. And in October it blocked a move to limit class-action lawsuits. It's no mere coincidence that the Association of Trial Lawyers gives a lot of money to political campaigns (OGJ, Nov. 3, 2003, p. 80).
Fear of litigation
The fear of ruinous litigation has become a core motivation of modern business management. It's pricing health care beyond the reach of many Americans. And it's distorting politics, including energy politics.
Trial lawyers call this justice. But real justice fosters prudence, not fear. The system is corrupt. Congress needs to fix it—but not in an energy bill.