Critics say the litigation system for resolving medical malpractice claims The Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239) requires that GAO review these alternatives. In December 1990, we reported on Michigan's voluntary arbitration program for medical malpractice.1 In this report, we describe voluntary arbitration, as well as other alternatives available in other states and from two health maintenance organizations (HMOS) in the private sector-including mandatory arbitration, no-fault programs, and assessing compliance with approved standards of care. This last alternative is a unique approach being tested in one state. Background Generally, a medical malpractice claim filed for litigation is based on tort law. A tort is a wrongful act or omission (not based on a contract) that causes injury to another person. Tort law provides a framework for compensating the damages that an injured person incurs through medical malpractice.2 Most malpractice litigation is based on negligence. The threat of litigation alone may discourage negligence and other substandard medical care. Medical Malpractice: Few Claims Resolved Through Michigan's Voluntary Arbitration Program (GAO/HRD-91-38, Dec. 27, 1990). 2 An injured person can seek compensation for both economic and noneconomic damages. Economic losses include medical bills, rehabilitation costs, and lost income. Noneconomic losses include pain, suffering, anguish, and marital losses. In the courts, recovering damages for negligence is a multistep process. As part of the process, the attorney for the injured person (the plaintiff) must establish, usually through expert witness testimony, the standard of care to which the health care provider is accountable. The attorney must also prove that the provider failed to meet that standard, causing an injury resulting in damage or loss. If a plaintiff proves that the provider's negligence or fault caused the injury, the plaintiff is entitled to recover damages. The uncertainty associated with how a judge or jury may decide a claim often affects plaintiffs', providers', and insurers' decisions about whether to settle or go to trial. Most claims are withdrawn or settled before the court reaches a verdict. During the mid-1970s, malpractice insurance costs increased rapidly, in part because of the rising number of claims filed for litigation and the size of settlements and awards. As a result, insurance became unaffordable or unavailable for many health care providers, creating a medical malpractice "crisis." Almost all states responded to the crisis by changing tort laws to reduce the amount of litigation and damages paid. Some also enacted legislation so that alternatives to litigation could be used. Arbitration is one alternative to litigation. Under most states' general arbitration statutes, medical malpractice claims can be resolved. During the 1970s, however, states began to enact specific statutes authorizing medical malpractice arbitration. Under arbitration, neutral third parties or panels resolve disputes. These decisionmakers usually operate with less formality than the courts, but the legal principle is the same—an injured party must prove that a health care provider's negligence or fault caused the injury. Generally, parties to a dispute who choose arbitration for resolving claims do so voluntarily. However, as a condition of enrollment in the health care plan, some HMOS have mandated that subscribers use arbitration to resolve claims. No-fault programs, another alternative, are designed to remove the difficulty of proving that an injury resulted from a health care provider's negligence or fault. Generally, under the no-fault alternative, compensable injuries and compensation amounts are specified. After an injury has been established, it is not necessary to identify the cause. Both the arbitration and no-fault alternatives contain positive and negative features. Arbitration supporters believe that this alternative offers faster resolution, reduced costs, and more predictable and equitable results. Critics, however, say arbitration may also encourage small or |