Texas Law Professor Charlie Silver has spent his career examining troubled systems and proposing ideas for how to repair them.
Silver earned a bachelor’s degree in political science from the University of Florida, a master’s in political science from the University of Chicago, and a law degree from Yale University. He joined the Texas Law faculty in 1987 and is currently the Roy W. and Eugenia C. McDonald Endowed Chair of Civil Procedure. Over the decades, his research interests have shifted from an interest in civil litigation, especially class action lawsuits, into insurance and the study of medical malpractice liability. Silver spent a decade alongside colleagues studying a large empirical data set of closed Texas medical malpractice claims, leading him to focus on health care. His research group’s findings are collected in a book entitled “Medical Malpractice Litigation: How It Works—Why Tort Reform Hasn’t Helped.”
Silver then studied the problems of the health care system more generally. He became convinced that the most important of them, including excessive spending, surprise bills, and fraud, are traceable to the payment system and regulations that limit supply and stifle competition. “We have an ocean of problems because we pay for health care the wrong way and prevent market forces from working,” Silver says. His book, “Overcharged: Why Americans Pay Too Much for Health Care,” argues in favor of consumer-controlled health care delivered through retail providers.
Silver still writes about and teaches courses on civil litigation and health care policy and is working now on a book on legal ethics, arguing that lawyers’ duties to clients are best understood through the lens of agency law, a subject that writers on legal ethics usually ignore.
In addition to his role on the Texas Law faculty, Silver is an adjunct scholar with the Cato Institute, the nonpartisan and independent think tank that promotes libertarian ideas in policy debates.
We recently caught up with Silver to learn more about his views on what’s wrong with the U.S. health care system, how Cato continually impresses him, his book on legal ethics, and why he loves teaching Texas Law students.
Your research interests appear wide-ranging. Is there a common thread among all the different areas you study?
There are several. One is market failure, which is to say, what kinds of problems can markets handle well, and what kinds of problems can they not? For example, do we really need a superstructure of ethics regulation, or would market regulation alone do a satisfactory job of encouraging lawyers to perform well? Lots of service providers are disciplined by markets. Why not lawyers?
Another thread is my focus on the law and economics of compensating service providers. We get what we pay for. If we pay medical providers to test people, they’ll give us lots of tests, including tests that aren’t needed or may injure patients. Pay lawyers by the hour and they’ll deliver legal services in volume, including services that aren’t worth the cost. We need to think hard about what we pay for and why.
Did anything personally inspire your research interests?
My education. I was a political scientist before I went into law. I’ve always wanted to know why governments work as poorly as they do and how they could function better. It turns out that the problems that plague governance—known as agency costs—arise in all contexts where people are supposed to serve others. For example, in class actions and multi-district litigations, lawyers operate with little client control, just like government officials operate free of direct control by voters. In all these contexts, the problem is to get the folks in charge to do what is best for those who depend on them. Which turns out to be hard to do.
We should therefore think hard about decision makers’ incentives and how they can be improved. An important lesson is that compensation should be linked to results.
Contingent fee arrangements do this explicitly, which is why they work well. I want such arrangements to be used more widely. I’d like to see such arrangements used to discipline public officials too, so that those who enact bad policies are responsible for the harm they cause, but I haven’t figured out how to make that work.
Looking at the health care sector, what do you see as the most serious problem?
Consumers rely far too heavily on third-party payment arrangements, especially private insurance, Medicare, and Medicaid. We normally reserve insurance for catastrophes. Homeowners’ coverage kicks in when houses are damaged severely or destroyed, not when they need new paint or maintenance. But in the health care sector, third-party payment predominates. People use insurance to pay for everything, including routine physician visits, lab tests, and medicines that cost less than their monthly phone bills.
Because insurers and government agencies pay providers’ bills, providers cater to them. They are providers’ real customers, and insurers and government agencies care far less about cost and quality than patients do. They spend other people’s money, and they don’t have to live with the consequences of shoddy care.
If patients were the primary focus, health care would be better and cheaper, because patients want high quality treatments sold at affordable prices. When consumers control the flow of money, the health care system will improve instantly. But as long as governments and insurers remain in charge, it will continue to serve us poorly while costing hundreds of billions of dollars a year more than it should.
That’s a bad outcome for patients. What does it mean for health care costs?
Is there any other economic sector in which consumers don’t know how much things cost before buying them? No. In other sectors, sellers advertise their prices, guarantee to meet or beat prices charged by competitors, and, in general, use price information to attract customers. But when it comes to health care, no one knows the full cost of anything. And so, prices in the U.S. are far higher than they should be.
Another consequence of third-party payment via Medicare, Medicaid, and other public agencies is that business interests—hospitals, pharma companies, insurers, and many others—use their political might to open the doors to the treasury as wide as possible. Year in and year out, these interests spend more money on lobbying and political contributions than anyone else. That’s why “Medicare for All” would be a disaster. If you want to take the brakes off health care spending entirely, Medicare for All is the way to go.
Government control also generates hundreds of billions of dollars in fraud losses every year. I just read about a fraud run out of Russia that took Medicare for over $1 billion. The criminals submitted phony bills for durable medical equipment, and Medicare paid them. The sad truth is that public officials treat taxpayers’ money like garbage.
In your work, you’ve used LASIK eye surgery as an example of what happens when we pay directly for treatment.
Insurance doesn’t cover LASIK. If you want the procedure, you’ll have to pay for it yourself. And if you want to know how much it will cost, you can find out easily. Just go online and look. Unlike most other surgeons, ophthalmologists who perform LASIK advertise their prices. They also offer money-back guarantees and will tell you in advance if you’re a candidate to have your vision improved to 20/20. And if you ever need follow up care—some people need to be retreated after a few years—there are providers who will do the second procedure for free. LASIK providers have excellent track records too. Many of them share quality information online.
If we paid for health care directly, all providers would face pressure to treat patients as well as LASIK providers do. That includes pressure to reduce their charges. In real dollars, the price of LASIK has fallen by about one-third since the procedure was first marketed. It’s hard to think of any service covered by insurance that costs less now than before.
You’ve said that having consumers directly pay for their health care services, instead of third parties, is the solution. How would that work?
I’ve called for Medicare, Medicaid, and other health care payment programs to be remade in the image of Social Security. Social Security doesn’t buy food for people, pay their rent, or cover doctors’ charges. It gives people money and lets them decide how to spend it. Social Security is also the most effective of the country’s many anti-poverty programs. That’s to be expected. Poverty is a money problem: poor people have too little of it. Social Security addresses the problem directly by giving them more. The important point, though, is that it helps people without preventing market forces from working.
Medicare, Medicaid, and other insurance programs could give money to consumers too. They could deposit funds into health savings accounts that consumers control. If they did that, the health care system would improve overnight. Prices would instantly become transparent as providers started competing for business. For the same reason, prices would fall too. And all those consumer-unfriendly practices like surprise bills, narrow provider networks, and invented charges for emergency room visits would disappear.
All the major problems of the health care system are attributable to some combination of third-party payment, stupid tax policies, and government control. I’m a libertarian; I believe in small government. But even if you’re not like me, the facts are overwhelming. If you wanted to design a health care system that would treat patients poorly while also being unbelievably expensive, you would have a hard time beating the system we already have.
Within the current system, do you have any advice for health care consumers?
Look for self-pay opportunities: When you go to a hospital, ask them how much a procedure would cost if you were paying in cash. When you want to buy a prescription item from behind the drugstore counter, ask them how much it would cost if you paid for it yourself instead of using your insurance.
You can often save money by paying cash even if you only shell out a fixed copay when using insurance. There are many examples, including in a PBS News story of a patient’s $285 copay for a $40 drug.
On the topic of small government, you’re an adjunct scholar with the Cato Institute in Washington, D.C. Can you describe your affiliation with Cato?
I’m very proud to be associated with Cato. The people there are smart, honest, hard-working, and truly committed to figuring out how to make things better. The place is an idea factory staffed by creative thinkers who tell good ideas from bad ones.
Of particular importance to me is Cato’s commitment to the rule of law. Cato is not aligned with any political party. Its scholars condemn policies that are incompatible with the Constitution or that otherwise threaten to undermine the rule of law regardless of which party proposes them.
I believe that everything good about life in this country depends importantly on the rule of law, and I’m very concerned about its ongoing erosion.
We have become our own worst enemies, and both major political parties are complicit. The scholars at Cato are doing their best to stop the country from sliding into an abyss. I’m proud to stand with them.
I also endorse many other policies that Cato supports. I believe in free markets, freedom of expression, open borders, an independent judiciary, low tax rates and tariffs, equal civil rights for all, deficit reduction, and small government. The scholars affiliated with Cato also support these policies and can often defend them better than I can.
Cato published your most recent books, and you’re at work now on a new book tentatively titled, “Common Law Legal Ethics.” How do you explain the topic?
My take on legal ethics differs from that of all but a few people who work in the field. Most writers, especially the most prominent ones, think that lawyers are special and should be subjected to special regulations from which other service providers are exempt. I think that lawyers are agents and should be subject to the generally applicable, client-facing responsibilities that agency law imposes. Agency law is common law. Hence, the working title for the book.
Because no one studies agency law in law school anymore, it’s hard to give a brief explanation of my reasoning that readers will find accessible. It starts with attribution, the doctrine that agents’ actions are treated as though principals perform them directly. For example, a lawyer’s receipt of a document satisfies a client’s right to service, even if the client never sees the papers. The lawyer’s action thus alters the client’s legal rights.
Normally, legal rights remain as they are until their holders agree to alterations. You retain ownership of your laptop computer until you sell it or give it away. But when agents act for principals, the latter’s consent can only be inferred. The inference must be drawn only when appropriate, however. Otherwise, agents will be able to alter principals’ legal rights too freely and the security of those rights will be undermined. Agency law supplies the doctrines that ensure that principals’ rights change only when agents do what they want.
Because the rules of legal ethics were drawn from agency law, they often regulate attribution correctly. But many leading commentators believe that lawyers should often disobey clients and act to their detriment while representing them. A person who appreciates the importance of keeping legal rights stable will realize that allowing attribution when lawyers are disobedient or disloyal would cause serious harm.
We look forward to reading it. How does your writing and scholarship complement your classroom teaching?
When teaching, my objective is to help students think about problems in sophisticated ways. To succeed, I first need to figure out good answers to hard questions. A math teacher who doesn’t understand calculus won’t be able to teach students how to use it to solve problems. I want to be a good teacher who challenges students to do better, so I spend my time working on problems. That’s one reason why I write op-eds. They have to be short and tightly focused, like classes. I also find that writing things out clarifies my thinking. In fact, I often do not know what to think about a matter until I sit at my computer, start typing, and test drive ideas.
Texas Law has great students. They’re young people with good minds and big hopes for the future. I love trying to get them thinking like lawyers. I tend to teach first years, and seeing the lights come on is wonderful. And they’re my legacy. Long after I’m dead, buried, and forgotten, my students will be out there doing great things and carrying the messages forward. They’re the part of the job that makes everything else worthwhile.