Avoid simplistic solutions to the malpractice crisis
Wednesday, February 19, 2003

The Medical Society of New Jersey offers one amazingly simple answer to every question raised about the doctors' malpractice insurance crisis: We must impose a $250,000 cap on jury awards for "pain and suffering."

After all, California does not have a malpractice insurance crisis. California has a $250,000 cap. New Jersey needs one, say our doctors, who recently staged the biggest physicians' strike this country has ever seen.

Like many simple answers, though, this one has serious problems.

Our doctors fail to mention that malpractice premiums in California continued to rise for 10 years after the Medical Injury Compensation Reform Act, the law that imposed the limit on pain-and-suffering awards, took effect. Some of those years saw 30 percent and higher premium increases, including the year after all legal challenges ended and the law was in full effect.

Our problem in New Jersey is that good doctors are being driven out of practice because of a sudden huge jump in premiums. If that is the problem, a plan that lets already unaffordable malpractice insurance policies continue to skyrocket in price for a decade or so is not much of a solution.

After it enacted its awards cap, California also passed the voter initiative Proposition 103, creating a law that puts the public's nose deep into an insurance company's finances whenever it asks for a premium hike.

A company cannot get an increase without proving that it has losses to justify the hike. That means the company cannot make a mint on investments, separate and ignore that pot of revenue, then claim it lost money. Proposition 103 also demands that the financial data be California-specific. A company cannot raise California premiums because business is bad in another state. Rate decreases are also scrutinized to make sure companies are not jeopardizing their solvency or lying about how low they can afford to go.

Finally, any group or individual can demand a public hearing on a rate hike, which exposes a company to all manner of questions it might prefer not to answer. As you might imagine, insurance companies do not like Proposition 103.

The malpractice crisis is a combination of problems. It is about insurance, both the malpractice premiums and the way that managed care adversely affects doctors' incomes, making it harder for them to pay malpractice insurance bills.

Some of the crisis is about greedy lawyers and clients. But it is also about people who are injured, sometimes horribly, by mistakes, negligence and malpractice that cannot be dismissed as a bad outcome or the luck of the draw.

There is no one, simple, quick solution.

Before we swallow the $250,000 single dose the Medical Society is offering, the state must at least consider some of the other factors that might explain why California's malpractice premiums look stabler than those in the rest of the country.

Remember, malpractice premiums around the country were dirt cheap not so long ago. Companies were cutting and undercutting prices -- even in states without a $250,000 cap.

New Jersey's MIIX, until recently the single largest physicians' malpractice
carrier in the state, was expanding into other states. Everything looked
good.

In fact, the Medical Society claims it fired a former executive because he failed to warn doctors that the crisis was coming. The executive, who filed suit against the society last year, says he was fired after 11 years because he warned the society that it was in a serious conflict of interest because so many members of its hierarchy sat on the MIIX malpractice company's board.

If the executive was supposed to be prescient, perhaps the Medical Society's members on the MIIX board should have been alert enough to see what was happening.

If doctors do not like to talk about regulating malpractice insurance companies the way their California ideal does, is it because most doctors are covered by companies that doctors and hospitals organized and operate? By the way, there are a number of doctors in California who, because of malpractice claims against them, are paying six-figure malpractice premiums, higher, in some cases, than the numbers that have New Jersey doctors upset.

A cap on pain-and-suffering awards eventually brings a form of stability to the malpractice market because it makes it easier for companies to predict what future expenses will be. Set low enough, the cap also makes suits less attractive to attorneys. It keeps cases out of court. As time passes, a cap set in stone at $250,000, as California's has been for more than 20 years, becomes more effective as a bar to the courtroom. Inflation, even low inflation, makes that a certainty. And it becomes less and less reflective of fairness and justice.

Malpractice reform must leave us with a system that will do right by those who are harmed by mistakes, negligence or malpractice. It should reduce not only premiums and lawsuits but malpractice.

Such a system will not come from one simple answer, although it may include some type of tort reform. It will definitely require that medical people look in the mirror and at their practices and make changes that reduce errors and malpractice. It will also require scrutiny of the insurance companies that determine the premiums that kick off our periodic crises.

The right solution most certainly requires that legislators resist the urge to respond quickly, without thinking, to the doctors who attempted to blackmail the state by walking out on their patients.