Condition critical: An
e-mail debate
Sunday, February 09, 2003
Dena Mottola sees the medical malpractice crisis that led to the current physicians' walkout as a problem the insurance companies should account for. Physician Robert S. Rigolosi sees it as a symptom of a system that needs responsible limits on awards for pain and suffering. In an e-mail correspondence over four days last week, they exchanged their views. Mottola is acting head of New Jersey Public Interest Research Group. Rigolosi is president of the Medical Society of New Jersey.
Dear Robert,
Could we start this debate agreeing that the current crisis in medical
malpractice is just one symptom of a larger underlying problem: a health care
system that is broken? My analysis of what's wrong with our system is simple.
Too many of the dollars we (as consumers, employers and taxpayers) invest in the
health care system are lost to insurance- industry waste and profit-seeking.
This includes the industry's bad habit of relying too heavily on the stock
market for income and other risky business practices.
Insurance companies are the culprits of the malpractice insurance problem. They
are the reason we spend trillions on health care and still have a health care
system that can't meet the needs of so many. In New Jersey alone over 1 million
are uninsured and hundreds of thousands more are without coverage for
prescription drugs.
I know physicians care about their patients and are frustrated with insurance
companies' low reimbursement rates. So why aren't physicians more willing to
address the industry's stranglehold on our health care system?
Physicians in New Jersey are clamoring for a solution to the malpractice
insurance crisis that would limit injured patients' right to compensation,
but they fail to hold insurance companies accountable for their role in the
crisis.
It is widely known that the insurance industry's profits and underwriting
practices are cyclical. During years of high interest rates, insurance companies
engage in fierce competition for premium dollars to invest for maximum return.
Insurers engage in severe under-pricing and insure very poor risks just to get
premium dollars to invest. But when investment income decreases -- because
interest rates drop, the stock market plummets or the cumulative price cuts make
profits become unbearably low -- the industry responds by sharply increasing
premiums and reducing coverage, creating a "crisis."
Such crises happened in the mid-1970s, again in the mid- 1980s, and, of course,
now. Each time, the insurance industry tries to cover up these pricing errors by
blaming lawyers, consumers, and the legal system for the liability insurance
price jump. Wouldn't you like to know how many of the premium dollars paid by
you and the state's other 21,000 physicians in the past few years were invested
and lost on the stock market?
My hope is that someday physicians will join with patients to address the
practices of the insurance industry and its misuse and abuse of our health care
system. The malpractice problem would be a good place to start.
-- Dena
Dear Dena:
I am a physician, not an apologist for the insurance industry. That said, I
cannot agree with your analysis of the health care system, especially the
seeming confusion between health and medical liability insurers.
To exist, all insurance companies have to
take in money. Some of this money will come from investments and some will come
from premiums. If it came totally from premiums, it would be cost- prohibitive.
The nature of insurance companies is to be risk-averse. Therefore, the
contention that they've lost millions in the stock market is baseless. Princeton
Insurance (New Jersey's largest medical liability provider) has testified that
96 percent of its investments are in bonds and government securities. Industry
average is around 90 percent investment in these conservative, long- term
investments. Certainly that is not irresponsible.
Most major liability carriers operating in New Jersey are physician-owned and
directed. They have a responsibility to their insureds to fairly price
their premiums, while maintaining solvency.
The U.S. Department of Health and Human Services estimates that limiting
unreasonable awards for non-economic damages could reduce health are costs by 5
percent to 9 percent without adversely affecting quality of care. This would
save $60 billion to $108 billion in health care costs each year, thus lowering
the cost of health insurance and permitting up to an additional 4.3 million
Americans to obtain health insurance.
Many government studies and a highly respected economic study from Pennsylvania
have clearly rejected the argument that our medical liability crisis is due to
the industry's cyclical nature. The problem in New Jersey lies with the mounting
losses caused by increased claims payments, particularly for non-economic
damages.
States that have responsible limits on non-economic damages have insurance
companies that are stable and offer affordable premiums. These companies are
seemingly immune to the business and investment climates that you claim cause
our crisis. The only difference between insurers in cap and non-cap states is
the ability to predict long-term risk exposure and set rates accordingly. This
is what we seek for New Jersey, so that physicians can continue to practice and
treat patients.
-- Robert
Dear Robert,
You cite many studies that support your campaign for caps on non-economic
damages, but you fail to look at what's going on in the states. Of the 23 states
that have caps on non-economic damages, only California has adequately
stabilized its medical liability market. Caps are not why California has been
successful. Insurance reform is.
In 1988 California voters enacted the nation's toughest insurance reform law,
known as Proposition 103. Under that law, insurance companies must justify any
proposed insurance increases, and doctors or other citizens can challenge any
proposed rate change.
The law dramatically reduced rates in California, after caps in place for over a
decade failed to achieve premium stability. Immediately after the law's
enactment, medical malpractice insurance premiums in California fell
dramatically and have remained stable ever since. After passage of the law, the
state's insurers refunded more than $1 billion to insurance consumers, including
more than $135 million from medical malpractice insurers. (That's money in the
doctors' pockets.)
It seems illogical that you would not want New Jersey to enact similar reforms.
I'll leave you with one last thought: Since 1990, why has the New Jersey Medical
Board taken disciplinary action against only 27 of the 135 physicians who have
more than five claims against them? If the medical board would get more
proactive about disciplining physicians who pose a higher-than-normal risk to
patients, fewer patients would need to access the civil justice system to be
compensated for malpractice.
-- Dena
Dear Dena:
Physicians have had their own fights with health insurers, including our
advocacy of New Jersey's HealthCare Quality Act, which secured patient rights
under managed care. But that is not our topic of discussion.
New Jersey has a problem because few
medical liability carriers want to write policies here. California has a
long-standing, stable medical liability market due to limits on non-economic
damages. There are many other states that do, too, with Hawaii, Indiana,
Louisiana and Colorado being a few examples.
In 1975, Gov. Jerry Brown and the California Legislature created the Medical
Injury Compensation Reform Act to solve the state's malpractice crisis. The
basis of this multifaceted initiative was a $250,000 limit on damages for pain
and suffering. Rates immediately stabilized, and then dropped after the
California Supreme Court upheld the constitutionality of the reform act in 1985.
I disagree with your saying Proposition 103 dramatically reduced insurance rates
in California. Proposition 103 was enacted in 1988, after 14 years of stable
medical liability rates. Little changed afterward. Even under Prop. 103,
insurers regularly apply for, and obtain, significant rate increases. In
September and October 2002 alone, the state approved more than 75 applications
for double-digit increases in rates for other lines of insurance
The sole insurance line exception has been medical liability. California's rates
rose only 167 percent between 1976 and 2000 (less than 7 percent a year), while
the rest of the country's rates rose 505 percent (21 percent). In real dollars
(inflation-adjusted), California's rates are 40 percent lower than in
1975.
In New Jersey, the Department of Banking and Insurance audits every casualty
carrier every three years. These companies must also provide annual financial
reports.
New Jersey's State Board of Medical Examiners and Medical Practitioner Review
Board review every malpractice case that results in a payment -- even $1. The
135 cases you mention were ones that showed a true propensity for malpractice.
In New Jersey, unfortunately, the specialty you practice -- not skill level --
is a stronger predictor for being sued.
PIRG wants general insurance reform. The physicians of New Jersey want access to
health care for 8 million New Jerseyans -- where and when they need it.
-- Robert
Dear Robert,
Again, in my view insurance reform is the reason California's medical liability
market is stable. You have to break out the premium rates before insurance
reform was adopted (1988) and after. Medical malpractice premiums nearly tripled
between 1976 and 1988, including the steepest increase in premiums in 1986, the
year after the California Supreme Court upheld MICRA.
Only after Proposition 103's passage did California buck the national trend,
with rates falling by slightly more than 20.2 percent between 1988 and 1991.
Proposition 103 mandated that rates be rolled back by at least 20 percent.
When California enacted caps, the state also strengthened the state Medical
Review Board procedures to ensure that physicians with multiple malpractice
claims against them are properly disciplined. This is important because a small
number of physicians are responsible for the bulk of alpractice costs. In 2001,
5.5 percent of New Jersey physicians were responsible for 61 percent of the
claims paid out. We should do more to protect patients from such "repeat
offenders." It would have the effect of reducing the total amount of claims
paid out to injured patients, which is what you want caps for.
Throughout this public debate, physicians have said patients have a jackpot
mentality. Victims of malpractice are not lucky, and they haven't hit the
jackpot. Physicians are human and sometimes make mistakes. When they do,
patients deserve compensation.
-- Dena
Dear Dena:
Look at California relative to the rest of the nation and other states.
In 1976, California's medical liability premiums were 19.3 percent of the
nation's total premiums, while Florida was at 1.6 percent. Ten years later,
California and Florida were 18.3 and 5.1 percent, respectively. By 2000,
California was only 11 percent of the nation's premiums, while Florida was 9.1
percent. Over those 25 years, California stabilized while the situation in
Florida and many other states worsened.
Effective limits on non-economic damages have stabilized medical liability rates
in California and the states I previously mentioned, and such others as Montana
and Wisconsin. These other states do not have Proposition 103 laws, so the
damage limits clearly are the magic bullet.
Every year, a small percentage of physicians account for a majority of a year's
paid claims. These are not necessarily "repeat offenders," and the
physicians comprising this small percentage will change from year to year. There
is no way to predict who they will be, and retrospective reviews have shown that
most of them are not problem physicians, but have experienced a random event.
Physicians with multiple claims tend to be those dealing in a high volume of
cases, particularly high-risk procedures. The trial lawyers know this and target
those physicians.
Too often, it is lawyers with the jackpot mentality, because they know that
their payoff increases with the amount of the award. California's MICRA law also
capped lawyers fees on a sliding scale. Compare a California and New Jersey
patient who receive $1 million awards. The California patient will receive
$93,500 more than the New Jersey patient does. Put another way, the New Jersey
lawyer receives $93,500 more than his California counterpart. The California
system is infinitely fairer to the patient.
That is the essence of what we seek: fair compensation that doesn't break the
system and restrict access to care for all New Jerseyans.
-- Robert