New reason for doubt on malpractice
caps
Sunday, June 08, 2003
As if the malpractice insurance debate had not been incendiary enough, the argument just picked up some new fuel:
In states where malpractice awards are capped, the premiums doctors
pay for malpractice insurance rose even more rapidly than they did in states with no caps.
So says a new study by Weiss Ratings, a Florida firm that analyzes insurance and other financial markets. Weiss
has a decidedly consumerist bent. One of its previous studies was critical of the way big
brokerage houses make investment recommendations.
Weiss says the caps in 19 states were good for the insurance industry, which paid out less money in those states
from 1991 to 2002. They were not as good for doctors. There was a 48.2 percent rise in median
premiums paid by doctors in cap states, compared with 35.9 percent in the states without caps.
We do not suggest that our lawmakers accept Weiss' numbers or anyone else's. We think they should go get their
own data. Our legislators are obligated to do so before they impose changes that might penalize true
victims of malpractice or saddle the state with a big subsidy for false solutions.
They must also make certain that the insurance industry is not manipulating the debate by hitting the doctors harder
than need be. June has brought big premium increases for more doctors, including some in
traditionally low-risk specialties.
In any case, Weiss' basic conclusion makes good sense: Legislators should put all proposals for caps on hold until
convincing evidence is produced to demonstrate a true benefit to doctors in the form of reduced
malpractice insurance premiums.
No insurance company has said it will lower premiums to solve the immediate and unquestioned problem: Some
doctors have premiums so high they cannot afford to stay in practice. That is a fact.
However, the debate is missing many other basic facts. How many doctors are affected? How much are they
paying? What is the insurance industry spending on the pain- and-suffering awards it so badly wants
capped?
We are asked to look to the states with caps as the solution. Then let us take a good look at them. California, the
doctors' lobbying ideal, imposed a $250,000 cap on pain- and-suffering awards more than 25 years ago.
Even so, malpractice rates in California rose for some years after the caps
were imposed. If doctors in this state are being driven out of practice now, they do not have three, five or more years to wait for a solution to kick in.
California followed up caps with tough insurance regulations that included limits on premium increases and opened
insurance company books. That is when California's rates stabilized.
Even so, hefty awards are still coming out of states with caps like California's.
Last month, a California jury gave the family of a brain-injured child nearly $15 million: $250,000 was for pain and
suffering, the rest for economic damages, including medical costs.
The cost of medical care is rising faster than overall inflation, and that, not pain-and- suffering awards, could very
well explain the increase in $1 million claims the malpractice companies report. We do not have the data
to know for sure.
Law firms pick clients carefully, skipping past plaintiffs without major income potential. Eighty percent of the cases
are settled out of court. For all the rhetoric about crazy juries, doctors win 80 percent of the cases
that go to trial. Few of the rest yield mega-million awards, and judges or pre-appeal settlements frequently reduce the really huge
ones.
Is a tiny fraction of the total cases driving all of medicine to the brink? Perhaps the industry should reconsider what
it does at the negotiating table, where the payoffs for the vast majority of claims are set. Certainly, it
should provide hard numbers to back the conclusions on which it says it bases premiums.
Finally, as Weiss and others have explained, not long ago malpractice companies were signing up all the doctors
they could, including those in states with no caps. Companies were slashing premiums to undercut
each other's prices until the stock market fell and they could not longer subsidize premiums with the return on their investments.
That is when premiums started rising.
A good part of this crisis can be traced to boardroom decisions. Should the public subsidize business mistakes?
However many millions companies must set aside to pay off pending claims, they invest that money for the three to
five years it takes to settle a claim. That revenue, fed by ever-increasing premiums, is making money,
not sitting under a mattress.
There is no simple single answer to this problem. The cut lawyers take out of malpractice awards, the way judges
handle these cases, the rules under which trials are conducted, regulations governing insurance
companies, and the responsibility of all of society for gravely injured people are all fully as worthy topics as caps in this debate.
However, the Weiss report makes two other very important points: "Insurance companies must never again allow
marketing to divert or pervert prudent actuarial analysis and planning," and "the medical
profession must assume more responsibility for policing itself."
Common sense. Not rhetoric without facts.