Bush-Backed Malpractice Caps Failed California Doctors

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State Insurance Regulation, Not Caps, Successfully Lowered Malpractice Rates

Santa Monica, CA — Restrictions on medical malpractice victims’ legal recovery, proposed today by President Bush to doctors in Arkansas who face skyrocketing malpractice premiums, will fail to lower physicians’ rates nationally as they failed to lower rates in California, said the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR). Malpractice premiums rose after a damage cap was imposed in California, and did not fall until voters passed an initiative to regulate insurance premiums in 1988, according to an FTCR study.

The study, available online, compares the impact of the 1988 insurance reform initiative Proposition 103) on malpractice premiums, on the one hand, and the effect of 1975 restrictions on victims’ recovery of non-economic damages (the Medical Injury Compensation Reform Act, or MICRA), on the other. It shows that medical malpractice premiums remained extremely volatile after MICRA and did not stabilize until Prop. 103 imposed rate regulation on the insurance industry.

"Strong insurance regulation, not the arbitrary caps on injured patients’ rights that President Bush proposes, is the only proven way to bring malpractice insurance rates down," said Carmen Balber, consumer advocate for FTCR. "The President’s claim that caps on legal damages will lower the cost of insurance for doctors is a myth straight from insurance companies’ playbooks in their effort to limit victims’ recoveries and increase corporate profits."

California malpractice premiums increased 450% during the thirteen years after passage of a malpractice cap, and decreased 20% in the first three years after passage of Prop 103. Further, Prop 103 required medical malpractice insurers to directly refund more than $135 million to policyholders. In 2003, FTCR used Prop 103’s protections to successfully challenge rate hike requests by the state’s two largest malpractice insurers, saving California doctors another $45 million.

President Bush’s claim that "junk" lawsuits are driving up health care costs is also false, said FTCR, as medical malpractice premiums account for just a fraction of 1% of total medical costs.

FTCR called on the insurance commissioner in Arkansas, and commissioners around the nation, to develop strong regulatory models such as California’s insurance reform Prop 103 to protect doctors from insurance industry profiteering.

California voters passed Prop 103 in response to soaring insurance rates during the mid-nineteen eighties. The initiative enacted the nation’s toughest insurance regulation of many lines of insurance, imposed a temporary rate freeze on insurance rates, required a rate rollback, ordered insurers to seek prior approval of future rate hikes from the insurance commissioner, made the insurance commissioner an elected official, and removed insurers’ exemption from anti-trust laws.
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Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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