California’s medical malpractice premiums some of the lowest in the country

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National Public Radio – All Things Considered

SUSAN STAMBERG, host: From NPR News, this is All Things Considered . I’m Susan Stamberg.

JOHN YDSTIE, host: And I’m John Ydstie. Doctors across the country say the price of malpractice insurance has become unaffordable. As a result, many have retired early or stopped performing the procedures that are more likely to lead to lawsuits. As a result, members of Congress have considered placing limits on the amount of money that juries can awards patients in malpractice cases. In California, a similar law has existed for 25 years. NPR’s Patricia Neighmond reports on the way the law has influenced medical practice in California.

PATRICIA NEIGHMOND reporting: Doctor Peter Weiss has been delivering babies for 20 years, about 10 babies every month.

Dr. PETER WEISS: I love it. It’s probably the best job that anyone can imagine. You get to be a part of probably the most exciting time of any young family.

NEIGHMOND: Weiss is an OB/GYN with a private practice in Beverly Hills. His malpractice insurance policy costs him $40,000 a year. He says that’s a big chunk of income, but it pales compared to what doctors in some states are facing, prices that have climbed 600 percent to $100,000 a year in New York and Michigan, and over $200,000 a year in Florida. Weiss says for him those prices would be unaffordable.

Dr. WEISS: I would stop. As much as I enjoy it, I would stop. I would see if I could afford just to practice gynecology without doing the obstetrics.

NEIGHMOND: In Florida, New York, Michigan and Pennsylvania, many OBs have stopped delivering babies. Others have retired early or moved to states where premium prices are lower, states like California. Dr. Jack Lewin directs the California Medical Association. He credits malpractice reforms put into place 25 years ago with keeping premium prices down. California juries cannot award patients any more than $250,000 for pain and suffering. Lewin.

Dr. JACK LEWIN (California Medical Association): And even if the doctor wasn’t at fault, juries sympathize and want to award that patient with something for their suffering; and that’s where a cap on non-economic damages puts those kinds of awards, which can be very emotional, in a proper perspective.

NEIGHMOND: California law also limits how much lawyers can take from patient settlements. Lewin says these limits have discouraged lawsuits when a doctor has done nothing wrong. Even so, multimillion-dollar damage awards are growing, but they’re not the only reason for rising malpractice rates, according to Jim Hurley. Hurley is an actuary for Tillinghast-Towers Perrin. He helps insurance companies figure out how much to charge for premiums. Over the past 10 years, Hurley says, many companies priced policies artificially low in order to sell them.

Mr. JIM HURLEY (Tillinghast-Towers Perrin): And so companies sometimes go in, find out they’ve mispriced the product and then withdraw because they’ve been hurt badly by the financial consequences of writing at the wrong rate level.

NEIGHMOND: And if companies don’t withdraw from a market and stop selling insurance altogether, then they raise their prices dramatically. In California, that’s not the case, says Hurley; and the reason is, he says, malpractice reform. Limits on how much juries can award patients, he says, have made the market more stable for companies.

Mr. HURLEY: They can feel more comfortable writing business, more confident that the rates that they’re charging will not be adversely impacted by very large claims.

NEIGHMOND: In other words, companies don’t have to worry about paying multimillion-dollar jury awards. Hurley says these malpractice reforms have done a lot to keep a lid on rising prices in California, but today, he says, there are other forces that threaten to push prices up. Wall Street: Returns on investments are down. As a result, insurance company profits are also down, and insurers are trying to make up those losses, says Hurley, by charging more for premiums. Jamie Court directs the consumer watchdog group Foundation for Taxpayer and Consumer Rights.

Mr. JAMIE COURT (Foundation for Taxpayer and Consumer Rights): When an average investor loses money on Wall Street, they can’t go to their customers and raise the prices of their product by 400 percent, but insurance companies seem to be able to think they can do that.

NEIGHMOND: Court says that’s the major reason why malpractice prices are rising, and he says those who ultimately lose are consumers who can receive only $250,000 worth of damages for pain and suffering. California law does not limit damage awards for economic losses or medical costs, but Court says that doesn’t help people who cannot work.

Mr. COURT: If a child who has not yet entered the job market loses their hand, that injury is likely going to be worth $250,000 no matter how egregious the conduct that led to that injury. If a chief executive officer of a major insurance company loses their hand for the same instance of medical negligence, that injury is going to be worth tens of billions of dollars.

NEIGHMOND: California Medical Association director Dr. Jack Lewin disagrees with Jamie Court. Lewin says children who are harmed would receive enough money in any settlement to cover all their medical costs. And if it’s proven that a doctor was, in fact, grossly negligent, then there’s no limit on punitive damages. Lewin has spoken around the country in support of national malpractice reform, arguing that what’s been good for California will be good for the rest of the country. Patricia Neighmond, NPR News, Los Angeles.

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