Cause of rises in medical malpractice insurance rates

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National Public Radio(NPR) All Things Considered


Doctors and other health-care workers in Florida are the latest to go on strike to protest the skyrocketing costs of malpractice insurance. Several hundred closed their offices for the day in St. Johns County and gathered for a rally. Earlier in the week, doctors in the state of New Jersey staged a walkout, and there have been similar actions in other states. Prices are rising especially fast for specialists who perform care most likely to spark lawsuits: delivering babies, for example, or treating trauma victims. At the rally today there were calls to cap jury awards in certain malpractice cases at $250,000. Those calls echo proposals by members of Congress and President Bush. Others say that’s not the answer. NPR’s Patricia Neighmond has this report.


Everyone agrees premiums are rising fast. Exactly why they’re rising is where the debate begins for Dr. Jack Lewin of the California Medical Association.

Dr. JACK LEWIN (California Medical Association): It is appropriate for patients who have been harmed by a medical error of any kind to be made whole; they deserve unlimited economic damages–that is, for all the future employment loss, lost income and for any medical care they need–for the rest of their life.

NEIGHMOND: The question is, says Lewin: When no mistake has been made but something bad occurs as a result of a catastrophic illness or injury, should the patient be compensated by the legal system?

Dr. LEWIN: We have come as a public today to expect to be cured of incurable diseases and to be made completely well and whole from catastrophic injury. So the physicians and hospitals that take care of the sickest people and the most severe trauma are very likely to be sued multiple times even when there’s no malpractice or no sign of any mistake that was made.

NEIGHMOND: And in the vast majority of cases, Lewin says doctors are found not guilty of malpractice. But when they are, overly sympathetic juries often award millions to patients for their emotional pain and suffering.

Dr. LEWIN: In every state, there’ll be three or four or five a year that will be, you know, 5 or $10 million or more. They’re huge.

NEIGHMOND: The AMA says the number of multimillion-dollar payouts in malpractice cases has doubled over the past five years, and in the year 2000 the median jury award soared to $1 million. Such huge jury awards, along with the growing number of lawsuits filed, increase costs for insurance companies, says Lewin, which pass those increases on to their customers, the doctors. But is that the reason why premiums are rising so much? No, says Jamie Court. Court directs the Foundation for Taxpayer and Consumer Rights. He says the reason isn’t huge jury awards and frivolous lawsuits; it’s business practices on the part of insurance companies.

Mr. JAMIE COURT (Foundation for Taxpayer and Consumer Rights): Insurance companies gamble. They gamble on Wall Street, and that’s how they make most of their money. And when investment opportunities are good on Wall Street, when the rate of return is 30 percent a year, malpractice insurers will cut their rates very low.

NEIGHMOND: In order to attract more customers. But when investments are off, either in stocks or bonds, and insurers lose money, Court says companies do a turn-about.

Mr. COURT: They have to compensate for those investment losses by raising premiums dramatically, particularly because they’ve been lowering them when investment rates are good. So premiums can skyrocket for many physicians by 20, 30 percent a year. In the worst specialties, maybe it’s a hundred percent.

NEIGHMOND: That’s a credible reason for rising costs, says Dr. Sidney Wolfe. Wolfe directs Public Citizen’s Health Research Group, a consumer advocacy organization. But he says there’s more to this equation: bad doctors.

Dr. SIDNEY WOLFE (Public Citizen’s Health Research Group): When 5.1 percent of the doctors in this country over a 12-year period account for more than 54 percent of the malpractice payouts, you know that there is a small core–most doctors are practicing good medicine–but there’s a small core of doctors who are repeatedly injuring and killing patients, and very few of them are disciplined.

NEIGHMOND: State medical boards do have the power to suspend and even revoke a doctor’s license for serious offenses like grossly negligent care, alcohol or drug use and overprescribing certain medications.

Dr. WOLFE: Even when you look at those doctors who have had 10 malpractice payouts against them–these are not 10 lawsuits filed, but 10 malpractice payouts against them–fewer than one out of three–only 32 percent of them–have ever been disciplined by their state medical boards.

NEIGHMOND: And if doctors were strictly disciplined, Wolfe says they’d either change their behavior or they’d be put out of business. And that, he says, would cut down on rising malpractice costs because there would be fewer cases of malpractice and therefore fewer lawsuits. So here the debate polarizes, with lawyers and consumer groups on one side and doctors and insurance companies on the other.

Mr. RANDALL BOVBJERG (Urban Institute): Both sides are right. I think in general the doctor-insurer side is a little bit more right, but the lawyers are certainly partly right.

NEIGHMOND: In blaming insurance company business practices, says policy analyst and lawyer Randall Bovbjerg with the Urban Institute.

Mr. BOVBJERG: But they are wrong that it is all that, because if it was all that the change would be very similar across lines of insurance and very similar from state to state, and that’s not the case.

NEIGHMOND: In fact, in some states premium costs are quite a bit lower than in others, and that’s because of lawsuits, says Bovbjerg–the number filed and the amount of the jury award.

Mr. BOVBJERG: In past years, it was more typically a problem of an unexpected number of claims that there was an increase in the number of people seeking to collect for medical malpractice. Today that’s not it. Today it’s an increase in the amount of payout on each claim.

NEIGHMOND: In sum, Bovbjerg suggests the reason for rising costs has to do with a little bit of everything: more lawsuits, higher awards and insurers trying to make up for investment losses. In 1975, California legislators faced a similar situation and they took action. They approved a cap on how much jurors could award for emotional pain and suffering. At the time California premiums were highest in the nation. After the cap was imposed, they dropped dramatically. Then California voters passed insurance reform which strictly regulated how much insurers could raise their rates. Today California premiums are about average.

In Washington, President Bush and Congress are seriously considering imposing California-like caps on all states. But Bovbjerg says a flat cap for everyone wouldn’t be fair. He suggests a system of routine payouts for certain similar malpractice cases. He says this is a more effective way to get to the real point in all this: fewer medical mistakes.

Mr. BOVBJERG: When I think of how to raise a child or how the Highway Patrol tries to send signals to motorists, the key thing is consistency, that people know where they stand, what the rules are, and that they follow them. And it’s much better, in my view, to have a consistent system that covers a lot of cases with known consequences rather than an unpredictable system that very occasionally hits people with a sledgehammer very hard.

NEIGHMOND: And Bovbjerg echoes a growing consensus among health experts. In order to reduce medical mistakes, the entire system needs to change in everything from how mistakes are reported to how true negligence is punished. Patricia Neighmond, NPR News, Los Angeles.

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