Forget Liability Caps, Focus On Accreditation

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In June of 2004, my father slipped into a coma. He had spent several days in Guam Memorial Hospital for what we were told was a bad case of pneumonia. My family was informed that if my father were ever to awaken out of the coma, his only chance for survival was to be transferred to a hospital with the capacity to provide the medical care he required. We made immediate arrangements for his flight and 60 hours later my dad woke up in the ICU of St. Luke’s Hospital in the Philippines.

This is my personal experience with the shortage of medical specialists and the poor state of health care on Guam, yet I am sure that many of our island’s residents have their own stories to tell.

With Guam being geographically isolated and therefore so far from a hospital capable of specialized medical care and high-technology resources, the community of this small island faces a serious challenge in providing much-needed specialists and medical care to its citizens.

The Guam Medical Society has proposed implementing medical malpractice liability caps in order to address this issue. Caps limit the amount a victim of malpractice can be awarded in a malpractice suit, also known as "pain and suffering" damages. The Guam Medical Society, like many proponents of the caps systems, believe that having caps on Guam will decrease insurance premiums for local doctors, thus attracting more specialists to the island.

The reality is that liability caps do not work to reduce premiums and will not resolve the shortage crisis. What I propose is for residents to urge government officials to forget about caps and instead focus on improving the availability of our island’s health-care facilities and resources.

To some extent, states with caps have slightly lower premiums than states without caps, because insurance companies know they will lose less in malpractice payments where caps are present and therefore give comparatively better premiums to doctors. Although this fact implies that caps are good, it is also deceiving because it does not mean that states with caps are immune to spikes in premium rates.

In 2002, The American Insurance Association stated in a press release, "The insurance industry never promised that tort reform would achieve specific premium savings." The message here is that, in the long run, premiums will continue to go up, cap or no cap.

There is shocking evidence showing that many states, despite instituting caps, continue to see premium rate increases. For example, like Guam, Missouri has an extreme shortage of doctors and was named a "crisis state" by the American Medical Association. In 1986, Missouri enacted a $350,000 cap. The cap worked to reduce the number of malpractice claims and the amount of malpractice losses, yet according to the Center for Justice and Democracy, an organization that works to protect our civil justice system, the state of Missouri saw a 121-percent increase in premiums between 2000 and 2003. Naturally, doctors continued to leave the state, making the physician shortage even worse, despite caps.

If the cap on payouts and consequent reductions in losses were supposed to reduce premiums in order to retain physicians, why did rates continue to rise, worsening the physician shortage?

Insurance companies set premium rates based on the stock market, not caps. When the market is bad and investment returns are low, insurance companies cover their losses by increasing premiums, but rarely reduce them when the market improves. A report published by the Foundation for Taxpayers and Consumer Rights evaluated how the caps system worked in California. It stated that despite introducing a caps system called MICRA (Medical Injury Compensation Reform Act) in 1975, premium rates showed a 450-percent increase in the 13 years following its enactment.

What does this mean for Guam? Since no local companies offer malpractice insurance, off-island providers insure local doctors with malpractice coverage. Therefore, the premiums they are charged have nothing to do with a local caps system, which in turn do little to lower or stabilize doctor’s premiums. Guam will continue to experience a shortage of doctors and inadequate access to health care with a caps system.

As the court system learns to work with caps, lawyers find ways to win more money for victims in the form of uncapped economic damages – lost wages, medical or rehabilitation expenses, and other financial costs.

Guam must forget about caps and look for other ways of attracting specialists to the island. I propose that the residents support improvements to our health-care facilities by urging government officials to improve the availability of resources, especially by taking the necessary measures to get Guam Memorial Hospital accredited by the Joint Commission on Accreditation of Healthcare Organizations.

If residents want to see more doctors on the island, we should focus our attention and efforts on accrediting GMH and improving our medical resources. In the long run, these are the changes that will attract doctors to Guam, not caps.
Alexandra H. Leon Guerrero attends Stanford University.

Consumer Watchdog
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