Malpractice Insurance: No Clear or Easy Answers

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The New York Times

To control the rising costs of medical malpractice insurance, President Bush is urging Congress to impose limitations on lawsuits like those introduced in California in 1975, which insurance companies and doctors say have sharply reduced their expenses.

President Bush, the American Medical Association and the medical malpractice insurers all say that the linchpin of the California action — a limit of $250,000 on payments for pain and suffering in malpractice lawsuits — will benefit doctors, insurers and patients across the country.

“If one of the goals of a good health care system is for it to be affordable and accessible, and if lawsuits are running up the cost of medicine and/or driving docs out of business because the practicing of medicine is too expensive, we’ve got to do something about it,” Mr. Bush said in a speech yesterday to a national conference of the A.M.A. in Washington.

But a closer look at the California experience with medical malpractice suggests that the lessons of liability caps are not so clear for either the doctors or the patients. Since 1975, doctors in the state have had a drop in the level of their premiums. But the greatest drops in premiums and, so far, the most consistent, did not come until after California adopted price controls in 1988, throwing into question the effects of the caps alone.

Where the caps have had an effect, according to many plaintiffs’ lawyers and consumer advocates, is on the chances of compensation for a whole category of malpractice victims. Consumer advocates and plaintiffs’ lawyers say thousands of victims of malpractice have been unable to get lawyers to take their cases because of the limited payouts and that those who do get lawyers generally receive much less than victims in other states.

A bill that would limit payments for pain and suffering in medical malpractice cases to $250,000 was endorsed on a voice vote by a subcommittee of the House Committee on Energy and Commerce yesterday and it is expected to be voted on by the full committee in a few days. Tom DeLay, the House majority leader, said the House might vote on the measure as early as next week. Democrats in the Senate have promised to block the bill, which they say protects insurance companies at the expense of victims.

Over the 27 years since the limit on lawsuits was established in California, the state has shifted from being one of the most expensive places for doctors to buy insurance to one of the least expensive. For example, some of the largest insurers in California estimated that calculated in current dollars, premiums have fallen about 40 percent during that time, to about $14,000 a year.

An analysis by the Consumer Federation of America, puts the premiums even lower, although that calculation includes some doctors working as researchers and others who do not actually buy insurance.

At $14,000, California doctors are paying roughly half the average cost of coverage in states like New York and Pennsylvania and a little more than a third the cost in West Virginia, the highest in the country at $39,050. Some doctors in New York pay more than $100,000 a year for insurance, and obstetricians in South Florida pay $200,000 a year.

But it took several years after the imposition of the caps in 1975 before doctors in California saw a benefit in the form of lower premiums. There are varying interpretations of what caused that delay.

Frank A. Sloan, an economics professor at Duke University specializing in health policy and management, said he had tracked similar lags in other states that imposed limits on awards for pain and suffering.

“If anyone thinks caps on pain and suffering are going to work miracles overnight, they’re wrong,” Mr. Sloan said. “Bush will probably be out of the White House before we see appreciable relief from this policy.”

Jamie Court, the executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica, argued that the main reason for the decline in premium costs in California had not been the limits on lawsuits, but the law in 1988, first proposed by his group, that prohibited annual increases greater than 15 percent by insurers without a public hearing. The measure, known as Proposition 103, required insurers to rebate earlier premiums and led to a freeze on premiums for several years.

“Caps don’t have any effect on premiums,” Mr. Court said. “If you don’t limit what the insurers can charge, they will just make more profit as the cost of claims goes down.”

John Garamendi, the insurance commissioner of California, said both measures had helped keep costs down. However, there is no provision for controlling insurance rates in the Bush proposal.

As a result of premiums being held in check, doctors and medical malpractice insurers say, doctors are not fleeing California or retiring early as they are in states like New Jersey, Pennsylvania and Florida where costs have skyrocketed.

The insurance companies say the limits on awards for pain and suffering eliminate an emotional wild card in dealing with claims. They are prepared to pay for such measurable damages as lost income and medical expenses, which can easily run into the millions. But they say they need protection from huge awards by sympathetic juries for pain and suffering, which cannot be objectively defined.

“One jury might award $250,000 for an injury; for the next jury, it might be $250 million,” said Dr. Richard E. Anderson, the chairman of the Doctors Company, the third-largest insurer of doctors in California.

But consumer advocates and plaintiffs’ lawyers say that because of the limited payouts, many people with valid cases are unable find lawyers to take their cases. No one has kept track of the rejected cases. But Mary E. Alexander, the president of the Association of American Trial Lawyers who practices law in San Francisco, said, “You’re talking thousands.”

Moreover, they say, those patients who do find lawyers are likely to receive far less in compensation in California than in most other states.

“There are certainly cases where an individual who has been seriously harmed by a true malpractice has not been able to receive benefits that most people would think appropriate,” Mr. Garamendi said.

In 2000, for example, the average payment to a victim of malpractice in California was $142,637 — lower than in every state but Michigan, and about a fourth that in Washington, D.C., and Pennsylvania, the two most generous places. According to the American Medical Association, payouts of more than $1 million to victims occurred about three times as often in New York and New Jersey as in California.

California still has a higher percentage of lawsuits per doctor than the national average, according to an association of insurance companies, hospitals and medical associations called Californians Allied for Patient Protection. But consumer advocates and plaintiffs’ lawyers say that many legitimate cases in California are not being pursued.

Those least likely to find a lawyer, the consumer advocates and lawyers say, are the survivors of infants, elderly people and homemakers who are killed in a medical mistake. For their survivors, citing pain and suffering is frequently the only legal recourse. Since no one is financially dependent upon these victims, there is legally no economic loss; because of their deaths, there can be no future medical costs. That leaves the survivors — whether there is one or several — with a maximum payment for their pain and suffering of $250,000.

“Where the liability is obvious, the settlement will be almost instant — for $250,000,” Dr. Anderson said. “It requires almost no legal effort at all if the liability is obvious.”

But plaintiffs’ lawyers say the liability is seldom obvious to the insurance companies.

“If you’re talking about getting the full $250,000, you’re going to have to go to trial,” said Ken Sigelman, a doctor and lawyer who is the chairman of the medical malpractice committee of the Consumer Attorneys of California, the state’s organization of trial lawyers. “If the insurance company knows that’s the most they have to lose, they’re usually not going to offer that much before trial.”

Even in those cases resolved on the eve of trial, lawyers say, they typically have to invest up to $100,000 to hire experts and develop the cases. They would do the same work and invest the same amount of money to tackle a case with a potential payoff in the millions. So they choose the more lucrative cases.

Mr. Sigelman said he rejected about 100 of the limited-payout cases a year, about half of which he regarded as very strong cases. The others looked promising, he said, but would require research to determine their true strength.

Another lawyer, Ned Good, a former president of the California trial lawyers association, said, “There’s isn’t a week that goes by that I and most of the better lawyers I know in my state don’t turn down a medical malpractice victim.” Mr. Good now has a form letter that he sends out, rejecting these cases.

In stark contrast to an an infant who dies as a result of malpractice, one that lives and is likely to need decades of expensive medical care can be worth millions to a lawyer and client.

That contrast is painfully evident in the case of the Kaiser family of San Pedro, Calif. On July 25, 2000, Dennis and Wendy Kaiser became the parents of a 4-pound, 9-ounce baby boy. The child, who they named Casey, was born five weeks earlier than expected and suffered severe brain damage.

When the couple — he is a public relations executive, she a dental hygienist — realized months later that they were probably facing millions in medical expenses, they found several lawyers willing to work with them. They decided to go with Russell S. Kussman, a doctor who had become a trial lawyer specializing in medical malpractice.

But last September, Casey Kaiser died. Soon after, Mr. Kussman said that he was sorry but that he could no longer represent the Kaisers.

Since then, Mrs. Kaiser said, she has spoken to seven other lawyers. None would take the case. One asked the Kaiser‘s to pay an hourly charge for him to review medical records, Mrs. Kaiser said. Another would take the case, she said, if the Kaisers agreed to pay the expenses. They are now on the verge of giving up.

“I know it’s just going to bring up emotions that I’ve tried to put to rest,” Mrs. Kaiser said. “All it’s going to do is stretch out the hurt.”

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