A government report on malpractice insurance has blunted some of the arguments from the medical establishment that the skyrocketing premiums that have forced some doctors to relocate or retire are due almost entirely to ”jackpot justice” and multimillion-dollar jury awards.
While the 67-page study cites ”rapidly” increased losses on medical malpractice claims since 1998, it points out that several other key factors have contributed to the current crisis in certain states-including insurers’ losses from investment income, fewer competitors, higher reinsurance rates and artificially low premiums through much of the 1990s as many firms sought to
boost market share.
”The report undermines the argument that there is any silver-bullet solution in tort reforms and caps on damages,” said Doug Heller, senior consumer advocate for the nonpartisan Foundation for Taxpayer & Consumer Rights in Santa Monica, Calif.
The report, released last week by the General Accounting Office, indicates that ”multiple factors” have converged to stir up a volatile market that experienced similar periods of crisis in both the mid-1970s and mid-1980s.
”Cycles in the medical malpractice market tend to be more extreme than in other insurance markets because of the longer period of time required to resolve medical malpractice claims,” the report said, ”and factors such as changes in investment income and reduced competition can exacerbate the fluctuations.”
The report, which studied seven states, does not directly address one of the principal issues in the debate-the argument by doctors’ groups that only a strict, $250,000 cap on noneconomic damages will stabilize rates and bring about a return to relative normalcy. It points out that insurers generally are not required to submit data to state regulators that show the differences between settlements and verdicts and economic and noneconomic damages.
Still, groups on both sides of the issue-doctors, hospitals and insurers on one; lawyers and many consumer groups aligned on the other-suggest that the report backs their stand in the fierce debate.
Donald Palmisano, a New Orleans surgeon who is president of the Chicago-based American Medical Association, said the report confirms that ”increasing awards” are to blame for escalating premiums in some states and in some high-risk specialties. He added it ”also puts to rest two lawyer smokescreens: that insurance company gouging and/or stock market losses have caused the medical liability crisis.”
But Carlton Carl, a spokesman for the Washington-based Association of Trial Lawyers of America, said the report ”confirms that insurance industry investment losses and bad business practices, as well as too much medical malpractice, have resulted in high medical malpractice premiums. It presents no evidence that limiting the legal rights of malpractice victims or capping noneconomic damages would have any impact on doctors’ premiums.”
The report does indicate that losses on medical malpractice claims ”appear to be the primary driver of increased premium rates in the long term.” But it said the rates varied dramatically in the seven states studied-California, Florida, Minnesota, Mississippi, Nevada, Pennsylvania and Texas. For instance, Florida’s largest writer of medical malpractice increased premium rates for a general surgeon in Miami-Dade County by 75% from 1999 to 2002. The rate was $174,300 per year, or about 17 times higher than the $10,140 premium quoted by an insurer in Minnesota for general surgeons.
Rates like those in Florida are directly attributable to ”ever-increasing jury awards and settlements,” said Larry Smarr, president of the Physician Insurers Association of America, a Rockville, Md.-based trade group that represents liability insurance companies that cover more than 242,000 physicians and some 1,200 hospitals.
The report offers no suggestions or conclusions, other than to recommend that Congress ”encourage” the National Association of Insurance Commissioners and state regulators to collect more data to help evaluate the frequency, cause and severity of losses on medical malpractice claims.