Last month, more than two dozen surgeons in four West Virginia hospitals walked out to protest rocketing malpractice insurance rates. One doctor, a general surgeon, said he had to borrow money to pay a $73,000 insurance bill, and added that he was considering leaving the state if his premiums don’t abate.
The protest has spread in recent days, with doctors in Illinois, New Jersey, Florida and Mississippi walking out or threatening to take such action. President Bush has joined the battle, promising he will propose reforms to clamp down on jury awards and control malpractice premiums. One highlight: a $250,000 cap on non-economic damages such as “pain and suffering” awards.
Advocates tend to portray the problem in simple black-and-white terms: saintly doctors vs. greedy lawyers, or crusading lawyers vs. incompetent doctors, or everyone vs. profit-mad insurance companies. But the florid rhetoric and fingerpointing only guarantee that the system will remain, at best, unpredictable, irrational and increasingly expensive for everyone.
There’s no doubt that change is needed. Nationally, insurer payouts to cover malpractice settlements and verdicts have been rising. One major Illinois insurer, ISMIE Mutual, says its average payout has increased from $458,786 to $559,137 in the last year alone. In some medical specialties that has translated into average premium increases of 25 percent in the last year, with others soaring into triple digits.
Obstetricians in Illinois pay an average malpractice premium of $80,196 a year, significantly higher than the national average of $56,546, according to the Medical Liability Monitor.
The goal should be not only to bring some certainty and rationality to medical malpractice payments–and thus presumably insurance premiums–but also to cut down on the preventable doctor mistakes that justifiably land some of them in court.
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To be sure, lawsuits serve a valuable function, forcing doctors and hospitals to admit responsibility for mistakes, and more important, to take actions to fix endemic problems. But economic damages–loss of wages, rehabilitation expenses, medical bills–are easily calculated. Pain and suffering is inherently difficult to gauge, and often is an invitation to a jury to pick a number to express its outrage over someone’s injury. Usually, that is a very large number, and adds significantly to the bottom line of malpractice settlements and verdicts, not to mention lawyer’s fees.
One continuing study by the Rand Institute for Civil Justice suggests that of the money awarded to personal injury victims by Cook County juries between 1995 and 1999, roughly 60 per cent went for non-economic damages.
Doctors aren’t abandoning their practices in Illinois, as some are starting to do in harder hit states. But they are complaining–loudly. Dr. Thomas Pliura, who owns surgery centers in four Illinois cities, is organizing doctors for a one-day work stoppage on Feb. 26. A doctors’ strike is a profoundly bad idea–it risks the trust that patients place in their physicians.
Their complaint, though, is serious. Cook County has some of the highest malpractice insurance rates in the nation.
Don’t expect much change here. The Illinois Supreme Court in 1997 struck down a tort reform law, including a $500,000 cap on non-economic damages. The court ruled that the cap violated the separation of powers because the legislature had taken a power that should be reserved to the judiciary, that is, to reduce excessive jury awards. With a Democratic legislature, governor and Supreme Court majority, it’s highly unlikely Illinois is going to reinstate a cap on non-economic damages. That’s too bad, because there is evidence that caps are effective–to a point.
Average malpractice insurance rates are generally lower in the 19 states with caps on non-economic damages than they are in other states, according to the Medical Liability Monitor. In 1975, California was among the first in the nation to cap pain and suffering awards to $250,000. Malpractice insurance rates there have increased since then, but at substantially lower rates than in other states, in large part because of the cap, many experts say.
In 2002 the average rate increase for internists, for example, was 24.7 percent, according to the Monitor. In Illinois, the figure was 31.1 percent. California’s rates jumped only 8.7 percent.
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No one should be deluded into thinking that a simple cap on pain and suffering is all that is needed to fix the system. In medical terms, that’s like putting a Band-Aid on a broken leg: it won’t be enough.
President Bush’s proposed $250,000 cap is right in principle, though it ought to be hiked to $500,000. Bush is also proposing as-yet-unspecified changes that would encourage doctors and hospitals to share information on quality control problems and medical errors, an effort to cut down on an epidemic of preventable medical errors that, according to a federal government estimate, kills 44,000 to 98,000 Americans yearly. That must be part of any malpractice reform agreement.
States also must crack down on bad doctors.
In many states there has been too little effort to weed out the bad doctors, whose incompetence fuels higher rates for everyone. Illinois has improved slightly, watchdogs say, but much more can be done to make certain that inept doctors are quickly disciplined. At the very least, consumers should be able to get more information about their doctors. The state still lacks a central, publicly available record of malpractice awards and hospital actions against individual doctors. That must be a priority.
The biggest target of reformers is the insurance industry. Malpractice insurance is so-called “long tail” insurance, referring to the long interval between when a doctor pays a premium and the possibility that the company may have to pay a judgment. In the interim, the company invests the money, mostly in bonds or stocks. In the high-flying ’90s, profits from higher interest rates and market gains helped subsidize insurance rates.
But when the markets collapsed, particularly interest rates, companies returned to grim reality. Some were forced out of the business; most just raised rates. That is not evidence of wrongdoing, however. It’s evidence of trying to earn a profit.
For the past few decades, doctors have formed their own insurance companies, dubbed “bedpan mutuals,” to compete with or in many cases replace commercial insurance companies. These were touted as a solution to the rate spikes, since they were not under the same profit pressures as private companies. But those companies have not fared much better in controlling rate increases in the current crisis.
This is not the first, nor will it be the last, malpractice rate crisis. It should be abundantly clear now that there’s no simple, painless solution to this problem. But a solution is needed, one that caps the more outlandish jury awards and reduces the medical errors that produce them.
