Illinois Declares Med Mal Cap Unconstitutional

The Illinois Supreme Court struck down a State law that set caps on noneconomic (pain and suffering and mental anguish) damages.  That law placed a cap of $1,000,000 on noneconomic damage awards against hospitals and $500,000 against physicians.  The court held that the law violated the separation of powers article of the Illinois Constitution in that it was a legislative attempt to infringe upon the inherent powers of the judiciary branch to decide these cases on a case-by-case basis.

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The Synthesis Project Analyses Medical Malpractice Insurance

The Synthesis Project recently released a report entitled Understanding medical malpractice insurance: A primer.   The Synthesis Project is an initiative of the Robert Wood Johnson Foundation to produce relevant, concise, and thought provoking briefs and reports on today’s important health policy issues. This particular report, Report No. 8, is authored by Dr. Michelle M. Mello, of the Harvard School of Public Health.

In the report, the authors note that several important shifts in the liability insurance market affect the cost of malpractice insurance paid by health care providers. These factors include:

 

             -Exit of some commercial carriers and the advent of physician mutuals (physician owned companies)

            -Problems obtaining affordable reinsurance after September 11

            -The growth of hospital self-insurance

            -Shift from occurrence policies to claims-made policies

            -Increasing interest in hospitals buying insurance for doctors

            -The growth of joint underwriting associations

            -Relatively poor returns on investment since 2000

 

Conspicuously absent from this listing is the greedy insurance company mantra that trial lawyer medical malpractice verdicts are the reason these insurers are raising their rates on health care providers. In fact, the study reports that with regard to claims frequency there is no evidence that an increase in the number of malpractice claims has contributed to the current malpractice insurance crisis. Significantly, the source for this statement came from statistics obtained from The National Practitioner’s Data bank, a federally funded site that tracks every malpractice payout made by any entity on behalf of a physician. 

 

            Also noteworthy in this study is the analysis on how medical malpractice insurers actually go about setting their premiums. According to the report, insurers set premiums on a prospective basis based on four (4) separate criteria: (1) their expected payouts for providers in a particular risk group; (2) the uncertainty surrounding this estimate (3) their expected administrative expenses and future investment income; (4) and the profit rate they seek. 

The report notes that medical malpractice insurers do not set their premiums like those who provide automobile insurance. Automobile insurers use an experience rated basis to set premiums.

 

When an auto insured has a claim, his insurance goes up. Thus, an individual is accountable for his own claim’s experience and corresponding premiums. In the medical malpractice arena however, premiums are priced by the specialty, regardless of a particular physician’s claim’s history. Thus, good doctors pay for bad doctors’ mistakes. This inequitable basis for determining premiums is driven by the insurance companies’ profit motives. Past experiments with using a more equitable model like the auto insurers have used have resulted in a less stable estimate of the insurer’s risk, and thus correspondingly lower profits. 

 

Insurers always want to focus the medical malpractice insurance debate on only one of the four elements used to set rates: the one based on payouts for a particular risk group. However, since claims frequency has not risen in real terms over the past 10 years, the other three elements used to set rates account for increased premiums. Where is the debate concerning the unreasonably high profit rates, poor investing and high administrative costs of these insurance companies. 

 

The recent horror citizens have had to endure with their insurers following the natural disasters, including Hurricane Katrina, are finally exposing insurers’ profiteering at the consumer’s expense.

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Medical Malpractice Caps are Unwarranted by the Payout of Claims Data

Each year, the debate in state legislatures around this country regarding the so called need for tort reform and caps on medical malpractice cases intensifies. Big medical corporations and insurance companies, who are only motivated about increasing premium revenue and decreasing payments to victims, lead the fight with big dollar lobbying campaigns.  Unfortunately, these lobbying efforts rarely contain accurate facts and figures and in the end, leave innocent victims of malpractice with little or no recourse for even blatent acts of malpractice.

One of the favorite arguments of the proponents of caps of damages is the alleged increased cost of physician premiums which they erroneously suggest  are caused by big money payouts.  However,  published statistics for state health facts and figures debunk this myth.  The StateHealthFacts.org website, sponsored by the Kaiser Family Foundation, reports that in the year 2005, the average medical malpractice payment totalled only $290,982 for the 14,021 reportedly paid claims.  Highlights of this state by state breakdown on the number of paid claims showed that New York led the nation with 1,768 paid claims and was followed by California (1,117), Florida (1,095), Pennsylvania (1,061), and Texas (1,018). 

Many states were well below the small national $290,000 payout.  Louisiana, which had 299 paid claims in 2005, only averaged $185,897 per paid claim. Similarly, Texas only paid an average of $182,795.  Michigan, which paid 451 claims averaged $130,412 per payout.  South Carolina averaged $161,092 on 171 paid claims.

These documented facts and figures, compiled by an independent and reliable source, certainly dispell the notion that medical malpractice payouts in this country each year are not "runaway verdictsor payments" that require special legislation to "reel in the trial lawyers." 

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United Press International Talks With Trial Lawyer's President on Medical Malpractice Tort Reform

In an article entitled: CostRx: Kill all the tort reformers? United Press International interviewed the president of the Amercian Trial Lawyer's Association, Kenneth Suggs, regarding the so called medical malpractice crisis in this country. In this article, Suggs points out that the medical malpractice reform issue has been heightened by the fact that the head of the Senate, Bill Frist, also a cardiothoracic surgeon, has his sights set on the White House and bringing this issue forward helps his fundraising efforts.

Suggs also points out that for more than 10 years, medical malpractice payouts have remained flat. In other words they have not risen, yet insurance premiums continue to skyrocket out of control.

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The Best Data Suggests That Malpractice Premiums have Not Risen Steadily

According to the May/June issue of Health Affairs physicians' medical malpractice premiums have not steadily risen and do not constitute a crisis for medical practices. In support of this statement, Health Affairs quotes a survey of the American Medical Association of self-employed physicians taken between 1970 and 2000. According to the AMA survey, physician premiums rose until 1986, then declined until 1996, and rose thereafter. However, the physician malpractice premiums were actually lower in 2000 that they were in 1986. The survey reflected National trends with variations in obstetrics/gynecology, surgery and anesthesiology in nine regions.

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AARP Agrees That Malpractice Lawsuits Do Not Cause Physician Premiums to Rise

In its April 2006 Bulletin the AARP debunks the myth that "Malpractice lawsuits cause doctors' premiums to go up, making health care unaffordable for many people." According to the AARP,

"the real reason for health care inflation is costly new technology. New treatments and tests may be used before there is evidence that they are necessary, resulting in wasted health care dollars. Since premiums account for only about 2 percent of total health care spending, the GAO says, national health costs in general would drop by only 0.4 to 0.5 percent if caps and other proposed reforms were passed."

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Caps on Damages Do Not Lower Physician Malpractice Premiums

Louisiana, Maryland, Missouri, South Carolina, Florida, Ohio, Oklahoma, Mississippi, Nevada, Texas and California are all states that have enacted legislation which has placed caps on the damages a victim of medical malpractice may recover. In every instance, law makers supporting the caps have been bombarded with false and misleading information from the insurance industry blaming the skyrocketing costs of physicians' medical malpractice premiums on lawsuits and the trial lawyers who bring lawsuits for medical malpractice. In every one of these states that enacted a cap on damages because of this alleged "crisis", malpractice premiums have continued to spiral out of control.

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U.S. News And World Report Article Dispells Notion That Verdicts and Lawyers Are Causing Physician Malpractice Premiums to Rise

In its June 30-July 7 issue, U.S. News and World Report discusses physician and insurers' claims that malpractice awards are driving up the cost of physician malpractice premiums. According to this pestigious business magazine, "their diagnosis may be wrong."

The article, written by author Christopher Schmitt, reports that there is "no explosion of cases that might drive up legal costs. The number filed each year has remained fairly steady during the past decade." Moreover, the article correctly notes that two thirds of the cases that are filed, are dropped before ever making it to a jury. Of those that are tried, only a small fraction are in favor of the patient.

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Research Proves Unfounded Controversy Over Medical Malpractice Lawsuits

We are constantly being bombarded with press clippings, statistics, and other propaganda suggesting that "frivolous lawsuits" are threatening medicine across this country. We hear that malpractice premiums are skyrocketing and driving physicians out of practice. Doctors are telling some stories that expectant mothers no longer can find obstetricians willing to deliver their babies.

However, documented research performed by groups within the insurance and medical industries exposes this "hype" over malpractice litigation for what it really is: special interest groups and politicians trying to gain a competitive edge.

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The Medical Malpractice Insurance "Crisis" Is Caused By Insurance Companies, Not the Legal System

For years, insurance companies who wish to justify raising their premiums have used the "need for tort reform" as a handy excuse upon which to base their rate hikes. In the area of medical malpractice insurance, insurance companies have succeeded in convincing health care providers that the lawyers and the legal system are causing physician malpractice rates to climb.

However, many studies and statements totally disprove this bogus claim.

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Medical Malpractice Caps Fail to Prevent Premium Increases for Physicians

In June, 2003, Weiss Ratings, Inc. published a study demonstrating that caps on non-economic damages in medical malpractice cases have failed to prevent sharp increases in medical malpractice insurance premiums for physicians.

The comprehensive study performed by Weiss reviewed the impact that tort reform has had on medical malpractice premiums paid by doctors in three high risk specialties: internal medicine, general surgery, and OBGYN practice.


The Weiss Study demonstrated the following trends between 1991 and 2002:


Despite caps on damages, physicians' med mal premiums rapidly increased.


The insurance companies enjoyed slowed increases in payout levels.


In 32 states without caps on damages, medical malpractice premiums actually rose more slowly than in the 19 states that had implemented caps during the 12 year period. In those 19 cap states premiums jumped 48.2% (from $20, 414 in 1991 to $30,246 in 2002). In the 32 non cap states, premiums only rose by 35.9% ($22,118 in 1991 to $30,056).

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