I have said before that “Insurance makes things cost more,” and that “Tort reform is not the same thing as damage caps.” These facts are still true, and you are welcome to see my arguments in the archives. Today, I would like to focus on the Medical Malpractice Crisis. In short, yes there is a crisis, no simply capping non-economic damages will not make it go away.
There is definitely a crisis, make no mistake. Malpractice insurance rates are going up by double-digit percentages — as much as 82% in one case — in many places. Because insurance is regulated at the state level, the actual figures vary wildly from state to state. Doctors are not in a position to pass their added expense on to their patients. In some states, things are worse than in others. According to the AMA, about 19 states (almost 40% of all states) are in “crisis.” The AMA prescription for the crisis is caps on non-economic damages. Republicans agree. Mostly, anyway.
There is anecdotal evidence that doctors in some areas are closing practices, limiting the scope of their practice, leaving the state, retiring early, or making do without malpractice insurance at all. According to these tales, there is a particular problem with specialists, such as Obstetricians and Neurosurgeons. This evidence may or may not stand up to objective scrutiny.
One thing many people do not understand is that the malpractice insurance your doctor carries has limits, just like your auto, renters, or homeowners insurance does. In many places, the standard policy has limits of $1 Million per incident and $3 Million per year. In theory, anything over those limits awarded to a plaintiff must be paid out of the doctor’s pocket. In real life, this is not really the case. Perhaps more defendants (such as the doctor’s partners or a nice deep-pocketed hospital) have their insurance tapped. Or rather than spend years in appeals, a settlement is reached.
But back to the million dollars. Let’s imagine that a 40 year old man in killed through medical negligence. First, lets look at the real damages. He made $50,000 last year, and planned to work until he was 65 (yes, that’s ambitious planning these days). That means if he worked 25 years for $50,000 — never got another raise — there are real damages of $1.25 Million before we even calculate the cost of his funeral. The insurance company has already reached the limits of what they will pay, regardless of what might be awarded for “pain and suffering.” In fact, it turns out that “only a handful” of cases exceed $1 Million verdicts. According to the National Practitioners Data Bank, the average payout of a doctor to a patient was $135,000. This figure likely averages in out-of-court settlements, which account for 96% of all cases.
To say that mega-verdicts have anything to do with rising malpractice rates is disingenuous. To say that capping non-economic damages will fix malpractice rates is doubly so. Non-economic damages account for 24% of the money spent on malpractice; more than any other single category, but not by much.
Critics who say that damage caps work normally point to California as their poster child. The truth is that California’s MICRA statute is just one part of an elaborate insurance reform and cost control scheme. It is furthermore worth noting that “California’s medical malpractice disputes are settled 23 percent faster.”
Proponents of damage caps prefer that you not look at Nevada. In 2002, they passed damage caps. That year, 7 doctors came to Las Vegas to practice medicine, an area that sees 5000 new residents every month. Despite passing damage caps, malpractice rates have still risen double-digits for 2004. Further reforms of the reform propose limiting lawyers fees, telling the jury when insurance paid for treatment (that would be “most of the time”), allowing payment of verdicts over time, and some shuffling of percentage of liability. I am at a loss for how most of this stuff is supposed to help. It is ironic that Nevada’s Senator Harry Reid is co-sponsoring a bill to bring damage caps to the nation.
One of the problems with Nevada’s reforms is that it abolished a medical review panel. Before, many cases could be dismissed as frivolous by a panel of actual doctors — whom one must assume are competent and impartial. Not surprisingly, the number of malpractice suits has risen. Now, everybody is entitled to his day in court, and this is costing everyone a lot of money. It can cost tens of thousands of dollars just to get to the point where a judge can decide to dismiss a frivolous suit, or take a clearly uninvolved party out of a suit.
Oh, and those legal fees are usually paid by the malpractice insurance carrier. It might take only one frivolous and quickly dismissed case against a family practitioner to obliterate the premium he paid. For reference, in West Virginia 29% of malpractice cases were dismissed in the last decade. Nationally, 70% of cases are closed with no money changing hands — except of course among the lawyers.
As if that is not bad enough, it turns out that the majority of malpractice complaints are against 1-5% of doctors. The figure varies by state. Some of this may well be “personality issues,” but the fact remains that as much as 80% of malpractice claims could be eliminated by getting “Dr. Nick” the heck out of the hospital.
Getting the malpractice crisis in hand will really impact health care costs by less than 1% according to the Congressional Budget Office. Others say that reduced “defensive medicine” such as unnecessary tests will help bring costs down. However, it may very soon impact the availability of healthcare in general. That would be bad. Here are some options we might consider instead of liability caps:
Insurance reform. Insurance needs to be reformed in many ways, all across the nation. We can start with re-mutualizing insurance companies (so no money is funneled off as profits), or setting up state insurance pools for high-risk groups.
Medical malpractice review boards. These impartial medical/legal experts would be the equivalent of a grand jury, determining whether there is sufficient evidence for a malpractice case to make it to trial. If they see the same doctor over and over, they should have the authority to open an investigation into his competence. For that matter, if they dismiss cases by the same lawyer over and over, they should turn him over to the local Bar Association for review.
More arbitration, fewer trials. Utah is considering this approach. There are pros and cons, of course, but it will be interesting to see how it works out.
Remember, sometimes bad things happen. Not everything has to be somebody’s fault. Does it?
On the lighter side, I thought you would enjoy this image.
