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This summer, the University of Nevada Medical Center closed its Las Vegas trauma center for ten days after its surgeons quit over the cost of medical malpractice insurance. The center re-opened after some of the surgeons temporarily became county employees, thereby limiting their liability. Then, on August 17, a more permanent solution was put in place when Governor Kenny Guinn signed Assembly Bill 1 which, among other provisions, capped med mal non-economic damages at $350,000.
While the incident in Nevada garnered nationwide attention, it is just a small part of a concerted effort to restrict med mal litigation. In March, the Pennsylvania legislature passed Act 13, eliminating joint and several liability, and in September Governor Mark Schweiker urged them to make further changes to reduce forum shopping.
According to the ATLA, twenty-two other states either have med mal legislation pending or will have when the lawmakers return in 2003.
Meanwhile, at the federal level, President Bush is pushing legislation to set national standards capping non-economic damages at $250,000, lowering contingency fees and eliminating joint and several liability.
“One of the main reasons that [health care] costs are rising is a broken liability system,” he told an audience at High Point University on July 25. “Too many lawsuits filed against our doctors have no merit. The unpredictability of our liability system means that even frivolous cases, even what we call junk lawsuits, carry the risk of enormous verdicts.”
On September 26, the House passed H.R. 4600 which contains the changes the President wants. But the vote was close (217-203), was largely on party lines, and is not likely to pass in the Democrat-controlled Senate.
The impetus behind all the legislation is huge increases in med mal insurance premiums, and the accompanying horror stories of doctors quitting the field or moving to another state because they can no longer afford insurance. This only applies to certain high-risk medical specialties, and certain cities are particularly hard hit. For example, last October the Medical Liability Monitor reported that some OB/GYNs in Dade County, Florida, were paying upwards of $200,000.
Huge jury awards are being blamed for the insurance rate hike, and there is some evidence to support that allegation. When the National Law Journal listed the 100 largest verdicts of 2001, fourteen of them were med mal verdicts. In March, Jury Verdict Research (JVR) announced that the median jury award in 2000 had spiked up 43% over the previous year, hitting an even $1 million. (See chart p. 2)
On the other hand, there is no explosion in the number of cases filed. The National Center for State Courts’ report Examining the Work of State Courts, 2001 found that med mal case filings are running flat. (See chart p. 3)JVR also reports that the median settlement amount dropped by sixteen percent that same year and that plaintiffs lost 62% of the time. Then there is the fact that past and future medical expenses take up a huge chunk of overall med mal costs, and medical costs have been rising at a much faster rate than other types of expenses.
Large verdicts, assuming they survive the appellate procedure without being overturned or reduced, do have the potential of driving up the insurance premiums. But there are also other factors that can have that same effect.
“[L]iability rules are just one factor determining claim costs, and claim costs are just one factor determining the ultimate cost of insurance,” the American Insurance Association (AIA) said in a March 13, 2002, press release. “Claim costs are also influenced by accident frequency, population density, medical inflation and underlying economic conditions. And there are other state-specific factors that affect premium levels, such as taxes, fees and the degree of market competition.”
J. Robert Hunter, Director of Insurance for the Consumer Federation of America, says that the primary factor driving up rates has been the economic downturn. As he stated in a July 30 letter to President Bush:
“The cause of the current crisis is the same as I advised the President and Congress it was back in the 70s and again in the mid 80s: fallout from the economic cycle and the business practices of the insurance industry. This is a well known cyclical effect.”
“In a nutshell, during the ‘soft’ phase of the market, rates do not rise as costs do, particularly if financial markets are producing positive results in long-tailed lines like malpractice, where the premium is paid years before claims are paid, giving enormous ‘float’ profits to insurers. In the last decade, medical malpractice rates stayed flat while costs (claims, including jury verdicts) rose by exactly the rate of medical inflation. When interest rates and the stock market tanked, the rates had to catch up.”
The key piece of missing data which would resolve this issue is whether insurance companies are actually paying out more money, or a higher percentage of their premiums, as a result of large awards for non-economic damages. No one interviewed for this article had any hard figures on this.
We do know that there are occasionally huge jury awards, but there is a huge difference between receiving an award and receiving a check. At this point there is really no way to tell whether capping damages will actually result in lower insurance premiums for doctors. As the AIA puts it in the release cited above:
“Insurers never promised that tort reform would achieve specific savings, but rather focused on the benefits of fairness and predictability.”
Common Features of Med Mal Legislation
- Abolition of joint and several liability
- Taking contributory/comparative negligence into account
- Capping non-economic damages
- Capping Punitive Awards
- Setting limitations on attorneys’ fees
- Establishing a Patient Compensation Fund to cover damages in excess of policy limits
- Allowing periodic, rather than lump sum, payment of damages
- Abolition of the collateral source rule to keep plaintiff from being double-compensated
- Establishing pre-trial screening panels
- Requiring that parties go through arbitration or mediation before going to trial
- Requiring an Affidavit of Merit from a health care professional or the attorney when the case is filed
- Shortening statutes of limitations