The Case For Medical Malpractice Caps

[Major_Feelgud]

In the US, health care is mainly a closed system as far as monetary resources go, i.e. everything which is spent in health care comes out of the patients’ pockets - that includes doctors’ fees, equipment costs, hospital rents, malpractice premiums and malpractice payouts.

When insurance companies pays an award, the money doesn’t come from nowhere, it comes from doctors’ premiums. Doctors’ premiums come from patients’ fees. When awards increase, insurance companies increase their premiums and doctors increase their fees, and patients pay more to see their doctors. So when juries hand out outrageous awards, they are actually sentencing the general pool of patients in that community to pay that award. The system is somewhat more complex than that, but that’s the basic idea.

Insurance companies aren’t being hurt because they pass on their costs to doctors, and for years doctors have been passing on their costs to patients, they all have to in order to stay in business.

There are two main types of awards given which should not be given:

1. Medicine isn’t an exact science and there are elements of risks in many types of procedures. Nothing can be guaranteed, if procedures could be guaranteed, insurance would not be needed. However, it seems like even when the doctors have done their utmost, if the procedure does not come out as planned they are still being sued. This should not happen if the doctor has done nothing wrong. The unfortunate result was simply one of the adverse outcomes of the procedures.

It cannot be argued that because patients have suffered, they need to be compensated. Because if the doctors were not at fault then the adverse outcome was one of the risks, i.e. no one was at fault. And the patients accepted these risks as part of the procedure.

Many bad things happen in the world that are nobodies’ faults. People have accidents, they trip, they fall, they have heart attacks. They’re probably suffering just as much, should society be responsible for paying compensation to these people who have also suffered through no fault of their own? No, but that’s what’s happening in health care. Society, or the general pool of patients are paying for adverse outcomes which were part of the risks which the patients chose or had to take.

2. The second type of award is due to incompetence. When patients are injured due to a health care professional’s incompetence, malpractice awards are given. The money comes from the pool of doctors’ premiums, which comes from patients’ fees. Nothing happens to the doctor, who usually keeps practicing, and again, society pays the debt. The doctor isn’t even punished financially really, there is a limit to how much one doctor’s premiums can be increased, so all doctors’ premiums are increased over time. So in the end all that large malpractice awards hurts are the rest of the patients.

3. In criminal cases patients should be paid nothing. Money that the general pool of patients have paid into health care should not be used in compensating victims of crime. The health care professional should be prosecuted instead. As far as I know malpractice insurance does not cover criminal acts, but for some reason they still seem to be paying out.

As I mentioned in the beginning, this is a closed system. As individuals in the pool of consumers/patients how much are we willing pay for health care in order to cover large malpractice awards to suffering and injured patients? Families are paying on average $1000-$1500 per month for health care premiums. How high can it go? At some point people are just no longer going to make enough money to pay for health care, and that’s beginning to happen now.

Nothing in this world is free. Large malpractice awards don’t come from insurance companies, they come from the patient pool. Large malpractice awards might assuage our guilt in some way that we are doing something for an injured patient, that’s what juries seem to believe, but we are not. All we are doing is making health care unobtainable for the rest of the people.

And health care costs are part of the reason why so many families now have to work so many jobs. Decades ago, one person could support the whole family, perhaps in the future, it may happen again.

There are many ways to solve the health care crisis, here are some thoughts:

1. Have patients buy their own malpractice coverage per procedure, or additional coverage per procedure.
2. Poorly performing doctors need to be sanctioned or even “retired”. Happens to all other professions, real estate sales, cooks, coaching, but not medicine.
3. Decrease education requirements. Medical students do not really need 1st year calculus, 1st year physics, 1 year of foreign language, umpteen credits of social sciences and humanities. More doctors can be put through a simpler education system consisting of only core classes and the necessary pre-requisites. Doctors learn “doctoring” in residencies and internships, they learn through what they see. Of course rigorous screening is still needed to ensure that only competent and responsible students get in medical school. Cutting down on useless classes will mean less education costs, less college loans to pay back. More doctors mean greater access to health care for more people. Like anything else, prices go down when there are more of them.
4. All teaching hospitals should provide free health care. That is what it is like in many other countries. It’s a trade off, free health care for learning students.

[Fear_Itself]

*Originally posted by Major Feelgud *
In the US, health care is mainly a closed system as far as monetary resources go.

Incorrect. See following:

When insurance companies pays an award, the money doesn’t come from nowhere, it comes from doctors’ premiums.

Incorrect. The bulk of awards are paid from the profits on premiums which insurance companies invested in stocks and bonds. The only time the insurance industry is in crisis is when the stock market is down:

“Insurance was cheaper in the 1990s because insurance companies knew that they could take a doctor’s premium and invest it,and $50,000 would be worth $200,000 five years later when the claim came in,” --Victor Schwartz, general counsel to the American Tort Reform Association. Honolulu Star Bulletin, April 20, 2003

[Major_Feelgud]

Fear Itself: A common misconception.

Sure, insurance companies can make money on investing their premiums. But don’t you see that if they could guarantee profits on stocks they’d just get out of the insurance business altogether and just invest in stocks and bonds? The point is that no person has been born that can guarantee sustained profits by investing in the stock market, and if that person was born, he or she surely won’t be working for an insurance company.

Money still comes from premiums (and investments), and if there weren’t ridiculous malpractice awards premiums wouldn’t be rising like they are. My other points still stand.

What I find shocking is such a lack of interest in this topic. Personal injury is destroying our health care system and there appears to be more interest in astrology.

[Fear_Itself]

*Originally posted by Major Feelgud *
Money still comes from premiums (and investments), and if there weren’t ridiculous malpractice awards premiums wouldn’t be rising like they are.

Another common misconception.

Stable Losses, Unstable Rates (pdf)

First, contrary to what the insurance and medical lobbies have alleged, the years 2001 and 2002 saw no “explosion ” in medical malpractice insurer payouts or costs to justify sudden rate hikes. In fact, rather than exploding, inflation-adjusted payouts per doctor dropped from 2001 to 2002. Payouts (in constant dollars) have been essentially been flat since the mid-1980s.

Second, medical malpractice insurance premiums rose much faster in 2002 than was justified by insurance payouts. The 2002 hike is similar to the rate hikes of the past, which occurred in the mid-1980s and mid-1970s and were not connected to actual payouts. Rather, they reflect a weakened economy and losses experienced by the insurance industry ’s market investments and their perception of how much they can earn on the investment “float ” (which occurs during the time between when premiums are paid into the insurer and losses paid out by the insurer) that doctors ’ premiums provide them.

Insurance rates for doctors have skyrocketed twice before: in the mid-1970s and in the mid-1980s, each “crisis ” occurring during years of a weakened economy and dropping interest rates. Each of these periods was followed by a wave of legislative activity to restrict injured patients’ rights to sue for medical malpractice. Medical and insurance lobbyists told legislators that changes in tort law were needed to reduce medical malpractice insurance rates.

However, history shows that the insurance industry has not cut, and has no plans to cut, insurance premiums as a consequence of tort restrictions. The American Insurance Association (AIA) and representatives of the American Tort Reform Association (ATRA) have already gone on record admitting this, with the AIA stating on March 13, 2002, “[T]he insurance industry never promised that tort reform would achieve specific premium savings.”

The Center for Justice & Democracy’s 1999 study, Premium Deceit —the Failure of “Tort Reform ” to Cut Insurance Prices, found that tort law limits enacted since the mid-1980s have not lowered insurance rates in the ensuing years. Some states that resisted enacting any “tort reform ” experienced low increases in insurance rates or loss costs relative to the national trends, and some states that enacted major “tort reform ” packages saw very high rate or loss cost increases relative to the national trends. In other words, there was no correlation between “tort reform ” and insurance rates. More recently, Weiss Ratings, an independent insurance-rating agency in Palm Beach Gardens, Florida, found that between 1991 and 2002, states with caps on noneconomic damage awards saw median doctors’ malpractice insurance premiums rise 48 percent —a greater increase than in states without caps. In states without caps, median premiums increased only 36 percent. Moreover,according to Weiss, “median 2002 premiums were about the same ” whether or not a state capped damage awards.

In January 2003, Ohio lawmakers enacted a cap on compensation for patients injured by medical malpractice. Almost immediately, all five major medical malpractice insurance companies in Ohio announced they would not reduce their rates. One insurance executive predicted his company would seek a 20 percent rate increase.

In Mississippi, lawmakers enacted a cap on medical malpractice verdicts in October 2002. Four months later, investigative news articles reported that surgeons still could not find affordable insurance and that many Mississippi doctors were still limiting their practice or walking off the job in protest.

Nevada also enacted a severe cap on compensation in 2002. Within weeks of the law ’s enactment, two major insurance companies proclaimed that they would not reduce insurance rates for at least another year to two, if ever. The Doctor’s Company, a nationwide medical malpractice insurer, then filed for a 16.9 percent rate increase. Two other companies filed for 25 percent and 93 percent rate increases.

**

What I find shocking is such a lack of interest in this topic. Personal injury is destroying our health care system and there appears to be more interest in astrology. **

The lack of interest is due to the fact that the so call “insurance crisis” has been exposed as an unnecessary fraud, perpetrated on the medical community and the public at large by insurance companies, in a greedy attempt to recoup losses on risky investments and risky underwriting practices. So-called “tort reform” will not reduce premiums, it will only insulate the insurance industry from accountablity for their own short-sightedness. If I have to bear the consequences of my actions, so do they.