december…
I take it you are saying the lawyers force the verdicts to make themselves rich.
I appreciate your responses. DSeid & december I’d probably lean toward doctors in almost any issue involving lawyers vs. doctors, this cap just bugs me. It includes everything, even those of bad docs. $250,000 wouldn’t buy a house here. For someone thoroughly wronged by a quack, permanently disabled and needing chronic care let’s say, it’s doesn’t seem like enough, and I don’t know if “conceivable economic damages” includes future care and/or housing. For the opportunists, it still seems like too much.
When I first read this it struck me as a band-aid, that neither side (Dem or Rep) wants to get too heavily involved in a reform. I wouldn’t mind being wrong on that though.
Tee,
Yes, it includes future care and housing.
And you are also right that tort reform is in no way enough to reform what ails our country’s health care system. It can help keep doctors available in certain areas that they are becoming scarce, it can cut down costs some, it can improve the overall quality of health care delivery some … but it does nothing to address the needs of the uninsured or to address other very significant drivers of health care inflation. Caps are needed but are not what is needed most to provide quality health care that all can afford. But that is another thread …
I’m surprised no lawyers have jumped in here yet. The last time I tried something similar some of our resident attornies were all over. Of course the title of my thread might have antagonized them: Why not limit attorney fees? (the thread gets more worthwhile about halfway through).
The attornies (or others opposed to the idea) did bring up some good points however.
Show where punitive damages are out of control or even increased beyond inflation over a period of time. Certainly you here about the occasional big case but on the whole damages seem steady. I provided some stats in the linked thread but more effective and reliable numbers are hard to come by. Why? Those numbers need to come from the insurance industry and, oddly considering the huge problem they claim, they hide this data. The insurance companies will however hit you with a dozen anecdotal cases that look like travesties of justice and make them (and by inferrence you and me) pay through the teeth. Travesties thoguh those cases might have been together they are a drop in the collective bucket.
Second the attornies claim that it is near impossible for them to file weak or frivilous cases. It doesn’t make economic sense for them to take on a weak case and they can get in trouble for a frivilous case. The assumption that ambulance chasers get to slap a neck brace on their client and extort money from doctors doesn’t pan out.
The really sad part is there is clearly a problem here. There are areas in the US with no coverage of certain types of doctors because they simply can’t afford to pay their insurance premiums. It’s not a matter that the doctor will have to drive a Toyota instead of a Mercedes…they literally cannot pay the premiums and make ANY money. The insurance companies and the attornies are pointing their fingers at the other as the problem. Both have powerful lobbies and American citizens are left holding the bag.
Honestly if you look at it closely it looks more and more like it is money grubbing from the insurance companies. As such capping pain and suffering awards will do little to solve the problem and will just enrich insurance companies. Do you think medical costs will lower if such a bill was passed? Do you think your insurance premiums will go down at all? I bet you, as a consumer, wouldn’t see a thing happen as far as the price of medical care is concerned. This extra money will get absorbed into the companies long before you or I see it.
So, december, speaking as an expert in the field of medical malpractice reform, is it your professional opinion that tort reform will reduce premiums?
Your fellow insurance industry professionals disagree with you (.pdf):
Tort reform is a windfall for the rapacious insurance industry, at the expense of the little guy. Don’t believe it when december says that premiums will go down if torts are capped. That is not true, and he knows it!.
This particular tort reform won’t reduce premiums much, but it may avoid a disastrous rate increase. Companies have been selling malpractice at a big loss for years. I recently retired from St. Paul, who was by far the leader in malpractice. They totally quit the business, because they were losing so much mony and saw little hope of ending the losses. This would be like Ford pulling out of the automobile business.
As I said, the effect of a $250,000 cap on non-economic damages is only a moderate reduction in benefits. If the cap were passed, I would not expect immediate rate decreases or large rate decreases. However, if we don’t get reform, I expect disaster. Insurance companies that have been selling malpractice at a loss will leave the business or go bankrupt. Then there will be huge increases in rates.
We went through this in the mid 1970’s. Rates for doctors and hospitals typically quadrupled in a single year, as companies like Employers of Wausau and American Mutual quit the business. They were replaced by other companies charging around 4 times as much. I worked for one of those companies, Argonaut Insurance. Even at 4 times the price, we lost a fortune. In other words, the cost of the benefits was more than 400% of what Wausau and American Mutual were charging. In that sort of situation, a reform that reduces the cost of benefits by 25% is a drop in the bucket.
I don’t think things are that far out of whack today. But, I know that St. Paul’s cost of benefits was around double what they were collecting in premiums. They have quit the business, but I assume that other companies still in the business are facing similar problems.
This is another factual misstatement that the insurance industry perpetuates to justify their rate increases. Why do you continue to flog this horse when you know it is not true?
The shortfall in the insurance industry that is causing insurers to raise rates is due to poor investments in the 1990’s and huge losses in the stock market since 2001. This was also the case in the 1980’s, the last time the insurance mafia tried to bully Americans with dire predictions if tort reform was not passed. The fact is that insurance companies are drowning in quicksand of their own making, brought on by unsound management practices and the greedy pursuit of unprofitable underwriting to generate capital to gamble in high risk investments.
Fear Itself, my wife and I had a beautiful trip to the Kenai Peninsula last summer, so I have a reservoir of good feeling toward you. The web site you are relying on is evidently set up by wealthy plaintiffs’ attorneys, who don’t want reform, because they’re making a fortune under the current laws. If you’re a rich malpractice attorney, this is a good site for you to use. If not, I’m afraid that you’re being duped by rich makpractice attorneys. You think you’re supporting the weak against the strong, but you’re doing the opposite.
InsuranceReform.org is filled with lies, half truths and out-of-context quotes. I probably could explain every distortion there, but I’ll restrain myself to a few.
Insurance companies do earn significant investment income on the assets they hold, although their main source of income is premiums. OTOH the story about mismanagement of assets during the 1990’s is a flat-out lie. In fact, the reverse is true. Most malpractice insurers invest in bonds, not stocks. Bonds have done unusually well in the lasts 10 years as interest rates dropped. That site creates confusion by falsely implying that the drop in interest rates constitutes some sort of mismanagement.
E.g., the quote from Victor Schwartz is nothing embarassing. He said that when interest rates were higher, insurance companies could earn more investment income, so they needed less premium. That’s just basic finance. When insurance companies could buy 9% bonds, they made more investment income than they do now, when their bonds pay only 5%. Since they get less investment income, they need more premium income.
Myron Picault also alludes to the drop in interest rates, not to investment losses. Note that Picault also confirms what I said earlier – there is a horrendous deficiency in pricing.
If you want to better understand this and you have questions, I’ll be happy to try to answer them.
I want to clarify one thing.
Doctors are free to bill however much they want for their services. What they get back from the insurance companies is a different story. A routine office visit for an existing patient may be billed at, say, $60.00 per patient. That doctor may only get back anywhere from $40.00 to $50.00 from the insurance company. In Pennsylvania, where I live, Medicare has set the allowed for that at $48.81, with the doctor getting $39.05 and the patient being responsible for the remainder. The leftover $11.19 is eaten by the doctor’s office. If a doctor sees 100 patients in a week, that’s $1119.00 that the doctor doesn’t get. Over the course of a year, that’s $111,900 just for that.
In some specialities, like pathology and radiology, the reimbursement is a hell of a lot less than that. An MRI that was billed at $1090 was reimbursed at a little more than $800. X-rays that are billed at $50.00 get less than 10 bucks from Medicare. Therefore, 80 percent of an x-ray is eaten by the radiologist.
So, of the $20,000 billed by your doctor, he saw maybe one- to two-thirds of that. Nothing to sneeze at, but he’s still far from getting rich, either.
Robin
I know, I didn’t really explain that. The $20K was the total for the year and most of it involving Mass General Hospital and affiliates. Pediatric ICU is about $3K a day by itself, then regular room, ambulances, consults etc…adds up fast and there were two such trips, and many things billed individually. If they bill it wrong the first time and it comes here directly, they want the full amount. There’s no discount or 20% write-off. All of these I’ve sent back through insurance with only one stubborn problem.
Honestly I have no idea what the total was last year for the kids’ pediatrician alone…probably not enough. Granted.
december (or anyone):
Can you provide cites for malpractice damages run amok? Not anecdotal tidbits of an occasional, ridiculous award but hard numbers from a credible source? I would like to see a sharp trend upwards in the total damages paid out in malpractice suits that exceeds the rise in costs you’d expect from inflation. My money is that you can’t produce those numbers and if you can’t what does that say about the motivations for passing the law in question? Fear Itself has shown that the insurance companies will not lower premiums and I seriously doubt you can count on price hikes being limited in the future. You might get a slightly lengthened time till prices rise again but I doubt it will even be noticed by Joe Consumer.
This is a money grab by the insurance companies…pure and simple.
I am also of the opinion that $250,000 seems a rather arbitrary amount for the mental anguish of never being able to walk again, losing a child or parent, being in agonizing pain for the rest of your life, or any other worst-case scenarios that are thankfully rare but sadly do happen, especially if it happens as the result of gross incompetence.
Time magazine had a large article about this. One thing I read struck me- the States with Tort limits had the same or higher premiums that the Satates without. That is- there is no evidence AT ALL that Tort reform or limits would reduce premiums- or even stave off an increase.
I see this also when the Insurance Co start to flog “No fault” auto insurance, and promise lower premiums. However, the States that have enected it have shown no such decrease.
So- if Tort Reform or limits have no apparent effect on premiums- why bother? Their only use is to help make Insurance Companies get richer- and although the primary use of large settlements seems to be to make Lawyers richer- there is an occasional case where a large settlement is richly deserved.
IF there was a clear advantage to Tort reform, I could see it. There isn’t one.
There you go again, december; when you can’t argue with the facts I present, you attack the credibility of my sources with your patented, lame, “I don’t like them, so they must be liars” schtick. Why don’t you admit that, regardless of who is quoting them, all my cites are direct from the mouths of insurance company executives. Are you alleging that these well known experts in the industry never said these things, that AIR made them up from whole cloth?
Oh, I guess you are! Well, how can I put this in language that is not pit-worthy:
december, your pants are on fire!!
The mess in which the insurance industry finds itself is of its own making, through poor management, poor investments, and an unwillingness to recognize that insurance is a cyclical business and a failure to plan likewise. History has shown that when ever there is an economic downturn that catches the insurance industry by the short hairs, they always start to yelp about tort reform, in greedy attempt to keep profits up.
If this was the case of a spendthrift youngster who wasted his earnings without planning for the future, then whined that he couldn’t live on Social Security when he was old, you conservatives would not have any sympathy for him at all. That you expect the rest of us to shoulder the burden for the insurance industry when it finds itself in the same circumstance is disingenuous on your part, and belies any stated concern for justice, fairness or responsiblity.
Last try, and then I give up. First, your cites aren’t all from industry company executives. E.g., Myron Picault is a stock analyst. Victor Schwartz is an independent attorney. These people are responsible spokesmen. I’ve attended lectures they’ve given. But, they’re not insurance company execs.
The main problem is that your site misrepresented the meaning of what these people said, either through ignorance or intentionally. I tried to explain this in my prior post. I’m well known in the insurance industry for my expertise and my communications ability. This is complicated stuff, but I I could help you understand it.
But, if you prefer to take the word of some web site put out by Heaven knows who, that’s your privilege.
I would sooner believe the statements of trial lawyers than an insurance industry flack, and here is why: at least when a lawyer wins a case, the plaintiff gets to keep at least a small percentage of the award. If the insurance industry has its way, everyone loses; hospitals, doctors, patients and, yes, attorneys. All this whining by insurance companies sounds to me like they are mad because they just found out someone, somewhere, still has some money that they haven’t found a way to steal yet.
Great! I really hope you can but so far you have ignored my requests for an accounting of upward spiraling malpractice and personal injury awards taht would merit a tort reform law to correct. This should be a somewhat simple stat to collect but so far I have failed. The people who have those numbers are the insurance companies but they’re not sharing for some reason. Maybe as an indusrty insider you can provide the evidence we seek.
DrDeth states
I’d be curious were their information came from.
The US Department of Health and Human Services. http://aspe.hhs.gov/daltcp/reports/litrefm.htm is my source. Take a look for detailed tables.
The average jury award rose 76% from 1996 to 1999. More than half was “non-economic” damages.
I’m still waiting - is there agreement as to the goals I had listed?
We want fewer mistakes that result in harm.
We want individuals who have been harmed to be fairly compensated.
We want high quality medicine practiced and we want it available affordably.
Do jackpot awards help or hinder the achievement of those goals?
Here is a list of the citizen’s groups that make up Americans for Insurance Reform, the web site I linked to. Feel free to point out all the groups that are insidious fronts for trial lawyers:
Alabama Watch, AL
Alaska Public Interest Research Group, AK
Arizona Coalition Against Domestic Violence, AZ
Arizona Consumers Council, AZ
Arkansas Advocates for Nursing Home Residents, AR
Association for the Protection of Our Elderly, CA
Boston Women’s Health Collective, MA
California Advocates for Nursing Home Reform, CA
Caribbean Women’s Health Association, Inc., NY
Center for Economic Justice, TX
Center for Insurance Research, MA
Center for Justice & Democracy, NY
Citizen Action/Illinois, IL
Citizen Action of New York, NY
Citizens’ Committee to Protect the Elderly, VA
Citizens’ Environmental Coalition, NY
Citizens for Consumer Justice, PA
Citizens’ Health Advocacy Group, WA
Coalition for Consumer Rights, IL
Colorado Progressive Coalition, CO
Colorado Public Interest Research Group, CO
Community Food Resource Center, NY
Concerned Citizens of Clarence, NY
Connecticut Public Interest Research Group, CT
Consumer Federation of America, DC
Consumers for Civil Justice, NJ
Consumers United/Minnesotans for Safe Foods, MN
Cornerstone, MN
Dalkon Shield Information Network, PA
Democratic Processes Center, AZ
DES Action, CA
Jennifer Dingman, PULSE of Colorado
Disabled in Action of Metropolitan New York, NY
Empire State Family Farm Alliance, NY
Families Advocating Injury Reduction, IL
Families for Improved Care, OH
Florida Consumer Action Network, FL
Florida Public Interest Research Group, FL
Foundation for Spinal Cord Injury, Prevention, Care and Cure, MI
Foundation for Taxpayer and Consumer Rights, CA
Free Hand Press/Mouth Magazine, KS
Georgia Coalition Against Domestic Violence, GA
Georgia Public Interest Research Group, GA
Georgia Watch, GA
Good Old Lower East Side, NY
Gray Panthers National Office, DC
Greater New York Labor-Religion Coalition, NY
Headway for Brain Injured, Inc., NY
Homeowners Against Deficient Dwellings, MO
Illinois Public Interest Research Group, IL
Indiana Public Interest Research Group, IN
Joint Public Affairs Committee for Older Adults, NY
Kaiser Permanente Reform Committee, CA
Massachusetts Public Interest Research Group, MA
Mental Health Association of New York State, Inc., NY
Michigan Consumer Federation, MI
Minnesota Consumers Alliance, MN
Regene Mitchell, Consumer Federation of California, CA
National Community Reinvestment Coalition, DC
National Fair Housing Alliance, DC
National Gay and Lesbian Task Force, DC
National Hispanic Council on Aging, DC
National Women’s Health Network, DC
Neighbors Against Garbage, NY
New England Patients’ Rights Group, Inc., MA
New Hampshire Public Interest Research Group, NH
New Jersey Public Interest Research Group, NJ
New Mexico Coalition Against Domestic Violence, NM
New Mexico Consumer Action, NM
New York City Environmental Justice Alliance, NY
New York Committee for Occupational Safety and Health, NY
New York Public Interest Research Group, NY
New York State Coalition Against Domestic Violence, NY
New York State Tenants and Neighbors Coalition, NY
New York StateWide Senior Action Council, NY
New Yorkers for Accessible Health Coverage, NY.
North Carolina Hunger Network, NC
North Carolina Public Interest Research Group, NC
Ohio Citizen Action, OH
Ohio Domestic Violence Network, OH
Oregon Consumer League, OR
Oregonians for Insurance Reform, OR
Oregon State Public Interest Research Group, OR
Patient Information Alliance, NY
Pennsylvania Consumer Council, PA
Pennsylvania Public Interest Research Group, PA
People’s Medical Society, PA
Physicians and Patients for Quality Care, NJ
Progressive Tenants Association, Inc., NY
Public Interest Research Group in Michigan, MI
Rhode Island Public Interest Research Group, RI
Safetyforum.com, VA
Senior Action in a Gay Environment/ Queens, NY
SmokeFree Educational Services, NY
Statewide Emergency Network for Social and Economic Security, NY
Texas Advocates for Nursing Home Residents, Coastal Bend Unit, TX
Texans for Public Justice, TX
Texas Watch, TX
The Housing Advocates, Inc., OH
Tort Reform Institute, Australia
United Policyholders, CA
Universal Health Care Action Network, OH
USAction, DC
U.S. Public Interest Research Group, DC
Utah Citizens Alliance, UT
Vermont Public Interest Research Group, VT
Washington Citizen Action, WA
Washington Public Interest Research Group, WA
Western New York Committee for Occupational Safety and Health, NY
West Harlem Environmental Action, Inc., NY
West Virginia Citizen Action Group
Woodstock Institute, IL**
It is a simple stat to collect. It is collected state by state and available at the Dept. of Insurance. However, I don’t know if its available on the web. Since I’m now retired, I don’t have convenient access to various insurance trade publications, although a big city library would have some of them. E.g., Best’s Insurance Reports shows results by line of business for each company. One could check the profit or loss in med mal for those companies who write that line of business.
I’ve been studying, teaching and writing about insurance for 35 years, so it’s a challenge to condense it into a few posts. My guess is that most readers will lose interest. But, let’s begin.
There are several thousand insurance companies in the US. Most do not sell medical malpractice, because those who do tend to lose money. As I said, I retired last year from what had been the country’s #1 writer of med mal, St. Paul Insurance. They totally quit the business two years, because they had lost so much money and felt that the losses would continue.
Most insurance companies are either corporations or they are mutuals. The corporations seek to make a profit for their owners. The mutuals are owned by their customers. They’re something like a cooperative. Many or most of the current malpractice insurers are mutuals, so any profit would go back to their customers. They’re not seeking large profits; they just want to remain solvent. Many insurance companies have gone bankrupt due to medical malpractice insurance losses.
Malpractice coverage can be either occurrence or claims made. Let’s consider the former type. A physician or hospital buys an annual policy which will cover all occurrences that take place during that annual period. Noite that an injured patient may not file suit for several years. Then, it can take more years for the case to come to trial. At one point, the Chicago court system had a 5-year backlog. Then, appeals can add more years. In all, it may take 15 or 20 years or more for an insurance company to pay all the claims covered by a year’s policies. This is called the “long tail.”
In one way the payment delay is good for the insurance company. While they’re holding the premiums, they invest the money, mostly in bonds. Investment income supplements the premium income. In another way, the delay is bad. It makes it very, very dificult to project how much the claims for a year will ultimately amount to. Also, inflation will drive up the claims by an unknown amount. This combination of delay and rapidly increasing costs was deadly for many companies. They underestimated the necessary premium, but it took many years for them to discover how much money they had been losing. When they found out, it was too late.
Many claims end with a negotiated settlement, rather than have the trial determine the amount paid. The settlement negotiations usually take place during the trial or during trial preparation or during the appeal process, so even a settled claim can take many years to be resolved. However, to get a full cost accounting, one must include settled claims as well as adjudicated claims. Insurance company statistics are set up on this basis. They include estimated loss costs on pending claims. These are called “loss reserves.”
The ultimate profit equation compares
premiums + investment income
against
losses paid + loss reserves + expenses
I could go on. Should I? How many of you posters care about these details?
Fear Itself, that’s an interesting list. From the names, most of these groups are not directly controlled by plaintiffs’ attoneys, although I believe that they are deeply influenced by plaintiffs’ attoneys. I don’t have the wherewithall to investigate each group in order to prove it, though.