By Lorraine Woellert
Way back in 1975, doctors marched on California's statehouse and staged a sit-in over soaring malpractice-insurance premiums. Politicians responded with a landmark law that capped pain-and-suffering payouts to victims at $250,000--a measure that was copied in more than 20 states.
Now, premiums are spiking again, doctors across the country are walking off the job, and President George W. Bush is calling for legislation that would impose a California-like cap on malpractice awards nationwide. With Congress in Republican hands, the proposal is getting serious consideration.
But do caps on awards really keep doctors' insurance premiums down? Both sides in the debate--doctors and insurers fighting for caps, and trial lawyers and patients fighting against them--are waging a war-by-anecdote. But clear away the dubious studies, the exaggerated line charts, the hysterical press releases, and look at the numbers, and the statistical case for caps is flimsy. Here's what we found:
MYTH 1: Premiums have risen more slowly in states with caps on pain-and-suffering awards.
The White House, pro-tort-reform business groups, and insurance companies all note that states with caps on awards had average premium hikes of just 12% last year, while states without caps averaged a 44% premium jump. That puts a crimp on doctors, who have watched premiums compound for many years even as their incomes are squeezed by managed care. But the Administration's analysis is incomplete, omitting data from nearly a dozen states without caps, such as Vermont and Arizona, where premiums have stayed low. If those states had been included, the gap would have narrowed. Taken as a whole, capped states raised premiums an average of 12.7% last year; states without them saw premiums rise 20.4%, according to data provided by Chicago newsletter Medical Liability Monitor.
And if you go back a few years, the difference between states with caps and those without narrows more. In 2001, premiums went up 5.8% in the cap states, compared with 9.6% in jurisdictions without them. The year before, premiums actually rose more in states with caps (3.2%) than in states without them (2.7%)--a pattern that also held true in 1999 (2.12% vs. 0.54%). The bottom line: Caps might moderate premium hikes, but not to the extent that tort reformers claim.
MYTH 2: Runaway jury awards are forcing insurers to raise rates.
The size of damage claims paid out by physician insurers has been more or less steady since 1991, according to the National Practitioner Data Bank, a government service that tracks doctor errors and malpractice claims. The mean payout was $135,941 in 2001, up 8.7% from $125,000 a year earlier. Over 10 years, malpractice payouts have grown an average of 6.2% a year.
Guess what? That's almost exactly the rate of medical inflation: an average of 6.7% between 1990 and 2001, according to the Journal of Health Affairs. It's also worth noting that, nationwide, malpractice payouts by physicians and their insurers were a mere $4.5 billion in 2001--less than 1% of the country's overall health-care costs of $1.4 trillion. They have risen slowly, if steadily, since 1996, when the total was $3.5 billion.
MYTH 3: The number of mega-awards is growing.
It's the jaw-dropping award that spooks insurers. They claim malpractice payouts of $1 million and higher are becoming all too frequent, up by 7.9% last year. But the number of mega-claims remains small. Only 895 out of 16,676 payouts, or about 5%, in 2001 topped $1 million, up from 506 in 1996, according to government data.
Meanwhile, some states are finding that a small percentage of physicians accounts for the majority of big malpractice verdicts--which would indicate that the problem is a few bad doctors, not greedy tort lawyers. Officials in Nevada, which adopted a $350,000 cap last year, discovered that only two doctors were to blame for $14 million of the $22 million in claims awarded in one recent year. Both are still practicing.
MYTH 4: Courts are clogged with an exploding number of claims.
Claims against the industry as a whole have actually been flat since 1996 (chart). In Florida, a state insurers say is in crisis, medical malpractice claims rose just 3.7% from 1997 to 2000, according to the National Center for State Courts, a Williamsburg (Va.) research group. A broader as yet unreleased study of 17 states will show that filings remain stable, with an increase of about 5% from 1997 to 2001.
No doubt there are frivolous lawsuits out there. But there are also plenty of medical mistakes. A 1999 study by the federally funded Institute of Medicine found that 44,000 people die from hospital errors each year. And doctors, many of whom are covered by physician-owned mutual insurers, traditionally have been loath to sanction colleagues by denying them insurance. "We're getting more aggressive" at weeding out bad doctors, says Dr. Richard E. Anderson, chairman of Doctors Co., a Napa (Calif.) insurer that covers 28,000 physicians in all 50 states. But Anderson and other insurers refuse to document that claim by releasing their nonrenewal rates.
That makes it hard to tell if the profession is changing its culture. On this and many other key points, proponents of caps simply aren't coming up with the facts to make their case. Instead, they're relying on scare stories--always a bad starting point for making serious policy decisions. Woellert reports on legal affairs from Washington.