Sunday, September 26, 2004
Blame trial lawyers for the malpractice mess
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Roth is a plastic and reconstructive surgeon in Roanoke and a former president
of the Virginia Society of Plastic and Reconstructive Surgeons.
Continuing his long-standing romance with militant Democratic politics, Tommy Denton, writing in the Sept. 5 Horizon section ("Trial lawyers and a 'crisis' misdiagnosed"), bobs and weaves through the facts to reach his flawed conclusion that the current medical malpractice crisis cannot be attributed to the trial lawyer contingent, exemplified by Denton's "champion of the little guy," North Carolinian John Edwards. Rather, Denton argues, it is "gouging" insurance companies whom the doctors should demonize.
Were Denton Charlie McCarthy himself, he could not better project the disingenuous self-serving whine of the trial lawyer lobby, perversely counterfactual and just plain wrong.
It is a real crisis, not a "crisis." National media attention focuses weekly on state after state in which trauma centers are thinly manned, obstetrical care is unavailable, surgical specialists demur on treating high-risk patients and doctors march on state capitols.
The current tally is 20 states in full crisis mode, with virtually all states having some serious access problems like the sparse obstetrical care in rural Virginia that has engaged the interest of Gov. Mark Warner.
Today, 40 of Virginia's 134 localities are designated as health professional shortage areas, and another 22 localities have pockets of underserved areas.
While in the Old Dominion not all of that can be attributed to malpractice-premium sticker shock alone, it is telling that 2003 was the first year the University of Maryland Medical School graduated no obstetrical candidate, and that John Hopkins failed to fill its residency slots for obstetrics on the first round.
Has the specialty lost its appeal in the wake of runaway litigation against obstetricians? Sen. Edwards?
The number of "frivolous lawsuits" and "extortionate awards by runaway juries," Denton wrote, is "wildly exaggerated."
On any given day, 120,000 malpractice suits are pending in the United States. For high-risk specialties like neurosurgery, obstetrics, trauma surgery, emergency medicine and my specialty, plastic and reconstructive surgery, more than 30 percent of us are sued yearly. Approximately 70 percent of those claims are closed with no payment to the plaintiff, but each one costs an average of $22,967 to defend; the math is staggering.
Moreover, those figures speak only to the frequency of claims. The rubber hits the road when severity is factored in.
Jury Verdict Research of Horsham, Pa., reports the median malpractice verdict has doubled to $1 million between 1997 and 2000. The Physician Insurers Association of America reports that mean payouts have increased by 75 percent since 1995, and the incidence of million-dollar or greater payouts has doubled since 1997. Pennsylvania has had multiple judgments in excess of $50 million, and New York and Pennsylvania paid nearly $1 billion in malpractice indemnity in 2000. $1 billion. Hyperbole not required, thank you.
"Insurance companies have had a terrible rate of return in the last few years from their investment income...," Denton also wrote.
The insurance industry is regulated by individual states' approval mechanisms for premium increases, and overseen by national rating agencies assessing their investments. For the decade ending in 2001, insurers averaged an investment return of 10 percent of premium.
True, with declining interest rates and falling bond yields in the new millennium, investment income has declined. But I could find no evidence of any medical liability company that has experienced investment losses beyond investment income. Most have at least 80 percent invested in bonds, and less than 10 percent in the more volatile stock market.
Even the Government Accountability Office says that annual investment returns for the nation's 15 largest malpractice insurers dropped by an average of only 1.6 percentage points in 2001. "Terrible"? Hardly.
Furthermore, indirectly arguing that obligations to shareholder equity is a factor in the doctor gouging fails to acknowledge that more than 60 percent of medical liability carriers are now physician-owned mutual companies. They are not beholden to stockholders, but rather to the doctors themselves, who plug investment profits into subsidizing their own premiums - yet the premiums still continue to rise.
Moreover, the landmark decision by St. Paul Insurance Co. to cease offering malpractice insurance came in the wake of approximately $1 billion in malpractice claims losses in 2001, not investment losses; St. Paul's CEO questioned whether medicine itself was any longer an insurable risk.
"States with caps on noneconomic damage awards... saw insurance premiums rise 48 percent," Denton wrote in arguing that caps are not the answer.
The plain truth about his examples from New Jersey and Missouri is that their caps were cosmetic. Even the Congressional Budget Office stated in January that the causes of rising premiums are increasingly higher payments for increasingly higher claims.
The simple matter is that caps on noneconomic damages not only must be set at $250,000 to be effective (lower than either of those two states. More important, they must be part of a multipoint - not a piecemeal - approach.
A full discussion of such a successful program is beyond my space limitations. But by limiting contingency fees, forcing insurers to open their books, establishing a patient compensation fund, enacting a collateral source rule, providing for periodic payouts and electing, not appointing, a state insurance commissioner, we might be able to batten down rates against the harmful storm surge of unrestrained litigation.