News And World Report Article Dispells Notion
That Verdicts and Lawyers Are Causing Physician
Malpractice Premiums to Rise
In its June 30-July 7 issue, U.S.
News and World Report discusses physician and
insurers' claims that malpractice awards are driving
up the cost of physician malpractice premiums. According
to this pestigious business magazine, "their
diagnosis may be wrong."
The article, written by author Christopher
Schmitt, reports that there is "no explosion
of cases that might drive up legal costs. The number
filed each year has remained fairly steady during
the past decade." Moreover, the article correctly
notes that two thirds of the cases that are filed,
are dropped before ever making it to a jury. Of those
that are tried, only a small fraction are in favor
of the patient.
0.9 percent of 5,500 cases surveyed
in the year 2002 were decided in favor of the patient
or plaintiff. The overwhelming majority were decided
in favor of the health care provider. According to
the Physicians Insurers Association of America, the
trade group for malpractice insurers which accounts
for about 60% of the market, the 0.9 percent is down
by half since the year 2000. Within that 0.9%, the
article reports that the number of payments that doctors'
insurers make following jury verdicts has held steady
in recent years, at around 400 annually.
The article also reports that doctors
and insurers also complain about the size of medical
malpractice awards. However, U.S. News found that
in 2002, the median jury award was approximately $295,000,
far below the $1million number that the American Medical
Association and others often cite.
U.S. News also reports that in the 19
states that have medical malpractice caps, the premiums
actually grew faster than in the nearly three dozen
states without caps. Although it is not clear what
is driving the costs of insurance higher, U.S. News
reports that chief among the forces driving those
costs is the usual business cycle of insurance. "Early
in the cycle, competition or a desire to expand encourages
low premiums. Later, losses clash with cheap rates,
forcing premiums up. In addition, the number of malpractice
insurers has declined, so there is less competition
to keep rates low."
Standard & Poors, a financial services
industry research firm says malpractice insurers'
loss ratio has been improving since 1998, and the
industry should soon return to profitability and strengthening
reserves. According to U.S. News, J. Robert Hunter,
insurance director of the Consumer Federation of America
has explained: "Doctors and insurance companies
are all saying it's the dastardly lawyers, [but] nobody
who really studies it seriously thinks it's a bunch
of million-dollar verdicts exploding that's causing
U.S. News points out that 17 years ago,
during an earlier malpractice crisis, florida legislators
enacted rules like those being pushed today.One malpractice
insurer, St. Paul Fire and Marine Insurance Company,
told regulators that the changes would mean no savings
in payouts and hence no rollback of premiums.
U.S. News quotes J. Robert Hunter "Caps
don't work to cut costs, and if they do, the money
just goes to insurance company profits."
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