New 2002 Government Data Dispute Malpractice Lawsuit "Crisis"
Originally Published on Citizen.org

Malpractice Payouts Declined as Insurance Premiums Spiked; 5.2 Percent of Doctors Are Responsible for 55 Percent of Malpractice Payouts

WASHINGTON, D.C. – New government data show that both the number and amount of payments to medical malpractice victims declined in 2002, casting further doubt on the assertion that lawsuits are responsible for doctors’ insurance premium increases.

The number of medical malpractice payouts decreased by 8.2 percent, from 16,669 in 2001 to 15,304 in 2002, according to a Public Citizen analysis of new National Practitioner Data Bank (NPDB) records for last year. The total damages paid to victims declined by 6.9 percent, from $4.5 billion in 2001 to $4.2 billion in 2002, the analysis found. When adjusted for medical services inflation in 2002 the decline was even more dramatic – 11.2 percent. The cost of medical care typically represents the greatest cost in a medical malpractice payout.

The number of awards greater than $1 million decreased by 11.5 percent, from 454 in 2001 to 402 in 2002. The data bank, a U.S. government agency, collects reports of every judgment or settlement paid to malpractice victims throughout the country by insurance companies on behalf of doctors.

The U.S. Senate is expected to vote Wednesday on legislation that would significantly limit patients’ ability to hold medical providers accountable for negligence. The bill, S. 11, would arbitrarily cap the amount of non-economic damages available to malpractice victims at $250,000, which would penalize those most harmed by doctors and other health care providers.

The bill’s proponents claim that malpractice insurance rates are rising because of malpractice awards to patients, but all available data show that the legal system has no impact on insurance rates. Rather, insurance rates are tied to investment returns from the bond and stock markets and to the competitive economics of the insurance cycle.

"It’s clear from these numbers that the insurance premium increases over the past year are not tied to lawsuits," said Joan Claybrook, president of Public Citizen. "The only thing that correlates with the premium increases is the decline in malpractice insurers’ investment income."

The mean payment per malpractice victim increased by just 1.4 percent in 2002, lagging behind the increase in health care inflation of 4.8 percent during that year for an inflation-adjusted drop of 3.3 percent. Both consumer advocates and the insurance industry have pointed to heath care inflation as a major factor in pushing up malpractice awards in recent years.

"Given increasing health care costs, the decline in damages awarded means that malpractice payments are becoming an even more miniscule portion of the nation’s overall health care costs," Claybrook said. In 2000, the total premiums paid for malpractice insurance constituted 0.56 percent of all health care expenditures.

According to Public Citizen’s analysis of NPDB data, a small percent of doctors are responsible for more than half of all malpractice payments, yet disciplinary actions (license suspension or revocation, or a limit on clinical privileges) for these doctors have been few and far between. The data showed that:

* Just 5.2 percent of doctors made two or more malpractice payouts and were responsible for 55 percent of all payouts between 1990 and 2002. Just 1.1 percent of all doctors have made three or more malpractice payouts, amounting to 30 percent of all malpractice payouts.

* Only 10.7 percent (1,401 of 13,182) of all doctors who made three or more malpractice payouts have been disciplined. Only 16.9 percent (488 of 2,896) of those doctors who made five or more malpractice payouts have been disciplined.

"The American Medical Association says that 100 doctors were put out of business last year in West Virginia because of rising medical malpractice insurance rates, yet the damages paid out in West Virginia dropped by 31 percent during the same period. If that $15 million in savings didn’t help, how would damage caps solve the problem?" Claybrook asked.

Other Facts:

* Insurance companies are paying victims of medical negligence on average approximately $30,000. Average payouts have stayed virtually flat for the last decade.

* Medical malpractice costs, as a percentage of national health care expenditures, are at an all time low, 0.55 percent.

* According to the National Center for State Courts, there has been no change in the volume of medical malpractice cases in the last five years.

* Among the 19 states with caps, only two of the states, or 10.5 percent, experienced flat or declining med mal premiums. In contrast, states without caps were actually better able to contain premium rate increases, with six, or 18.7 percent, experiencing stable or declining trends.

* Malpractice insurance costs amount to only 3.2 percent of the average physician's revenues.

* If you are a 20-year-old who ends up confined to a bed by medical malpractice, and you live out an average life expectancy (to 76 years old), $250,000 translates to $12.20 a day (or less than two weeks' salary for the CEO of a medical malpractice insurer).




Definitions:
"DPW" or "Direct Premiums Written" = the amount of money that insurers collected in premiums from doctors during that year.

"Paid Losses" = what insurers actually paid out that year to people who were injured - all claims, jury awards and settlements - plus what insurance companies pay their own lawyers to fight claims.

Conclusion:
Premiums charged do not track losses paid, but instead rise and fall in concert with the state of the economy. When the economy is booming and investment returns are high, companies maintain premiums at modest levels; however, when the economy falters and interest rates fall, companies increase premiums in response. In other words, insurance companies raise rates when they are seeking ways to make up for declining interest rates and market-based investment losses.