According to some, tort reform is the answer to skyrocketing medical costs. Capping any monetary compensation patients can recover after suffering medical mistakes will keep health care costs in check, they say, since medical malpractice lawsuits result in ever-increasing medical malpractice insurance costs.
Well, not according to a recent report in the April issue of Medical Liability Monitor. Year-end results for 2014 show insurers that specialize in medical professional liability coverage experienced yet another year of strong profits, marking the eleventh consecutive year of positive operating profit. As a former federal securities prosecutor, I always found a company’s financial records insightful to see if their rhetoric matches their books.
Analysis Shows $14.4 Billion Policyholder Surplus
The Medical Liability Monitor has been following financial results for a composite of medial liability insurers for five years, now, and publishing quarterly results. The data they use dates back to 2002, and is provided by SNL Financial.
Though the end-of-the-year results for 2014 show that premiums declined for the eighth straight year, the declines were not enough to affect profits, which remain “consistently strong.”
“Eleven-consecutive years of profitability has helped accumulate more than $14.4 billion in policyholder surplus as of December 31, 2014,” the researchers wrote, “almost tripling the $5 billion held at the end of 2002.”
No Clear Evidence Tort Reform Works
Despite the evidence that medical malpractice insurers are doing just fine, there is a myth out there that rising premiums are the result of high jury awards. Yet according to the Insurance Information Institute, growth in medical malpractice costs since 2005 have averaged less than 0.5 percent annually.
A 2011 study of medical malpractice claims showed that 78 percent of all claims resulted in no payment to the claimant, while an annual report from the Ohio Department of Insurance showed that total claims had actually decreased from about 5,000 in 2005 to about 3,000 in 2011.
In 2004, a report by the Congressional Budget Office (CBO) noted that medical malpractice claims make up only two percent of healthcare costs in the U.S. “Even large savings in premiums can have only a small direct impact on health care spending—private or governmental—,” they wrote, “because malpractice costs account for less than 2 percent of that spending.”
In 2006, the CBO noted that “previously published estimates of the effect of proposed tort limits on federal spending vary widely,” stating that in some cases, tort limits seem to reduce healthcare spending, but in other cases, they have no affect at all, and can even result in higher spending.
As to whether medical malpractice lawsuits encourage doctors to practice “defensive medicine,” ordering more tests than necessary to cover their backsides in court, the CBO stated that “evidence for those other effects is weak or inconclusive.”
Increasing Safety Needs to be the Focus
Any caps on medical malpractice lawsuits denies victims reasonable compensation for injuries caused by doctor error—errors that result in an estimated 210,000 to 400,000 deaths in hospitals every year, according a 2013 article in the Journal of Patient Safety. Such numbers put medical errors in third place when it comes to causes of death in the United States.
“The epidemic of patient harm in hospitals must be taken more seriously if it is to be curtailed,” the researchers wrote.
In fact, some hospitals have seen significant decreases in medical malpractice claims when they focus on increasing patient safety. In 2002, for example, the New York Presbyterian Hospital implemented a new safety program in obstetrics. According to a report in the American Journal of Obstetrics and Gynecology, the result was a 99 percent drop in malpractice claim payments, or $25 million a year.
Exclusively focused on representing plaintiffs, especially in mass tort litigation, Eric Chaffin prides himself on providing unsurpassed professional legal services in pursuit of the specific goals of his clients and their families. Both his work and his cases have been featured in the national press, including on ABC’s Good Morning America.