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Soaring Malpractice Premiums Bleed Doctors, Rob Consumers

January 1, 2002
By Vicki Lankarge

Skyrocketing medical malpractice insurance premiums are wreaking havoc in communities throughout the United States.

stethoscope and insurance docs


Skyrocketing medical malpractice insurance premiums are wreaking havoc in communities throughout the United States.

In Beaumont, Texas, for example, the Texas Medical Liability Trust has increased its medical liability rates for all specialists a whopping 120 percent since 1999. It has become so bad in Beaumont that the Texas Medical Liability Insurance Association—the insurer of last resort for doctors with previous malpractice claims against them—is charging individual neurosurgeons upwards of $176,000 a year for a policy that caps malpractice payments at $1 million per occurrence with an overall total cap of $3 million per policy year.

The result? There is only one practicing neurosurgeon left in Beaumont.

"This is a scary thing," says Kim Ross, vice president of the Texas Medical Association. "What if a patient has a car wreck, needs a neurosurgeon, and there's none available? It's an hour to Houston. That 'golden hour' [when treatment is most beneficial] is lost."

It's not any better in Pennsylvania, where 72 percent of doctors polled by the Pennsylvania Medical Society say they have deferred purchasing new equipment or hiring new staff due to sudden, steep increases in their medical malpractice insurance premiums. After absorbing increases between 21 and 60 percent for those premiums in 2001, doctors fear their rates in 2002 could jump another 70 percent.

The society says the hefty sums awarded in malpractice lawsuits are driving doctors' medical liability premiums through the roof. Pennsylvania ranks second among states in terms of total payouts for medical litigation; New York is No. 1. (See accompanying chart.)

"The numbers are off the charts," says Dr. Howard Richter, the Pennsylvania Medical Society's president. "Combined judgments and settlements for fiscal year 2000 amounted to $352 million—roughly $30 per state resident and nearly 10 percent of the U.S. total."


Jump in Jury Awards

Jury awards for medical malpractice claims jumped 76 percent from 1996 to 1999, according to the latest edition of "Current Award Trends in Personal Injury" by Jury Verdict Research.

As a result, many doctors and patient advocates in states that don't have laws to limit the dollar amount of jury awards fear that increasingly large verdicts threaten their health care system by driving up medical malpractice insurance premiums.

To fend off litigation and cope with steep premiums, doctors ultimately are being forced to take defensive measures, such as:

  • Practicing defensive medicine by ordering additional, sometimes unnecessary, medical tests. Insurers may be reluctant to pay for them, but doctors want them in order to protect themselves from lawsuits. According to the Quarterly Journal of Economics, such "defensive medicine" adds $50 billion per year to the nation’s overall health care spending.
  • Deferring the hiring of new staff, or even downsizing staff, sparking patient backlogs and making it difficult for patients to get timely appointments.
  • Ceasing to practice certain high-risk specialties, such as obstetricians/gynecologists who stop delivering babies because the threat of patient litigation is so high. Richter cites one obstetrics/gynecology group where insurance premiums nearly tripled in 2001 to $1 million. When two of their seven physicians stopped delivering babies, their rates were cut in half.
  • Moving their practices to regions with lower medical malpractice insurance costs, or stopping the practice of medicine altogether. Regions with high liability costs may have difficulty attracting new doctors, creating a lack of consumer choice of physicians.


Situation Critical in Pennsylvania

Pennsylvania is one state reeling from the effects of the rise in jury awards for medical malpractice claims. Although the state does cap punitive damages, it does not limit "non-economic" jury awards, including damages assessed by juries for "pain and suffering," by far the most common type of jury award.

In 2000, Pennsylvania's doctors and other health care practitioners paid $372 million in total lawsuit judgments, according to research conducted by the state's medical society. That figure ranks second only to New York's approximately $633 million in aggregate medical malpractice lawsuit judgments in 2000.

As a result of Pennsylvania's liability crisis, patients are suffering, according to the Pennsylvania Medical Society. A recent survey of the society’s member doctors discovered that more than 90 percent of them are practicing defensive medicine to avoid lawsuits.

There seems to be no limit to the skyrocketing jury awards, says Pennsylvania Medical CAT Fund Director John Reed. "There used to be a gentleman's agreement that lawyers wouldn't go after an award larger than a physician's liability coverage," he says. "Now the gloves are off."

But trial lawyers argue that frivolous lawsuits and large jury awards are not to blame for the health care crisis in Pennsylvania—or any other state.

"Medical error is the 8th largest killer in the United States," says Mark Phenicie, legislative counsel for Pennsylvania Trial Lawyers. "Juries award large medical malpractice settlements in only the most egregious cases. These kinds of lawsuits are not frivolous. If there wasn't a malpractice that happened initially, there wouldn't be a malpractice case or malpractice verdict."

The consequences of the take-no-prisoners approach to jury awards has caused malpractice insurance premiums to shoot up, particularly in the Philadelphia area, where Reed says trial lawyers are deeply entrenched and juries generous. The average annual practice insurance premium for a Pennsylvania physician in 1998 was about $35,000, according to the American Medical Association; Reed says a Philadelphia-area obstetrician is now paying upward of $87,000.


Vicki Lankarge writes for insure.com, the Consumer Insurance Guide.

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