The rhetoric has been escalating in the battle between doctors and lawyers over the problem of soaring medical malpractice insurance premiums. “What’s behind this?” asked a former American Medical Association president last year. “Excessive awards in liability suits. More and more, America’s courtrooms are becoming casinos for jackpot justice… In short, a few lawyers may get rich, while a lot of us may get sick.”
“Corporate America and its lobbyists are working hard to reduce wrongdoers’ liability when their actions cause injury and death to innocent American children and families,” fires back the Association of Trial Lawyers of America.
In North Carolina, doctors and their insurance companies are urging the legislature to pass a $250,000 cap on “non-economic” damages in malpractice cases as a fix for spiking premiums; currently, juries can determine how much victims should receive for such damages, which include the proverbial “pain and suffering” and “emotional distress.” The Bush administration is backing similar federal legislation, which passed the House last year.
The primary arguments for caps in North Carolina and elsewhere have been almost entirely anecdotal: A Raleigh ob/gyn, John Schmitt, whose premiums increased from $17,000 to $46,000 in one year, prompting him to give up his practice and take a faculty position at the University of Virginia; nine judgments in excess of $3 million last year, a record number, with one case going for $15 million; a physician in Allegheny County who stopped delivering babies to reduce her insurance, leaving only one delivery-qualified obstetrician in the entire county.
Seizing the moment in a way that tends to reinforce their image as opportunistic sharks, trial attorneys have countered with a high-profile anecdote of their own. Caps, they say, would be an injustice to the family of Jésica Santillán, whose botched heart-lung transplant made national headlines.
Sensational examples are a time-honored tool for tort reform efforts, made famous by the McDonald’s spilled-coffee lawsuit, which yielded a multi-million dollar verdict and became Exhibit A in the case against a legal system spiraling out of control. Such stories make great soundbites, but they obscure the truth. Santillán makes a weak case for unlimited non-economic damages, heart-tugging as her story may have been; in particular, her life expectancy was very short even under the best of circumstances.
And the examples cited by the proponents of a cap hold little water under the microscope: The argument that physicians are being driven out of the state by outrageous premiums, for instance, conflicts with information provided by the Sheps Center for Health Services Research at UNC, which shows a steady increase in the number of physicians serving the citizens for the past two decades — and at a slightly faster growth rate than the general population. The same is true for ob/gyns, who along with neurosurgeons pay the highest premiums. Medical Mutual Insurance Company of North Carolina, the largest malpractice carrier in the state, says on its own telephone hold message that “Premium rates in North Carolina are among the lowest in the country.”
Hardly the stuff of a crisis, as the AMA and cap advocates contend.
At the same time, no one disputes that malpractice premiums have been increasing at an alarming rate the past couple of years, here and everywhere else. The tales of huge rate hikes are not confined to the cap debate. “We’ve been hearing the same things,” says Chrissy Pearson, spokeswoman for the state Department of Insurance.
The why of rate hikes, however, is a fuzzier question. Arguing cause and effect has been largely a matter of faith for both sides. The doctors point to huge jury verdicts, but the figures don’t support the conclusion. Most of the large awards for non-economic damages have been settlements, not jury awards–only two of the last 16 awards exceeding $1 million came from juries. And while historical jury decisions do drive settlement terms, they’re only part of the equation. Moreover, according to Medical Mutual senior vice-president and general counsel David Sousa, his company’s average claims payout in 2002 actually decreased from the previous year by almost $100,000.
Focusing on jury awards also ignores the many complex factors that go into rate hikes. The single most dramatic development in recent years affecting rates in North Carolina, for example, was the pullout of one of the major players, St. Paul Companies, from the malpractice market in 2001. Doctors covered by St. Paul (which had a high percentage of the state’s ob/gyns on its roster) had to find new carriers. None of the remaining companies in North Carolina would provide “tail coverage,” an expensive provision that protects doctors from past malpractice. So the doctors had to get tail coverage from St. Paul on top of their new malpractice insurance, which in many cases blew the lid off their premiums.
Former Raleigh ob/gyn John Schmitt, whose case was invoked by President Bush as an example of why caps are needed, was one of the St. Paul casualties.
For their part, the lawyers blame malpractice premium hikes on the insurance companies, saying that the underwriters are jacking rates to cover investment and other corporate losses. They also say that doctors should be charged according to their experience–the more claims they have against them, the more they should pay. “By failing to adjust premiums based on performance, the current system does not allow the market to promote good medicine,” states a fact sheet produced by the North Carolina Academy of Trial Lawyers.
Sousa calls those charges bunk. The company has performed well the past several years even in a tough economy, he says. And the company does charge doctors and healthcare facilities according to their claims history. “I don’t know where they’re getting their information that we do not experience-rate,” Sousa says. “The only way that [we have] ever charged a doctor is through experience rating.”
That may be, but that still doesn’t help explain the anecdote–offered by both sides–about the doctor with no claims experience whose rate jumps by 50 percent or more in a single year. In fact, it’s impossible to know how individual premium rates are calculated by looking at the public records at the state Department of Insurance. Companies set a base rate for various specialties, then apply a host of variables that may or may not include a doctor’s claim history. “There is no way to track those numbers,” confirms DOI spokeswoman Chrissy Pearson.
And those numbers may be at the heart of the answers. Medical Mutual’s base rate increase this year ranged from 12 to 14 percent after several years of only single-digit increases that kept pace with the inflation of healthcare costs, a far cry from the screaming hikes cited by doctors as the reason for lawsuit reform.
The question of whether the suggested fix would solve the problem is also open to debate. California, which supporters tout as an example of how the reform worked, passed the first cap in 1975 that became the model for legislation in other states. But after an initial drop, malpractice insurance premiums in that state increased by 190 percent between 1976 and 1988, and only flattened when voters passed an insurance reform. Data on states that have caps, versus states that don’t, show no clear correlation between caps and lower malpractice rates.
Getting a handle on the numbers and other nebulous facts–a step that some legislators say will have to happen before any dramatic changes are made–seems to be in order. At this point, there’s little evidence of a crisis in North Carolina, no indication that juries here are out of control, no clear rationale for a $250,000 figure, and conflicting data on the effect of caps elsewhere. The case for a cap has simply not been made.
The focus on runaway juries and greedy lawyers is remarkably similar to the tenor of similar debates in 1986 and 1995, which resulted in tort reforms that were supposed to fix some of the same problems. Today, attorneys filing malpractice cases against physicians have to get another doctor in the same specialty to certify negligence and agree to testify. Frivolous suits can be punished. Punitive damages are already capped. Barriers to unreasonable lawsuits already exist.
And the one group lost in the latest permutation have been the injured patients, whose stories are the most compelling of all. Measuring the pain and suffering of a patient who, as a result of malpractice, has died or been permanently maimed or is unable to speak or function without assistance is indeed a subjective task. Does $250,000 cover that loss? Sometimes yes, sometimes no. That’s what juries are for. 
Contact Burtman: burtman@indy week.com
