Wednesday, July 30, 2008

Why do medical malpractice premiums increase?

Caps on non-economic damages for medical malpractice cases simply do not work.

What would work is disciplining bad doctors . . . read on . . .

Multiple independent studies have concluded that caps on non-economic damages in medical malpractice cases do not prevent increases in medical malpractice premiums. According to Weiss Ratings, Inc., the nation’s leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks, caps on non-economic damages have failed to prevent sharp increases in medical malpractice insurance premiums, even though insurers enjoyed a slowdown in their payouts.

Weiss identified six factors driving the increase in medical malpractice rates, each of which may be exerting a greater impact on premiums than the presence or absence of caps:

  • The medical inflation rate: Medical costs have risen 75% since 1991.

  • The insurance business cycle: The property and casualty industry suffered a 12-year "soft" period through 1999, during which marketing goals often superceded prudent underwriting practices and decision-makers typically relied too heavily on high investment income to make up for losing operations. In an attempt to catch up, insurers have tightened underwriting standards and raised premiums.

  • The need to shore up reserves for policies in force: Med mal insurers have been consistently under-reserving since 1997—to the tune of $4.6 billion through December 31, 2001. The only way to shore up reserves is to increase premiums.

  • A decline in investment income: Investment income declined by 23 percent in 2001 and then another 2.5 percent in 2002, which is particularly critical for lines of business like med mal since the duration of claims payouts typically spans several years.

  • Financial safety: Based on the Weiss Safety Ratings, 34.4 percent of the nation’s med mal insurers are vulnerable to financial difficulties, compared to 23.9 percent of the property and casualty insurance industry as a whole. To restore their financial health, many med mal insurers will remain under pressure to increase rates despite new laws to cap payouts.

  • Supply and demand for coverage: The number of med mal carriers increased through 1997 to 274, but has since fallen to 247 in 2002.


So, why is the state of Illinois trying to establish caps on medical malpractice cases? I am a card carrying conservative Republican, but why is President George W. Bush pushing for caps and tort reform?

I was injured by an Illinois orthopedic surgeon (Dr. Chris Dangles). Doctors protect Dr. Dangles. The civil justice system is designed to protect against frivolous medical malpractice cases. The Illinois General Assembly, Governor Blagojevich and the AMA are advocating for caps on non-economic damages.

But if the same injuries I received as a result of my surgeries by Dr. Dangles were caused by a motor vehicle accident . . . there would be no limit to the non-economic damages. Why should it matter how the damage was caused?

Why should a surgeon causing the damage result in less pain and suffering than if the damage was caused by an auto accident?

Hmmm. That's a poser.

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