Medical Malpactice Costs - They're Lower Than You Think

There's a supposed healthcare crisis with regard to medical malpractice costs. However, the facts don't seem to support the idea of a crisis. For example, total healthcare expenditures in 2001 were $1.42 Trillion dollars. Medical Malpractice expenditures were $7.3 billion - less than one half of one percent of medical expenditures. (From 2001 US Census) That one half of one percent figure doesn't sound like a crisis to me. But, let's assume that it is. How would we fix it?

Well, not by enacting tort reform; just ask the VP of State Farm:

"[W]e believe the effect of tort reform on our book of business would be small. ... [T]he loss savings resulting from the non-economic cap will not exceed 1% of our total indemnity losses." - Robert J. Nagel, Assistant VP State Farm

State Farm isn't alone, either. In Florida, a $450,000.00 cap on noneconomic damages was put into effect. Aetna then analyzed their previous malpractice payouts to determine whether the new cap would be able to lower their costs. Here's what Aetna had to say: "[T]he review of actual data submitted on these cases indicated no reduction of cost."

OK, so State Farm and Aetna don't think that tort reform lowers costs or premiums. Let's keep looking to see if any insurance company does.

In the eighties, Washington state enacted some of the most draconian tort reform ever in an attempt to lower malpractice premium rates. Did it work? Not according to General Accident Insurance Company (GAI), one of the largest malpractice carriers in Washington state. GAI said this immediately after the legislation they lobbied for took effect:"Given that liability losses constitute such a low proportion of business owners' losses, GA feels it is prudent to continue with its original proposal of a 10 percent increase in base rates."

Just in case you missed it. GAI raised insurance rates right after tort reform took effect because liability lossed constituted such a "low proportion" of their costs. Allstate was even worse: "[O]ur proposed rate would not be measurably affected by the tort reform legislation." Allstate then wanted to raise rates by a whopping 22%! Thankfully, the Washington Supreme Court ruled the tort reform laws to be unconstitutional in 1987.

Will tort reform lower malpractice caps? No. Ask the insurance carriers - they'll tell you! And so will their trade groups:

"We wouldn't tell you or anyone that the reason to pass tort reform would be to reduce insurance rates." - Sherman Joyce, President of the American Tort Reform Association.

The only sure way to lower malpractice premiums is to regulate the insurance industry to cap premiums.

Comments

[Jeff]

Anyone can make a case using correlation data. Unfortunately that does not make a complete explanation.
Healthcare costs may be $1.42 tillion, and malpractice costs (note: not payouts, just premiums and deductibles) may be $7.3 billion. Here's the breakdown. Hospitals eat up most of Healthcare costs. Pharmacies also add a great deal of costs to the total. I could go through and break down each part of the Healthcare tree; that would be long and rather boring reading. To make my point much shorter than it could be: Malprectice costs make up roughly 50%-90%!!! of Doctors costs. Malpractice insurance companies are going bankrupt from payouts of cases rising to over $250 million!!! Medical Tort reform does not limit the amount of money for economic loss (salary lost including future salary, medical bills, medical housing renovations such as wheelchair ramps and support bars, etc...) it puts a cap on non-economic costs such as pain and suffering. A good amount of states have limited these awards to amounts of $750,000, $450,000, or $250,000. $1 million+ awards still happen in these states, but within reason. Something to think about.

[Jeff]

One more point. The point was made that tort reform has not made a difference to insurance companies. I find that a weak claim considering the seemingly, anit-corperation stance of this wesite. Don't get me wrong; I don't mean that this site wants to destroy corperations or wants them to go away. I simply mean that the site, and most of America, does not want the corperations to receive unfair advantages. Back to my point. Supporting data used by this site is from MAJOR insurance companies. The Big Dogs. Companies that don't bat an eyelash at millions of dollars losses. What about the smaller companies? The ones that offer competing rates to Doctors and smaller hospitals. How has/would tort reform effect them? Don't punish the little guy.

[creditmonitoringsucks]

That is exactly who you are talking about punishing really.

The avg patient makes a significant amount less than their doctors do.

So exactly who is the little guy in your opinion?

Until the medical boards do a better job of policing the quacks I see no reason for CONSUMERS to give up rights to BUSINESSES.

And what you are talking about are businesses are you not? Doctors are not little guys they are businesses.

Since when is business more important than the individual?

See when you have completely devestated a families entire life quite frankly a million dollars isn't worth spit really. Especially NOT in today's economy when a single child graduating in the year 2018 educational bills are projected at almost 1/4 of that.

And most people given their choice would rather have their loved one back.

[Jeff]

Doctors should be limited to $20,000 a year. They should only make enough to barely survive by themselves. In fact, they shouldn't be able to support the families that they never get to see because they are on call 24/7 and always have to go to the hospital to attend to someone's emergency. Down with doctors. We should round them all up and put them in camps. The national public can take care of themselves. In fact, we were all alot better off before doctors were around. Doctors always hurt people and always do the wrong things. They make way more money than they deserve. They are corporate America. All their money should go to other people who need it more. Those without jobs. Add it to the welfare total. In fact, lets raise medical school costs. It wouldn't take much to reach $1 million debt for med students. The average is already 300 - 400 thousand dollars.

[creditmonitoringsucks]

You are making blanket hyperbole Blah!

If you hurt someone you should pay plain and simple.

If you make someone dead through careless error you should pay.

It really is that simple...........

If you think the 5% who cause 50% of the payouts should NEVER be disciplined and should never have to pay, then who is going to provide real disability payments for those people with tort reform?

After all if a person is damaged beyond repair do you not think they bear any responsibility for that?

[Ted]

This post is incorrect. The Department of Health and Human Services has estimated medical malpractice expenses to be approximately $100 billion/year. See the medical section of pointoflaw.com for more information.

[BRET SCHNITZER, ATTORNEY]

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