Editore"s Note
Tilting at Windmills

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June 8, 2003
By: Kevin Drum

MEDICAL MALPRACTICE REDUX....Based on some of the comments to my post below about medical malpractice, I just want to make few additional miscellaneous remarks:

  • The overall rate of growth of malpractice payouts over the past decade has been less than the rate of medical inflation. Since this includes all payouts, including big ones, the insurance industry really has no basis for an overall complaint about skyrocketing damage awards.

  • Some states have high payout levels, but by itself that may not mean much. Some states are just more expensive than others, and as long as their growth rate is in line with inflation, there's no real crisis. Likewise, some states have high growth rates of payouts, but sometimes that's because their payout rate a decade ago was extremely low. If high growth is only bringing a state up to the average level, that's not necessarily a danger sign either.

    If you have both high payouts and a high growth rate, however, that's almost certainly a danger sign. Delaware appears to be in a class by itself on this score.

  • There was tremendous competition in the malpractice insurance market in the 90s, with many companies pricing coverage at well under market rates. When this bubble burst and companies exited the market in droves, rates went up dramatically. However, that doesn't necessarily mean that there's anything wrong with the court system, it just means that doctors now have to pay the rates they should have been paying all along. That's painful, but it's hardly a reason to beg for government-mandated payout caps.

Payout caps are not a black and white issue, and the important thing is to understand the costs on both sides. Even if caps do hold down awards, it's also true that they prevent some seriously injured people from collecting reasonable damages. Is $250,000 enough for someone who's paralyzed for life? To most people that seems patently unfair, and it's not at all clear that results like that are worth the rather moderate effect on overall rates that caps produce. There are some cases where large awards are warranted, and caps prevent judges and juries from making equitable judgments in these cases. Is that fair, even if it does save some money?

Overall, I'm not very sympathetic to the argument for caps, especially since insurance companies routinely refuse to commit to limits on premiums in return for getting them. And it doesn't make things better that the loudest argument in favor of them is "frivolous lawsuits," a complete red herring.

In fact, it almost seems to be a law these days that the most effective argument for something is the very argument that has the least real value to it. I wonder if this has always been the case?

Kevin Drum 10:16 PM Permalink | Trackbacks

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