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Tilting at Windmills

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February 27, 2006
By: Kevin Drum

NO MORE CRISIS....Good news! The medical malpractice "crisis" is over. The fine folks at Americans for Insurance Reform have tabulated recent increases in malpractice premiums and found that after the big upsurge of a few years ago, rates aren't going up anymore:

Contrary to the medical and insurance lobbies message that medical malpractice lawsuits and claims were to blame for the increase in insurance rates the fact is that in 2001, commercial property insurance rates jumped across the board. In other words, rate hikes for doctors were only a small part of a much larger insurance problem that affected homeowners, motorists and all kinds of policyholders.

....These kinds of volcanic eruptions in insurance premiums have occurred three times in the last 30 years in the mid 1970s, again in the mid-1980s, and then again following the year 2001. The cause is always the same: a severe drop in investment income for insurers compounded by underpricing in prior years. Each time, insurers and the health care industry have tried to cover up their mismanaged underwriting by blaming lawyers and the legal system. To buy this position, one would have to accept the notion that juries engineered large jury verdicts in the mid-1970s, then stopped for a decade, then engineered large verdicts again in the mid-1980s, stopped for 17 years and then did it again beginning in 2001 only to stop once again. Of course, this is ludicrous and untrue.

They also found no correlation between rate increases and imposition of caps on damages. No surprise there.

Kevin Drum 8:54 PM Permalink | Trackbacks | Comments (65)

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Comments

wait. that can't be true. for if it was, then that would mean that the "conservatives" who claim malpractice is the problem and award caps are the solution are full of shit. and that just can't be true. they seem so confident!

Posted by: cleek on February 27, 2006 at 9:08 PM | PERMALINK

Missing the point again. Malpractice premiums don't factor in defensive medicine.

Posted by: mcA on February 27, 2006 at 9:19 PM | PERMALINK

By the way if that chart is right - there was a 36% increase in malpractice premiums (not compounding) in 1 year.

Anyone telling you that has no effect on medicine is a liar.

Posted by: McA on February 27, 2006 at 9:25 PM | PERMALINK

move those goalposts! move em quick!

Posted by: cleek on February 27, 2006 at 9:26 PM | PERMALINK

By the way if that chart is right - there was a 36% increase in malpractice premiums (not compounding) in 1 year.

Anyone telling you that has no effect on medicine is a liar.

What about a person who tells you that premiums went up because of high jury awards that didn't exist? Are you willing to call that person a liar?

I'm sure that some (maybe even a lot) of doctors tried to control their rising premiums by practicing defensive medicine. Problem is, because the rising premiums had nothing to do with malpractice claims, practicing defensive medicine did them about as much good as sacrificing a live goat in the name of Ba'al would have.

Posted by: Mnemosyne on February 27, 2006 at 9:31 PM | PERMALINK

By the way if that chart is right - there was a 36% increase in malpractice premiums (not compounding) in 1 year.

Good point Aristotle. Also if insurance prices are increasing because of industry gouging prices as libs claim instead of malpratice lawsuits, how come both insurance companies and doctors are leaving the states with heavy litigation? Libs have yet to explain that yet.

Posted by: Al on February 27, 2006 at 9:34 PM | PERMALINK

Defensive medicine is just as equally a product of insurance companies not taking cases to court than juries actually giving out huge verdicts. Insurance companies have the boogie man in lawyers, and thus can settle out of court and pass on the rate hike to doctors. If they just took it to court and beat the hell out of the so-called frivilous law suit then precedent would be established, not to mention a deterrent.

Posted by: donnie on February 27, 2006 at 9:35 PM | PERMALINK

I hate to agree with McA, but defensive medicine definitely plays a part in the cost of medical care. Unnecessary tests, super-specialization, excessive referrals are mostly driven by defensive concerns - rightly or wrongly American physicians worry a lot about malpractice.

I have a new job with a new group and their culture insists that prescriptions can only be written for 1-3 months so that they can avoid malpractice, should something go wrong. They have patients who have been stable on meds for years and are still seen every 3 months. These are mostly capitated HMO patients, so the group makes no more money for patients that they see frequently than for patients that they see rarely. The last group that I worked for did not have a problem with greater numbers of prescription refills, but they referred more heavily among the group and both groups are crazy about doing "routine labs". I'll point out again that neither group makes a penny more for providing care at this level since these are all HMO patients.

Posted by: J Bean on February 27, 2006 at 9:38 PM | PERMALINK

how come both insurance companies and doctors are leaving the states with heavy litigation?

why don't you tell us ?

Posted by: cleek on February 27, 2006 at 9:42 PM | PERMALINK

I hate to agree with McA, but defensive medicine definitely plays a part in the cost of medical care.

Perhaps so. But McA brought that up only because the evidence is irrefutable that lawsuits are not responsible for the recent sharp rise is malpractice insurance premiums.

Here's the thing-- no one is really against defensive medicine, except for doctors who are vaguely annoyed by it. The costs of defensive medicine are, generally, costs that patients are willing to bear. What the public does not like the idea of is doctors facing huge financial barriers of entry, in the form of malpractice insurance. As a consequence, republican politicians seized on this myth in order to pit lawyers against doctors, all the while letting the insurance companies get rich in the process.

Posted by: Constantine on February 27, 2006 at 9:44 PM | PERMALINK

McAnus: Missing the point again. Malpractice premiums don't factor in defensive medicine.

Missing the point again.

Conservatives lied about the source of increased malpractice premiums, just like they lied about increases in oil prices in the last two years, and increases in cigarette prices thirty years ago.

Anyone telling you that has no effect on medicine is a liar.

Anyone telling you that lawsuits are the primary ingredient in the rise of insurance premiums is a liar.

Posted by: Advocate for God on February 27, 2006 at 9:55 PM | PERMALINK

On the lumpy pattern in hikes...this is something to do with the uncertain nature of insurance pricing.

Prices tend to stay the same, before repeated losses force insurers to recognise an ongoing trend - which they then adjust for. So the effect of more lawsuits wouldn't always produce a smooth pattern.

You also have to make sure policies didn't change in nature in that year e.g. retentions (uninsured portions paid my the doctor) didn't increase in 2005. That would move some of the claims cost back to the doctor/clinic and out of the chart.

Posted by: McA on February 27, 2006 at 10:01 PM | PERMALINK

I agree with you too, Constantine. The public does willingly embrace defensive medicine if not outright demand it. Part of that is cultural. We want Hummer medicine.

A few months ago during one of these debates somebody complained that they could only see a nurse-practioner at Kaiser for minor problems and further down the thread a Finn said he got great care in Finland and had no trouble getting in to see a NP for minor problems. They both got the same care, but the American did not find it acceptable.

Posted by: J Bean on February 27, 2006 at 10:04 PM | PERMALINK


So does this means that the "good docs" will be able to "practice their love" on their patients after all?


Posted by: jayarbee on February 27, 2006 at 10:04 PM | PERMALINK
Missing the point again. Malpractice premiums don't factor in defensive medicine. By the way if that chart is right Posted by: McA
You and tbrosz are the straw men dauphins.

You're distorting the point again. Defensive medicine, which is a good thing, and its occurrence is has been constant, while the malpractice rates have risen drastically then dropped precipitously. Therefore defensive medicine costs are not a factor in malpractice premiums. What one person derides as "defensive medicine" may very well save other's life.
It should be noted that the few medical malpractice insurance companies that did pull out of the market during this recent insurance "crisis" did so because of mismanaged underwriting practices. In 2001, one of the country's largest medical malpractice insurance companies, St. Paul, pulled out of the medical malpractice insurance market, creating significant supply and demand problems in some states. According to a June 24, 2002, Wall Street Journal front-page investigative article, St. Paul, with a 20 percent share of the national market, pulled out after mismanaging its underwriting and reserves. The head of a leading medical malpractice insurer described problems in the med mal insurance market: "I don't like to hear insurance-company executives say it's the tort [injury-law] system it's self-inflicted."
As they do each time the market turns hard, insurers blame the legal system
for the price jumps. The data has never supported this allegation.

Numbers don't lie, but rightwing hacks lie about numbers.

Posted by: Mike on February 27, 2006 at 10:05 PM | PERMALINK

I hate to agree with McA, but defensive medicine definitely plays a part in the cost of medical care.

J Bean, how much MORE defensive medicine are you doing now than you were 3 years ago? Or, rather, since you've joined a new and more malpractice-conscious group, how much more defensive medicine is the group as a whole doing? Because over that period, the cost of health insurance has risen, what, 20%? More?

If you're trying to claim that rising health insurance premiums result from rising health care costs which result from rising defensive medicine which results from rising malpractice premiums which result from rising malpractice awards, then it's pointless to note that doctors practice defensive medicine. You have to show that defensive medicine practice is RISING.

Posted by: brooksfoe on February 27, 2006 at 10:18 PM | PERMALINK

As a person who has worked in the malpractice insurance business, I can confirm that the large rate increases have nothing to do with increased lawsuits or claims. During the recent price run-up, the immediate cause was the withdrawal of the major insurance provider from the medical malpractice market. The reason the insurer offered was that the medical malpractice business was too volatile and the company could get better returns by writing more commercial insurance instead. Of course, the remaining companies decided this was a good time to raise their rates.

It's also not true that medical malpractice is a major factor in medical price increases. I don't recall the exact figure, but I seem to recall that medical malpractice premiums are less than 1% of the total medical expenditures in the US.

Posted by: RNS on February 27, 2006 at 10:21 PM | PERMALINK
On the lumpy pattern in hikes...this is something to do with the uncertain nature of insurance pricing.

No, as Kevin notes here and has several times in the past, it has to do with the certain nature of insurance pricing -- prices will certainly go up (and just as certainly be blamed by the industry on malpractice awards) whenever malpractice insurance companies' investments perform badly.


Posted by: cmdicely on February 27, 2006 at 10:25 PM | PERMALINK

The reason rates for all insurance made such a large jump is because the insurance companies were NOT making large profits, and were, in fact, losing money in many instances. People with a reflexive, emotional, dislike for insurance companies, like Kevin, point to their losing money as evidence of incompetence.

Newsflash: insurance is a complex, difficult, venture in all but the most favorable circumstances, like offering term life insurance when mortality rates are dropping. Ted Willimas got on base less than 50% of the time; does that make him an incomptent hitter? Even as good an operator as Buffett has experienced significant setbacks in recent years, through his reinsurance firm, General Re.

Determining the appropriate rates for insuring against outcomes as unpredictable as what 12 people, selected through the voir dire process, will determine to be a just verdict, is just a wee bit more difficult than determining what the appropriate rates are for insuring against the outcome of a healthy 50 year old dying within the next 20 years. This is especially the case when no person can predict with great confidence what ups and downs interest rates (which largely determines investment results for insurance companies) will take over any significant time period.

Trying to achieve more predictability in losses, given that trying to predict interest rate swings is impossible, is not inherently anti-consumer, IF it can be shown that a state's population will not get the medical services it has demand for, given the inability of medical providers within that state to obtain malpractice coverage at a price which still makes worthwhile for such providers to offer services.

I have heard anecdotal information of some services, like delivering babies, to be very difficult to obtain in some locations, due to ob/gyns being unwilling to work, given the cost of insurance. If this is true, one can either rail at those incompetent insurance companies, or rail at the fact that interest rates are impossible to forcast with great accuracy, or one can rail at the fact that less predictable outcomes, like what juries will do, tend to lead to higher insurance rates. Then one can determine what public policy will lead to having the medical providers giving service in the areas which now lack them, despite those services being in demand.

Posted by: Will Allen on February 27, 2006 at 10:25 PM | PERMALINK

That said, I do think the level of malpractice suits in the US, and the adversarial relationship they create between docs and patients, is dumb.

Posted by: brooksfoe on February 27, 2006 at 10:29 PM | PERMALINK

Malpractice suits--Rick Santorum and his wife might knows something about those. IOKIYAR.

As for these rates having little to nothing to do with malpractice awards, I mention this every time the subject comes up--but why look at the real issues when you can just drag out the old lawyer boogyman?

Posted by: Ringo on February 27, 2006 at 10:37 PM | PERMALINK

This is a really bullshit post. If you look at the link provided, the rate hikes from 3Q, 2002 to 4Q 2003, were 61%,63,54,48,28,&34%. Every poster here would be screaming bloody murder if their homeowners, or auto, or health insurances had increased at the same rate. To say that it's "good news" that the malpractice "crisis" is over is like telling the the residents of New Orleans "Good News! Hurricane Katrina has passed!"
Here in Arizona, my malpractice carrier just bumped our rates alot (since I've never been sued, I still get a 5% discount). My carrier is for profit. However, my former carrier, which is a mutual company (MICA), also greatly increased their rates because they lost money in 2004 & 2005. Remember as a mutual insurance company, any profit it makes goes back to the policy holders- there are no stockholders.

Posted by: gyp on February 27, 2006 at 11:33 PM | PERMALINK

Keep in mind that the physicians took a cut in salaries this year from 7 to 15 per cent depending on location in the U.S. I doubt if the individuals in the administration of the HMOs took a salary cut as well.

Jack

Posted by: Post-Toll on February 27, 2006 at 11:40 PM | PERMALINK

I may have to second the above comment by gyp...

Americans for Insurance Reform appears to be a collection of about 100 Progressive organizations which I understand includes many of the following:
http://www.commondreams.org/community.htm

It makes the conclusions pretty suspect.

Didn't we have a forum a few weeks back about how much confidence one can place in "think tanks" that may be sponsored by interest groups?

Posted by: pencarrow on February 27, 2006 at 11:40 PM | PERMALINK

Another point of view here.

Posted by: tbrosz on February 27, 2006 at 11:55 PM | PERMALINK

pencarrow,
Just how much money (the real sorce of conflict of interest) do you believe these progressive groups stand to make by pointing out the insurance industry's lies? And, how much does the insurance industry stand to make if challenges to their lies are disregarded because of morally relitivistc arguments like yours?

Posted by: joe on February 28, 2006 at 12:07 AM | PERMALINK

can confirm that the large rate increases have nothing to do with increased lawsuits or claims. During the recent price run-up, the immediate cause was the withdrawal of the major insurance provider from the medical malpractice market. The reason the insurer offered was that the medical malpractice business was too volatile and the company could get better returns

Posted by: RNS on February 27, 2006 at 10:21 PM | PERMALINK

But how does an insurer get worse returns and decide to withdraw from the market? Claims of course.

Insurers are somewhat tactical.

They don't always pass a claims rise on, because they don't want to lose market share or aren't sure its not a random fluctuation instead of an increase in the trend or average - but they eventually do.

Insurers are not obligated to waste their shareholders capital in a bad class of insurance.

-----------------

Posted by: McA on February 28, 2006 at 12:20 AM | PERMALINK

If this is true, one can either rail at those incompetent insurance companies, or rail at the fact that interest rates are impossible to forcast with great accuracy, or one can rail at the fact that less predictable outcomes, like what juries will do, tend to lead to higher insurance rates.

One tiny problem, Will -- this study shows that the people who complain that jury awards lead to higher insurance rates are wrong.

You're defending scapegoating of people (juries) who did not cause or affect the problem. Why is that? Why are you so invested in the idea that juries, and not bad insurance company investment decisions, caused this rise in premiums?

Posted by: Mnemosyne on February 28, 2006 at 12:24 AM | PERMALINK

But how does an insurer get worse returns and decide to withdraw from the market? Claims of course.

Not in this case. It was BAD INVESTMENTS. Says so right in both the post and the associated story.

Or were you under the impression that insurance companies make all of their profits by selling insurance?

Posted by: Mnemosyne on February 28, 2006 at 12:26 AM | PERMALINK

Hey, progressives: don't sink too much energy into this debate. It's not so important.

The important point is that, regardless of whether insurance rate hikes are driven by malpractice claims and regardless of whether tort limits would help manage the hikes, none of this contributes significantly to inflation in health care costs or in health insurance rates.

The Administration's concentration on limiting medical malpractice as a way of keeping health insurance costs down is bad because it's a deceptive distraction from the real source of rising health insurance rates and on the need to implement national health insurance to keep costs down. But the mechanics of this argument over why the malpractice insurance rates are going up aren't very significant in themselves, unless of course you're a doctor. In which case, definitely, pay attention and argue away.

Incidentally, the European national healthcare systems we're all so fond of have very severe limits on suing for medical malpractice. There are drawbacks to that, but also benefits.

Posted by: brooksfoe on February 28, 2006 at 12:30 AM | PERMALINK

this study shows that the people who complain that jury awards lead to higher insurance rates are wrong.

There was a problem with that part of the report: it notes that the MEDIAN award for malpractice has not gone up. It doesn't mention what happened to the average. The awards at the high end of the scale could be going way up, while the median remains unchanged. I also didn't see where it addressed out of court settlements.

Posted by: brooksfoe on February 28, 2006 at 12:34 AM | PERMALINK

You're distorting the point again. Defensive medicine, which is a good thing, and its occurrence is has been constant, while the malpractice rates have risen drastically then dropped precipitously. Therefore defensive medicine costs are not a factor in malpractice premiums.

Posted by: Mike on February 27, 2006 at 10:05 PM | PERMALINK

You are missing two points:

1) Insurers can take losses and dismiss them as a bad year. They just won't do so indefinitely - triggering an insurer exit which allows insurers to raise prices. You can't expect a correlation.

Your paycheck is linked to your companies profits in the long run but it may not be in the short-run. Same thing.

2) Defensive medicine saves some lives but it also uses up medical tests, doctor time and equipment to eliminate some obscure conditions before diagnosis, all of which costs money.

You get a situation where a country spends money for marginal gains in public health.

A doctor in the States uses CATSCANS and diagnostics more agreesively than in other countries. Because he needs to cover his ass a bit more.

My view on US medicine is that its regulated (by lawsuit) at a high level of care (how many years of training does a Pharmacist need in the UK?)
and is therefore expensive. Making Universal Healthcare harder to deliver.

Most countries with working Universal Healthcare that doesn't break the bank, accept that the free system will be of lower quality and have more queues than the private system.

Posted by: McA on February 28, 2006 at 12:35 AM | PERMALINK

Just how much money (the real sorce of conflict of interest) do you believe these progressive groups stand to make by pointing out the insurance industry's lies? And, how much does the insurance industry stand to make if challenges to their lies are disregarded because of morally relitivistc arguments like yours?

I guess the point here is that trial lawyers are large contributors to politicans and possibly organizations that advance the lawyer's positions.

The trial lawyers stand to gain from "research" that suggests that malpractice awards are not a major cause of increasing medical costs. As such, they would likely support organizations that advance "policy" positions that take trial lawyers off the hook.

Hence, conclusions generated by progressive organizations that may benefit from trial lawyers "contributions" would be suspect in my view.

Posted by: pencarrow on February 28, 2006 at 12:39 AM | PERMALINK

Not in this case. It was BAD INVESTMENTS. Says so right in both the post and the associated story.

Posted by: Mnemosyne on February 28, 2006 at 12:26 AM | PERMALINK

For classes with a long time from premium collection to claims payment. Investment return matters.

If you have a few bad years, you can lose the capital you need to write a specific class of business triggering an exit - that then allows all the insurers to raise prices.

When you set pricing though, you don't look at your last few investments.

You look at bond rates plus equity markets and come up with a forward looking assumption based on that. And those can't differ too much from company to company (insurance pricing/financial control is regulated).

At the end of the day, promising to pay claims is about promising to pay claims. The amount of, the inflation there of and timing of which are very important.

Posted by: McA on February 28, 2006 at 12:45 AM | PERMALINK

St. Paul, with a 20 percent share of the national market, pulled out after mismanaging its underwriting and reserves.

Posted by: Mike on February 27, 2006 at 10:05 PM | PERMALINK

By the way, 'Mismanaging underwriting and reserves' is insurance code for
the claims for the policies we wrote were more than expected, plus the amount of money we set aside for claims was wrong.

As most claims are paid some time later than premium receipt, assumed discount rates (and whether investments beat those) play a part but its a claims thing....

Good underwriting means you rejected the unhealthy people.

Posted by: McA on February 28, 2006 at 12:50 AM | PERMALINK

Here's an idea. How about we regulate the insurance industry so they can't raise rates so fast? That way they'll have to be incredibly conservative, not undercharge in the fat years and overcharge in the lean ones, and doctors won't face the sudden unmanageable problem of a 60% rate hike.

Oh, but I forgot - regulation is baaaaaaaad....

Posted by: brooksfoe on February 28, 2006 at 1:02 AM | PERMALINK

The study blames sudden rises in malpractice premiums on "mismanaged underwriting practices." What does that phrase mean? It means that premiums in prior years were TOO LOW to make a profit. What the study shows is that spikes up and down in premium resulted from compeitition in the marketplace. The current premiums, according the study, are JUST RIGHT. But ask your doctor if he thinks that his premiums are just right.

Insurance is a business that is very sensitive to competition because the barriers to entry and exit are very low. When returns on investment (eg interest rates) are high, there is much competition for premium dollars and rates fall. When returns on investment are low, some insurers don't want the premium and leave the market or cut back on capacity, and rates climb. These short-term lurches should not disguise the long-term trend of increasing med mal rates. That trend cannot be explained in terms of interest rate fluctuation, and it cannot be explained by "greedy insurers" - if the problem were greedy insurers, then competitors who could make money at less premium would come in and eat the big guys' lunch. They don't because they can't - the rates they can charge won't support it.

What this study shows is that the current astronomically high rates have finally gotten to a point that will fund the claims being received. That doesn't mean the crisis is over. It means the crisis has become the status quo.

Posted by: JR on February 28, 2006 at 1:10 AM | PERMALINK

brooksfoe: I'm not trying to argue that the rate of practicing defensive medicine is higher, just that it is practiced and that it makes up a significant chunk of the difference in cost between countries. It's pretty hard to tease out the difference between "defensive medicine" and reasonable precaution.

Posted by: J Bean on February 28, 2006 at 1:35 AM | PERMALINK

Gosh, mnemosyne, why are you so invested in your view that you can't discern the problem in using median figures in examining this issue, as brooksfoe rightly notes? Why are you so invested in your view that you cannot discern the difference between the terms "bad" and "unpredictable"? Why are you so invested in your view that you think it is possible to always have good investment results, or, perhaps to state more accurately, that having bad investment results necessarily indicates incompetence?

Did Warren Buffet suddenly become incompetent when some of his insurance concerns experienced bad investment results? Do ya' think it might be possible, just maybe, that sometimes there is nothing can be done to avoid bad investment results, especially when one is constrained as to what investment vehicles can be chosen, as insurance companies often are? Why are you so invested in your position that you think it notable that investment results are not always good?

Brooksfoe, what historical evidence leads you to believe that having political bodies set prices leads to optimum results for consumers? Do the examples of the airline or telecommunications industries point you to this remarkable conclusion?


Posted by: Will Allen on February 28, 2006 at 1:42 AM | PERMALINK

Here's an idea. How about we regulate the insurance industry so they can't raise rates so fast? That way they'll have to be incredibly conservative, not undercharge in the fat years and overcharge in the lean ones, and doctors won't face the sudden unmanageable problem of a 60% rate hike.

Posted by: brooksfoe on February 28, 2006 at 1:02
AM | PERMALINK

Sure, but they'd have to raise rates by a huge amount to pay for the risk or exit that market. And those that fuck up, would go broke and need government bailouts.

Why not pass a law saying that uninsured sick people who say they are sick, should be ignored?
Problem solved.

Posted by: McA on February 28, 2006 at 1:50 AM | PERMALINK

Why not pass a law saying that uninsured sick people who say they are sick, should be ignored?
Problem solved.

It seems the ultimate goal of insurance companies these days. And conservatives.

Posted by: Sandals on February 28, 2006 at 3:18 AM | PERMALINK

McAsshole speaks its a modern medical miracle.Obvious proof that higer med maalpractice premiums are leading to new medical miracles

Posted by: gandalf on February 28, 2006 at 9:08 AM | PERMALINK

Hence, conclusions generated by progressive organizations that may benefit from trial lawyers "contributions" would be suspect in my view.

So, you read French philosophy in the original or simply absorb it from the Zeitgeist?

Posted by: Jeffrey Davis on February 28, 2006 at 9:27 AM | PERMALINK

McAnus: Why not pass a law saying that uninsured sick people who say they are sick, should be ignored?

That's conservatives' preferred solution.

See, we knew there was a little nazi in all of you just begging to be let out!

Sure, but they'd have to raise rates by a huge amount to pay for the risk or exit that market.

Only in the delusional world of conservative la-la land.

Posted by: Advocate for God on February 28, 2006 at 9:49 AM | PERMALINK

Kevin, this reasoning is very muddled and very wrong. There are several minor problems, but here's the major one.

Investment performance explains why the rate rise is 10%, 10%, 15%, 50% rather than 20%, 20%, 20%, 20%; it does nothing to explain why malpractice insurance costs 10 times what it did in 1980.

The timing of increased claims and rate rises is not simultaneous, but the trend in prices over the long term is driven by claims.

Posted by: SamChevre on February 28, 2006 at 9:54 AM | PERMALINK

SamChevre: . . . but the trend in prices over the long term is driven by claims.

That's the industry line.

But, then, that was the industry line when blaming cigarette taxes for the entire increase in cigarette prices, when in fact taxes would have accounted for only a very, very small fraction of the increase.

Big Tobacco hid price gouging in the cloth of tax increases.

Same for Big Oil, who most recently hid price gouging in the sale of gas, and still are, in the cloth of supply limitations and increased prices of crude.

However, increases in the prices of crude simply would raise the price of gas, not increase profits - profits is an amount above production costs. Increases in crude prices increase production costs. Only price gouging increases profits in this situation.

The same is true of the insurance industry which is clothing its greed in claims of increased malpractice costs.

Yet, the industry does nothing to get bad doctors out of the profession, something else that would decrease malpractice costs, and does nothing to improve patient care practices in hospitals, which also would result in a decrease in such costs.

The insurance industry has routinely lied about such things as the high cost to the industry of punitive damages, despite the fact that the actual impact of such damages is negligible, as they form a tiny, tiny, tiny fraction of all litigation costs.

The insurance industry has routinely engaged in insurance fraud, denying legitimate claims, yet you hear no mention of that from the "tort reformers."

The claims of tort reformers are lies.

The claims of the insurance industry that increases in premiums are driven primarily by frivolous malpractice cliams are lies.

When will people learn: Big Business Routinely Lies to Increase The Profits Going to Their CEOs and Upper Level Management.

Posted by: Advocate for God on February 28, 2006 at 10:17 AM | PERMALINK

SamChevre,
The timing of increased claims and rate rises is not simultaneous, but the trend in prices over the long term is driven by claims.

Which is driven by the number of people receiving medical care which is driven by age - an aging population.

I know what - since the price of gas is 10 times what it was in 1980 we should pass a law restricting the amount of gas people can buy. That'll bring the price down.

But wait - so-called free market proponents don't like to restrict a free market. Except they do seem to like the idea in the case of medical malpractice. What a connundrum. I'm sure there is nothing political going on.

Posted by: Tripp on February 28, 2006 at 10:32 AM | PERMALINK

HMOs also routinely deny care so their CEOs
and top management can receive multimillion
dollar per year salaries, including
"peformance bonuses" for denying preventive
care to insured members, resulting in given
number of deaths per year, say for example
re colonoscopies. Blue Shield for example
denies routine colonoscopies, spends approx.
70% on health care, rest to top level salaries.
Can please see stats on deaths caused by
denial of HMO care? Have hard time finding
data for this. But it is happening.Death on the
HMO plan!

Posted by: Augustus on February 28, 2006 at 10:37 AM | PERMALINK

Anyone else noticed that the style and vocabulary of McAnus' writing all of a sudden changed on this subject?

Hmmm, it's as if someone else was posting under his name. Or perhaps several people were posting under the pseudonym.

Posted by: Dr. Morpheus on February 28, 2006 at 10:41 AM | PERMALINK

When will people learn: Big Business Routinely Lies to Increase The Profits Going to Their CEOs and Upper Level Management.

Posted by: Advocate for God on February 28, 2006 at 10:17 AM | PERMALINK

Yup, only lawyers and their clients know how to tell you the truth!

----------

Or perhaps several people were posting under the pseudonym.

Posted by: Dr. Morpheus on February 28, 2006 at 10:41 AM | PERMALINK

Varies with my concentration. The handle was originally researcher and the name is shared.


Posted by: McA on February 28, 2006 at 11:24 AM | PERMALINK

kevin,

why is everyone so opposed to a free market economy when it comes to insurance? Do you think the government should control the cost of other things you buy as well? Should Costco have to file a plan with the government when it wants to increase the price of raisin bran? Why should insurance be different.

I've never understood why people think governmental price control in insurance is any more effective than it is anywhere else. Here's what should be regulated in insurance:

1) Solvency: does the company have the ability to pay the claims it promises to pay? The govenment should make sure this is the case.

2) Claims paying: does the company pay the claims it promises to pay without creating undue burdens on policyholders. Again, the government should make sure the company is following the law and doing what it promises.

3) Competition: is there fair and rigorous competition amoung companies. The government should make sure there isn't collusion, and a free market is operating.


If you have those three things being regulated properly, you won't have to worry about the pricing component.

Posted by: derek g on February 28, 2006 at 12:37 PM | PERMALINK

McAnus: Yup, only lawyers and their clients know how to tell you the truth!

Insurance companies are the clients of lawyers.

Funny how you gloss over that, pretending that insurance companies (and other businesses) go into court alone to battle the evil lawyers that only exist for plaintiffs.

A lie by implication . . . or sheer stupidity . . . is still a lie.

You've been busted!

Posted by: Advocate for God on February 28, 2006 at 1:17 PM | PERMALINK
why is everyone so opposed to a free market economy when it comes to insurance?

Whose opposed to that? What people are opposed to is people lying about what drives malpractice insurance rates (and, supposedly, through them, healthcare costs) to justify changes in government policy that have only a distant relation to malpractice insurance rates, but simply are designed to reduce accountability to negligent and reckless harm.

Posted by: cmdicely on February 28, 2006 at 1:25 PM | PERMALINK
That said, I do think the level of malpractice suits in the US, and the adversarial relationship they create between docs and patients, is dumb.

The level of actual malpractice in the US is also dumb. Its almost as if there was a systemic problem in healthcare caused by providers, patients, and various institutional players all working at cross purposes.

Posted by: cmdicely on February 28, 2006 at 1:30 PM | PERMALINK

This is an important post because it the basic Republican position on this is one of the top five "lies" (or should I say, "inaccurate memes") which accounts for, probably, their current control of congress.

When any Republican stands up and asserts that malpractice awards are "out of control," they are in fact hoping that the general public will take that to mean: (i) I am going to pay an extra $200 per month this year in premiums, and that is because (ii) the insurance company had to pay some plaintiff and his lawyer that same $200. This seems, somehow, unfair, and, when blended with a few select other memes, results in a person voting Republican out of ingnorance.

Anyone who researches this issue for a minimum of about five seconds knows that is not true. However, put cmdicely on "Meet the Press" to hold forth on this subject and that sound you hear is millions of sets clicking over to the PBA Tour's Bahama Lanes Open.

Its important to break down the meme. Very important.

Posted by: hank on February 28, 2006 at 1:42 PM | PERMALINK

derek g,

In case you missed my sarcasm I am NOT in favor of price control. I simply point out the hypocracy of the right wing in advocating 'free market' when it benefits their benefactors and then advocating 'price control' (or more precisely attempting to cap the cost of business) when it benefits their benefactors.

Why don't they just say they believe in maximizing the profits of certain businesses any way they can?

Posted by: Tripp on February 28, 2006 at 2:29 PM | PERMALINK

Punitive damage verdicts have also been found to be exceedingly rare. A 1992 study by Professor Michael Rustad of the Suffolk University Law School (termed by the Supreme Court as `the most exhaustive study' of product liability awards 14[Footnote])[Footnote 14: See Honda Motor Co., Ltd. v. Oberg, 114 S.Ct. 2331, 2341, n. 11 (1994).] uncovered just 353 punitive awards in product liability cases between 1965 and 1990. 15 [Footnote][Footnote 15: Michael Rustad, `In Defense of Punitive Damages in Products Liability: Testing Tort Anecdotes with Empirical Data,' 78 Iowa L. Rev. 1, 38 (1992).] Excluding the 91 asbestos cases, there were an average of only 11 such awards reviewed each year in the entire country. Furthermore, over half of the punitive damage awards in the study were either reduced in settlement negotiations or reduced or reversed by an appellate court. 16 [Footnote][Footnote 16: Id. at 55.]

Despite overwhelming evidence to the contrary, showing that total punitive damage awards across the nation during any given year and below the level of miniscule when compared to corporate profits, total national actual damage awards, or virtually any other national financial comparator, insurance companies and so-called tort reformists have consistently claimed that punitive damages are out-of-control and add tremendously to premiums.

That is a lie. Period.

The level and risk of punitive damage awards is simply not high enough to have any significant effect on premiums.

We are talking about less than one punitive damage award per day across the entire country compared to hundreds of millions of insureds, billions of dollars in premiums collected, and dozens, if not hundreds, of insurance companies sharing the risk.

Such "tort reformers" also routinely use the amount of puntive damage awards prior to reduction by the court to describe the level of punitive damages businesses and insurance companies are subject to, which is yet another lie.

The actual punitive damage burden is what the courts ultimately award, not what juries initially award.

To use the latter, rather than the former, is to engage in blatant and indefensible mendacity.

The fact that the industry and its "tort reform" supporters would lie so blatantly and so grossly about the issue of punitive damages means they have absolutely no credibility when they make similar claims about medical malpractice.

It is clear that they will lie and continue to lie about the issue of tort costs, refusing to addresss the most sensible way of avoiding such costs: having businesses refrain from committing torts through sound business practices that safeguard consumers from bad actors and bad products.

For every frivolous lawsuit, there are hundreds of claims or legitimate lawsuits for which insurance companies and businesses increase costs to the system by refusing to pay those legitimate claims and by trying to extort lower settlements from legitimate plaintiffs through the extortive and expensive tactics of delay, deceit, and fraud.

Yet, you never hear "tort reformers" calling for legislation against the frivolous defenses and tactics of insurance defense attorneys, which ultimately add at least as much if not far more costs to the system than frivolous plaintiffs' suits.

When self-styled "tort reformers" start calling for reforming incompetent and dishonest physicians, medical boards, hospitals, and insurance adjusters, insurance defense attorneys, and insurance CEOs, then they can be taken seriously.

Until then, we know them for the liars they are, not interested in a fair and equitable system, but only interested in a system that allows and encourages business to accept no personal responsibility for the harm they cause or the unethical and illegal acts they commit.

Posted by: Advocate for God on February 28, 2006 at 3:21 PM | PERMALINK

There's a bigger picture than the obvious fact that malpractice lawsuits have very little to do with defensive medicine, and very little to do with superhigh insurance premiums. Insurance premiums are also not the only reason for constantly expanding health care costs. Quite frankly, the very idea of paying for health care with an actuarial system is a nightmare. 'Incomplete information' doesn't begin to describe the chaos of being a health care consumer, with millions of products, a total lack of neccesary knowledge for the consumer to be able to choose from them, perverse incentives everywhere for five layers of intermediary parasitic bureaucracies to inflate costs and pass them around, and the basic fact that health care is a survival neccesity and not really a consumer choice at all in the classic sense -

you get the American system, the most expensive per-capita, per-deliverable, per-any-benchmark you like in the world, yet somehow producing immensely crappy products for all but the bottomlessly wealthy.

Personally, I'd rather take my chances on the kitchen table with a mitre saw than trust any hosptial I can think of. It's hard to imagine any financial bitch-slap republicans could do to the consumer that could make them more reluctant to get health care than they already are.

Posted by: glasnost on February 28, 2006 at 8:42 PM | PERMALINK

AOG,

Blah, blah, blah. Like a record.

Court awards don't pick up the costs of lawyers involved on both sides, defensive medicine, administrative procedures/paperwork to deter lawsuits, etc.

Its really naive not to examine the profits of tort lawyers. An accident compensation system
that hands 40-50% of compensation to lawyers is really stupid.

And that's what most tort lawyers ask for.

Posted by: McA on February 28, 2006 at 9:21 PM | PERMALINK

Several interesting arguments raised in the above comments.

Still, regardless of the rates of increase, if one looks at the cost of the annual premium in a state with large malpractice awards such as Florida, it's hard to justify these levels of premiums not being related to the costs of malpractice suits.

Example from a Govt GAO report...

a large insurer in Florida charged base premium
rates in Dade County of $56,153 for internal medicine, $174,268 for general
surgery, and $201,376 for OB/GYN. (http://www.gao.gov/new.items/d03836.pdf)

So a family doctor getting charged $56K/year would have to recover approx $4,500 month in fees charged and a OB/GYN about $16,500 a month.

BTW, the same report supports the contention that states that have limited tort amounts enjoy lower rates of malpractice insurance premiums than those which do not.

Posted by: pencarrow on March 1, 2006 at 1:18 AM | PERMALINK

McAnus: Its really naive not to examine the profits of tort lawyers.

It's really naive not to examine the profits of insurance CEOs and insurance defense attorneys, both of whom get paid regardless of the outcome of litigation or how expensive it becomes.

Plaintiffs' lawyers, on the other hand, only get paid if they win. That's 0% for you, McIdiot.

Again, you show your stupidity or bias by ignoring basic economic facts that drive the motives of those involved.

A compensation system that pays insurance defense attorneys even when they lose invites frivolous defenses.

Yet, that is exactly what happens.

Again, ignoring the basic economic facts that drive the motives of those involved.

So, more blah, blah, blah, lie, blah, lie, blah, ignorance, blah, misrepresentation, blah, omission of facts, blah, blah, blah . . .

. . . from the McAnalCanal

Posted by: Advocate for God on March 1, 2006 at 11:55 AM | PERMALINK

pencarrow: BTW, the same report supports the contention that states that have limited tort amounts enjoy lower rates of malpractice insurance premiums than those which do not.

Because insurance companies artificially further inflate rates in states which do not adopt such systems in order to convince those states that rates will drop if they do.

You know, like a store that raises prices the month before they put everything "on sale" so it looks to the consumer like they are saving money.

Or how stores have "going out of business" sales every six months, but never seem to go out of business.

Don't be so gullible.

Still, regardless of the rates of increase, if one looks at the cost of the annual premium in a state with large malpractice awards such as Florida, it's hard to justify these levels of premiums not being related to the costs of malpractice suits.

Why would Florida have large malpractice awards? Didn't Jeb and the GOP legislature adopt tort reform years ago? Apparently, therefore, tort reform didn't work to reduce malpractice awards and premiums.

I'm sure the defenders of the oil companies look at the raw numbers and say that high gas prices must be necessarily related to increases in crude, despite a detailed analysis of the numbers which shows the increase in gas prices far outstrips the increases in crude prices.

Big Business Lies.

Big Business Manipulates Markets.

Big Business Manipulates Legislatures.

Big Business Lies.

Big Tobacco proved it over and over and despite overwhelming proof that they covered up information, destroyed documents, perjured themselves in court, rigged "scientifc studies", and engaged in deceptive advertising and PR, conservatives continued to defend the industry and carry water for it.

Same for many, many other industries . . .

. . . including the insurance industry.

Big Insurance Steals.

Big Insurance Commits Fraud.

Big Insurance Itself Creates Most of the High Costs That They Complain About.

Posted by: Advocate for God on March 1, 2006 at 12:04 PM | PERMALINK

Here's a GAO report worth having a look at:
http://www.gao.gov/new.items/d04128t.pdf

Posted by: J Bean on March 1, 2006 at 10:28 PM | PERMALINK

From Ezra Klein at the TPM Cafe:

http://www.tpmcafe.com/user/12325/recent

The key is:

"the whole malpractice "industry" amounts to less than one half of one percent of [medical] spending".

Something that constitutes such a small percentage cannot result in a big increase in overall healthcare premium.

And the myth of malpractice awards driving doctors out of business is exposed here:

http://healthypolicy.typepad.com/blog/medical_malpractice_myth/index.html

Can you seriously believe this government when it tries to justify the high premiums their corporate buddies charge you ?

Posted by: Calvin V on March 2, 2006 at 2:28 AM | PERMALINK

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