A Layman’s View of Medical Malpractice
The Medical Malpractice (Med-Mal) issue can be viewed as having four basic components:
The needs for :
- Protection of the Patient form just that; Medical Malpractice
- Protection for the Practicing Professional from Indemnity
- An Insurer to provide such Coverage
- Government Oversight
It is a simple task to find data that will site the rate of change for various criteria but little or no hard numbers. You will find here my humble attempt at ferreting this data out. But first a little about the author. I am a married white Christian grandfather of 56 years holding no secondary education. I am self taught in mechanical engineering, architecture, computer systems both hardware and software as well as versed in both Hebrew and Cherokee (Tsalagi) languages. I am also self taught on various stringed instruments, favoring the Banjo, Guitar and Mandolin. From a business prospective I have formulated six formal business plans, worked with the State of Mississippi on economic development, designed Industrial Process Equipment, and served as a Regional Sales Manager for Engineering (CAE), Manufacturing (CAM) and Business (ERP/MRP) systems.
Looking at these four basic components the “gouging” comes from A and C, and obviously D has the proclivity to serve as a detriment. I hesitate in using the massively overworked term “Frivolous Lawsuit” yet find it expedient in describing what a slim majority of MedMal cases involve. Current Tort Reform in this area has both reduced these cases in number and award. The Insurer can simply extract these absurd premiums from the Profession while the legalesee are trained to go after “the money”. This writer views the Medical Profession as predominantly whole, with a few bad apples. The very fact that these professionals are required to pay exorbitant premiums for Professional Liability Insurance dictates that they closely monitor their peers, fellows and interns.
The Numbers (Or Lies, Damn Lies and Statistics)
The national average for liability insurance for a primary care physician is $16,042. (1)
The national average for liability insurance for a specialist is $65,489. (1)
A Dade County Florida Obstetrician can pay $250,000 where a General Surgeon in Idaho $4,000. (1)
The CEO’s of the major Insurers can expect a salary between $10,000,00 and $25,000,000. (2)
Enter the legal profession into the mix.
The Law Firm will reap approximately $200,000 per case.(3) (7) and probably in error
The Median Annual Household Income $50,221. (4)
From 1997 to 2006, the median medical liability jury award more than tripled from $157,000 to $487,500. The average award increased from $347,134 in 1997 to $637,134 in 2006.(a) Staggering growth has not only occurred with jury awards, but also with settlement amounts. Average settlement amounts increased from $212,861 to $335,847 between 1997 and 2006.(b)Unfortunately, some awards greatly exceed these amounts. In Illinois and Massachusetts, 17 percent of claims paid were at or above $1 million, as were 8.5 percent of claims in Nevada according to a 2007 Bureau of Justice Statistics report.(c) (5) emphasismine
(a) Physician Insurers Association of America, PIAA Claim Trend Analysis: 2006 ed. (2007).
(b) Physician Insurers Association of America, PIAA Claim Trend Analysis: 2006 ed. (2007).
(c) Bureau of Justice Statistic, Medical Malpractice Insurance Claims in Seven States, 2000‐2004, Department of Justice (March 2007).
According to Towers Perrin, a global professional services firm, malpractice litigation costs $30 billion a year, and, since 1975, direct costs of litigation avoidance have grown at more than 10 percent annually. (6)
Combined written premium for all three segments of the market peaked in 2004 at $270.4 million, and has fallen every year to $200.4 million in 2009. (7)
Total claims: Insuring entities and self-insurers reported 1,733† claims closed with an indemnity payment, defense costs,†† or both types of payments. Commercial insurers††† reported 1,006 claims, self-insured entities reported 659 claims, and risk retention groups reported 68 claims.
†The 2009 Medical Malpractice Statistical Summary published June 15, 2010 used data as of April 14, 2010. One claim report was later modified by the insuring entity, and two claims that closed in 2010 were reported in error, which has slightly altered the figures.
†† For simplicity, this report substitutes “defense costs” for the technical phase “defense and cost containment expenses.” Defense and cost containment expenses are expenses allocated to a specific claim to defend an insured, including expenses such as court costs, fees paid to defense attorneys, and fees for expert witnesses.These expenses do not include the internal costs to operate a claims department. This term is defined in WAC 284-24D-020(1).
††† Commercial insurers include both admitted and surplus lines insurers.
Lawsuits resolved in the two-year period ending December 31, 2009 – Washington State
Indemnity payments to claimants: Attorneys reported that claimants received total compensation of $159.5 million on 253 claims, or $630,388 per settlement. Attorney fees were $57.1 million, or an average of $225,792 per settlement with an indemnity payment.††††
On average, the attorney fee was 35.8 percent of the total compensation paid to the claimant. Paid indemnity by type of settlement: Fifty percent of the settlements were the result of an alternative dispute resolution process; these settlements resulted in the lowest average indemnity payment of $569,308 and the lowest average attorney fee at $201,871. Regional comparisons: One-third of the lawsuits, or 95, came from King County. King County had the highest total paid indemnity at $63.3 million, the third highest average paid indemnity at $708,900 and the third highest legal expense per lawsuit at $278,358. Settlement by age of claimant: The most expensive settlements involved claimants under the age of 21. In these cases, the average settlement was $1,495,071 and the average legal expense was $630,812. (7)
†††† Attorneys in this area of litigation typically work on a contingency basis, and receive fees if the claimant is compensated by the defendant(s).
We need Tort Reform and “Real” Oversight. It seems to me that MedMal is a self fulfilling prophesy; the lawyers / lobbyist in one state “demand” the higher premiums, ostracizing the finer physicians, increasing the chances of more MedMal cases. The numbers involved are ridiculously difficult to ferret out. Flip the coin and look at provider CEO “over the table” salaries. Good grief! Talk about “In Search of Excess”.http://www.graefcrystal.com/aboutus.html
Insurance Co. & CEO With 2008 Total CEO Compensation (2)
* Aetna, Ronald A. Williams: $24,300,112
* Cigna, H. Edward Hanway: $12,236,740
* Coventry, Dale Wolf: $9,047,469
* Health Net, Jay Gellert: $4,425,355
* Humana, Michael McCallister: $4,764,309
* U. Health Group, Stephen J. Hemsley: $3,241,042
* Wellpoint, Angela Braly: $9,844,212
For those of you who would desire to look into all CEO Executive Pay:
These bloated salaries certainly invite “manipulations” of the industry and government. The 80/20 rule likely applies with regard to practicing physicians; that is to say 80% of the MedMal cases can be attributed to 20% of the physicians; or more likely a fewer in number.
Malpractice insurance costs amount to only 3.2 percent of the average physician’s revenues. (8)
The total amount spent on medical malpractice insurance in 2000 was $6.4 billion. (9)
“We in the insurance business avoid the term “malpractice.”
The usual industry word is misadventure.” (10)
The standard attorney contingency fee contract in Florida provides (after a lawsuit is filed) that the lawyer gets 40% of the first $1 million recovered, 30% of the second million, and 20% of anything above that. (11)
Florida once again led the nation in top rates physicians pay for malpractice insurance with the highest insurer reporting a rate for internists in Dade County at $65,697, a 17 percent increase over 2002 report. The highest rate for Dade County, Florida obstetricians was reported at $249,196, a 24 percent increase over the $201,376 reported in 2002. Rates for general surgeons in Dade County were reported at $226,542, a 30 percent increase over the 2002 reported rate of $174,268 in 2002. At the other end of the spectrum, Idaho internists had the lowest reported rate of $3,770 in 2003, the same as reported in 2002. Iowa general surgeons had the lowest reported rate of $14,386, also the same as reported in 2002 and Idaho obstetricians/gynecologists had the lowest reported rate in their specialty of $19,320, also the same as 2002. (12)
In Illinois and Massachusetts, 17 percent of claims paid were at or above $1 million, as were 8.5 percent of claims in Nevada according to a 2007 Bureau of Justice Statistics report. The 2009 CBO study estimated that providers incurred approximately $35 billion (two percent of total health care expenditures) in medical malpractice liability costs in 2009. (5)
Medical liability insurance premiums are at or near all‐time highs. According to a NASS survey conducted between March and April of 2008 the average estimated annual liability premium between 2002‐2006 rose from just under $50,000 in 2002 to just under $60,000 in 2006. et. Seq. (13)
The Journal of the American Medical Association (JAMA) produced an article highlighting these medical malpractice lawsuit statistics, with regard to patient deaths:
* 106,000 patients die each year from the negative effects of medication
* 80,000 patients die each year due to complications from infections incurred in hospitals
* 20,000 deaths per year occur from other hospital errors
* 12,000 people die every year as a result of unnecessary surgery
* 7,000 medical malpractice deaths per year are attributed to medication errors in hospitals
This totals up to 225,000 deaths each year, due to medical negligence of some nature. And that number is ever growing. (14)
The Case for Reform:
Florida ranks among the worst states in the nation for paid malpractice claims and payouts, both in total sum and per capita. In Florida, dollars paid in medical liability settlements totaled $177,528,500 compared to the national average of $47,775,740. By comparison, Texas paid $70,840,500 in medical liability settlements during the same period of time. Florida had 770 paid medical malpractice settlements compared to the national average of 180. By comparison, Texas had 464 paid medical malpractice settlements during the same period of time. Florida medical liability premiums are the highest in the nation, and by a wide margin. The average primary care physician in Florida pays $41,946 for liability insurance, while the national average is $16,042. The average specialist in Florida pays $171,231 for liability insurance, while the national average is $65,489. (15)
The NPDB Public Use Data File
According to the NPDB, total payments for physician medical malpractice claims in the U.S. more than doubled between 1991 and 2003, rising from $2.12 billion in 1991 to $4.45 billion in 2003. (16)
Again, current Tort Reform in this area, caps, collateral sources, statues of limitations and “fair-share” have both reduced these cases in number and award.
From The Congressional Budget Office (Tort Reform)
CBO estimates that the direct costs that providers will incur in 2009 for medical malpractice liability—which consist of malpractice insurance premiums together with settlements, awards, and administrative costs not covered by insurance—will total approximately $35 billion, or about 2 percent of total health care expenditures. et. Seq.
By reducing spending on health care in the private sector, the package of proposals discussed here would also affect federal revenues. Much private-sector health care is provided through employment-based insurance that represents nontaxable compensation. Lower costs for health care arising from those proposals would lead to higher taxable wages and thereby increase federal tax revenues by an estimated $13 billion over the next 10 years, according to estimates by the staff of the Joint Committee on Taxation (JCT). Combining the effects on both mandatory spending and revenues, a tort reform package of the sort described earlier in this letter would reduce federal budget deficits by roughly $54 billion over the next 10 years. (17)
Interesting the Washington mindset, always looking for more tax revenue.
FOOTNOTES / SOURCES
(3) Extrapolated from http://www.gafp.org/…/GAFP_Simply_Stated_Newsletter_March_2009.pdf
(12) http://www.medicalliabilitymonitor.com/press release survey.pdf
*California entities are not required to file data with either the NAIC or the California Department of Insurance.
R E F E R E N C E S