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We have been told repeatedly over the years that medical malpractice claims are destroying the business of healthcare. Various groups have advanced this claim at various times, but the usual suspects are insurance companies, doctors, and conservative politicians. Today, let’s take a look at the insurance industry and see if we can’t sort out some of their claims. Perhaps we can take a look at the other groups a bit later.

Insurance companies claim that medical malpractice claims are the primary driver behind the high prices doctors pay for insurance. This seems reasonable, if the cost of being a doctor goes up, either doctors will stop being doctors, change to less risky fields, or pass the costs along to the consumers of healthcare. It is true that malpractice insurance premiums have drastically increased over the last 25 years. Are these price increases being driven by lawsuits? For this charge to be true, either the overall number of claims must have increased or the awards for individual judgments must have increased massively. If increases in damage awards were responsible, then one would expect to see lower payouts and lower premiums in states that have statutorily capped such damage awards. So, when we do the research, do we see such an explosion, of either claims or payouts? The short answer is no, we do not.

A study of malpractice claims in Texas 1988-2002 found after controlling for inflation and population growth that there had been a decline in the number of small claims (under $25,000) and that the number of large claims had remained roughly constant. In addition, the amounts of those paid claims only rose 0.8-1.2 percent per year. As for the effects of capped non-economic damages, one national study found that while payouts did decline in the nineteen states that then had caps, premiums in capped states rose far faster than those in uncapped states. In states with statutory caps, the median annual premium increased 48.2%, while those states without caps saw a median increase of only 35.9%. This suggests that while something is driving premiums higher, it isn’t malpractice claims. A slightly more recent bit of research shows that nationwide the number of claims declined by four percent between 1995 and 2000. (pages 24-25). Declining numbers of lawsuits doesn’t sound like a crisis.

So, from the perspective of the insurance companies, what is driving up the cost of insuring doctors? According to Martin Weiss, an analyst with Weiss Ratings, Inc., there are several factors, including: increases in the cost of medicine generally, the cyclical nature of the insurance market, a need to shore up capital reserves for policies already in force, and a decline in investment incomes due to poor investment choices. (pages 9-11). These are all real forces, and it is utterly rational for the insurance industry to raise its prices in response to them. What is wrong is for the industry to hide those increases behind a smokescreen of some phantom ‘crisis’ of lawsuits.

The tort system as we know it has existed for centuries. Its goal is to ensure that when a person is injured through no fault of their own, that the person responsible for the injury restore them to health. A secondary goal is to discourage negligence in general. It is difficult to argue with the morality of either of these goals. We want a society in which people are personally responsible for their behavior. Tort reform is about severing responsibility for causing an injury from the person who caused it. Insurance companies would have us do this as a mere convenience, so that they need not explain why they are raising their prices. This is an unacceptable reason for fundamentally altering a massive chunk of our legal system, one that has long served us well.

Perhaps the best way to end this is to ask who tort or medical malpractice reform doesn’t benefit? The answer to that is simple: consumers.


  1. Gravatar for Jim O'Hare VP medmal claims
    Jim O'Hare VP medmal claims

    A reasonable approach. In 25 years of med mal claims analysis, I rarely see attempts to just make a client whole, unless paying all the available coverage means whole. The costs of defending suits has increased significantly.

    A recent case just settled for $400k among 4 codefendants. I spent almost $100k for counsel , experts, records, reporters etc. I assume the other defendants did as well. In this case, the total cost to defend was 400k, I am guessing that the plaintiffs paid $75k and contingency was 33%, or 133k. That is 475k spent on a case that settled for 400k. The plaintiff rec'd about $200k.

    This is about 25% of the total expenditure and too little in my view. How do you make the client whole when they get only 25- 40% of the total expenditure? How do we get more money to the injured and keep the ancillary costs down?

    Maybe arbitration? Dont dismiss it, it could work.

    Re meaningful reform :

    - get rid of joint and several, as those with insurance pay for those that do not.

    - loser pays. Why not? creates frugality, stimulates settlement..

    - expert affidavits prior to every suit.

    - a frivelous suit statute.

    - Cap only pain and suffering, the amount can be debated. Neither side can argue what is too much or too little. It is a subjective concept with no objective ruler. There is no scale for pain. Money is a poor ruler.

    - how about one expert per defendant for each side to handle liability, causation and damages.

    - How about examining the definition of "peer", look it up in any dictionary of your choice. docs dont get peers, you know, similiar rank and station in society. Arbitration fixes this as well.

    - How about structuring payouts, lets say everything over 250k.

    - How about all Docs need PL insurance to practice. Just like we all need car insurance to drive? This puts more money in the pool, bringing down premiums.

    - mandatory mediation at close of discovery, if arbitration cant be reasoned.

    - have a sliding scale of contingency fees.

    - re examine vicarious liability, agency etc.

    just a start

    regards jim

  2. Gravatar for Jeremy Engdahl-Johnson
    Jeremy Engdahl-Johnson

    The current medical malpractice (medmal) system is woefully inefficient, with only 39 cents on the dollar going to claimants. Find out more at

  3. Gravatar for Mike Bryant

    Mr O'Hare, while I don't agree with all of your ideas, I will say it is one of the more rational lists I've seen from anyone calling for reform. Minnesota uses affidavits and it works well with our lower premiums and continues great health care. I think it's a little unfair to use the math of the defenses costs to figure out what the percentage was for the plaintiff, because it either suggests the case should have settled a lot earlier or alternatively the attorney was absolutely necessary for the claim to get to where it did. Put, setting that aside, and stepping back I can see the overall point. I don't see caps as ever being anything but a way to limit responsibility and I would add better policing of the medical industry to your list.

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