Regulators Hesitate On

Medical Malpractice Proposal

Consumer groups slam report urging non-economic damage award restrictions

By Michael Ha

Insurance regulators delayed adoption of a report recommending limitations on awards for non-economic damages in medical malpractice cases after it came under intense fire from several consumer advocacy groups.

The draft report on medical malpractice reform was presented at the National Association of Insurance Commissioners spring meeting last month in New York. It suggests that states should consider putting caps on non-economic “pain and suffering” damages in medical malpractice lawsuits.

Texas Insurance Commissioner Jose Montemayor, who chaired the property-casualty insurance committees market conditions working group session, said that while medical malpractice victims should be compensated, people still have to ask the fundamental question of “how much is enough” on punitive damages.

Montemayor told group members that the goal of compensating the injured and deterring negligence must be balanced with the urgent need for the continued availability of health care.

Montemayor and other commissioners, including Washington, D.C., Insurance Commissioner Lawrence Mirel, offered stories of how doctors are fleeing their jurisdictions, retiring early or even abandoning their practices to avoid rising malpractice premium rates. Mirel said that Washington, for example, could lose half of its obstetricians by the end of 2004.

However, consumer advocates attending the session slammed the report as having hardly any substantial information on insurance topics such as loss control and said that it avoided discussing the real forces behind soaring medical malpractice premiums for many physicians.

They also argued that stories of physicians fleeing their states or leaving their practices because of higher premiums are largely anecdotal and are “propagandas by the American Medical Association.”

“They are wrongthe U.S. General Accounting Office studied that and concluded in its report there is no evidence of that,” said Robert Hunter, director of insurance with the Washington-based Consumer Federation of America.

The GAO has studied this very issue, Hunter told the working group, by examining some 17 states to see how many physicians are leaving their states and how many are retiring early or leaving their practices. “The GAO said there may be some cases, but its not a real widespread problem,” according to Hunter.

Objecting to the reports focus on litigation reform, Hunter said: “NAIC is not the American Bar Association; its a group of insurance experts. But the report doesnt even touch major insurance issues. It just looks stupidwhat does NAIC add to the debate if it doesnt add insurance expertise? Why even bother?”

A second consumer advocateBirny Birnbaum, executive director of the Center for Economic Justice in Austin, Texasadded that the report doesnt analyze any claims costs.

“It does a poor job of analysis,” he said. “For example, it doesnt cite which particular specializations have particular claims costs. So, what the report does is take a very broad approach to a problem that requires a much more precise analysis.”

Hunter argued that medical malpractice problems actually stem from insurance-related issues, “one of which is the economic cycle of the insurance companies, where every 10 to 15 years theres a hard market where rates essentially doublethats the problem.”

Hunter also told the market conditions working group members that the report failed to discuss “the pyramid of doctors.”

“The problem is that its not bad if your rate doubles if you happen to be a general practitioner in Virginia and are paying $2,000 for insurance,” he said. “But if you are an ob/gyn or a neurosurgeon and are paying 25 times the general practitioner, you are starting at $50,000 or $75,000, and the hard market would double that to $100,000 or $150,000.”

This can be especially burdensome now because, unlike in previous insurance cycles, doctors have much more difficulty passing those costs back to Medicare or HMOs, Hunter said.

He also told regulators that they shouldnt be talking about tort reformbut if they do, they should at least have a balanced presentation that illustrates the negative side of tort reform for consumers.

Hunter argued the reports tort reform proposals had a consistent anti-consumer bias, with no “quid pro quo” for consumers. For example, he cited that while Michigans auto insurance reform eliminated the right to sue through a no-fault system, it repealed limits on accident victims rehabilitation services. The NAIC report, on the other hand, proposes to “take away the rights of victims and give them nothing in return.”

The NAIC reports proposals, he added, “would be just a very bad deal for people who are consumers of medical care. If a doctor makes a mistake, why should you have a limit on what you can get? It doesnt make sense.”

Birnbaum also noted at the working group session that the draft report ignores medical malpractice insurers lackluster investment income, which he suggested has been a major contributing factor in soaring premium rates. “The report is inaccurate in a number of waysit doesnt analyze how a reduction in investment income had a major impact on insurers revenues,” he said.

Also speaking at the working group session was Ruth Bernstein, a representative of the Association of Trial Lawyers of America in Washington, D.C., who disputed the reports claims that the current tort system needs to be fixed.

She told regulators that jury awards are subject to judicial and appellate review and often are reduced. Bernstein also remarked that the distinction between economic and non-economic damages is discriminatory, because it puts victims with no incomeincluding children and nonworking womenat a disadvantage when getting economic damages in jury awards.

After a lengthy and wide-ranging debate at the session, Montemayor decided not to bring the report to a vote at the meeting. The group will now work on revising the draft report with an eye toward possibly adopting a revised version later this year.

Michael Ha is an assistant editor of NUs Property & Casualty edition.


Reproduced from National Underwriter Edition, April 16, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.