Three times in the last 35 years, the insurance industry has
created liability insurance “crises” for doctors (and other businesses and
professions). Each time this has
happened, the insurance industry has tried to cover up
its own mismanaged underwriting by blaming the legal system for its sudden,
astronomical premium increases. Like
clockwork, following these rate hikes have been frenetic calls for legislative
limits on victims’ rights to sue, with state lawmakers viewing the “crisis” as
an isolated problem rather than indicative of a broader national problem caused
by the cyclical nature of the insurance business.
The first time this happened was the mid-1970s. On June 9, 1975, Newsweek ran a cover story, "Malpractice - Doctors in Revolt.” The "revolt" was against sudden malpractice premium hikes. Sound familiar? Insurers quickly blamed what they believed
was occurring in the country – a “litigation explosion.” They
demanded huge rate hikes from state regulators and convinced lawmakers that the
only way to bring rates under control was to limit the legal rights of injured
victims , i.e., insurer payouts. In
fact, insurers learned during this period that state regulators would give away
the store in rate increases. They also
learned that they could easily take political advantage of the situation by
asking state lawmakers to limit victims’ rights. And it was during this period California
enacted the Medical Injury Compensation Reform Act, or MICRA, which
placed a $250,000 cap on non-economic damages for malpractice victims.
Yet it turns out that there never was a “litigation
explosion.” After insurers abandoned the
medical and product manufacturer lines, the federal government decided to
review the situation and not simply accept the insurer’s assertions that
litigation was “exploding.” An inter
agency working group was formed under then Federal Insurance Administrator J.
Robert Hunter, to look into the crisis and to report back specifically as to
whether a claimed “explosion” of medical malpractice claims was causing the
huge and sudden jump in premiums that doctors were experiencing.
Hunter’s research immediately found that data was not
available to answer this question.
Insurers did not have such data.
Therefore, working with the National Association of Insurance
Commissioners (NAIC), they undertook a closed-claim study. The closed claim study revealed that there
was no “explosion” of claims and that there was no justification for the
insurer actions. (See more here.)
But it was too late for California. Incredibly, MICRA has remained on the books for 38 years. MICRA's $250,000 cap is worth about $65,000 today. This cap has never once been adjusted for inflation. Because medical malpractice cases are so
expensive to bring and the cap is so low, it’s often impossible for an injured
patient to even bring a case in California.
It’s been a bonanza for the insurance industry. In fact,
California’s medical malpractice insurance industry has become so bloated due
to this cap, that “as little as 2 or 3 percent of premiums are used to pay
claims” and “the state’s biggest medical malpractice insurer, Napa-based The
Doctors Company, spent only 10 percent of the $179 million collected in
premiums on claims in 2009.”
However, the political lessons learned by the insurance
industry were clear: by blaming lawyers and litigation
for a crisis that the industry itself had manufactured, the industry could
obtain major changes in tort laws – basically, gravy to their bottom line. Their clients – businesses and doctors – were
more than happy to go along. It is a
political strategy that worked in the 1970s, and carried them through
the next three decades.
To wit, in 1986, in the midst of this nation’s second liability
insurance crisis, Missouri lawmakers were told by insurers the same thing - that
the only way to reduce skyrocketing insurance rates was to enact a similar cap
on non-economic damages. And they proceeded to enact a $350,000 cap. But when the third insurance crisis hit in the early
2000’s, guess what happened? Claims were
down in Missouri, alright. “New medical malpractice claims dropped 14 percent in 2003
to what the [Missouri Department of Insurance] said was a record low, and total
payouts to medical malpractice plaintiffs fell to $93.5 million in 2003, a drop
of about 21 percent from the previous year.” And “[t]he
National Practitioner Data Bank, a federally mandated database of malpractice
claims against physicians, found that the number of paid claims in Missouri
fell by about 30 percent since 1991. The
insurance department’s database found that paid claims against physicians fell
42.3 percent during the same time period.”
But doctors’ malpractice insurance premiums rose
121 percent!
Fast forward to 2013.
Today, Missouri’s cap is no longer
on the books because the Missouri Supreme Court struck down the law as
unconstitutional 26 years after it passed. Over the weekend, the St. Louis Post-Dispatch wrote a blistering editorial,
strongly opposing the effort by some Missouri lawmakers to reinstate the unconstitutional cap, and referencing the recent case of Regina Turner, whose neurosurgeon operated on the
wrong side of her brain leaving her severely disabled.
And just last week, a major new effort got underway in California to, if not repeal MICRA, at least properly adjust the 38-year-old $250,000 cap
for inflation. Here’s some of what the campaign “38 Is Too Late” folks say:
MICRA has a disproportionate impact
on people who have little or no income, including children, the elderly,
stay-at-home parents and working class Californians.
- Victims of medical
negligence can collect the estimated cost of actual economic damages, such as
loss of income resulting from their injuries. On the surface, that may seem
fair. But the law has a disproportionate impact on people who have little or no
income, including children, the elderly, stay-at-home parents and working class
Californians. The reason is that these citizens have little or no economic
losses resulting from lost income.
- Despite having no
impact on health care or insurance costs, non-economic damages caps have a
tremendously negative impact on the permanently injured, especially, for
example children who may live for 70 years with brain damage or other
catastrophically debilitating injuries. California’s 1975 cap on non-economic
damages is worth $61,525 in 2009 dollars. A patient would need to recover
$1,018,201 in 2009 for the equivalent medical purchasing power of $250,000 in
1975.
It’s been over three decades since California went down a
very cruel road. It's time to do something. Go here to help.
