Untangling the Malpractice Mess
Doctors, lawyers and insurance companies blame one another for the crisis in obstetrics, but according to one expert all three are at fault. Robert Hunter, 49, a Federal Insurance administrator in the Ford and Carter administrations, is now president of the National Insurance Consumer Organization. Hunter reviewed the emergency in the nation's delivery rooms with correspondent Margie Bonnett Sellinger and discussed ideas for stabilizing malpractice insurance.
Is the current crisis a new phenomenon?
This is something that has plagued us for more than a hundred years. I recently found an article from an 1880 medical journal in which doctors were complaining that malpractice lawsuits and insurance costs were getting out of hand and threatening to bring down the whole system of medicine.
Why has the crisis become so acute?
We are caught in a cyclical pattern in insurance, which occurs roughly every 10 years. Most people imagine that premiums are based on how much insurance companies project they'll have to pay out in claims, but that isn't true. They make most of their money by investing the premiums, and when interest rates fall as they have recently, the companies have to raise premiums to preserve their profits. The fall in interest rates led to low profits in 1984. That was followed by the skyrocketing insurance premium costs we are witnessing today.
Can't these sudden escalations in premiums be prevented?
Yes. But the federal government has not tried to regulate the insurance industry in recent decades. The states, which can regulate premiums, have been ineffective. Insurance companies are very large political contributors and important lobbying forces in every state. The states are understaffed, most don't have actuaries or computer capacity. So they have a very low capacity to regulate and a very low will to use the powers that are available to them. Insurance is our third largest industry—12 percent of the nation's disposable income goes into premiums—yet it's not subject to antitrust laws. By their own conservative accounting, insurance companies have netted $75 billion in the last 10 years. During that same period, as a group they paid no federal income tax.
Isn't part of the problem an actual increase in malpractice lawsuits?
There are more lawsuits for medical malpractice than there used to be. But the idea that malpractice victims are all money grubbers is ridiculous. The fact is, doctors make mistakes, and our common law says that if someone hurts us we are entitled to seek recompense. Nevertheless, studies by the Health Research Group in Washington indicate that only one in 10 people who are victims of doctor negligence actually sues. And 70 percent of the time doctors are sued, they win in court. Typically, juries don't give verdicts and monetary awards that aren't justified, and even if they do, there is an appeals process.
If you or I have an auto accident, our auto insurance rates go up. Is the same true with malpractice insurance?
No. In most states, a doctor who has been sued successfully 10 times pays the same premium as a doctor who has never been sued. This is a serious problem because the system should provide a disincentive for bad practice and it doesn't. A bad doctor should be identified as a bad risk and have to pay higher premiums.
The incompetent doctors need to be weeded out, and physicians have not done a good job of policing themselves. Until this year in Puerto Rico, for example, the medical regulatory office had not lifted a single license in a decade. Out of 6,000 doctors they hadn't removed one incompetent individual—not even one drunk or drug addict.
What other flaws are there in the way malpractice premiums are determined?
Last year the premiums represented about 1 percent of the total cost of health-care costs. So it's a reasonable price for a system that pays us when we get hurt unfairly. But high-risk specialists—especially neurosurgeons, obstetrician-gynecologists and anesthetists—are being driven out of practice by inordinately high premiums. The problem is particularly severe for the doctor in a rural area, who only occasionally delivers a baby and ends up paying the same premium as someone delivering hundreds of babies in an urban area.
What can be done to spread out the burden more fairly?
Obstetricians, for example, could pay premiums according to the number of babies they deliver. In addition, hospitals could be held responsible for half the malpractice costs of their high-risk specialists. This would help spread the financial burden, and hospitals would know that if they give privileges to doctors who hack people up, they will pay for it.
The Reagan administration has endorsed a proposal to put financial caps on malpractice awards and legal fees. Will that solve anything?
The insurance companies have made it clear they wouldn't guarantee that they would lower their rates one penny, even if there were caps on awards. They suggest that maybe if we do all these things, we'll start to see not a lowering of the rates but an increase in the costs of insurance at a slower rate. To make things worse, the Administration is suggesting there be control on fees for lawyers representing patients but not for those representing physicians. I think it is an outrage to control just the victim's legal fees. It represents a massive intrusion on the side of doctors against patients.
The answer is not to take away the rights of a victim by limiting the amount of a judgment he can receive. There is no reason that you or I should give up our legal rights because doctors, malpractice lawyers and insurance companies—who all make a great deal of money—can't get their act together.
What solutions do you propose?
One, get rid of incompetent doctors. Two, get control of legal costs. There should be limits on how much lawyers on both sides can take out of the system, and there should be penalties for frivolous suits and frivolous defenses. Three, we have to get control of the insurance mechanism to stop the boom-and-bust cycle. The states have to enforce their laws to regulate premiums, with help from the federal government. Good doctors and patients are victims of the insurance cycle crisis. It's time for meaningful insurance reform so that we can stop this roller coaster ride.
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