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Just How Much do Malpractice Suits Raise Health Care Costs?


A succinct op-ed in The New York Times earlier this week by UPenn Law School professor Tom Baker made some terrific points about medical malpractice, and the expensive malpractice insurance that everyone is always blaming for the skyrocketing costs of health care.

Eighty percent of malpractice claims involve significant disability or death, a 2006 analysis of medical malpractice claims conducted by the Harvard School of Public Health shows, and the amount of compensation patients receive strongly depends on the merits of their claims. Most people injured by medical malpractice do not bring legal claims, earlier studies by the same researchers have found.

In other words, patient claims, and accordingly, the malpractice insurance to cover them, are not that large unless patients can prove significant injury or death due to medical negligence. This means that claims are not draining our pocketbooks; medical negligence is.

On the other hand, medical liability has improved patient safety — by leading hospitals to hire risk managers, for example, and spurring anesthesiologists to improve their safety standards and practices. Even medical societies’ efforts to attack the liability system have helped, by inspiring the research that has documented the surprising extent of preventable injuries in hospitals. That research helped start the patient safety movement.

Disturbingly, findings have shown that hospitals in New Jersey, Pennsylvania, and in fact all over the country are still vastly underreporting preventable errors, even serious ones, that occur on their watch, despite state laws requiring them to do so. On the consumer level, patients have no way of knowing how well local hospitals are performing. State agencies do not release reports from individual hospitals regarding their rate of medical errors. Oftentimes, it is not until the health department cites a hospital for breaking state laws that the public even hears of the hospital’s failing.

Take away medical liability and you take away the only meaningful check and balance a patient has on the impossible monstrosity of a system that American health care has become.

As Baker notes, “there’s a better answer for doctors worried about high malpractice insurance premiums.” And this answer is:

…[m]edical providers should be required to disclose injuries, provide quicker compensation to deserving patients and — here’s the answer for doctors worried about their premiums — shift the responsibility for buying malpractice insurance to hospitals and other large medical institutions. Evidence-based liability reform would give these institutions the incentive they need to cut back on the most wasteful aspect of American health care: preventable medical injuries.

It’s so crazy it just might work.


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  1. Mike Bryant says:
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    Very important, especially as the health care lies grow, that the right messages and information keep being written and spread.

  2. Penny Lane says:
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    It is vital that neither Congress or Obama do anything that will take away rights of those injured or killed as the result of medical malpractice.

  3. Facebook User says:
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    As Congress and the President try to hammer out a solution for health care, please write to you Congresspersons and Senators and let them know that they must not do anything to take away the rights of those Americans injured by careless doctors, hospitals or nursing homes.

  4. Facebook User says:
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    As some one who works in healthcare I can tell you it’s not all just careless people who makes mistakes that work in healthcare. While there are some careless people that don’t belong in healthcare some mistakes are made because plain and simple people are human and humans make mistakes. To say they don’t is plain ignorance. I personally don’t think a doctor, nurse, myself or anyone else should have their life taken away from them over a mistake. If things like medical malpractice/liability and EMTALA aren’t reformed it’s pointless to give everyone health insurance. It’ll pretty much just sink us in a much larger hole then we’re currently already in. I know a very good doctor who got sued and had a to pay a huge judgment meaning 7 figures all because he was the first one in the line to treat the patient. The medical board stated well he could have admitted the patient for obs. Anyone can be admitted for obs for anything. You have an ingrown toenail you can be admitted for obs. It didn’t matter that she had other people treat her over the next year up until her death the lawyer sued everyone and won against everyone. It was a BS judgment and now this doctor admits people for the most frivolous reasons that make you shake your head all cause he doesn’t want to be sued again. This results in significant amounts of waste. There’s a statistic that says 90% of the amount spent on someone in healthcare is spent on their last 5 years of life. Curtail that and save significant amounts of cost. There’s also a saying the US has 10% of the worlds lawyers yet has 90% of the worlds lawsuits. Curtail that and again you’ll reduce overall costs. Healthcare needs to be about cost containment and if you can’t contain that cost it’ll run out of control and bankrupt the system.

  5. Mike Ferrara says:
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    Brian. Thanks for your comment. All we are asking is when humans make mistakes they accept personal responsibility for the harms they cause. No more and no less. When a kid hits a ball and breaks a window. It was an accident. But his parents pay. That’s only fair.

  6. Facebook User says:
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    Sure I’m in agreement that people need to pay for their mistakes but there also needs to be a ceiling on the compensation so it’s not out of control and there also needs to be accountability by the patient which is something clearly lacking these days. If we do nothing when the shortage of doctors and other healthcare professionals treating you and I gets worse what are you going to do about it then. Nothing that’s what you’ll do about it cause it’ll be too late. We already see that in some specialties like ER, GI, hand surgery and so on. Some states have already begun to place caps on settlements/judgments so doctors stop leaving those states. This needs to be a federal thing though to protect all healthcare providers better so we continue to have people wanting to be a healthcare providers.

  7. Steve Lombardi says:
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    Brian D’Alessandro: You state clearly patients are not being accountable today. If it’s clear then you should be able to name five cases where that is true. Please prove that statement by naming those patients or cases to which you’re referring. Thanks.

  8. Facebook User says:
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    I can’t say it’s clear and that every patient lacks accountability. I can only say about my personal experiences in my dealings with both doctors and patients as to there being malpractice or lack of accountability. Obviously I can’t go into specific details do to things like HIPPA. A very vague example of a situation that has occurred is Joe comes into the ER for abd pain. Joe gets up and takes off for whatever reason walking across the street not in a crosswalk and gets hit and killed. Joe ends up having a BAC of .20 which is realized after the fact however Joe is a chronic alcoholic so he’s able to walk and talk and act as normal as most of us without any impairment noticed. Hospital, doctor, nurse and everyone else in the chain gets sued having to pay out a significant amount to Joe’s family. This to me exemplifies a lack of accountability on Joe’s part which I’m sure any decent lawyer can make a jury sniffle and everyone else the bad guy so a jury provides a settlement to Joe’s family. I’ll do some more research to find actual cases where you can read the specifics and get back to you.

  9. jim O'Hare says:
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    VP med mal claims:
    You cant legislate against mistakes nor gravity. malpractice cant be eradicated and people fall. The small % of med mal that actually turns into a claim, is enough to cause a crisis. The injured should get paid, and they should also get most of the money. I recently settled a case for $500k. The atty fees and costs was $200k. The defense of the case cost $85k. THe premium of the insured was $26k. The total cost to me was roughly $585k, of which the injured rec’d $300k. How many premiums of $26k does the company need to sell, without a reported claim, to break even? What if arbitration totals for the same case cost $400k, with both atty’s fees of $50k and the same indemnity? The company now has $185k more in its warchest to indemnify another patient. The cost of healthcare now improves by the effect of that $185k savings. It goes on and on .Good idea? regards Jim

  10. James Cool says:
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    The thing I never hear doctors and health care professionals do is propose a viable alternative to the tort system that does not shut the door on validly injured people (as caps do).

    So…what’s your solution?

  11. James Cool says:
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    Jim O’Hare:

    By the way, I must confess that your comment makes me question whether you understand how insurance works. The basic concept is simple and you miss the fulcrum idea in the insurance model:

    Insurers collect premiums (let’s say your 26k) from thousands of clients. They project (using very smart mathematicians) approximately how much they are likely to pay out given jury trends, the type of work being done, and a myriad of other factors in a given year. They make sure that their premiums cover more than this project. They then create a federally mandated reserve to cover potential claims.

    Everything that if left over gets invested. Since their bean counters are smart, it ends up being a fair amount. They make their money by investing that extra cash. When you’re talking about millions, even conservative returns yield big results.

    It is not dollars in dollars out. Insurance, if viewed that way, must seem like a horrible business. If that were the case, the only way insurers could make money would be unjustly denying claims (which they do) or charging obscenely high premiums (which they do anyway). At its core, insurance relies on a time-based model of investment. They expect to spend every dollar they collect in premiums, just not right away. They hope to delay the risk long enough for them to make money on their money.

    Unfortunately, not all insurance companies make smart investments. A great example would be the world’s biggest insurer, and bailee, AIG. AIG bought a bunch of mortgage backed securities which were, to any one with a brain, bad investments that derived their worth almost entirely from global confidence in the forward inertia of the American economy. When insurers make bad investments, they lose their profit center and federal law prevents them from using reserves to rescue themselves since those are earmarked for claims. Thus, they go to the only source of revenue they have remaining: policy holders. They jack up your premiums to cover their bad investments and then blame trial attorneys and injured plaintiffs so you won’t be mad at them for screwing up.

    This isn’t rhetoric, it’s simple truth.

  12. jim O'Hare says:
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    Response to Jim Cool Esq:

    I enjoy the discourse. You are misinformed on several fronts. There are no caps in arbitration. I will address caps later. The hollywood nature of trial can only incite non peer juries, and amp up verdicts. This is removed in arbitration and a Doc gets a jury of his peers. Do you see this as a fair exchange? Or would this remove the most valuable bullet for the plaintiffs bar? You know – explaining complicated medicine to lay people, those looking for theatre and entertainment in the courtroom and got their medical training from watching House.
    Consider who your peers are the next time you pick a jury, just based on your extensive education alone.
    Re my education and experience. I am an x ray tech and litigation paralegal prior to 1985 and have investigated and adjusted med mal claims since. I have an AIC and AIS professional designation and near my RPLU designation. To date,I have settled more than 1000 complex liability claims and monitored more than 100 trials to verdict. I have many friends that are plaintiffs attorneys. I sort of know how insurance works, as much as anyone with my experience. PRI in NY is a big player and they have a $40 mil negative surplus. Interesting term isnt it? MLM had a $2 bil surplus now down to a couple hundred million. Remember Frontier Insurance? These firms are filled with bright people and they understand insurance. Investments are limited to certain conservative arenas and the market isnt doing well. AIG is the biggest in the world. I guess their time based model of investment should have kept them sober.
    I have 1000 docs insured. PIC has been in Florida since 2002 and is the 2nd oldest med mal carrier in Fl. What does that tell you? Dozens have come and gone. Why is that? Dumb insurance executives? Just assume that this is not the case, then what do you have. Could it be the system?
    In arbitration the injured party gets the money and quickly, premiums come down, defensive medicine plummets, policies become affordable, the cost of healthcare drops,the courts get declogged, while the attorneys still make a nice living. I could go on re the benefits or arbitration!!
    The solutions for med mal crises may be against your personal interests, and would not affect your clients ultimate recovery. I am all for reasonable compensation to victims of med mal, structured if practical. The fact that only 30-40% of the costs of med mal( expense and indemnity) go to the injured, is an afront to the honest assessment of the problem, and the search for the solution.. You do not really want it solved, do you? The current approach and forum is inefficient and lumpy.
    Finally re caps. The only cap I see is for pain and suffering. What ruler or scale do you use for measuring pain and suffering? Loss of earnings I can measure. A cap is a feeble attempt to make a ruler, but a ruler is needed to calculate exposure. Does Pain equal infinity?There is pain with alot of medicine. We have all had pain meds. How do you separate the expected pain from the pain due to med mal? What if you have a jury of Navy seals, would they give a large award for pain compared to a different jury pool?
    Level the field via a jury of peers and get most of the indemnity to the injured. That is my argument. The results will resonate throughout the country and keep the golden goose alive for your hunting expeditions.
    regards Jim O’Hare AIC AIS- VP of Claims Physicians Insurance Co.

  13. James Cool says:
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    Thanks for all the great information and for being open and honest about your background. It is appreciated and helps contextualize your opinions and lend force to your observations.
    In light of your background, I apologize for assuming you did not understand the business of insurance. Clearly you do, you might just have a different perspective than I.

    In the interest of candor, I need to stress the “esq.” is not appropriate as I am not yet an attorney. I also do not specifically plan to practice med mal, though I am not opposed to that.

    I don’t necessarily oppose arbitrations. I agree that in some respects an arbitration-centered system may produce fairer results.

    I also understand that certain types of insurance are significantly harder to remain profitable at than others. But I guess what boggles me about that is, if it’s so hard to make a buck selling med mal insurance, then why do people do it? No one is making these folks enter the game. In fact, if no one would ensure doctors I suspect the problem would resolve itself, although I concede we may not like the result.

    I think I also have a higher opinion of juries than you do. For one, I don’t think “jury of your peers” means peers in a educational or social sense. While socially, a millionaire may not be my peer, he is nonetheless my peer in our democracy. Juries are designed to represent a cross-section of the community. They do not always succeed in being that, but the idea necessarily requires that some jurors will not be your “peer” by this definition. This was never intended.

    Juries were ever-intended to be the crucible in which community values were forged. With this framework in mind, it is better than a jury represent the community at large as opposed to those similar to you. Am I being clear on this point?

    Finally, I sense you think juries are dumb, unedcuated, and prone to persuasion via theatrics. I disagree. Juries are under-educated, but together thay have a 8-12 person hive mind. The collective education and experience of 12 people is remarkably powerful. Moreover, the modern jury advocates job is largely educating jurors.

    I have a tough time feeling sorry for the defense bar. Insurance companies can hire large law firms and can afford to pay them. Large law firms hire the top 10% from every law school.

    Trial lawyers may be a lot of things, but they aren’t magicians. How is it that we keep tricking 12 people all over the country into overcompensating folks when our opponents are the best and brightest?

  14. jim O'Hare says:
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    Dear Jim – you write well and will do well with your chosen profession.
    One last comment re jury of your peers. A general jury is fine for bank robbery, murder etc as these are gen’l things that people can figure with a 5th grade education. A nuclear physicist robs a bank, a peer is anyone that uses a bank. No need for nobel laureates. Thats not my point.
    Explaining to Joe the plumber how the elective retrograde cholangiopancreatogram compromised the ampullae of Vater leading to acute pancreatitis. Sounds bad must be med mal. Clearly this is not gen’l knowlegde and words never heard by genpop. How can they be peers?
    As you are aware, the word “peer” means equal in rank and station.” A count, a duke and baron are peers; while a peasant is not considered a peer. Check Blacks dictionary, I know that you have one.
    The uneducated jury is the plaintiffs bars’ best friend, low socioeconomic counties equals lower education, equal humongous verdicts. Why is that? Counties like cook, Bronx, Trenton are those counties. These are places with the largest gaps between education and society. A highly educated jury is the defendants best friend, simply because the defense of a bad outcome is always more complicated and loaded with subtley. yes the patient lost his leg, but this was an outstanding result. That is a tough sell. A level of sophistication and education is required. This is specialized and a peer is someone that knows the same kind of stuff.
    RE people wanting to enter the med mal insurance industry: initially alot of money comes in via huge premiums, for the first few years with no payouts. The coffers dwindle quickly once defense and indemnity costs knock on the door with those first claims, times get tough. You have to be lucky and good in every decision to be a successful PL writer.
    Review any definition of peer it has nothing to do with your utopian ” we are all created equal” stuff. This is a foudation in common law that is ignored in med mal cases. Docs know what med mal is, at least give me a vet, a dentist or podiatrist as a peer, equivalent to a count, baron or duke. Rank and station.

  15. Mike Ferrara says:
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    The President’s speech to the AMA made it clear that caps are not going to be part of any health care bill. The classy doctors in attendance booed him when he announced that. Doctors: Let’s find common ground rather than fight each other. We want you to get better reimbursements, to have less paperwork, and to have fewer fights with the evil insurance companies. Join us and we can make this work.

  16. James Cool says:
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    Great post, Mike.

    Caps make absolutely no sense for everyone except big insurance. The “frivolous” injuries were never getting near the caps to begin with. It frivolous lawsuits are a problem, they are problematic because they waste resources in defense prior to being bounced, not because juries are giving away huge amounts of money to uninjured people.

  17. Jim O'Hare says:
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    Isnt a policy limit a cap? Shouldnt they be done away with as well? You cant measure nor weigh pain
    can you? Until a reliable ruler or scale appears, we are left with a cap for the pain and suffering component – This element only! Other causes of action , like loss of economics can be calculated. That can be measured: I was 10 years from retirement when the Doc goofed, so I couldnt get my $50k/yr for those 10 years = $500k.
    A good ruler! It makes sense.
    Nobody can evaluate pain, compare pain, or evaluate it. The multiplier is always related to how high you can amp up a juries emotions. Is this the ruler that you want? Of course you do, the sky should be the limit right? WE can argue about the size of the cap number ,but there needs to be some objective scale to weigh a subjective concept. Why are there caps for attorney fees? thats different !!
    regards Jim O’Hare VP med mal claims

  18. Mike Ferrara says:
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    Jim. I appreciate your comments and frank discussion. As attorneys, we like to deal with evidence. You know your trade magazine, Business and Industry Insurance Journal or something like that? See the article that confirms what we have said that there is NO, NADA evidence that lawsuits affect malpractice premiums. None. If you have such data, I’d love to see it. BTW, do you the CIGNA whistleblower who is taking on his former industry. Look out for him, he’s on a mission.

  19. James Cool says:
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    Why do you prefer legislators, who know nothing about individual cases, setting damage caps to juries doing it?–who know the case intimately

  20. jim O'Hare VP med mal claims says:
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    – Caps should be changed to limits, like speed limits or policy limits. All calculations, like those used by the insurance industry, are useless if you allow infinity as a factor. If I wreck your 1969 corvette. I can see and touch the wreck and calculate maybe $50-100k to make you whole. You tell me-What is 7 minutes of 9/10 pain worth? Weigh it for me, use a ruler. How much? Is it 10 billion? The answer, as much as you can get with amped up emotion sold to laymen You are measuring subjectivity- pain , with objectivity- money. Flip that around, and I compensate you for your wrecked corvette with 100 angel kisses. Make that 150. You have a Blacks dictionary, look up peer. Equal station and rank in society. Today that means education levels. Why is it that the highest verdicts nationwide in med mal occur in the poorest uneducated venues. Think about that. Selling a lemon to a dimwit takes little skill, try selling it to Mario Andretti. Mario gets the fair price of that lemon doesn’t he. I really don’t care what the cap is but their needs to be a limit. Do you think juries understand staging and doubling times of infiltrating ductal breast cancer when treated by fluoricin instead of adriamycin. Those that are intimate with that info get Nobel prizes.. Intellectually, is it fair to attempt selling that argument to Sparky the oil lube guy or somebody that has more education, like Jim the accountant? If you were a doctor would you want your career potentially ruined by someone that rec’d all their medical training from watching ER reruns?
    regards Jim

  21. jim O'Hare VP med mal claims says:
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    Lawsuits affect premium. If you have 3 suits your premium will be higher, just like crashing your car 3 times. What happens to your premium? Verdicts affect premium and is a significant calculation to rates. Why do OB’s pay more than family practice docs? = lawsuits and verdicts. I do not recall CIGNA writing med mal- they are healthcare writers. In any insurance the more claims you put in the higher your premium is going to be- homeowners, auto etc as well as med mal. How do you know what to charge for premium if you dont assess what the claims cost? This is rudimentry insurance. There are counties in Florida w/o neurosurgeons nor OB’s, directly due to the unavailability of insurance and guarantee of suits regardless of merit. . Premium levels have approached the coverage limits for some specialties. Directly related to lawsuits.