What's broken in the medical malpractice insurance system?

Date published: 11/6/2005

We've got bleeding

Malpractice-insurance rates are traumatizing Virginia physicians

DIAGNOSING A PROBLEM first requires establishing some facts. That's why the report released last week by the State Corporation Commission is so valuable.

Most observers believe that the medical-malpractice system in the United States needs therapy. The American Medical Association claims that 20 states are in crisis because skyrocketing malpractice-insurance premiums are driving doctors out of certain specialties and, sometimes, out of certain states. The AMA believes it's expensive and often frivolous lawsuits that chiefly jack up premiums. Trial lawyers deny culpability, pointing instead to insurance companies that, they maintain, are making up for bad investments by cynically raising premiums. Insurance firms shrug and say no, they base premiums on prior claims payouts.

What's a legislator to do?

Require some facts, for one thing, which the General Assembly did, compelling medical-malpractice insurance companies to report on "closed claims." The first such report, outlining cases from 2002 through 2004, has raised eyebrows. In the Old Dominion, figures show, malpractice is a tough sell. Three out of four cases in that period produced no payout whatsoever. Five out of six juries found for the doctor or hospital. And mega-awards, those of $1 million or more, are rare. The system, viewed from the award-payout angle, isn't broke. But does it still need fixing?

Doctors say yes, for they see the problem through an insurance-premium prism. If they can't afford or even obtain medical-malpractice insurance, they can't work. And if they can't work, the public suffers. That's in fact what happened when the only ob/gyns on the Northern Neck were forced to close their practice. Now, moms-in-waiting have to travel to Richmond or Fredericksburg for care. First World medicine meets Third World access.

In fact, doctors' insurance premiums have risen. Tom Cox, vice-president of PhillipsCox Insurance of Richmond, says that a typical family doctor's rates tripled between 1997 and 2005, while already-steep premiums for an ob/gyn more than doubled. The latter now pay around $50,000 a year for malpractice insurance. Mr. Cox says the rates are yoked to claims histories, but in the three years covered by the current report, both the number of claims and the total amount paid out have remained level.

So if that's the case, but premiums have spiked anyway, wherein lies the pathology? That will take more diagnostic effort to discover. However, a study by Americans for Insurance Reform found that, in Virginia over the last 30 years, "the astronomical premium increases that some doctors have been charged during periodic insurance 'crises' over this time period are in exact sync with the economic cycle of the insurance industry, driven by interest rates and investments. In other words, insurance companies raise rates to make up for declining interest rates and market-based investment losses." Should legislative investigators confirm this conclusion, a different poultice than tort reform is in order.

Thirty-eight companies offer medical-malpractice policies here, a number that should translate to vigorous competition and reasonable premiums. But when docs have trouble getting coverage, the commonwealth needs to step in. STAT.

Date published: 11/6/2005