Surgeons at four hospitals in West Virginia stopped performing operations last week to protest the skyrocketing malpractice premiums -- which can be as high as $150,000 per year -- and urged the state Legislature to enact laws to cap jury awards for malpractice cases and make it more difficult to bring the lawsuits in the first place. The problem is occurring in many states, and some physicians have said they are retiring early or moving to other states to avoid high malpractice premiums.
The consumer groups -- Public Citizen, the Center for Medical Consumers and the Consumer Federation of America -- said their report shows the real cause of the problem is poor investment choices by the insurance industry, and state medical boards failing to discipline doctors adequately for committing malpractice and injuring patients.
"Doctors should be calling on medical boards to better police their own and demanding reform of the insurance industry," Joan Claybrook, president of Public Citizen, said during a news briefing.
The current economic slump has caused insurance companies to lose money from their investments and their only way to continue to make profits is to increase medical malpractice premiums, the consumer groups said.
The American Medical Association, however, rejected that claim.
"We've heard that argument before and checked into that and what we found ... is that from 1997 to 2001, return on investments has been stable" for the insurance industry, Donald J. Palmisano, president-elect of the AMA, told United Press International. "There have been no significant losses due to investments, so we don't find any validity to that," said Palmisano, who also is a surgeon in New Orleans.
However, the insurance industry itself has conceded its investments have lost money.
"Investment income is down for insurers ... and that is used by insurers to help moderate premiums," Julie Pulliam, public affairs director of the American Insurance Association, told UPI. "In the last few years, the economy has not given us or anyone else good income, so that does not help when it comes to calculating a premium for a doctor," Pulliam said.
She noted, however, that investment income only makes up about 17 percent of the factors comprising premiums. "A more important part of the puzzle is litigation costs," which have increased significantly over the past few years, she said. More malpractice lawsuits have been filed and jury awards to victims exceeding $1 million have increased by over 600 percent between 1995 and 1998, she said.
Palmisano also agreed the malpractice premium increase is due to a rise in jury awards. Both the AMA and the AIA endorse a bill in the Senate that would allow all medical expenses and lost wages to be paid but would cap awards for punitive damages and pain and suffering at $250,000. A similar bill was passed by the House last year.
The consumer groups said capping jury awards would have little effect on malpractice premiums, however.
"In California, which has done just that, insurance rates did not fall," Claybrook pointed out. The groups also noted that the National Association of Insurance Commissioners said the number of new medical malpractice claims declined by 4 percent from 1995 to 2000.
A study by Robert Hunter, director of insurance for the Consumer Federation of American and a former federal insurance administrator, found premiums have not increased over the last decade but at the same time medical costs increased due to inflation. In order to return malpractice premiums to 1991 levels, they would have to be increased by 50 percent, Hunter said.
In addition, a cycle of decreasing and increasing premiums is well known in the insurance industry and has occurred previously, in 1976 and 1986, Hunter said. The cycle is on the increase now, which is causing the premium increases, he said. The increases are related to business practices of the insurance industry and not to frivolous lawsuits, he said.
"Claims have not skyrocketed, nor have average award amounts," Claybrook said.
The consumer groups said rather than capping jury awards, a better solution to the problem would be for state medical boards to increase their disciplining of doctors who commit malpractice.
A nationwide review shows only about 5 percent of doctors account for more than half of all malpractice payouts, said Sidney Wolfe, director of Public Citizen's Health Research Group. Furthermore, only a small percentage of doctors who have multiple malpractice payouts against them have ever been disciplined by their state medical boards in the last 12 years, he said.
"Better regulation of doctors by greatly increased doctor discipline ... would greatly diminish, and thereby prevent, a large proportion of negligently caused injury and death of patients and the malpractice litigation and expenses that occur," Wolfe said.