Malpractice caps offer only illusion of help to struggling doctors

by Lynn R. Laufenberg

Why does crossing the line (between Illinois and Wisconsin) cost your doctor $82,300 (in increased malpractice premiums)?” asks a June 9 Blue Cross/Blue Shield ad in the New York Times.

An intriguing question. But unfortunately, the ad provides both the wrong diagnosis–blaming our nation’s civil justice system– and prescribes the wrong cure—promoting a rigid federal cap of $250,000 on malpractice awards.

A large injection of reality is required here. Thankfully, an authoritative study on malpractice premiums has just been just released by the independent Weiss Ratings of Palm Beach Gardens, Fla., which studies and ranks the financial health of insurance plans. The study’s most stunning discovery: states with caps have actually witnessed much sharper increases in premiums (48%) than states without caps (36%). Clearly, caps offer no relief on premium increases, the study concludes.

That’s because size and frequency of medical malpractice awards are not what’s actually pushing up premiums. Chief among the real forces driving premium increases for doctors: the unstable investment and financial practices of many malpractice insurers, according to Weiss. The nation witnessed these very same spikes in the 1970’s and the 1980s—always coinciding with a downturn on investment income from the bond and stock markets for the malpractice insurance firms.

To make up for the drop in investment income, the malpractice insurers jack up malpractice premiums, putting the squeeze on physicians. And then to divert attention from the real causes, the insurance corporations scream about malpractice awards and demand federal and state caps as a “solution” to the premium increases they have just imposed.

The caps amount to a one-size-fits-all, government-imposed limit on what juries can decide is fair. It doesn’t matter how disabling or disfiguring the injuries, or how irresponsible the malpractice. There would be one and only one standard for non-economic damages, and that’s it. The industry and its allies like Blue Cross/Blue Shield are aggressively pushing this in both state legislatures and Congress.

In this environment of big-money publicity campaigns designed to justify astronomical market-driven premium increases, Wisconsin stands out. Our state offers a valuable alternative model on malpractice insurance. Wisconsin’s stable, lower premiums are based upon a unique, non-profit malpractice system for malpractice claims above $1 million through the Patients Compensation Fund. The Fund now has a huge surplus of $600 million, and is so successful that the PCF’s fees have actually fallen by 40% since 1997. Wisconsin also offers a plan that provides malpractice coverage to doctors unable to find it on the conventional market.

And thanks to these particular features, Wisconsin is the only state with a cap on malpractice awards where premiums for primary coverage have actually fallen. Lacking Wisconsin’s universal and non-profit system, premiums have meanwhile been generally soaring in the other states with caps.

Lawmakers at both the state and federal level ought to heed this stern warning from the Weiss Ratings’ report: “Legislators should put proposals involving non-economic damage caps on hold until convincing evidence can be produced to demonstrate a true benefit to doctors in the form of med-mal caps.”

In response to periodic and predictable premium crises of the mid-1970s, the mid-1980s, and today, various states have limited the legal rights of patients injured by medical malpractice. But in not a single case have those limitations on the rights of patients resulted in lower insurance premiums for doctors.

In effect, the insurance industry is asking for the Congress and states to penalize the most severely injured victims of malpractice, while offering only the illusion of help to doctors struggling with soaring premiums. Such a “cure” only subsidizes the insurance industry’s profits, at the expense of patients’ legal rights and doctors’ ability to have affordable insurance.

The proposed caps benefit only malpractice insurers, while both patients and doctors pay.