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AMA and consumer group debate tort reform efforts
Public Citizen cites RAND study
Although the researchers themselves focused on deficiencies in the delivery of health care, officials with the nonprofit consumer protection group, Public Citizen, claim the new analysis of health care quality conducted by the RAND Corp. demonstrates that the malpractice insurance crisis is not as great as tort reform advocates claim.
"The medical lobby has a lot of gall asking for favors from Congress, " Public Citizen president Joan Claybrook charged in a statement preceding the U.S. House of Representatives vote to pass the tort reform bill, the Health Act of 2004 on May 12. "It should look in the mirror and address the health care quality issues identified in the RAND report rather than asking for handouts."
The RAND study gave its highest rating for health care quality to Seattle. The city is located in one of the 19 states the American Medical Association (AMA) cites as being in a crisis condition due to rising malpractice lawsuit judgments that have been responsible for increases in insurance rates, Claybrook noted.
Overall, the RAND study found the quality of health care was higher in cities in six AMA "crisis" states than in two of the states the AMA says are doing "OK" — California and Indiana. The RAND researchers singled out Orange County, CA, and Indianapolis as delivering the lowest-quality cardiac care.
The RAND report studied patients’ medical records in 12 metropolitan areas, compared their care to recognized standards and quality indicators, and found that overall, patients receive only about 55% of the care recommended for their conditions.
But there were local variations and, in most categories, the best care was delivered in cities where the AMA claims a malpractice crisis exists, Claybrook pointed out.
Preventable medical errors kill up to 100,000 people in the United States each year and injure hundreds of thousands more, she said. And research shows that most malpractice payments are made by just a small number of doctors.
An analysis of data from the National Practitioners’ Data Bank shows that just 5.4% of doctors, all of whom have made two or more malpractice payouts, have been responsible for 52.6% of payouts since September 1990. Just 2% of doctors, all of whom have made three or more malpractice payments, have been responsible for 31.1% of all payouts since September 1990.
Damage caps do nothing to lower malpractice insurance rates, and insurers say they would likely not lower malpractice premiums if damages were capped, she says.
The increase in malpractice rates is due to financial hardships faced by insurers during the recent economic downturn, Claybrook adds.
"A better solution, then, is for state medical boards to be more diligent in disciplining doctors who commit malpractice."
AMA says argument flawed, crisis is real
Evidence that some crisis states are able to continue to provide their citizens with a comparably adequate level of care does not indicate that health quality in these states is not being affected by rising malpractice judgments, AMA tort reform advocates argue.
The association’s crisis designation is given to states that can directly demonstrate drastic changes in availability of quality health care in communities linked specifically to rising malpractice insurance premiums.
A February 2003 poll conducted by AMA found that 45% of hospitals reported that the professional liability crisis had resulted in the loss of physicians and/or reduced coverage in emergency departments.
According to information posted on AMA’s web site regarding its tort reform effort, previous substantial increases in premiums for professional liability insurance were caused by a number of different factors.
Why professional liability insurance increased
The article on AMA’s web site explains that, in the early 1970s, a number of insurers left the professional liability market due to soaring malpractice costs and inadequate rates. The exodus created a crisis of insurance availability. This was remedied by a variety of initiatives over the next 15 years. These initiatives included tort reform at the state level, increased diagnostic testing, improved peer review, and increased communication between physicians and patients. Aggressive campaigns to reform state laws governing medical liability lawsuits also began in the 1970s and were successful in a number of states including California, Louisiana, Indiana, and New Mexico. For the full article, please see the AMA web site at www.ama-assn.org/
These efforts appear to have had a positive impact, AMA maintains: the number of claims stabilized. Also the severity of verdicts, in the form of the dollar amount, has continued to increase nationwide, except for the states that enacted effective reforms.
Now rapidly increasing jury awards appear to be the factor largely responsible for increases in costs to insurers and the resulting rise in premiums.
According to data AMA obtained from the firm, Jury Verdict Research, the median medical liability award in medical liability cases jumped 110% from 1994 to 2002, topping $1 million. The average award reached $3.9 million in 2001.
Research into the financial health of the largest malpractice insurers also does not support claims by Public Citizen and others that the premium increases have been enacted to offset financial losses due to poor investments or market downturns, AMA continues.
Figures reported by the accounting firm A.M. Best, representing 76% of the industry, show that 80% of investments by Physician Insurers Association of America (PIAA) companies between 1995 and 2001 were in high-grade bonds, with the remainder divided among stocks, mortgages, real estate, and working cash. Increased losses on claims are the primary contributor to higher medical liability premium rates, according to the A.M. Best analysis.
Insurers are not charging and profiting from excessively high premium rates, AMA states.
Insurers not gouging to recover loss
According to the PIAA, physician-owned and/or operated insurance companies insure 60% of all physicians in private practice. Further, none of the insurance companies studied by a recent Government Accounting Office report experienced a net loss on investments.
Annual statement data summarized in Best’s Aggregates & Averages, Property-Casualty, 2003 edition, showed that the investment yields of medical liability insurers have been stable and positive since 1998. Those returns have ranged from 4.5%-5.4%, and include income from interest, dividends, and real estate income. Medical liability insurers have approximately 80% of their investments in the bond market. Therefore, their total returns on invested assets are strongly influenced by bond market performance, and less so by stock market performance. Best’s Aggregates and Averages indicate that insurers’ total returns on invested assets has fallen by only 5.1 percentage points over that period.
The AMA insists that federal liability reform legislation is needed to prevent more physicians from leaving medical practice and preserve citizens’ access to health care.
"The Health Act gives the patients of America the common-sense medical liability reforms they seek," AMA president Donald J. Palmisano, MD, JD, said in a statement following the bill’s passage in the House. "Patients are losing access to critically important medical services because of skyrocketing liability premiums. They are demanding action. Now we urge the Senate to hear the voice of the people and pass reforms to help increase access to medical care."