Medical Malpractice Primer
Let's look at how we got to our current malpractice system, and then step back and see how well it meets its goals. In general, tort law is designed to do three things:
1. Allow victims to recoup financial losses.
The problem is that most malpractice lawyers work on retainer, so when the lawyer's fees can often comprise about half the settlement, this goal is not well served.
2. Punish negligent or bad people
But since most doctors have malpractice insurance, they are largely insulated financially.
3. Provide incentive for avoiding bad outcomes
However, the threat of lawsuits often actually impedes the flow of information about medical errors and system inefficiencies that could lead to improved healthcare delivery.
There have been three different 'crises' of medical malpractice. In the 1970s, there was a marked increase in claim frequency and severity, leading many malpractice insurance carriers to drop out of the business and increasing the cost of insurance. Then in the 1980s, there was a trend of physician-owned malpractice companies, which had high costs and premiums again increased. Today's malpractice problem is more complex though.
1. Investment income of malpractice insurance companies took a steep dive in the tech bubble burst. This is perhaps the most important factor in the current market, as the primary driver of increased premiums--more so than claims costs.
2. Frequency of claims per insured physician has risen from 1.5 claims per 100 in 1956, to 15 per 100 in 1990. 17% of all OB/GYNs in the US have a claim filed against them in a given year.
3. Cost of selling malpractice insurance is increasing due to rising defense and administrative costs.
4. Managed care has placed a never-before-seen ceiling on the ability of physicians' ability to raise fees to offset premium and loss of productivity expenses.
Finally, it's worth noting that 80% of malpractice cases at trial are found in favor of the physician. The cost to the healthcare system of a physician's time lost to work, and the doc's own personal toll, are difficult to calculate. But more fundamentally, if the system doesn't meet its stated goals well, we have a lot of thinking to do.
Certainly this complex problem requires targeted solutions, but we need to have a clear understanding of the incentives built into the malpractice system and its actual cost burden before relying too much on malpractice reform to relieve the broader problem of the nation's healthcare costs. More later on why caps on damages don't make sense.
Thanks to Martin Palmieri MD, on whose presentation much of these data are based. More references in comments.