The Medical Malpractice Insurance Crisis: What You Should Know

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Most people have probably heard the argument that “frivolous lawsuits” and “excessive verdicts” are raising medical costs and driving doctors away from the practice of medicine.  Armed with these sound bites, special interest groups like the American Medical Association and Insurance Industry Lobbyists have been trying to make it more difficult for injured patients to file medical malpractice lawsuits.  Most recently, as malpractice insurance premiums have skyrocketed, these groups have started claiming that tort reform is mandated in order to avert a national medical malpractice “crisis”.  But are these claims actually true?  The evidence suggests not.

piggy bank in chainsRECORD PROFITS DURING A CRISIS

As a New York City Patient Safety and Medical Malpractice Attorney, I have become all too familiar with the tort-boogeyman that Corporate America tries to waive in everyone’s face whenever talks about medical malpractice lawsuits arise.  Working with people on a daily basis, I have become intimately familiar with the irreparable harm that medical malpractice causes.  I see human life lost or devastated by medical negligence, as persons of all ages struggle to cope with the physical, financial, emotional, and mental consequences of their injuries.  And yet I have never once believed that helping injured families obtain justice was the root of some “insurance crisis”.

Therefore, it was bitter-sweet to read the American Association for Justice – March 2012 Report on the financial health of the medical malpractice insurance industry.  As demonstrated by the insurance companies earnings data, the medical malpractice insurance industry has been doing exceedingly well.  In fact, the malpractice insurance industry has been banking record profits, and their profit margins now exceed that of every other industry in our country.

HOW THEY DO IT

The AAJ report confirms that medical malpractice premiums have been increasing in recent years.  However, the rising costs are not connected to either the number of medical malpractice lawsuits being filed, or the payouts being made to injured patients.  Instead, the data reveals that the total volume of malpractice claims paid have actually decreased nationwide in recent years.  It also shows that the payout per claim has stayed relatively stable.  Yet, despite the lower number of claims being paid and the stable payout amounts, the cost of malpractice insurance premiums for doctors have soared.  Why is this happening?

This recent report explains that the insurance industry has been able to justify charging higher premiums simply by projecting inflated estimates of future losses – even when these projections have no basis in reality – in order to build up a massive cash “reserve”.

In some locations doctors have been hit with premium increases of up to 600% within a single year, which insurance companies claimed were necessary because of a fear of future loses.  With a limited amount of competition in the insurance industry, doctors often have no choice but to pay the increases.

What’s worse is that these wholly unnecessary rate increases are then cited by the insurance industry as “proof” that tort reform is needed in order to stave off a “crisis”.  Make no mistake about it, the insurance industry is the giant puppeteer behind all of the tort reform efforts.  It’s bad enough that the insurance industry is willing to feign a crisis in order to support their effort to strip every injured person of the right to obtain justice.  But what is equally disturbing is that the industry is so money hungry that they are willing to gouge their own clients (doctors and hospitals), and literally use them as pawns, in order to meet their objective of obtaining record profits year after year.

AAJ’s report entitled The Reserving Practices and Record Profits of Large Medical Malpractice Insurers demonstrates that the current profit margin for the top ten medical malpractice insurers in this country is twice as high as the average profit margin of the fifty most profitable Fortune 500 companies.  In fact, only one Fortune 500 company has an average profit margin that matches that of the top ten medical malpractice insurance carriers.

That’s not a crisis.  It’s a fleecing.  Please post your comments about what is happening.  This is truly an issue that hurts both doctors and patients.  What can we do to help doctors and hospitals, and reign in the insurance industry?

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