The malpractice insurance crisis does not exist. Actually, it does, but only in the popular press and in the minds of the AMA, a few politicians and alarmists. In the real world, the cost of malpractice insurance as a percentage of total practice expenses changed little over the last 30 years, rising from 6% of expenses in 1970 to 7% in 2000.
The finding comes from a report based on data collected by the American Medical Association and published in the MarketWatch section of Health Affairs’ May/June 2006 issue.
While the overall percentage increased by just one point over that period, there were significant changes during the thirty years. From 1970 to 1986 malpractice expenses jumped from 6% to 11% of total practice expense before falling back to 6% in 1996. Premiums bumped back up by a point to 7% in 2000.
Notably, the cost of other practice expenses, including non-physician labor, utilities, rent and medical equipment and supplies, increased much more rapidly than med mal premiums.
Let’s contrast this reality with the hyperbole and outright misinformation generated by some; Ohio Rep. Deborah Price is a great example. She is one of the supporters of med mal reform who have cited some highly doubtful statistics, including one noting that “Four out of 10 Ohio physicians have retired or plan to retire in the next three years due to rising liability insurance premiums”.
If physicians are retiring because med mal premiums are now consuming a couple points more of their practice’s overall expenses, they are lousy business people and probably should join a large group practiice anyway.
NOTE – the AMA has published a comment on their website in an attempt to refute the original article claiming that the analysis stops in 2000 which makes it inaccurate (a possibly valid argument, although one that is refuted prospectively by the authors in their article) and arguing that the data used by the authors is misleading (although the authors make a solid case for their selection of data sources).
My take – the med mal “crisis” can affect pockets of physicians significantly while having relatively minimal effects on the overall population; and the inefficiencies in the insurance market are much greater contributors to the problem than are tort costs. And, most potential suits are never filed anyway.
What does this mean for you?
More wasted time arguing about non-factors when we could be trying to actually solve the real problems driving health care costs up and access down.
May
19
As I understand it, there are approximately 600,000 doctors in the U.S. To the extent that med-mal is a problem, it is with the high risk surgical specialties like OBGYNs, neurosurgeons, etc., and then more so in some states than others. There could well be problems with access to those specialists which is a significant matter for the people who need it and can’t get it even if these doctors only account for a small percentage of the total number of doctors in the country. If the chain is only as strong as it weakest link, it suggests that the system may be in need of at least some repair.
BC – it could be that there are problems in pockets, but that is unproven and I have not seen anything but anecdotal data re med mal issues forcing docs out of the system. I’m sure it occurs, but my point is that the individuals saying that med mal reform is required to fix the health care system distracts from the central problems of cost and access. a few pockets of docs are not the problem, and it is not a chain, it is a web.
Joe — I agree that med-mal is only a very small piece of the healthcare cost/access issue, though I think there is room to debate both without crowding out discussion of either one. With respect to cost/access, I wonder if you have seen or had a chance to review the Century Foundation reform proposal (basically a premium support, tax financed voucher good/better/best approach) and, if so, what you and/or your readers think of it.
Joe- what about the New England Journal of Medicine article also this week saying that 40% of medical liability claims are groundless?
What about the fact that medical liability costs went up so much for the 4 family practicioners in Bisbee, AZ that now no one delivers babies, forcing pregnant women to travel at least 60 miles to see an ob-gyn?
Medical liability costs matter because the costs cannot be passed on to customers (patients). Why are airline ticket costs up? Why did my local utility get an emergency approval for a 5.4% rate increase? Why are gas prices >$3 gallon? Because when core costs go up, those businesses can pass on that cost to consumers.
The trial lawyers and their advocates cannot compete in the area of science and justice, so they will selectively use statistics and studies to bolster their POV.
As a regular MCM reader, I am very disappointed, that despite the opportunity to present the other very important medical liability study published in the past week, you only chose to highlight the one that supports the myths of the trial attorneys.
I am a member of the AMA but do not speak for them. I am not a politician. I guess I would fit into the “alarmist” role described, and there are more than a few of us. Joe’s “myth” may reside only in his mind, since he is just looking at the cost of the premiums for malpractice insurance and not the issues of availability of such insurance or the problem with rapacious awards. In WV, along with other states, those are the issues that have caused the crisis. Our legislature addressed the awards end with some caps and other factors last year, but availability of insurance remains a problem. As pointed out by Joe, the insurance companies cause a lot of the crisis too. The trend over the last 20 years in WV is for insurance companies to offer malpractice insurance for 3-4 years then leave the State. That makes the physicians move to another insurer and pay a huge “tail.” If a doctor stays with an insurer 5 years or more, then no tail is allowed by law. Tails are also a tremendous burden on older physicians who would like to cut back their practices. The policies state that no tail is required if they are disabled or completely retire, but no provision for part-time work.
You statistics contradict themselves. You quote how malpractice insurance costs have only gone up 1% of total practice expenses but that other expenses have gone up more. You don’t have the figures to state that. Malpractice expenses may have gone up an absolute figure of 20-25% but that comes to just 1% of all expenses as all expenses increase. A 1% increase of the total pie is a lot, especially if we don’t know how big the total pie is. For example, say the malpractice insurance premium was $10,000 last year which was 6% of total expenses which would be $166,667. Now if it went up only 25%, to $12,500 and is now 7% of total expenses, that would mean total expenses are now $178,571. This would mean all other expenses went up about $12,000,or 7.2% for all other expenses. But say malpractice rose 40% and is now $14,000. If this was 7% of total expenses, total expenses would now be $200,000, up $33,333/year or 20% increase for all other expenses. So to be fair you have to look at how much malpractice has gone up, now how much more of the pie it consumes. It is going up far faster than “all other expenses”. And where does the doctor get the extra income, reimbursement certainly is not going up as fast as any of it.