Posted on 01/07/2003 10:09:47 AM PST by Incorrigible
Tuesday, January 07, 2003
Former Gov. Jim Florio had a column on this page the other day nicely stating the position of the Democratic Party -- and of its major subdivision, the trial lawyers -- on the malpractice crisis that is threatening health care in New Jersey.
Florio blamed the spike in malpractice insurance rates on the insurance industry. In the 1990s, this argument goes, the insurance companies were making a fortune on Wall Street. They kept their rates low so that they could amass capital to invest.
But the companies got too greedy and they lost money on their investments. Now they need to raise rates to compensate.
There is some truth to this argument. But it wasn't just the insurance companies that lost money on Wall Street. In fact, the state's pension fund managers lost $27 billion in the market. That's enough to pay the malpractice bills of every doctor in America three times over.
It was a bad time all around. But let's put it behind us. Let's deal with the question at hand: Now that the insurers' losses can no longer be subsidized by gains on Wall Street, just what are the proper rates for malpractice insurance? Florio is silent on this issue, as is the McGreevey administration. Here is what Florio wrote:
"This should be seen for what it is: insurers engaging in a risky game of 'chicken' in hopes of getting rate increases to soothe the string of investment losses."
Let us pursue this "chicken" metaphor further. In a game of chicken, two drivers aim their cars at each other at high speed. The first driver to veer away from the impending collision is the chicken.
But who are the drivers? One of them seems to be John Brown, a surgeon at Morristown Memorial Hospital. "My premium was $36,000 last year and it's $216,000 this year," Brown told me yesterday. "I can't keep paying that. Each year my office costs go up. Meanwhile, Medicare is cutting payments to us by 5.4 percent this year."
Florio might have nerves of steel, but Brown doesn't feel like playing chicken. He and his fellow doctors would prefer to avoid the head-on collision. Like the doctors in West Virginia, they are considering some sort of job action to force the Legislature to call off the game.
"Right now there's a lot of momentum for a job action in February," Brown said.
That would be a real mess. But it could be easily averted. "Government needs to stand strong," Florio wrote. He went on to call for stricter regulation of the insurance industry.
That wouldn't be my solution. Given my druthers, I would solve the problem with less regulation, not more. I would give patients the power to waive the right to sue. That would solve the problem tomorrow.
But if we are going to have regulation, fine. Let's have regulation. The state Senate Health Committee meets at 1 p.m. Thursday. By 2 p.m. the senators could craft a bill giving the McGreevey administration the power to set rates for malpractice insurance. The administration does not now have that power. Car insurers need state approval for rate hikes. Malpractice insurers do not.
This is easily remedied. A bill granting the administration that power could be on the governor's desk next week. By Monday, the new rates would be set. Bingo. Crisis solved.
Or maybe not. Here is where the capitalist-bashing approach of the Democrats comes up against reality. The Democrats' assertion is that this crisis is illusory, that there has been no boom in malpractice judgments. The dollar figures say otherwise. In 1975, insurance companies paid out a mere $521 annually per doctor in judgments and defense costs, according to Americans for Insurance Reform. By 2001, that figure had risen to an astounding $7,232 per doctor. Even after accounting for inflation, payouts per doctor rose by more than 400 percent in a mere 26 years. If payouts had stayed flat, there would be no crisis regardless of how the stock market performed. But costs rose and premiums had to rise accordingly.
But did premiums rise by too much? A Star-Ledger editorial offered the very reasonable suggestion that New Jersey adopt a system similar to that in use in California. Any annual increase of more than 15 percent needs state approval in California.
Great idea. But before capping premiums, California first capped judgments, with a 1975 tort reform law that is the model for the nation. New Jersey Democrats reject that approach. They seem to be arguing that we can cap premiums without capping judgments. Can we? Fine, let's not wait until Thursday. Let's do it tomorrow.
That would take the doctors out of it and put the administration on a collision course with the insurance companies. If the Democrats are right, the companies will reduce their premiums and the crisis will end. If they're wrong, they'll create a mess similar to the car insurance crisis.
So let's play chicken. What's one more car crash?
Paul Mulshine is a Star-Ledger columnist. PMulshine@StarLedger.com
Not for commercial use. For educational and discussion purposes only.
A question: do states require malpractice insurance? Again, this is one of those things that will drastically effect the market. If the insurers know the demand pool is always maximized, they can set any rate they want. Mandatory insurance is, though well-intentioned, a massive scam. We often discuss the hidden costs associated with legal fees and taxes, but think about all of the insurance money out there. Insurance for occurrences that statistically will never happen to you in 50 years. That's a ripoff.....
This would return the punative "society" punishment back to society and not to some unlucky/lucky individual and their lawyer.
A lawsuit should not be a lottery substitute.
By the way, insurers can't set any rate they want and expect to do business. There will always be some other insurer willing to offer a lower price if the original price is absurdly high.
I agree, which is why I brought up the idea of LLC's, or some other arrangement. A moderately successful practice of accomplished physicians could self insure given the right climate.
I found the surgeon's story mentioned here astonishing. 36k to over 200k! If he had no negative claims in the prior year, that increase is downright outrageous. How many unnecessary procedures is he going to perform just to cover his overhead?
The dirty little secret of medical liability insurance is that only 30% of the premiums go to (allegedly) injured plaintiffs. The trial lawyers get their 30-40% of course. But the costs of the DEFENSE attorneys is equal to the payouts to the plaintiffs attorneys!!
God forbid Mr. Florio's democrats would support authentic tort reform to lower the income of their lawyer buddies.
The democrats will enrich themselves (or at least their trial lawyer constituency), destroy the trauma and obstetrical system, and have the SHAMELESS gall to demand a federal takeover and universal health system to "correct" the non-functional, lawyer-ravaged system. I am absoluely convinced this will be lawyer-politician Hillary's agenda when the time comes.
I think that the trial lawyers are only too happy to be a part of the democrat effort to destroy the health care system, so that the democrats will then trot themselves out of the shadows to claim to be saviors!. I strongly believe that national health care will be the cornerstone to a Hillary Clinton campaign!!
One maddening thing (for the docs) about the med malpractice industry is that the suits and payouts generally bear no relationship to competence. Thus doctors who agree see the most high risk (sickest) patients are the most likely to be sued. Very sick patients are more likely to have adverse outcomes. Another example is the gold mine (for crooked lawyers) who make mega-bucks off of neurosurgeons (brain injury almost always has some residual brain damage, by definition) and obstetricans (congenital blameless birth defects equals lawyer yachts and French Riviera condos).
My recommendations for this problem and for the unregulated lawyer plague that damages all of our lives in so many ways? The world would be a better place with:
1) Loser Pays.
2) Massive tort reform on a unprecedented level
3) Widespread empowerment of paralegals for independent practice
4) An end to punitive damages.
5) An end to bogus class action suits.
6) Outlawing contingency fees (This is considered grossly unethical and is completely illegal in almost all other democracies).
7) Lawyers forbidden from running from office. They are agents of the judiciary. Practicing attorneys violate The Separation of Powers when they enrich their lawyer industry at public suffering
8) Most important: a total disempowerment of the bar associations. Lawyer discipline by true consumer control. Like any other industry.
The medical tort issue is just the tip of the overall tort problem that this country faces. We have the most litigous society on earth, fer cryin' out loud. The USA desperately needs tort reform before lawyers leech the last few remaining profitable entities out of existance. Doctors don't deserve the "asbestos" treatment, and neither does Mcdonalds, GM, of any of the other countless industries that are under attack with dubious lawsuits. Enough is enough!!
How about capping attorneys? Just kidding, of course. :^)
Much of the tobacco lawsuit fiasco followed the "punative damages to the community" model. So, instead of people playing the litigation lottery, cities and states played. Now, to a non-smoker, this may not seem like a problem, but if you witness the attacks on obesity and fast foods, you can see the next round of enrichment on the horizon.
I know that if I were a doctor and were presented with such an outragous bill, I'd give my assets to a family member and go without insurance. Something about blood from turnips... By the way, insurers can't set any rate they want and expect to do business. There will always be some other insurer willing to offer a lower price if the original price is absurdly high.
Yes, a competitive insurance market is the best way to deal with abnormally high rates. But, I think you'll find that it is the high cost of litigation that is driving the rates up more than anything else.
First, the jury selection process stinks - perhaps it needs to be completely randomized such that it truly represents a cross-section of American citizens rather than those that lawyers feel they can manipulate the easiest with anecdote and emotional stories.
Second, I'd like to see more than a simple majority required for judgement, particularly when punishment is involved. I mean think about it - if someone violates the law and is punished in criminal court, there needs to be a unanamous decision based on there being no 'reasonable doubt' that the suspect is guilty. But punative damages in civil (??) court only requires a simple majority to dish out punishment for a perceived crime that most likely wasn't even illegal.
I'd also like to see some set retribution amounts, cast in stone, to deal with common medical mistakes/mishaps. I mean, things are going to happen occasionally and people need to be made whole, but its crazy to enrich the legal profession in a lot of cases for stuff that can easily be paid for without consulting a lawyer.
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