Two Reports Explain Why Medical Malpractice Caps Hurt Consumers


Posted on 19th November 2011 by gjohnson in Uncategorized

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Despite the rheroric of many lawmakers and the misconceptions of the public, putting caps on medical practice cases doesn’t hold down spiraling health care and insurance costs, according to two recent reports on the topic.  

“A Failed Experiment: Health Care in Texas Has Worsened in Key Respects Since State Instituted Liability Caps in 2003,” done by the public advocacy group Public Citizen, and “Can Mandatory Caps on Medical Malpractice Damages Harm Consumers?,” by the think tank the Cato Institute, were both released last month.

And they both come to somewhat similar conclusions, namely that medical malpractice awards don’t drive up the cost of health care.

But what is disturbing in these reports is that consumers, people who have been harmed and have a cause of action against a medical provider, are being short-changed because of the caps. In fact, even worse, they are losing their ability to sue as lawyers shy away from bringing litigation that is expensive to try, with little potential reward.

The Public Citizen report dealt with Texas, which set a $250,000 limit on noneconomic damages for medical malpractice suits in 2003.

“A common misconception among policymakers and pundits is that medical malpractice litigation is significantly, or even chiefly, to blame for our country’s skyrocketing health care costs and steadily diminishing access to care,” the report said. “Those who blame malpractice litigation for the broken economics of our health care system typically tout laws limiting physicians’ liability as the answer.”

But the data in Texas doesn’t bear that out, despite the claims to the contrary by Texas Gov. Rick Perry,  who spearheaded the legislation limiting cap awards, according to the Public Citizen report.

“While litigation over malpractice in Texas has plummeted dramatically since the caps were imposed, residents of Texas (except for people with financial connections to liability insurance companies and, to a lesser extend, doctors) have realized few, if any, benefits. Instead, the health care picture in Texas has worsened significantly by almost any measure,” the report said.         

Since the Lone Star State imposed the caps, its Medicare spending has outpaced the national average. 

“Per enrollee spending for Medicare’s two main programs ranked second-highest in Texas among the 50 states in 2009,” the report said. “In 2003, Texas ranked seventh … These figures contradict the theory that medical malpractice litigation is driving health care costs.”

In addition, premiums for private health insurors have risen and outpaced the national average. Oh, by the way, the percent of Texans who are uninsured has also increased, “solidifying the state’s dubious distinction of having the highest uninsured rate in the country,” according to the report.

In addition, the per capita increase in the number of doctors practicing in Texas has been slower than prior years, and “the prevalence of physicians in non-metropolitan areas has declined,” according to the report.

The cap in Texas appears to have been a boon to insurance companies and doctors. For one insuror, premiums for doctors were 50 percent less in 2010 versus 2003.  But the medical malpractice payments that insurors are issuing have dropped 74 percent, adjusted for inflation, from 2003 to 2010, the report said. That translates into a “windfall” for insurance companies, according to the report.

“But the benefits realized by these two groups have not translated into savings for regular Texans or for the taxpayers who  fund Medicare,” the report said.

The Public Citizen report is very detailed, and it all can’t be presented here. But one of the highlights is the section on health insurance premiums. Caps have not kept those costs down.

“Although health insurance costs in Texas have not outpaced national rates as dramatically as have Medicare expenditures in the state, they have risen faster than the national average since the caps were imposed,” according to the report. “Family health insurance premiums in Texas rose by 51.7 percent between 2003 and 2010. Nationally, they rose by 50 percent. Since 2004, health insurance premiums in Texas have risen 13.1 percent faster in Texas than nationally.”

Here are the report’s conclusions.

“Despite the sales campaign to promote Texas as an exhibit of the merits of limiting doctors’ liability for mistakes, the real world data tell the opposite story. Health care in Texas has become more expensive and less accessible since the state’s malpractice caps took effect.

The beneficiaries of the new system are the doctors who escape accountability for their errors and the liability insurance  companies that reap a windfall of inflated premiums. Regular Texans are the losers. They include not only the victims of medical malpractice who are deprived of the chance to recover damages but also the taxpayers who must foot the bill for the future medical costs of seriously injured patients.”

That conclusion is similar to the one made in the study by the Cato Institute, on whether mandatory caps on medical malpractice damages harm consumers. The executive summary of that report makes its position pretty clear.

“Supporters of capping court awards for medical malpractice argue that caps will make health care more affordable,” the Cato report said. “It may not be that simple.”

That’s the understatement of the year.

“First, caps on awards may result in some patients not receiving adequate compensation for injuries they suffer as the result of physician negligence,” the Cato report said.

“Second, because caps limit physician liability, they can also mute incentives for physicians to reduce the risk of negligent injuries,” the report added.

And contrary to what supporters of caps claim, “medical malpractice awards do track actual damages,” according to the Cato report.

But here is the heart of the matter, from the report.

“If the medical malpractice liability insurance industry does indeed protect consumers, then policies that reduce liability or shield physicians from oversight by carriers may harm consumers,” it said.

In its conclusion, the Cato report said that patients are protected by a interdependent system of oversight that includes evaluations, hospital oversight and the medical malpractice industry.

“Underlying nearly all of these activities is the threat of legal liability for negligent injuries,” the report said. “Reducing physician liability for negligent care by capping court awards, all else equal, will reduce the resources allocated to medical professional liability underwriting and oversight and make many patients worse off. Legislators who see mandatory liability caps as a cost-containment tool should look elsewhere.”



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