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Medical Malpractice

January 16, 2003 at 12:00 AM EDT
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SUSAN DENTZER: Today President Bush went to Pennsylvania to talk about the growing crisis in medical malpractice insurance.

PRESIDENT GEORGE W. BUSH: Something’s wrong with the system. And a broken system like that, first and foremost, hurts the patients and the people of America. (Applause)

SUSAN DENTZER: Medical malpractice insurance protects doctors and hospitals from the costs of lawsuits involving allegations of errors or negligence. Across much of the country, premiums for this type of coverage are skyrocketing — and in some areas, providers are having trouble getting insurance at all. The problem is especially severe for providers in high-risk fields like neurosurgery or obstetrics, where coverage for an individual doctor can now run $150,000 or more per year.

The crisis has hit hard in about a dozen states, and groups like the American Medical Association say it threatens to be a concern in about 30 others. In recent weeks, doctors in Pennsylvania, one of the worst affected areas, threatened a statewide strike. They backed down when Democratic Gov. Ed Rendell proposed reforms. And about a dozen surgeons in West Virginia staged a brief work slowdown, causing some hospitals to cancel surgeries.

DR. GREGORY SARACCO: If somebody would come up to me and say, you know, we agree that your malpractice premiums are off the wall and maybe we can cut them 25 percent, maybe that would be a good enough show of faith to get people back to work.

SUSAN DENTZER: Today the president laid most of the blame for the crisis on medical malpractice lawsuits. He said frivolous suits were driving up health costs unnecessarily and hurting both health providers and patients.

PRESIDENT GEORGE W. BUSH: There are too many lawsuits in America, and there are too many lawsuits filed against doctors and hospitals without merit! (Cheers, applause) Oftentimes, in order to avoid litigation, and oftentimes to cut their costs, docs and therefore the companies that insure them, just settle, see. So even though there’s no merit, in order just to get rid of the thing, they say, Okay, let’s just pay you; we’ll get you out of the way.

SUSAN DENTZER: The president called on Congress to pass legislation that would place a variety of limits on malpractice lawsuits. Those would include a $250,000 cap on damages awarded for a patient’s pain and suffering. Punitive damages, intended to punish doctors or hospitals for wrongdoing, would also be capped. And plaintiffs’ attorneys fees would be sharply limited.

PRESIDENT GEORGE W. BUSH: We want our judicial system to work. People who have got a claim, a legitimate claim, must have a hearing in our courts. Somebody who has suffered at the hands of a lousy doc must be protected; that is fair; that is reasonable, and that is necessary for us to have confidence in the medical system and in the judicial system. Yet, for the sake of affordable and accessible health care in America, we must have a limit on what they call non-economic damages. (Cheers, applause)

SUSAN DENTZER: There’s no data on how many malpractice lawsuits are clearly frivolous, but statistics do show that damage awards in all malpractice lawsuits have been rising. According to a survey by Jury Verdict Research, in 1994 the median award for compensatory damages in medical malpractice lawsuits was $362,500. By the year 2000, it was $1 million.

SUSAN DENTZER: But even many medical groups say that lawsuits and damage awards are not the only cause of the malpractice crisis. They say another factor has been mismanagement by insurance companies. One national insurance carrier, St. Paul, pulled out of the malpractice insurance business in late 2001 after a series of mistakes led it to set premiums too low. Other companies have also abandoned the market. With fewer carriers competing for business premiums have soared. Although the House of Representatives passed malpractice reform legislation last year, the Senate, then under Democratic control, did not. Today the president urged swift action.

RAY SUAREZ: So, just what is the right prescription for the nation’s medical malpractice system? We get four views: Larry Smarr is president of the Physician Insurers Association of America, which represents more than 40 medical malpractice insurers; Ken Suggs is secretary of the Association of American Trial Lawyers; Dr. Donald Palmisano is president-elect of the American Medical Association, which represents the nation’s doctors; and Joanne Doroshow is executive director of the Center for Justice and Democracy, a national consumer organization.

Well, Mr. Smarr, let me start with you. Do you agree with President Bush’s assessment of the problem today, that this is a broken system, and is his suggestion at least part of the answer?

LARRY SMARR: Well, the president is indeed correct. Over 70 percent of all claims made against physicians are without merit and do not have an indemnity payment. When the doctor goes to trial, the doctor wins 80 percent of the time. But our studies show that it takes 50 percent of all the money available to pay claims to fund the lawyers’ lottery system. And we wholeheartedly support the president’s plan to cap non-economic damages at $250,000. We think that’s the answer.

RAY SUAREZ: Ken Suggs, a broken system?

KEN SUGGS: Absolutely, but broken in the sense that the insurance part of it is broken. Insurance companies in the ’90s could make all the money they wanted to on their investments so they dropped premiums way below where they should have been and now they’re paying the price just like your 401(k) plan for their bad investments except since they have a monopoly, they can pass the costs right on to the doctors without any checks and balances.

RAY SUAREZ: Dr. Palmisano would a cap on damages, as the president suggested today, get you on the road to where you need to be?

DR. DONALD PALMISANO: Yes, sir. We strongly support President Bush’s plan. Caps do work. The California model has worked very well for a quarter of a century. It was one of the highest states for premiums in 1975 and now the rate is so much lower — $55,000, $50,000 for an obstetrician. South Florida, $202,000, $210,000, so we strongly support the president. This system is broken. We’re concerned about access to care for patients. That’s our concern.

RAY SUAREZ: Joanne Doroshow, was the president’s assessment of what’s wrong with the system correct and is his solution a help?

JOANNE DOROSHOW: Unfortunately he’s quite wrong. His proposal is an extremely cruel proposal that will do nothing other than give insurance companies more rights than catastrophically injured children, putting more money in the pockets of the insurance companies, taking it away from the families that need it. And it will do absolutely nothing to help the doctors who are being price-gouged by the insurance industry.

The only way to solve that problem is to specifically reform the insurance industry like consumer groups have been calling for, for years. These kinds of crises happen periodically. They happened in the mid ’80s, they happened in the mid ’70s. The only way to solve it is to bring down rates through reforms of the insurance industry.

Caps do not work. States like Missouri that have had a severe cap in place and all kinds of restrictions on lawsuits since the mid ’80s, for example– that state is experiencing one of the worst insurance crises right now in that state’s history. That’s not the solution to this problem.

RAY SUAREZ: How would you answer Joanne Doroshow, that bringing down rates would really help more than anything else?

LARRY SMARR: Well, insurers now are not making profits. And understand that the companies I represent are all owned or operated by doctors or hospitals. And they were formed by these professionals to get accurate data about what’s really going on in the industry. Even so, the malpractice industry last year incurred $1.53 in losses for every $1 of premium that we took in, but the premium was augmented by, in the case of my companies, another 30 cents in investment income.

The notion that we’re losing money on the stock market is simply untrue, as med-mal insurers are primarily invested in bonds. We have seen interest rates go down. We all know that. So there’s less income to offset premium needs. But this whole crisis is fueled by the 6.9 percent per annum increase in the average paid loss. That’s been with us for decades and it’s not going away until we do something to cap losses for non-economic damages.

RAY SUAREZ: Well, Ken Suggs, just a moment ago you suggested this was an insurance industry problem. Larry Smarr is saying insurers can’t make any money. And if they lower their rates and if they reform in the way you suggest, they’ll probably leave the business altogether. Aren’t they doing that already?

KEN SUGGS: Well, what the problem is, they made huge profits in the 1990s that they don’t have to account for now. Every business goes through cycles. Just like Ms. Doroshow said, they went through a cycle like this in the mid ’70s, the mid ’80s. Now we’re right back with deja vu all over again. The solution is let’s make the insurance company charge the bad doctors instead of charging the good doctors the same as they charge the bad doctors.

If you look at statistics, Mr. Nader was on TV the other night and I think correctly said about five percent of the doctors cause more than 50 percent of the claims. But the insurance company practices to charge all doctors in a certain class or category the same premium whether they’ve had ten claims or none.

RAY SUAREZ: Dr. Palmisano, is it true that it’s really a couple of bad actors and a minority of doctors that are incurring most of the costs?

DR. DONALD PALMISANO: No. I mean, what we need to do is have a reasoned debate with the facts. Science looks at the facts, and other people have to reproduce the facts. We keep hearing these stories. The insurance companies are losing this money in the investments. You heard the answer to that. We check with AM Bess. They have made 5.5 percent, five percent for the last five years from AM Bess — we’ve had that figure.

When you talk about caps on work, read the Tillingham Study that just came out that the Pennsylvania Medical Association obtained. It shows that a $250,000 non-economic cap like California does work. When you talk about the critique that Ms. Doroshow and Mr. Hunter do, look at the study by Steven Foreman and it points out the methodology is wrong and the conclusions are wrong, so let’s give the legislators the true facts so we can make reasoned decisions.

We do know that the liability system does not measure negligence. And studies have shown this. Troy Brennan with the classical Harvard study showed that it only measures disability. There’s no statistical correlation with negligence. We want to enhance safety but this system doesn’t do anything for safety, quality, and it raises the cost of medical insurance for the consumer.

RAY SUAREZ: But earlier, Joanne Doroshow suggested that if you cap too low especially in the case of children who have a long time to survive with catastrophic injuries you’re simply not giving them enough to survive on.

DR. DONALD PALMISANO: The other night she brought up on a show, she brought up a case of a California case, the Olson case, and she said that the $7 million was reduced to $250,000. They said that was really wrong and cruel. What she failed to mention in that case was that $42 million was given to the child. It’s very sad when there’s an event where the child needs long-term care — very sad.

But let’s give the whole story. Don’t make it look like it’s only $7 million reduced to $250,000. Let’s talk about the $42 million for medical care and rehabilitation. That’s the rest of the story. And also why doesn’t Ms. Doroshow and the trial attorneys say if we’re so concerned about the child, why don’t we give more of our contingency fee back. They get 40 to 50 percent as President Bush pointed today. Let them give some of their millions and fix this system here but this system doesn’t work. It doesn’t work.

RAY SUAREZ: Joanne Doroshow, go ahead.

JOANNE DOROSHOW: Families like the Olsons are so appalled at proposals that the Bush administration is coming down with and they have suffered as a result of this devastating and very cruel cap that exists on damages in California, which is the model that now the president would like to impose on the entire country. This child was brain damaged, is blind, needs 24 hour around-the-clock care, and the family is getting a fraction of the money that it needs.

The jurors, in fact, were so outraged at the fact that those damages were capped because they weren’t informed about it, this is after an HMO refused to pay $800 for a cat scan by the way, the jurors were so outraged that they actually wrote letters to the editor to the local newspaper expressing their outrage.

These kinds of proposals not only take money out of the pockets of families who need them, but they’re an offense to the right to trial by jury in this country. The jurors are the only ones that listen to evidence in a case, and here we have, you know, Congress and the Bush administration coming in and trying to tell local judges and juries what they can award and can’t award in a case. This is really offensive. It’s never happened in the 200- year history of our country. And I really think people need to rise up against this kind of thing.

RAY SUAREZ: Ken Suggs, Dr. Palmisano brought up contingency fees and the huge settlements that attorneys sometimes get from these trials. How do you respond to that?

KEN SUGGS: I think that’s overblown. For one thing, if you start capping contingency fees, the people who have devastatingly injured children can’t afford to pay the $400 an hour that the doctors and the insurance companies pay their lawyers. They have to come find a lawyer who will take their case on a contingency fee. And they have to find a lawyer who can help pay the cost of the litigation, which sometimes runs into the forties, fifties, and even hundreds of thousands of dollars. Now, the fact is what we’ve got proposed here, it amuses me that the rationale for this cap on non-economic damages is frivolous lawsuits. But how is capping the most catastrophically injured people going to do anything about frivolous lawsuits?

RAY SUAREZ: Larry Smarr, if you had what you see as a properly functioning medical malpractice insurance system, what would it look like?

LARRY SMARR: It would be a system where only cases with merit would be brought forward, where the trial lawyers would triage the cases so that they don’t lose 80 percent of the time when they go to court. You know, in each of those cases there is a patient and there is a doctor who endure five years of the tort system simply for the benefit of the lawyers who at the end of the day, the 20 percent they win pay big for them. We need to bring some rational thought to this system such that we are able to pay claims, just claims, quickly and get more money into the hands of the truly injured patients.

RAY SUAREZ: Fewer cases would get to court.

LARRY SMARR: Fewer cases would be brought. The 70 percent now overall that are without merit and then come forward, we need to ferret some of those out.

RAY SUAREZ: Well, how do you do that though? If people feel that they are injured parties, how do you get some of those cases not to get as far as the courtroom?

LARRY SMARR: We have a legal system that encourages the filing of frivolous lawsuits. Lawyers are advertising for patients to come forward. We have a system that’s been proven — that pays rewards based upon the medical condition of the patients and not based upon whether or not there is a true health care system injury to the patient. Our system is truly out of whack. We’re spending far too much on the resources which are health care dollars which could better be used elsewhere in the health care system to support this transfer of income.

RAY SUAREZ: Joanne Doroshow, are too many cases getting to court? Should there be some other mechanism for handling, arbitrating some of these disputes?

JOANNE DOROSHOW: Actually, there is a huge malpractice problem in this country. Ninety-eight thousand people die in hospitals alone due to medical errors each year. Only one in eight of those people file a lawsuit. I am sure that many viewers tonight know people in their family or friends who have been the victim of medical errors and most people do not sue.

The only kinds of cases that can get through this system already where the enormous expense that is required to file and bring a malpractice case, where you have to get medical records and doctors to testify against one another and here you have hospitals covering up a lot of these errors which is a huge problem, it’s very, very difficult and expensive to file these cases. That’s why some of them don’t make it.

But that in no way should that suggest that these cases are frivolous and absolutely there are many, many more cases of malpractice that exist in this country where people do not ever file a lawsuit. So it’s a complete myth that the system is being overrun with frivolous cases in the medical malpractice area in particular.

RAY SUAREZ: Dr. Palmisano, medical errors have been a controversial topic for the last several years since studies began to appear. Can you work this problem from both ends, from the legal end and also the reducing medical errors end?

DR. DONALD PALMISANO: Absolutely. The American Medical Association wants the patient to have the safest environment. This is the best medical care the world has ever seen by the way. You don’t see any Americans going to other countries for their medical care. So we want to acknowledge that we have the best medical care. But we can do even better.

That’s why the AMA founded the National Patient Safety Foundation. That’s why we believe we should change from the shame and blame environment and lawsuit environment to an environment where if an error is made or there’s a near miss, we can report it without shame or blame.

Experts can look at it, give feedback to the people involved and disseminate the information to the entire world so we all learn from it. The aviation safety reporting system overseen by NASA is a perfect example of how to enhance safety. And that’s what the National Patient Safety Foundation does. So we need to… to think that there are not frivolous suits is ludicrous.

We have a pathologist being sued who never met the patient only at the autopsy table and they claim that he killed the patient. And we go on and on. What we’re concerned about is no obstetricians or family practitioners that deliver babies. We’re concerned about no neurosurgeons to remove a blood clot. We’re concerned about access to care. So we want to work in a system that is safe and it takes care of people who are harmed. This system doesn’t do it and President Bush got it right and Secretary Thompson got it right with this study at HHS.gov — July 24. Thank you.

RAY SUAREZ: Ken Suggs, is the trial lawyers group willing to meet some of these other players halfway, I mean, acknowledge some of the problems in the system and try to understand where they’re coming from? I mean, are you ready to change any of the ways that you’re doing your business?

KEN SUGGS: Well, we’re willing to meet these people halfway, but we want to look at the whole problem. And the whole problem includes insurance reform. I mean, there’s some quotes I have here that the doctors are threatening to quit practicing specialties and move out of the state. That’s from 1986.

Every time the business cycle goes down, the insurance companies stir the doctors up to blame the lawyers. I spend… we talk about triage. I spend my whole day, most days, telling people that bad results are not malpractice, and that they can’t sue their doctor just because something didn’t turn out the way they hoped it would. People have high expectations of the medical care but lawyers on contingent fees are not out there drumming up frivolous cases.

Why in the world would I want on a case where I can’t get paid unless I win to take a frivolous case? So the problem is not to address what the doctors and the insurance companies are saying now.

I feel for the doctors. They’re getting squeezed on both ends — HMO’s on one end telling them what tests they can do and what they can get paid and malpractice insurance companies on the other end raising their premiums. That’s tough for them. But the solution is not to limit patients’ rights. The solution is to reform the insurance industry.

RAY SUAREZ: Guests, thanks a lot for joining us.