Medical Malpractice Reform Benefits Insurance Companies

In 2003, a Republican led Pennsylvania legislature made “sweeping changes” to the state tort system designed to curtail the “medical malpractice crisis” plaguing the Commonwealth. Statistics were altered and medical lobbyists sold their snake oil by scaring citizens into believing that physicians were fleeing the state and that health care would soon be unavailable to the general public if immediate changes were not made. The culprit, according to them, – out of control medical malpractice lawsuits. Of course, the medical society advocates never mentioned how the stock market crisis had cost medical insurers millions of dollars thereby requiring huge premium increases. Instead, panic was created and citizens were stripped of rights long guaranteed to them by the State Constitution to have a jury of peers decide the true value of a case. Most disturbingly, many citizens happily supported the “reform.” So what has changed in ten years?

On November 3, 2014 there was an article in the New York Times eloquently explaining why Malpractice Reform has not done, and will not do, much to reduce health spending. Insurance lobbyists have been chanting the mantra “reform medical malpractice laws and save the American health system” for decades. The problem is, and always has been, that there is little truth to this theory.

The single largest component of the “lawsuit cost” analysis considers “defensive medicine,” meaning that doctors order additional tests, or perform extra procedures or recommend more visits, all because they think those actions will protect them from being sued. Statistics have proven that the premises for this conclusion just aren’t true. In 2003, Texas, led by a Bush of course, stripped citizens of constitutional rights by passing a law capping noneconomic damages in lawsuits at $250,000 per year. Their rationale was that by decreasing the number of suits, overall indemnity payments would decline, which would lead insurance companies to decrease premiums for malpractice insurance. This, coupled with reduced claims, would make doctors feel safer, happier, and reduce their practice of defensive medicine. Ten years later statistics reveal that health care spending didn’t go down in Texas. In fact, Medicare payments per patient INCREASED AT A HIGHER RATE in Texas after the change than anywhere else in the rest of the country.

The failure of the Texas tort reform was largely ignored because the promoters of the statistics were labelled as greedy lawyers who had a stake in misreporting the data. Perhaps the truth will be taken more seriously thanks to a comprehensive study published by the prestigious New England Journal of Medicine. As reported there, researchers examined how emergency-room care changed for patients in Texas, as well as in Georgia and South Carolina, which passed similar laws in 2005, compared with neighboring states without tort reform laws. The New England Journal of Medicine concluded that malpractice reform did not significantly change indicators like how often radiology was used to rule out problems, how much was spent on average and how many patients were admitted to the hospital.

In reality, most doctors do not order tests because they fear the lawyer. There are many reasons to order tests, procedures and additional visits. The most obvious reason is that physicians are paid for doing so. A fact, little known to the public, is that almost all physicians are paid, at least in part, based on the revenue the physician generates. Yes, medicine is a commission based system and the more a physician is able to bill, the more a physician will take home at the end of the year. Medicine is a business, big business, to both the health system and the individual physicians. Of course, not all physicians order tests in the name of money. Many physicians want to provide the best level of care and order tests as a safety check of their intuition and decision making. If a patient has paid for insurance, isn’t that patient entitled to have every test available to direct appropriate treatment?

Something that also gets lost in the rhetoric is the fact that there has never been solid evidence of a malpractice crisis. The National Practitioner Data Bank tracks every lawsuit payment made by every physician in the United States. Figures from the NPDB demonstrate that the number of malpractice payments made on behalf of doctors has dropped steadily every year, for the past 10 years! So why the continued drama? Because doctors have not seen a significant change in malpractice premiums. But why? Well-funded lobbyists will not tell you, but the answer is obvious and supported by irrefutable data – the savings are not being passed on to the physicians in the form of premium reductions. Those savings are being pocketed by insurance companies! Big surprise there.

Unfortunately, once rights have been lost, they are seldom reinstated. Despite the fact that the American public was lied to during the justification phase of passing tort reform laws, it is very doubtful that a correction will be made. The new laws are here to stay. Injured citizens will not be adequately compensated for their injuries. Physicians will not enjoy reduced premiums reflecting higher take-home pay. But insurance companies will continue to make unconscionable profits and continue to hoard premiums, while being untruthful to the paying public.