august05

Malpractice Liability Coverage: The OTHER Health Insurance

Generally speaking, the business of insurance is a business of risk. People buy insurance so as to protect themselves from the costs of a catastrophically expensive possibility. We buy fire insurance should our house burn down, life insurance in case we get struck by lightening, etc. In the world of health care however, the traditional concept of insurance has been flipped on its head.

Recently, there has been a great deal of attention devoted to the rising cost of health insurance. People are justifiably concerned about our current state of affairs and the debate over possible solutions is long overdue. However, there is another facet of the health insurance crisis which is currently receiving a limited amount of public attention outside of the immediate confines of the medical community.

I'm referring to malpractice liability insurance. Although generally considered an issue which affects just the small, "elite" physician community, the current state of malpractice liability insurance has far reaching implications which are significant and consequential to the entire state of the American health care system.

In order to fully understand the direct relationship between the cost of malpractice liability insurance and the cost of health care, one must first understand the underlying nature of malpractice insurance. Medical malpractice insurance is not necessarily purchased to protect a physician from the costs of a mistake made in the operating room. In practice, it is more the pre-purchasing of legal services to defend oneself in the event of a lawsuit, regardless of whether a mistake was made or not. The frequency of lawsuits filed and ever-increasing judgments are generating significant upward pressure on the cost of liability coverage. As all but a handful of states require physicians to have liability coverage, this is making it increasingly difficult for doctors to keep their doors open.

For instance:

50% of neurosurgeons are sued once a year [Average neurosurgeon liability premium in a so-called "crisis state" like Pennsylvania: $383,000];

76% of OB-GYNs are sued once, 57% twice, 42% three times;

33% of orthopedic surgeons are sued once a year, same as emergency physicians and trauma surgeons.

What are the outcomes?

74% of cases filed are found meritless;

A scant 5.8% actually go to trial, with the physician being found non-negligent 86% of the time;

Only 1% of verdicts go to the plaintiffs.

Still, these charges can cost between $25,000 and $90,000 to defend against, sometimes more.

The result of this enormous volume of litigation however is that many doctors are seeing premium increases of about 25% a year, making it very difficult for some to sustain their practices. This is particularly true for specialists who, in some cases, have seen their premiums increase at even faster levels. When doctors can no longer afford their premiums, or if the litigation risk of covering a doctor in a particular region becomes too great, insurers leave the market. The most notable example of this was the case of St. Paul, which left more than 41,000 physicians without coverage after sustaining over $1 billion in losses.

This, quite obviously, reduces access to the services those physicians provide (orthopedics, neurosurgery, obstetrics, gynecology, emergency physicians, cardiologists, etc) in states where the problem is most pronounced. My own father, a surgeon with 30+ years of experience, never found liable in a lawsuit, former team doctor for the New York Islanders, was forced to stop operating because the costs of his malpractice insurance was simply too high (almost three-quarters of a million dollars for his practice, annually). These should be the physicians we want to retain in our system, but they are being increasingly pushed out.

Those who do not drop out altogether are being forced to change their practice in other ways, whether it be by laying off employees, limiting high-risk services and procedures, quitting emergency room coverage, or refraining from taking care of trauma patients. In fact 66% of emergency rooms across the country are in danger of shutting down due to shortages of on-call specialists.

Right here in the nation's capital, the problem is especially pronounced, and we are already starting to see our access to physician services dwindle. According to a study from the Washington, D.C. Medical Society:

30% of doctors plan to retire early;

21% plan to stop practicing in the district;

31% plan to move out of the district altogether;

29% have stopped performing high-risk procedures;

27% have begun to fire workers;

56% plan to or already have dropped out of Medicaid, still others are dropping out of private plans;

40% of the OB-GYN doctors in the city no longer deliver babies; [A quick anecdote in this regard - the OB-GYN that delivered my own brother is now a car salesman, having been unable to keep up with the rising costs of liability insurance].

That last statistic should be particularly alarming for women, as it is not just obstetrics that is feeling the brunt of this storm, but mammography as well.

We all know that early detection of breast cancer saves lives yet, according to Dr. Stuart Weinstein of the University of Iowa, "you cannot find a radiology resident who would be willing to specialize in mammography, and experienced mammographers do not want to read mammography reports or assess an examination because of the high liability risk."

The saddest aspect of this problem is the changing nature of the doctor/patient relationship. Instead of doctors working to heal the sick, as they have been trained to do, they look upon them with skepticism, as a potential lawsuit, and many specialists are understandably hesitant to take on new patients.

This is not lost on medical students either, who are keenly aware of the problem and refuse to practice in high-risk states once they get out of school. For instance, there are only three orthopedic surgeons under 35 in private practice in the state of Pennsylvania. Many more are simply opting not to become doctors in the first place. This is an issue we can be certain to hear more about as the baby boomers retire and the demand for new physicians grows. Who will take care of the sick in the future? Who will take care of me in my old age?

This problem also has an enormous impact on broader health care costs. A study from the Harvard School of Public Health, Harvard Law School, and Columbia University Law school, sponsored by the Pew Charitable Trust, documents a disturbing trend that many have suspected for years. In order to protect themselves in the event of a lawsuit, doctors order more tests and screening than they know to be of value to the patient. Among other things, the study found that:

93% of physicians practice so-called "defensive medicine;"

92% engage in "assurance behavior," whereby they order tests, particularly imaging studies, perform diagnostic procedures, and refer patients for consultation to make sure they've done "everything possible" [This problem is of course exacerbated by the fact that there is virtually no check on the demand for health services, but that is for another day].

Sadly, defensive medicine has become the norm, not the exception, and its impact on cost is quite severe. The American Hospital Association projects that the professional liability expense per staff bed is about $4,000. In so-called "crisis states," it can be more than three times that much.

No matter how you look at it, the medical liability issue is affecting you. As a patient it is affecting your access to care, as a doctor, it is affecting your ability to keep your doors open to exercise your craft, and as an insurer, it is affecting your ability to stay in business. From any angle, this is an issue that needs to be resolved.

Posted by Michelle Rawlings