Reforming the malpractice system.

BEGINNING OVER A year ago, reform of the medical malpractice litigation system has moved from a slow back-burner simmer to a front-burner boil. Temporarily put on hold in spring 2003 as Congress turned its attention to the war with Iraq, consideration of this issue was expected to resume that July. The underlying crisis in the availability and affordability of professional liability insurance comes as little surprise to insurers (or most of them anyway), but it is perhaps somewhat startling in its severity. The real surprise is being realized by healthcare providers and institutions, which are now being required to pay insurance premiums commensurate with their rapidly expanding risk. Karen Ignagni's description of the current scenario is well done, and she ably details the woes of our tort system in terms all too familiar to those who work within it. Furthermore, she is right when she says that the system must change and that some better solution to handling malpractice must be offered. However, that is one opinion, and one that is not shared by more half of the United States Senate, and here is the rub. HOW DO WE MOVE FORWARD? Moving beyond the blame game is not so simple. While talking about reform is absolutely necessary and laudable, not everybody is talking about improving patient care, reducing defensive medicine, fairly compensating truly injured patients, and other issues that speak to equity in our legal system. Cost Issues Doctors and hospitals became very concerned with these issues almost three decades ago when they saw their medical liability insurance costs rising rapidly. They did not believe that these costs were real but did believe that the insurers were ripping them off. So they formed their own insurance companies, which now cover the majority of the market. The industry incurred $1.53 in losses and expenses for every dollar of premium it collected in 2001. Insurance rates have risen since that time, and A.M. Best, a leading industry-rating organization, expects this ratio to be only $1.41 for 2002 after the data are analyzed later in 2003 (A.M. Best 2002). Contrary to the intentionally misleading assertions of the opponents of healthcare liability reform (mainly trial lawyers), the medical malpractice insurance industry is faced with exploding costs at a time when investment income (mostly interest on bonds) to offset premiums approaches an all-time low. Also contrary to what the trial lawyers say, insurers are incurring real losses on their insurance risks, and the problem is not caused by massive losses on the stock market where they invest less than 10 percent of their assets. Clearly the driver of the current crisis is rising loss costs. The situation in the industry has gotten so bad that Standard & Poor's (2003), another leading rating agency, has forecasted that if severity trends continue to escalate in the absence of effective tort reform, the whole industry structure could reach a point where it is in peril. With the average cost of a paid claim rising by 8 percent per annum in recent years (PIAA 2002), insurers have no choice but to pass these costs along to their customers. Many physicians can no longer afford to pay enough to cover the risk they take by treating patients. As long as the insurers are able to charge adequate rates, most will survive-it is the doctors and hospitals, and most of all patients, that are at jeopardy. This problem is not somewhere down the road; in some places in the United States, it is here right now. As Ignagni points out, the funds being spent in the courtroom are better spent in healthcare, especially because half of these dollars go to the attorneys. One cannot imagine a more inefficient scenario than America's medical tort system, where plaintiff injury lawyers lose 80 percent of their cases before a jury. While that might be a positive thought for the defendant and his or her insurer, the cost to defend (and possibly lose) a case at court is approaching $100,000. …