State medical tort reform reduced costs, but not for families
By Andrew Guevara
For the Show-Me Institute
In September, the Missouri Department of Insurance reported the lowest number of new medical malpractice claims in 10 years and the lowest number of claims open in almost 30 years. According to the 2008 Medical Malpractice Annual Report, 1,215 new malpractice claims were filed and 3,017 cases were pending.
Meanwhile, the state insurance industry continued to earn a profit, which the report attributes to fewer claims filed and smaller payouts paid by malpractice insurers. The average claim for 2008 was $202,612, approximately $50,000 less than its “period high” peak in 2005.
Tort reform proponents claim that the new figures, coming less than five years after state legislation was passed to restrict medical malpractice claims, are evidence of success.
“The whole tort system had gone completely out of control,” said former Senate President Pro Tem Michael Gibbons.
Gibbons, who backed the reforms, said the decline in the number of malpractice claims and payout size is tied to medical tort reforms that former Gov. Matt Blunt and a Republican majority General Assembly voted into law during 2005.
The reforms placed a cap on non-economic damages, restricted suits to be filed only in the same county where the accused negligence occurred, required defendants to pay full judgment only if they are found to be responsible for more than 50 percent of the negligence, and implemented other limitations.
The purpose of the state’s tort reforms, Gibbons said, was “to create an environment that was more consumer friendly, with better quality health care, and to reduce costs.”
After the 2008 malpractice report was released, Blunt wrote in a Wall Street Journal op-ed that the 2005 legislation had helped to reduce the number of “junk lawsuits” in Missouri, lower health care costs, and provide better access to health care.According to the 2008 malpractice report, payouts have also declined. Providers issued $31.7 million less in written premiums to health care providers from 2006 to 2008, compared to the $5.8 million increase in written premiums from 2003 to 2005.
“It was important for Missouri to rebound from 2003 to 2004,” Gibbons said, and claimed that “2005 to 2008 have been buzz times for the state.”
Even though Blunt and Gibbons interpret the decreased number of claims filed as a positive change, trial lawyers see this as a defeat for patients.
Wally Bley, an attorney at the Columbia-based Bley & Pfeiffer law firm, said that the decline in claims is a “false victory.”
“This alleged reform has taken away patients’ rights to collect for negligence,” Bley said.
“There are as many phone calls from people as ever, but we can only take many of them when their cases are economically worth pursing,” he said.
THE REST OF THE COUNTRY
The decreasing cost of malpractice premiums in Missouri also reflects a national trend.
The Medical Liability Monitor 2008 Rate Survey, a study that examines medical malpractice premiums nationally, shows that 43 percent of medical malpractice insurers surveyed reported a decrease in premiums, 50 percent reported no change, and 7 percent saw an increase.
Geographic location, including state and metropolitan region, plays a large role in premiums, according to the survey.
For example, a general surgeon in the Kansas City area saw no percentage change in medical malpractice premiums from 2007 to 2008, and continued to pay $132,314. A general surgeon in the Miami-Dade County, Fla., region saw a 22-percent decrease in premiums but still paid $214,893. The lowest rates reported for general surgeons during 2008 were in North Dakota, with premiums of $18,063.
The study cited four possible reasons for a decrease in claim frequency, and thus a trend in reduced premiums nationwide: better risk management practices for patient care; state-level tort reforms; an increase in legal costs for plaintiffs, which could result in claims with a low chance of success not to be pursued; and the success of an “access-to-care” crisis campaign, which claimed that higher malpractice costs could lead to lower-quality health care.
Missouri seems to be following the trend predicted by the “access-to-care” campaign. Since the passage of the 2005 tort reforms, more practicing doctors have stayed in Missouri, according to reports from the Board of Healing Arts, the agency responsible for licensing and regulating physicians. According to the board’s calculations, Missouri lost 447 physicians between 2003 and 2005; however, between 2006 and 2009, Missouri gained 487 practicing physicians.
THE IMPLICATIONS
Missouri’s tort reforms could be freeing doctors from conducting medically unnecessary procedures and tests in order to prevent potential medical liability suits, known as “defensive medicine.”
Jeffrey Howell, director of legal affairs for the Missouri State Medical Association, said, “Tort reform keeps doctors from practicing defensive medicine and lets doctors do what they do best.”
But, despite the recent decrease in medical malpractice premiums, the savings don’t seem to be reflected in health insurance premiums. According to a Families USA report, family health insurance premiums in Missouri grew 3.6 times faster than Missouri workers’ incomes from 2000 to 2009.
Federal estimates illustrate the disconnect between medical malpractice premium costs and family health insurance premium costs. According to a 2004 Congressional Budget Office (CBO) report, a 20–30 percent decrease in malpractice premiums would decrease health care costs by only 0.4–0.5 percent.
In an Oct. 9, 2009, letter from the CBO to Sen. Orrin Hatch addressing tort reform in the United States, CBO Director Douglas Elmendorf wrote that national tort reforms could reduce U.S. health care spending by 0.5 percent — a small percentage, but a figure that would amount to approximately 11 billion in 2009 alone.
“That figure is the sum of a direct reduction in spending of 0.2 percent from lower medical liability premiums and an additional indirect reduction of 0.3 percent from slightly less utilization of health care services,” Elmendorf wrote.
Gibbons said that tort reform backers thought limiting defensive medicine costs would lower family health care costs, but acknowledged that this has not appeared to be the case.
Andrew Guevara is a student at the University of Missouri-Columbia