Malpractice insurance crisis must be tackled

July 18, 2004|By JAY HANCOCK

THE MARYLAND Trial Lawyers Association has accused Gov. Robert L. Ehrlich Jr. of jumping to conclusions about how to fix the medical malpractice insurance crisis.

Now I have damning evidence that they're right.

The governor "didn't want to make this an anti-trial-lawyer piece of legislation," Ehrlich legislative aide Donald J. Hogan Jr. said on the phone last week. "He made a specific decision not to deal in any way with attorney contingency fees."

Well, why not? Trial lawyers are part of the problem. They ought to be part of the solution.

High lawyer fees - from 33 percent to 40 percent of malpractice awards - take money that otherwise would go to injured patients and their families. High fees breed incentive to flood the courts with litigation in hopes of a jackpot.

Other states have eyed limiting lawyer fees as part of a remedy for soaring malpractice settlements and huge insurance costs that may push many obstetricians out of business.

In California, a reform package containing fee limits reduced malpractice awards while ensuring a greater portion of the awards went to victims, according to a Rand Corp. study published last week. Oregonians are talking about limiting malpractice lawyers' fees to $100,000 a case.

But nobody in Maryland wants to even bring up the subject.

Not the Democrat-controlled legislature, which lists numerous lawyers as members and contributors. But not the governor, either. As a Republican, he might naturally have something to say about this sore subject with business.

And not even the Medical Mutual Liability Insurance Society of Maryland, which insures most state docs against malpractice cases.

Med Mutual's claim payouts soared 66 percent last year to $93.2 million. As a result, the insurer plans to charge each obstetrician $160,130 next year for malpractice coverage, a burden that has many threatening to quit.

But instead of regarding booming premiums as a crisis, malpractice lawyers say greedy insurance companies are yelling wolf to jack up their revenues.

Med Mutual, by definition, however, is not greedy. It has no shareholders. As a mutual insurance society it is owned by its customers and has no reason to gouge them.

Well, the plaintiffs' bar mutters darkly, maybe the rocketing premiums are just political theater designed to inflame sentiment against malpractice victims and their advocates.

If so, it's a heck of a public relations fee. Obstetricians' malpractice premiums are set to rise $44,000 next year. That's about two dozen baby deliveries, at current reimbursement rates.

Insurance consultant Jay Angoff, who brilliantly exposed executive bonuses at CareFirst BlueCross BlueShield two years ago and now works for the Maryland Trial Lawyers Association, says Med Mutual has a history of overestimating future claims.

For the eight years ending in 1993 - the most recent period for which the books have been closed - Med Mutual initially figured malpractice awards would equal $353.4 million, Angoff says. Actual payouts turned out to be only $217.3 million - 39 percent less. That suggests Med Mutual's latest premium increases may be higher than they need to be.

But insurance companies are supposed to be conservative, and the risks of reserving too much for future claims are far less than the risks of doing the opposite. Charge too much and you rebate the difference later to member/customers. Charge too little and you go bankrupt.

"We can't just say this is cyclical and we have to wait for it to abate, because it may not abate," says Med Mutual President David L. Murray. He points to numerous insurers who have bailed out of Maryland malpractice coverage since 1995, he says, because they set reserves and premiums too low.

No, the malpractice insurance crisis looks like a real ailment needing a real cure. For sure, the solution should include better policing of bad doctors. But it also seems to call for litigation reform instead of copout fixes being floated such as soaking taxpayers for bailouts or making dermatologists subsidize obstetricians.

The governor has laudably pledged to protect taxpayers. He wants to cap "pain and suffering" malpractice damages at $500,000, a good start. And he has appointed a task force to propose remedial legislation.

The panel, however, has no plaintiffs' lawyers. They're either boycotting it or were blackballed, depending on whose spin you buy. Maybe it's a good opportunity to talk about them behind their backs.

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