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IS THERE A DOCTOR IN THE HOUSE?: High Insurance Premiums, Disappearing Doctors, And The Urgent Need For The Senate To Pass The New HEALTH Act


Tuesday, Oct. 15, 2002

The affordability and availability of health care has continued to be a hot political issue since at least the early 1990s. Leading issues range from the high cost of prescription drugs, to the ethics of HMO coverage practices, to the privacy of our medical records, to the fact that a significant portion of our nation's families are without any health care insurance at all.

Unfortunately, a new health care crisis is looming that is so severe, it may overshadow the rest: Our doctors are disappearing. High malpractice insurance rates are driving them out of particular localities, or, in some cases, even causing them to stop practicing altogether.

The Disappearing Doctor: Driven Out By High Premiums

According to the Census Bureau, the median household income in the United States last year was $42,228. But that is a mere fraction of what many doctors must pay each year in malpractice insurance premiums.

With premiums that high and rising, doctors often are deciding to move from particular areas of the country or, even more drastically, cease practicing medicine altogether.

For example, just this past summer, the only Level One trauma center in the Las Vegas, Nevada region closed for ten days because its surgeons could not afford their malpractice insurance premium - which had risen, for some, from $40,000 to $200,000. Meanwhile, in Mississippi, most rural cities are simply without any obstetrics care, as such physicians have moved out of the state, forcing women in those communities to make do with midwives or other caretakers or seek out-of-state care.

With insurance premiums often exceeding a doctor's income, it is no wonder some are taking such drastic measures.

The Volatility of Jury Verdicts: One Reason For Ultrahigh Malpractice Premiums

Meanwhile, there is no indication that we are in a malpractice crisis as opposed to an insurance crisis; quite the reverse. Our country's doctors are acknowledged to be among the world's very best. So why are they, as a group, paying so much for insurance against anticipated malpractice verdicts? Much of the answer has to do with uncertainty.

The purpose of insurance, of course, is to spread the risk of economic uncertainties and unexpected losses across a number of individuals. But when it comes to medical malpractice litigation, the economic uncertainties are great, and the losses can be staggering.

Because of the inherent scientific complexity of medical malpractice cases, it is necessary to hire expert doctors to evaluate the medical records in these cases. As a result, just to defend a claim - even a meritless claim - can cost close to $25,000 on average nationally, an average that often is many times higher in certain parts of the country. And that is to say nothing of any settlement amount or verdict award.

As with most litigation, medical malpractice claims often settle out of court. However, those relatively few cases that do make it to trial often result in verdicts of several hundred thousand dollars - with the high end of verdicts reaching far, far higher. In 1999, for example, 52% of all awards were in excess of $1 million, with some even in the tens of millions or more.

Moreover, these verdicts were not based primarily on economic or compensatory damages for lost income and medical expenses. Rather, they were based primarily on "non-economic damages" - that is, damages for "pain and suffering." The way a jury will calculate these intangibles is always hard to predict, and is limited only by the jury's sympathy for the particular plaintiff.

Congress Prescribes HEALTH: New Legislation Aims to Help with Insurance

Many states have made efforts to thwart the looming health care crisis, and reduce the risk of loss to doctors and their insurers. Most recently, Mississippi did so this past Friday. On April 25 of this year, Rep. James Greenwood (R-PA) introduced similar legislation on the federal level.

The bill is called the Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 2002. Given the pending crisis, the HEALTH Act quickly picked up bipartisan support, eventually amassing 123 co-sponsors.

On September 26, 2002, by a vote of 217 in favor and 203 against, the Act passed the House and now resides with the Senate Judiciary Committee. If enacted into law, it would apply to all federal and state medical malpractice claims.

The Specific of the Proposed HEALTH Act

The Act is based on a similar California bill enacted over 25 years ago to much success and acclaim. The Act caps non-economic damages at $250,000, and caps punitive damages at the greater of $250,000 or twice the economic damages. (That makes a great deal of sense: Punitive damages can be huge in the rare cases in which they are awarded, and pain and suffering damages, as noted above, vary widely from case to case.)

Importantly, the Act does not set any limit on the amount of economic damages that can be awarded - so that juries can continue to fully compensate plaintiffs for medical costs and other monetary losses such as lost income from missed work.

The Act also requires that medical malpractice claims be brought within three years of the injury, or within one year of its discovery by the patient, whichever is earlier. Of course, the statute of limitations is tolled - that is, extended - if the malpractice involved fraud or intentional concealment of the injury.

Under current law, in contrast, many jurisdictions allow for malpractice actions to be brought many years after the injury occurred - thereby leaving doctors exposed to liability indefinitely, and adding even more uncertainty to the question of what doctors' true liability risk may be.

Under current law, in many jurisdictions, lawyers currently can charge up to 40% for any amount recovered. That means that when a case settles early, as many do, the lawyer's fee may amount to a windfall: a huge sum paid for little work by the attorney.

Finally, in cases involving multiple defendants, individual health care practitioners would be held liable only for that degree of fault they contributed to the injury. That sounds intuitive, but it is not currently the law.

Instead, under current law, many jurisdictions hold multiple defendants to be "jointly and severally" liable for malpractice. That means that defendants who are only partially responsible for an injury must pay the plaintiff the entire award amount.

So What's Wrong with HEALTH? Nothing, Contrary to Critics' Claims

As with most efforts at tort reform, trial lawyers contend that these efforts to cap non-economic and punitive damages infringe on, or even remove altogether, the "right" of innocent patients to bring actions against doctors. But that's not a fair characterization.

No one reasonably can disagree, of course, that patients who are the victims of medical malpractice ought to be fairly compensated for their injuries. But the HEALTH Act manifestly ensures that. Indeed, according to the Department of Health and Human Services, the Act creates "a fair and predictable liability system for compensating injured patients."

Under HEALTH, plaintiffs still have the right to sue. And they still have the right to receive every penny of their jury award for economic damages. Their punitive damages are capped, but they are rarely awarded in medical malpractice actions anyway - and are meant, in any case, to send a message to the doctor or hospital, not to compensate the plaintiff.

So the only real issue critics can raise is the potential for recovering million-dollar "pain and suffering" awards - which the Act precludes. But that's only right: no one has a right to expect our court system to function as, in effect, a litigation lottery. It is difficult - perhaps impossible - to quantify someone's pain and suffering. So such awards are often the product of sympathy and speculation rather than evidence.

Under current law, some plaintiffs will win the lottery; some will lose. The only certain thing is that as long as the lottery continues, we all will risk a shortage of doctors - especially for crucial specialties such as trauma surgery and obstetrics - and we all will pay more for medical care, because doctors will have to charge us more to pay their own premiums and stay in business.

Critics of the Act also try to place blame with the insurance industry. They argue that the exorbitant insurance rates are not the result of excessive jury verdicts - though the sheer magnitude of verdicts seems to belie this claim.

Rather, they say, rates skyrocketed because the insurance industry made bad investments during the internet stock boom of the 1990s. Now that that bubble has burst, the insurance industry is alleged to be attempting to recoup its losses by raising rates.

Such an argument is probably not true: After all, insurers could undercut each other in the competitive market if their rates did not reflect actual costs to them. And a company eager to recoup money through premiums that exceeded its costs would hardly choose to leave the insurance business entirely - the way St. Paul Companies did.

Moreover, even assuming recouping is one cause of the raised premiums, it is nothing but a red herring. Even if the supposed "recouping" effect were eliminated, we would still have a crisis on our hands - for high and uncertain verdicts are an obvious, if not the only, cause of skyrocketing premiums. Caps on non-economic and punitive damages at least provide some stability to medical malpractice litigation.

Let's Keep Doctors in the House: Why the Senate Should Pass the HEALTH Act

As the cost of litigation becomes more predictable, the volatility of insurance premiums will be reduced. Because of California's tort reform, for example, malpractice insurance premiums in that state have risen only 167% over the past 25 years compared to a 505% increase for the rest of the country. As California's experience demonstrates, medical malpractice tort reform will work toward maintaining the integrity of our health care system by keeping doctors in the house.

Sometimes, the best can be the enemy of the good. For all the problems critics claim the HEALTH Act may have - and some do raise genuine issues - federal legislation to address the problem of disappearing doctors nevertheless is crucial.

The Act should be praised for bringing some needed rationality to an out-of-control tort system that threatens the very viability of many health care professions. When the 108th Congress reconvenes, it will take up the bill again. When it considers the bill, it should do so with the goal of passing, or at least improving, it - not shooting it down. The crisis is too serious for us to do nothing.

Let's hope Congress does what's good for our health, so that the next time we visit a hospital, there will indeed be a doctor in the house.

Mr. Allenbaugh is an Associate at Montedonico, Belcuore & Tazzara, P.C. in Washington, D.C., and also is an Adjunct Professor in the Philosophy Department at the George Washington University where he teaches courses on business and professional ethics. His current practice focuses on the representation of health care professionals in negligence and licensing matters. He can be reached at

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