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May 04, 2005

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» CJD's Med Math Part II from PointOfLaw Forum
James Copland took the Center for Justice and Democracy to task earlier this week for its recent report by Jay Angoff.  Mr. Angoff is a former Insurance Commissioner for the State of Missouri and he seems to have particular problem... [Read More]

» CJD's Med Math Part II from PointOfLaw Forum
James Copland took the Center for Justice and Democracy to task earlier this week for its recent report by Jay Angoff.  Mr. Angoff is a former Insurance Commissioner for the State of Missouri and he seems to have particular problem... [Read More]

» CJD's Med Math Part II from PointOfLaw Forum
James Copland took the Center for Justice and Democracy to task earlier this week for its recent report by Jay Angoff.  Mr. Angoff is a former Insurance Commissioner for the State of Missouri and he seems to have particular problem... [Read More]

Comments

Ted

Because Neil Vidmar has already cast his lot in this debate, "unbiased" is perhaps better phrased as "preordained," unless he changes the flaws in his methodology, but it's doubtful ISBA would've hired him if he was going to use the right methodology. The fact remains that malpractice insurers pay out more in claims that they take in in premiums, and by quite a sizable margin, too.

Oklahoma passed caps in June 2003, which makes it a more favorable environment to practice medicine than southern Illinois. The AMA map shows the same.

Evan

Ted: Neil Vidmar already cast his lot in the Illinois debate? Or some other debate? What are the problems with his methodology?

BT

I am a lawyer. I grew up in a medical community (the biggest employer was the local hospital), so I am family friends with a number of doctors. I'd say about 12 or so. 2 good friends (doctors) have moved out of state due to this. I can tell you honestly that they said without qualification it was because of how high their malpractice rates have gotten. Which isn't doublespeak for anything. People understand exactly what that means - that they want to maximize their income. Just like garbagemen, software designers, accountants, architects, secretaries, and (gasp) lawyers tend to do.

So to suggest that this isn't a real problem would be incorrect, in my opinion. It is a real problem that is affecting medical communities. Also, the newspaper announcement saying that she was going to be with her family is hardly evidence that her family is her main reason for leaving. I don't think a medical office would announce that their colleague has left due to these atrocious malpractice rates, leaving patients with two very realistic thoughts - first, "why are their rates so high? That's scary! They must screw up a lot" (if they aren't up to date on the current debate). Second, "these guys sure sound like shmos (is it spelled shmoes?) for sticking around here and getting paid less." So bottom line, that announcement was inevitable, and doesn't really mean anything.

A few more notes:

- In the case of the doctors I know, the state they each moved to was Texas (from Pennsylvania).

- In your entry, you are seemingly confusing the number of local malpractice verdicts with their malpractice insurance rate. The fact that the verdicts are low doesn't mean that the rate isn't comparatively high.

- I think one big thing here, from a lawyer's perspective, is that people (or at least doctors) understand that this is a structural flaw of the legal system rather than an "all lawyers are evil and I'm going to tell a lawyer joke now" thing. I talk to doctors who are very clear in saying that if they were to switch position with lawyers involved in such cases, they'd act as the lawyers currently do. So I'd take a little less personal offense than what the tone of your post implied.

After all of those critical comments, I just wanted to say that I really enjoy the blog (this is my first comment I think), and the post itself was interesting.

Sorry for the length of comment

Marie

Doctors should stop getting mad at lawyers, and start getting mad at doctors who make mistakes. How often do we hear a doctor speaking out about another doctor? It's been my observation that when an error by doctor of the first part is brought to the attention of doctor of the second part, doctor of the second part has a tendancy to downplay said error.

Matt

Ted,

Since you are so knowledgable in the area, and now have so much free time, can you tell us how much malpractice insurers paid out in claims vs. how much they collected in premiums over the last, say, 20 years? How did St. Paul manage to accumulate that $1 billion in med mal reserves by 1989? By paying out more than they took in?

Perhaps you didn't know this, but between 1996 and 2003, Oklahoma payouts by med mal insurers had decreased 16% when adjusted for inflation. Clearly a crisis.

Nice use of the AMA map. That's gold. How ironic that Mr. Vidman doesn't have credibility with you but the AMA is chock full of it. I'd say the AMA's definition of "crisis" may have some flaws in its methodology.

You continue to do your insurance industry clients a great service, and I admire you for that. We've all got to hitch our wagon to someone, I guess.

John Day

These doctors aren't coming to Tennessee - although the number of physicians in the State grows each year. Why wouldn't they come here?Because while TN isn't a "crisis" state; it is a state that could become a crisis state unless we restrict the rights of patients NOW. That is the argument for tort deform here.

I love doctors. But their ignorance of how the insurance industry abuses them and spoon feeds them lies makes me question their intellect or, at least, their intellectual honesty.

I think the reason doctors continue to harp on tort deform in the presence of clear evidence that any measure that could pass will not bring down rates is that they have complained for so long that they just want to say they won something. It is the equivalent of Vandy beating a Div III team in football - it's a win, damnit. They just want a win.

Ted

Evan, Vidmar's been writing about this subject for years, most notoriously as a paid expert challenging the constitutionality of Indiana's caps. If he makes the same errors in the Illinois paper that he made in his Indiana paper (and, from what I can tell from the press accounts, his Florida paper, where he trumpeted the data that could be spun to support his conclusions and downplayed the data that effectively disproved them, and the press happily played along), the lawyers will be happy with his results, which is why they're confident in hiring him. Vidmar may or may not be biased (though his decision to do a press offensive about his Florida study without putting the study on the Web may provide evidence on this question), but the selection of Vidmar to do the study was certainly a biased one.

Matt, I cited to the AMA map because Evan made an affirmative claim about the map that wasn't accurate. Take or leave the AMA map (I don't claim that it adds anything to the debate), but it doesn't say what Evan claimed it said about the relative state of affairs in Illinois and Oklahoma.

This pdf document lists combined ratios for 1980-2002. In 2003 it was 137.5%.

John, if you really believe that the malpractice insurance crisis is a function of insurers, rather than lawyers, why not encourage ATLA to put its money where its mouth is? Think of the profits, not to mention the opportunity to make litigation reformers look foolish!

Marie, the problem is that the majority of costs in the current medical malpractice system are caused by lawsuits against doctors that did not commit malpractice.

Evan

BT: Don't be sorry for the length of your comment. Comments are always welcome. Please come again!

Marie

Ted, you're saying the costs of defending frivolous lawsuits exceeds the costs for paying for real malpractice? I'll let others more qualified address that issue.

I'm just saying, how can you have an honest discussion about medical malpractice reform without addressing those real errors made by doctors. There's a mentality that permeates the medical profession whereby decent doctors are reluctant to point out mistakes made by other doctors. That's where I see a need for reform. Any reform that doesn't include that just looks doctors seeking.... well, I don't even want to say.

Ted

Marie: it depends on what you mean by "frivolous." As I've written elsewhere, the adjective is ambiguous, and can either refer to a broad swath of cases, or a very narrow set.

Legal reform doesn't preclude medical reform. But right now, the legal system is sufficiently inaccurate with respect to medical malpractice that any improvements in the medical system wouldn't fix the problem of the costs imposed by the legal system. It's almost an entirely separate issue.

John

Ted - you recommend that ATLA start a med mal insurer.

Do you really think that doctors are going to buy insurance from lawyers? Lawyers who sue them? Give me a break.

Second, why should docs buy ins from lawyers when they own their own insurance companies. Bedpan mutuals started in the mid-70s. TN's company has made a fortune. They did not raise their rates (after taking into account dividends) for over 10 years! Seriously, not even considering med inflation during that period.

In sum, your proposal makes no sense.

John

Ted - your link to the PDF doc is broken.

Also, combined ratios on future potential payouts are historically very inaccurate. Insurers make conservative (and therefore high) loss estimates early in the claims process. In TN the bedpan mutual initial loss ratios have been off by as much as 30% when one compares them with ultimate losses (paid claims and loss adjustment expenses).

Ted

Do you really think that doctors are going to buy insurance from lawyers? Lawyers who sue them? Give me a break.

But, John, you miss the point. It doesn't matter whether the doctors actually buy the insurance. So long as ATLA offers low-priced insurance to competent doctors, ATLA can say that there's no malpractice insurance crisis, because there's low-priced insurance available. And, remember, ATLA, et al., claims that profits from insurance are exorbitant, so the opportunity to make slightly less than exorbitant profits should be motivation in and of itself.

And why should doctors care who makes the profit from their malpractice insurance? I don't agree with all of Warren Buffett's politics, but I'm happy to take advantage of the low-priced car insurance GEICO offers. I can use the money I save for political causes I do agree with.

Second, why should docs buy ins from lawyers when they own their own insurance companies.

Ah, so your argument is that it's not insurance companies "abusing" doctors, as you originally stated, but that the doctors are overcharging themselves and driving themselves out of business, even though, as a mutual insurance company, if they do overcharge, they're required by law to return the excess premiums to the policyholders. Those gougers! Or, er, maybe not.

The reason ATLA doesn't start a medical malpractice insurer is because they don't believe their own propaganda. John Day certainly hasn't provided any reason to the contrary.

David

You've got to love people like Ted and his friends over at the Chamber of Commerce.

-Every article (not funded by AMA or the tort "reform" movement) I have ever read about the exodus of doctors from Illinois or any other state has shown that there is nothing more than anecdotal evidence to support the argument. For Illinois in particular, there was a Crain's Chicago Business article back in early July, 2004 that provided Illinois specific numbers.

-The states cited as "good" states are those that have aggregate caps on damages (e.g., Colorado which caps economic and non-economic damages combined at $1 million). When doctors fail to pay for their mistakes, the cost of taking care of their injured patients falls to society at large.

-One of my favorite insurance industry arguments, "The fact remains that malpractice insurers pay out more in claims that they take in in premiums, and by quite a sizable margin, too." I never went to business school but my memory of economics is that business that continually lose money go out of business. You folks in the business community should come up with a better argument. Having argued with an insurance industry executive I know that medmal insurers claim to be insolvent based on the premise that they could not pay every claim currently pending against their insureds. Besides the fact that every insurer is in the same position, the argument ignores the fact that very few medical malpractice actions that go to trial are successful. The percentage is nowhere near the 50% norm for other types of lawsuits. If you would like the facts regarding malpractice insurer profits and reserves, you could go to www.insurance-reform.org

-The real goal of tort "reformers" is to cap what can be obtained at trial, so that they can reduce the leverage plaintiff's have in settlement negotiations where the malpractice is obvious. Tort "reform" is about changing the economics of litigation so that it becomes economically unfeasible to bring a lawsuit.

-Please do not complain to me about the cost of defending malpractice actions. It is the defendants who drag out the litigation and drive up the litigation costs. Plaintiff attorneys on a contingency have an incentive to get the lawsuit completed. Injured patients who are being hounded by bill collectors have an incentive to get the lawsuit finished. Only the Defendants have an incentive to delay resolution.

-While I hate anecdotal evidence, here is some of my own. My physician knows I'm a lawyer, and during my visits he does not complain about his malpractice premiums. He complains about: how health insurers pay bills late, how they claim that certain tests were unnecessary (almost always without requesting let alone reviewing exam notes), many insurer's practice of not paying for tests unless they are done in pairs (BTW, those pairings are often undisclosed and subject to change without notice), and how unfair it is that insurers are allowed to engage in price fixing (i.e., take PHCS's contract price or have very few patients in your practice). What it comes down to, is that doctors do not have the ability to adjust their prices to reflect their costs and that is why they are getting squeezed.

Ted

Fixed link to pdf document.

These are combined ratios of actual expenditures to actual premiums taken in, not future estimated losses, so your point is inapposite. Insurance companies have underestimated, not overestimated, losses.

Ted

1. The Crain's article used the wrong numbers; their numbers included doctors who don't practice, and doctors who were licensed in Illinois to do their residency, and moved elsewhere.

2. "business that continually lose money go out of business." -- You're exactly right, and that's exactly what's happened in the medical malpractice insurance industry. Several insurers have stopped issuing malpractice insurance, which puts the lie to the claim that such insurance is a grand source of profit. The percentage of suits that are successful at trial does not change whether the cost of defending suits and paying claims exceeds the high premiums that doctors pay.

3. If you're a lawyer, you should inform your doctor that the practice he complains of is not price fixing.

4. Tort "reform" is about changing the economics of litigation so that it becomes economically unfeasible to bring a lawsuit. Meritorious lawsuits with real economic damages won't have their economics changed by pending reforms. It will become less feasible to bring a lawsuit where economic damages haven't been caused, but that's a good thing.


Aaron

The "ATLA should start an insurance company" argument is among the silliest pro-tort reform arguments I can ever recall hearing.

"The reason ATLA doesn't start a medical malpractice insurer is because they don't believe their own propaganda."

The ATLA isn't in the insurance business, is it? You want them to start an insurance company with no clients, not to do what insurance companies do - spread risk among a pool of insureds - but to prove some form of metaphorical point? Do you have even the slightest concept of how insurance works, or the economics of insurance companies?

"The fact remains that malpractice insurers pay out more in claims that they take in in premiums, and by quite a sizable margin, too."

Are you so ignorant of the insurance company that you don't know how a company can claim to "pay out more in claims than it takes in" while still making a profit? Or do you in fact know better, and are simply trying to mislead people?

And are you going to try to tell us with a straight face that insurance companies don't invest vast sums defending against meritorious medical malpractice suits? I'm supposed to feel sorry for the insurance company that spends more than $100,000 to defend against a case it knows is meritorious, in the hope of (a) increasing the costs for the plaintiff's law firm, (b) tripping the plaintiff over a rule of procedure, and (c) ideally to them, inspiring the plaintiff to accept a settlement for less than the case is worth?

So-called "tort reform" has killed the smaller medical malpractice case by driving up the cost of litigation - no matter how egregious the doctor's malpractice, few malpractice lawyers would consider a case where they expect less than a six figure recovery. It has also targeted the most meritorious cases, where patients have suffered the greatest harm, through "damages caps" - which, of course, have absolutely nothing to do with frivolous litigation. And the best part is, these "reforms" protect and expand insurance industry profits, but have little discernible effect on malpractice rates.

Perhaps a good "tort reform" would be to press insurance companies to settle the cases they know are meritorious at the outset, rather than running up astronomical defense fees. But that would mean doing what is right for the patient, not what is most profitable for the insurance company, so I certainly wouldn't expect a "tort reform" shill to take such a stance.

Matt

Ted,

Are you arguing that St. Paul got out of the med mal business because it wasn't profitable? Or are you arguing that insurers should be profitable each and every year and if not, it illustrates something is wrong with society?

Also, if lawsuits are the cost driver, how do you explain GE Medical Protective, the nation's largest insurer, saying Texas' tort reform would result in savings of approx. 1%?

Maybe there is a problem, but you're just advocating the wrong solution.

Ted

St. Paul got out of the med mal business because it wasn't profitable.

Matt, which is more plausible: that lawyers and insurers are expending huge amounts of financial and political capital fighting over something that actually has a 1% effect, or that an insurer trying to justify higher rates to a regulator that has demanded a rate decrease has an incentive to manufacture an argument that its expenses won't change? Other Texas insurers dropped their rates 16% after tort reform. As David notes above, there are second-order effects to caps beyond those to individual verdicts.

And, of course, as I've mentioned earlier, if ATLA really believes that caps (1) are unfair to patients and (2) don't affect insurance rates, ATLA can offer insurance to doctors on the condition that the doctors waive the caps. Patients could then decided that they'd rather see ATLA-insured doctors without caps than non-ATLA-insured doctors with caps. Everyone's better off! Doctors get lower insurance rates, patients and lawyers avoid caps, investors in ATLA insurance make a profit.

Aaron: why is my modest proposal stupid? As a matter of fact, ATLA did used to run an insurance company. Check the Cook County court records (or Point of Law) to see what happened to it. ATLA is arguing that insurers are making obscene profits, and it's hard to see why they wouldn't want a piece of it, especially if by doing so they could improve health care, prove the ineffectiveness of caps, and completely blunt the tort reform movement by lowering insurance rates, all while making money. All it takes to start an insurance company is money, and trial lawyers have plenty--it's not like this would be a charitable endeavour if ATLA believed its own propaganda.

And, yes, Aaron, as I've discussed elsewhere on this very site, insurers can make a profit without making an underwriting profit. An insurer with a combined ratio of 102 or even 105 might well be a profitable insurer. An insurer with a combined ratio of 137.5, however, is most certainly not profitable, at least not in a world of single-digit inflation.

Matt

Ted,

Maybe I'm being obtuse. If med mal is so unprofitable, how did St. Paul manage to accumulate $1 billion in reserves by 1989 in it, and then release it over the next decade as profits? Insuring houses in Florida the year Andrew hit is unprofitable, but over the long run it makes sense. You know this, stop being so disingenious. We're not your ATRA target audience.

Are you saying GE Medical Protective lied? That we can't trust the insurance industry to tell the truth when its bottom line is involved? Quite an admission on your behalf. One Texas insurer dropped its rates 16%, after raising them 150% in the previous few years. Again with the half-truths.

You're right, ATLA should start an insurance company. And you know what, since a plaintiff's med mal profit is a way to hit the jackpot, insurance companies should start a plaintiff's practice. You're arguing that med mal lawyers are making obscene profits, why doesn't everyone practice med mal. It's so easy.

Aaron

Ted, I realize that you much prefer to run around in circles on even the most basic of points, rather that conceding the obvious, but I'm really not interested in playing that game.

Your tactics put me in mind of the kind of lawyer who intentionally mistates the law to a court, or who fails to present relevant case law contrary to his position, and when caught presents the most duplicitous, belabored explanations of why his misrepresentations were in fact honest argument or why the contrary law is somehow irrelevant. (A vague reference to a prior comment somewhere on this site? Perhaps you would argue to a court that you addressed the actual law in a different case before a different judge, yet in the courts of the same circuit, such that the judge should have magically known that you were being misleading in your argument.)

Great, now you concede that it is possible for insurance companies to make hundreds of millions in profits while paying more in claims than they earned in premiums - so your earlier argument was what? A red herring? An intentionally incomplete argument you knew to be false, but hoped nobody would call?

Tom

Wow! This is a great debate here. I love what you guys have to say about this topic. If I may make just one point for you guys to ponder.
I live in California which created a Medical Malpractice cap of $250k for non economic damages. This bill was passed TWENTY FIVE YEARS ago. Doesn't it seem odd that this is the exact same figure most states are advocating to adopt today? I'm not a lawyer, but I receive emails from consumers every day that feel in some way they were harmed by a doctor or hospital. There are plenty of bad doctors out there, but if states continue to pass legislation that limits awards we will have even more bad doctors because we won't have any lawyers to hold these doctors accountable. The lawyers that I know that actually try these types of cases have become very selective and in the process many injured people receive little to no help because the experienced lawyers in this practice area know that the insurance companies will routinely exact their pound of flesh, by running up their legal fees, before any settlement talks will initiate. I really have a tough time believing that so called frivolous lawsuits are driving up the insurance rates. If you want lower malpractice rates, you should have better doctors. Hospitals that offer big bonuses for delivering as many babies as possible, don't help this situation.

Sorry for the rambling post. I wish I had more time to write about this, but I have to get back to work.

Ted

1. Aaron, this is an ongoing conversation on this website, and I reject your insulting implication that I've engaged in dishonest tactics because I failed to repeat every single thing I've ever said when I make a two-sentence followup. Evan wouldn't like it if I posted a sixty-page dissertation each time I posted. I gave the actual combined ratio numbers, and I assumed a certain level of familiarity with the issue in my audience as to what a combined ratio means. The combined ratio numbers provided show unprofitability. Where's the dishonesty? I stand by my earlier argument that "Malpractice insurers pay out more than they take in by a sizable margin" and haven't said anything to the contrary.

2. GE Medical Protective's analysis is inaccurate. Their "1% difference" conclusion doesn't follow from the data they presented to TDI, because it omits the second-order effects that everyone agrees takes place. I have no knowledge of the mens rea behind their rate filing, but their incentive is certainly to underestimate the effects of caps to the regulatory agency. ATLA certainly doesn't act as if the difference is 1%, and neither do the insurers.

3. Matt, because the insurers' rate increases reflect their actual expenses, I fail to see why my failure to discuss the previous rate increases in Texas is a half-truth or contradicts my argument in any way. Texas's biggest insurer reduced rates 16%, and insurers are entering the Texas market for the first time in over a decade, which will lead to more competition.

4. Not a single part of my argument rests on the assertion (which I haven't made) that med-mal lawyers are earning "obscene profits." I've said only that the current system is inefficient, inaccurate, doesn't distinguish between bad doctors and good doctors, and results in unjust and socially unproductive wealth transfers from doctors and patients to lawyers. But that's so whether the lawyers in question are becoming multi-millionaires (as a tiny minority are) or are barely eking out a living (as is the case for many more). In any event, I'm sure Matt is already aware of the state bar rules that prohibit a publicly-held company from investing in a law firm.

5. On the other hand, I've seen lawyers invest in fast-food franchises and Internet startups; heck, I've invested in a documentary that will appear on the Sundance Channel this month, a financial experience that has taught me that I should stick to investing in stocks, real estate, and Texas Hold'em. There's no reason plaintiffs' lawyers can't invest in creating or taking over existing med-mal insurance companies, other than the knowledge that it's really an unprofitable line of business notwithstanding the public arguments made to the contrary.

6. I haven't made any claims one way or the other about St. Paul's profitability in the 1980s. Doctors are claiming that med-mal insurance rates are "too high" now, in 2005. You can agree with that, or you can disagree with that, but you can't argue that the rates are as high as they are because of anything other than the costs of medical malpractice claims; the most one can claim is that the rate of increase was shocking because insurers didn't charge enough in the 1990s.

In the meantime, all but one neurosurgeon has fled Illinois south of I-64, and real people with brain injuries are dying in the time it takes to transport them to St. Louis, as Evan suggests.

Jeff Glass

For those who think doctors are leaving for reasons other than the bad malpractice climate, I say just keep your head in the sand. They are definitely leaving because of what they perceive as very hostile climate for practicing medicine. I represent doctors in medical malpractice cases. I can personally attest to more than a dozen (of my clients) who have left Madison and St. Clair county this year for the sole reason that they have given up on any meaningful tort reform occuring. Many stayed in the wake of Bush's speech in Collinsville. But the inability or unwillingness of the Illinois Legislature to enact any tort reform measures has caused them now to flee. It is a real crisis and when the citizens, especially women in our counties realize that their only option to receive obstetrical care is to go to St. Louis, the crisis will have hit home and there will be hell to pay for all those that let this travisity happen.

Matt

There is no doubt that doctors PERCEIVE a hostile climate for practicing medicine.

It's a testament to Ted and his ilk's efforts. Now that he has more time to focus on misleading and frightening people, we should have universal health care by the end of the decade.

Unintended consequences - don't you love them?

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