If there is one point tort reformers have been very successful at selling to the public it is that medical malpractice suits represent a huge problem that requires immediate action.
The failure to limit pain and suffering damages is alleged to be causing a large number of good doctors to flee their practices. Payments in med mal cases are claimed to inflate the cost of health care for everyone. Indeed, some tort reformers claim that limiting damages in med mal cases is an essential element of health care reform.
What is often missing from those discussions are hard numbers that help in estimating the size of any potential problem. Let’s try to rectify that failure by addressing two basic questions. First, how many med mal cases result in a payment (whether by judgment or settlement) to the injured party? Second, how much money are we talking about?
I will provide answers to those two basic questions as well as attempt to place the answers in some perspective.
How many med mal cases result in a payment from a medical professional to a med mal plaintiff?
That seems like a pretty basic and necessary fact to have at hand at the beginning of the tort reform discussion. Unfortunately, the discussion is a couple of decades old at this point and that data point is often missing from the discussion.
There are about 300,000,000 Americans. In the United States, there are about 120 hospital admissions per 1000 people each year. That works out to about 36,000,000 hospital admissions each year.
Consider the results of a Harvard study as summarized here:
One important study of medical injury is the 1990 Harvard Medical Practice Study (Harvard Study), a population-based study of injuries resulting from medical care during hospitalizations in New York. This study found that nearly 4 percent of patients suffered an injury that caused their hospital stays to be prolonged, or resulted in measurable disability. The Harvard Study, which used reviews of medical records to detect medical injuries, found that almost 14 percent of those identified as having suffered medical injury died as a result of their injuries. If the rate of deaths resulting from medical error identified by the Harvard Study in New York were consistent with rates in the other 49 states, that would mean that 180,000 Americans die annually as a result of medical injuries. (Footnotes omitted).If 4% of hospitalizations result in an injury due to medial error and we have 36,000,000 hospitalizations per year, then one might expect the number of payments for med mal would be about 1.4 million per year. Is that close to the truth? No.
In fact, according to the National Practitioners Data Bank as reported by the Kaiser Foundation, in 2003 there were 15,287 such payments.
That number includes both judgments and settlements. It also represents one payment for about each 2,500 hospital admissions. Does that strike you as being out of control and far more than we should expect?
How much money is paid for medical malpractice claims?
It would seem hard to have a discussion about the need for med mal tort reform without knowing the amount of money paid in med mal cases. Curiously, that figure is often missing from the debate. How much is paid on med mal cases?
We know from the NPDB that doctors and their insurers made 15,287 payments in 2003. The NPDB 2003 annual report (pdf) notes that:
Average medical malpractice payment amounts for physicians in 2003 were higher than in previous years: The median and mean medical malpractice payment amounts for physicians in 2003 were $160,000 and $294,814, respectively.By simple calculation, 15,287 payments at an average of $294,814 each yields total payments of $4.5 billion plus change for 2003.
There are a couple of ways to put that figure into perspective. First, how does it compare to total health care costs? Total US health care costs in 2003 were about $1.7 trillion. The medical malpractice payments represent about one dollar in every 377 of total health care costs, or less than 0.3% of the total.
The cost of health insurance for a family of four is currently $10,880 per year or $906 per month. If the total cost of all med mal payments were subtracted from health care costs and if those savings were passed along to consumers, the cost of health insurance for a family of four would fall by about three dollars per month. Big deal.
Another way to look at the total payments by or on behalf of doctors is to compare them to other benchmarks. Assume that all med mal plaintiff’s attorneys formed a corporation known as Med Mal, Inc. How would that business rank on the Fortune 500 list of the country’s largest companies?
First, we need to know how much revenue Med Mal, Inc. would have. Generally, personal injury lawyers work on a contingency basis. Their fee is based on a percentage of recovery, if any. That percentage can range from 30% to 50% with 33% and 40% perhaps the most common arrangement. Let’s go with 40% to be generous.
Forty percent of $4.5 billion is $1.8 billion in revenues for Med Mal Inc. Where would that place on the Fortune list?
Number 10 on the list is insurance giant AIG. AIG has yearly revenue of more than 81 billion, about 45 times the revenue of our hypothetical Med Mal, Inc.
Number 108 on the Fortune 500 is insurance giant Aetna. It has revenues of almost $18 billion or about ten times Med Mal, Inc.
Number 225 on the list is Guardian Life Insurance Company of America. It has revenues of more than $9 billion which is more than 4 times the revenue of Med Mal, Inc. Number 313 is American Family Ins. Group ($5.9 billion), with three times the revenues of Med Mal, Inc. At 332 is Oxford Health Plans, Inc. with revenues of $5.4 billion.
In the end, it is impossible to find a Fortune 500 company with revenues comparable to Med Mal, Inc. Last place on the list goes to Newmont Mining whose revenues of $3.2 billion are close to double our little hypothetical company.
Health care and insurance companies have no such problem being listed among the 500 largest companies in America. Below is a partial list of such companies including where they place and their yearly revenues:
10. American International Group, Inc., New York, 9, $81.300I began this post noting that hard data rarely finds a place in discussions of tort reform. Perhaps the list above provides a hint as to why that is the case. Posted by Dwight Meredith at October 20, 2005 11:23 AM17. Cardinal Health Inc., Dublin, Ohio, 19, $56.830
18. State Farm Insurance Cos., Bloomington, Ill., 21, $56.065
36. MetLife Inc., New York, 38, $36.261
41. Medco Health Solutions, Franklin Lakes, N.J., new to list, $34.265
47. The Allstate Corp., Northbrook, Ill., 44, $32.149
54. UnitedHealth Group Inc., Minnetonka, Minn., 63, $28.823
70. New York Life Insurance Co., New York, 65, $25.700
85. HCA Inc, Nashville, 90, $21.808
101. CIGNA Corp., Philadelphia, 87, $18.808
102. Hartford Financial Services Group Inc., Hartford, Conn., 114, $18.733
103. Washington Mutual Inc., Seattle, 94, $18.629
108. Aetna Inc., Hartford, Conn., 88, $17.976.40
115. Northwestern Mutual Life Insurance Co., Milwaukee, 113, $17.060
116. Liberty Mutual Insurance Group, Boston, 129, $16.914
138. Tenet Healthcare Corp., Santa Barbara, Calif., 136, $14.582
159. Humana Inc., Louisville, 169, $12.226
165. The Progressive Corp., Mayfield Village, Ohio, 197, $11.892
181. Health Net Inc., Woodland Hills, Calif., 185, $11.063
182. PacifiCare Health Systems Inc., Cypress, Calif., 170, $11.009
192. John Hancock Financial Services Inc., Boston, 208, $10.071
225. Guardian Life Insurance Co. of America, New York, 232, $9.022
227. The St. Paul Cos. Inc., St. Paul, 207, $8.958
263. Medtronic Inc., Minneapolis, 276, $7.665
313. American Family Ins. Group, Madison, Wis., 323, $5.895
332. Oxford Health Plans Inc., Trumbull, Conn., 334, $5.452
335. WellChoice Inc., New York, 325, $5.383
368. Erie Insurance Group, Erie, Pa., 454, $4.717
370. Conseco Inc., Carmel, Ind., 284, $4.710
374. Pacific LifeCorp, Newport Beach, Calif., 419, $4.6687
386. Coventry Health Care Inc., Bethesda, Md., 439, $4.535
440. Golden West Financial Corp., Oakland, 425, $3.842
462. Universal Health Services Inc., King of Prussia, Pa., 468, $3.644