Wampum

Fantastic post!

This is what blogging is for.

Excellent, Dwight, thanks.

But..but... those figures don't include the $15 per day payments made to jurors sitting on malpractice cases. And they don't include the cost of the attorney's morning latte on the way to the court house. When you include all that stuff, I'm sure you end up with a nearly $80 billion price tag.

Amazing. Thanks, Dwight. :)

(What puts even more of a crimp in Jane/Megan's point is the fact that the "crisis" is based on medmal payout increases that track with overall medical inflation.)

Jane Galt is very smart, has a very good education, reads a lot and is well informed. How can it be that she was off by a factor of 16 or 20 on such a basic point as the total payouts for medical malpractice cases?

Because in spite of a very good education, reading a lot and being well informed she's not that smart. She's an ideologue who does a good job of mimicking intelligence.

Jane should know better. She made this exact same comment when I originally posted those numbers and I pointed out to her that the $4 billion number did indeed include both judgments and settlements. I'm not sure why she continues to beat this hobbyhorse.

I agree that the payout figures in medical malpractice and other civil litigation should be more widely known. My understanding is that malpractice costs account for less that 1% of the cost of medical care. However, the figure for settlements plus judgements leaves out the costs of responding to and defending cases in which no payment is ever made. These costs are not reported to the NPDB and I'll be damned if I can find them easily this morning. (Which further goes to prove your point.) I assume they aren't negligible, however, since much attorney (and physician) time is spent on these successfully defended cases.

>I'm not sure why she continues to beat this hobbyhorse.

Um, because repeating discredited canards is what conservatives do best?

Really nice post. Might want to correct the "highly education person" part and tone down the redundancy of a few things (especially the amount of commentary about Jane), and you might have the makings of a good article.

The database only counts payments made, not defense costs. Also, if I remember correctly, you only have to report claims in excess of $10K, but I may be wrong about that threshold. There is a threshold where claims are not reported.

That being said, there is no denying the cost of transfering the risk for medical malpractice liablility has gone up substantially. What do you attribute this to? Please don't say greed, as I can point out to you many companies in the past 5 years who have gone bankrupt writing this business, and many more that have exited this line of business due to profitability concerns. If this were a profitable line of insurance to write, there would be many more insurers in the market writing it. the lack of insurnace capacity points to the fact that the significant increases in rate are still not sufficient, and the cost of transferring risk is up considerably.

Part of this is due to increased loss costs, part of it is due to poor investment opportunities going forward for insurance companies. But in any regard, the cost of transferring risk has gone up, and part of this has to do with the cost of claims.

If your point is its a small part of the overall economy, I agree. If your point is the cost of transferring risk in the medical malpractice arena is some sort of "fake" idea, I just don't buy it.

$6000 median tort verdict in Georgia. Half of the tort verdicts in GA were less than $6500. Now tell me there is a crisis. Juries are conservative as hell. If you see a high verdict, that defendant more than likely did something heinous and gambled big-time by sending it to a jury and not settling the case.

http://www.uga.edu/columns/000221/campnews3.html

I'd be curious to know how that $4B is distributed among specialties. For instance, primary care and family practice doctors typically have very low malpractice liability, while OB/GYN pay a lot more; to the extent that, in some states (such as Nevada) there's an exodus of the high-liability specialists who can supposedly no longer afford their malpractice insurance premiums. If the bulk of the $4B is being shouldered by a small fraction of doctors, then something needs to change (though I'm certainly not in favor of the version of "tort reform" currently being championed by Bush et al.)

Dwight,

Really good post, but a possible objection: Aren't settlements generally confidential? When the FTC wanted to look at settlements between brand and generic drug companies to look for anticompetitive behavior, they had to subpoena 104 deals. It would be inconceivable (I would guess) that the feds would subpoena each and every malpractice case. So is it possible that the settlement figure is incomplete, or do med mal settlements have to get reported?

Sorry to keep going, but the solution I have always favored was a cap for non profits and unlimited liability for for profit institutions.

That always made sense to me as the non profits really aren't monetarily motivated, so getting non-economic damages from the really just hurts the healthcare system. However, for profits like Columbia HCA, Tenat, etc who exist only to make money should be spoken to in a language they understand, money.

There's another reason to dismiss arguments for med-mal-driven "tort reform": Torts have much less to do with the cost and availability of med-mal insurance than does the performance of the insurance companies' own investments. Info here:

http://www.insurance-reform.org/StableLosses.pdf

Jane Galt is very smart, has a very good education, reads a lot and is well informed. How can it be that she was off by a factor of 16 or 20 on such a basic point as the total payouts for medical malpractice cases?

because it's easier to make shit up if you know your readers aren't ever going to check? because that's what paid corporate PR reps do?

Go ahead, ask for a cite on her numbers, or better yet, a source.

"non profits really aren't monetarily motivated"

You're joking, right?

Damn.

Lex,

Certainly I do.

I'll give you a couple of examples in my neck of the woods:

Shriners Hospital for Crippled Children
The City of Hope
Children's Hospital Los Angeles

These facilities exist for the very noble purpose of providing health care to people, regardless of ability to pay. They do not exist for the purpose of providing a ROE to some stock holder.

Another fabulous post on this important topic. On the issue raised by Dr. BDH, however, I have to respond with this point: The costs of bringing an unsuccessful medical malpractice claim are far from negligible for the attorneys who represent plaintiffs. Moreover, those costs cannot be recouped by those attorneys. The experts (who always have to be hired), the records services and the various other third-party vendors whose assistance is needed to put a case forward always get paid. The money a plaintiff's attorney has committed to paying experts and third-party vendors does not come back to her unless she wins the case. This is a HUGE disincentive to bringing bs claims.

Another triumph! Way to go!

And what's your point, again? The difference between $4 billion/yr and $40 billion/yr is what? (Yes, yes, I know, $36 billion/yr.) Is it supposed to tell me that med mal is a minor problem, instead of a huge problem? Why can't I interpret the difference as between a very huge problem and gigantic problem?

And the comparison to makeup is just stupid. Hay, remember McCain-Feingold? All that money in politics? Ummm, LESS THAN $4 billion/yr. And yet I was told ad nauseum by everybody from McCain to the NYTimes editors that soft money was a very important problem. Looks to me as though Mr. Meredith's argument is bogus.

Shorter AL:

I don't make any sense, so your argument must be bogus.

McCain-Feingold is another matter, this post was about medical malpractice judgements in reality vs. the spector of them alluded to by tort reform alarmists.

But, if you want to get into McCain-Feingold, that wasn't about the total amount of money in the system it was the quid pro quo nature and disproportionate "access" of a small number of rich donors to a small number (compared to the population as a whole, certainly) of policy makers.

She wouldn't exactly be a conservative if she honestly accepted facts, now would she?

I think you are ignoring the most important (and probably most costly) part of the equation: cost of defense. A few years ago I worked with an attorney who defended construction defect claims for a finished floor installer. In your typical construction defect claim, if anyone is at fault for floor damage, it is the roofer or window installer (for leaks) or the foundation layer (for settling cracks). The person who put in the finished floor (carpets and tile) is usually not at fault, especially in multiple houses). He almost always settled for less than $1,500. This is on cases which involved more than 100 houses. But the cost to defend these $15 per house cases ended up being over $100,000. So if you totalled the judgments and settlements you might get $45,000. But the cost of defense plus settlements would be closer to $145,000.

That is the cost of defense when there is almost no realistic possibility of liability. For roofers who must prove the problem was the window installers, I'm sure the cost is much much higher.

Notice this isn't high stakes med-mal cases where all of the incentives are higher and harsher.

Note that this is in cases with low probability of being found liable--these are cases which are closer to the frivolous end of the spectrum.

You can say this is anecdotal, of course. But my intention is not to prove that this is typical, though I suspect it is. I think you cannot so strongly suggest that the issue is over-blown so long as you are ignoring the cost of defense.

Maybe somebody already mentioned this, but the real measure of the cost of malpractice should include money spent defensively particularly on (a) lawyers in malpractice suits, and (b) malpractice insurance. What are the figures for those costs?

derek g wrote, But in any regard, the cost of transferring risk has gone up, and part of this has to do with the cost of claims.

I thought I'd read that those costs have been flat in recent years, giving credence to the claim that it's due to poor investment decisions by insurers. But I don't have the data on hand.

Sebastian Holslaw: think you are ignoring the most important (and probably most costly) part of the equation: cost of defense.

So the med-mal insurers are spending on defence ten times what they spend on settlements and judgements?

If so, they should all go out of business for glaring, egregious incompetance. That's true whether the defence cost is ten times settlement cost, or double or even 1.5 times. They are wasting their stockholders money.

What I love most about this post is that it dovetails with my current project---to wit, it's expensive to track down a lot of this data, and it'd be a good thing if efforts to do so were more centralized (to achieve economies of scale).

On the cost of defense: I'd like to add that cost of defense is something that insurers are capable of controlling (and they do when it suits them). Anyone who's done insurance defense work who is being honest with you will tell you that the party holding the pursestrings (i.e., the insurance company) can exert a lot of control over litigation costs. In fact, the only control over defense litigation costs is probably that which is exerted by insurers. I do not mean to impugn the integrity of the insurance defense bar, but it's an economic fact of life that attorneys who get paid by the hour have a natural incentive to overlitigate. Attorneys who get paid on a contingency fee basis, OTOH, do not have the same incentive. As I noted above, contingency fee lawyers don't even get their out of pocket costs back unless they win the case. And within certain parameters, the economic value of the case (either to the lawyer or the client) is not going to increase with the number of hours spent on it.

Nolo, you sound like you are positing a world where the defence costs are almost entirely discretionary. The cost savings by cracking down on insurance lawyers were wrung out in the 1980s. At some point you squeeze hard enough to start actually losing cases.

Defending the cases that the plaintiff would lose in trial may have extremely high defense to settlement ratios. A case which eventually settles for zero still has defense costs. A case which settles for $500 (a nominal settlement) will almost always have $5,000 in defense costs associated. And even if you cut to the bone and get $2,500 in defense costs the 'debunking' still has missed 5/6ths of the cost.

I have long been of the opinion that critics of the U.S. civil law system (i.e., those who call for tort reform) tend to ignore or deliberately downplay the costs of alternatives. In other words, the cost of litigation to the U.S. economy may be large, but they're at least explicit. In other countries the costs are simply shifted or absorbed elsewhere (by investors, consumers, etc.). Productivity and wealth figures would seem to support this view.

And yet, I've begun to swing around to the view that perhaps reform is needed. Just because our system possesses strengths doesn't mean it's perfect.

The total cost (i.e. including legal defense) in the U.S. of medical malpractice, for instance, is but a portion of the total cost of dealing with civil litigation as a whole. I believe the figure I've seen is in the range of a couple of hundred billion dollars.

At any rate, I'm not a lawyer, and am certainly no expert on what types of reforms (if any) might be desirable. Perhaps spending a couple of points of GDP on civil liability is reasonable in an advanced economy (and maybe it's cheaper than, as alluded to above, the alternatives).

But it's hard to deny that at least some elements of our society (lawyers) possess an economic interest in fighting reform.

The real cost of civil liability in the U.S. really ought to account for the cost of economic activity that fails to occur because of the threat or fear of lawsuits. I think what has brought me around to being more open-minded on the possible need for tort reform is that it recently hit home in a personal way (isn't this always the case?). My brother, a very talented but currently unemployed communications executive, was on the verge of joining (what sounded to my ears at least) a promising start-up outside of Seattle. Long story short: the would-be founder of the new firm took his bats and balls home at the last minute because of the threat of (again, what sounded to my ears like) a frivolous lawsuit by one of the participants in the startup.

Yeah, it's just one anecdote, and maybe the episode demostrates that this particular entrepreneur lacked the required instestinal fortitude. But maybe it really was a genuninely good idea that didn't get a chance because of a system that incentivizes people to earn money (instead of merely being compensated for losses) via the courts.

The medical community has in effect been subsided by the stock market investments of the insurance companies, and thus have not payed the true cost of their malpractice insurance. Now some doctors are having to pay the real price, and aren't willing to do so at the cost of reducing their income and so will go to a less expensive area for insurance. It is possible that this is being used by the anti-lawyer crowd as a means to get tort reform, when maybe another avenue would do a better job. Just for the record, having worked in the medical community for 23+ years, I have not seen the malpractice suits necessarily increase to the point that would justify current insurance premium costs, unless you included the loss of the subsidy from the stock market, which I would guess was more than 30%-40%,that being the average increase for the OB doctors in my area and they are telling me the malpractice suits have not changed significantly.

We lack the numbers we need to evaluate this. Doctors pay $A in malpractice insurance. Insurers pay out $B in defence costs, and $C in settlements (both in and out of court). Insurance overhead is $D, and profit is $E.

$A = $B + $C + $D + $E.

We know $C is around $4.2 Billion. We can't evaluate a damn thing about the industry unless we know the other parts. If there is a rule-of-thumb on the ratios, I'd like to know.

My $E doesn't include investment profits, of course. It also occurs to me that the industry as a whole may be weighed down by current payment obligations...making payments on cases from the past. I am not sure how to factor this in.

This is a great post.

SH has an interesting point, but he also (perhaps unknowikngly) brings something else to light. What are the costs of defense? Who knows.

Well, how did tort reform get to be a big issue, IF WE DON'T EVEN HAVE BASIC FACTS ABOUT THE SITUATION?

Read that last sentence again. Something is very wrong in American politics. 'Tort reform' is the solution to a 'problem' we have not even defined. That's not governance.

This is marketing. Tort reform is easy to sell. But what is the real point? Because it doesn't seem to be reform, as we don't even know if reform is needed.

Sebastian, I've worked both sides of the fence. I'm quite familiar with the "Skaddenomics" scandals of the '80s. This simply makes my point, though, which is that defense costs are much more susceptible to insurer control than tort reform advocates are willing to admit. What gets me is that no one talks about the point I was trying to make, which is that plaintiff's attorneys have no economic incentive to bring bogus lawsuits. You've mentioned that a $500 case costs $5,000 to defend. Maybe so-- but it costs money to bring the case in the first place, and plaintiff's attorneys who think they can pay their bills doing a series of $500 shakedowns don't stay in business too long.

Which brings me to the economics of small claims, which is where the real problem lies. As I'm sure you're aware, there are certain insurance companies and self-insured companies (the names I'll leave to your ability to Google) that have taken the position that they'd rather pay millions to their defense attorneys than a penny in tribute to a small-claim plaintiff -- no matter how warranted the "tribute" might be. There are many people who have meritorious small-value claims who are disserved by the system as it exists -- especially since there are certain insurers that take full advantage of the risk-benefit balance by forcing small-damage litigants to fully litigate their cases. It is a strategy that works to the insurer's economic advantage, since an insurer can decrease the likelihood that it will have to pay on smaller claims at all by cultivating a reputation for hardball tactics. Believe me, the plaintiff's bar knows who these insurers are, and when a potential client's small-value claim is against someone who's insured by one of those insurance companies, that fact goes into the attorney's decision as to whether to take the case.

This is a real problem, and it's not a new one. I'd love to see Newsweek spend some time analyzing *that* kind of abuse of the legal system. Don't hold your breath, tho.

The cost of defending claims is not pertinent.

Capping judgements does not reduce the cost to defend a case that goes to trial. Capping judgements only reduces number of cases filed.

Anybody who suggests that capping judgements is the proper remedy for the "Medical Malpratice" crisis has to prove that the majority of malpractice cases are frivolous/speculative.

The cost of defending claims is quite pertinent to the question of the existance of a tort problem, which our host suggests is dramatically hyped.

I don't think it is true that no one knows the costs of defense. Insurance companies have to cover the costs with their premiums. They pay out with money taken in. Insurance costs are high. That suggests that either insurance companies are making dramatic profits or that their costs are high. A huge number of insurance companies are teetering on the edge of bankruptcy or have actually gone bankrupt, so I suspect that the explanation isn't the first.

The solution to financial problems arising from medical malpractice is to do the work you were hired to do, doctor. Collectively, doctors are in the best position to police themslelves for incompetence and negligence. Most malpractice claims are filed against doctors who have already lost at least one malpractice case.

How much of the 4.2 billion was non-economic damages anyway? Economic damages aren't going to go down by fiat.

Thanks for writing about this issue.

Ya know, Sebastian, I think that since you can't be asked to back up what you acknowledge to be uninformed assumptions, the rest of us can pretty much assume you're wrong and disregard what you have to say.

Of course, since there is Google out there somewhere, the question is: are you eschewing facts because you can't be bothered with them, or because you tried and they don't support you?

Malpractice Insurer Raises Rates by 45 Percent
The Associated Press
Published: Jan 1, 2004

SARASOTA, Fla. (AP) - A medical malpractice insurance carrier is raising its 2004 rates for Florida doctors by an average of 45 percent.
GE Medical Protective, which covers about 2,500 doctors - or about 5 percent of the state market - said the increase had been approved by the state Office of Insurance Regulation.

"When you think about how medical costs will rise in the future, it becomes apparent that the costs of providing medical care to a plaintiff years down the road are astronomical," MedPro spokesman John Novaria said. "In order to meet those costs, we have to ask for higher premiums."

State regulators have approved only one other rate increase for a malpractice carrier: 8 percent for Jacksonville-based First Professionals Insurance Co., Florida's largest insurer of this kind, said Lisa Miller, an Office of Insurance Regulation spokeswoman.

First Professionals said its request could have been for a nearly 20 percent increase had there not been a recent law change limiting lawsuit damages in malpractice cases.

The Legislature earlier this year passed limits on some types of lawsuit losses in many medical malpractice cases in an effort to restore the market and stabilize premiums, which many doctors said were threatening their practices.

The law required insurers to factor in the new law and regulators determined that their rate requests should be lower by about 8 percent on average because of the damage limits and other changes in the law.

Miller said Fort Wayne, Ind.,-based MedPro's requested increase was justified.

"Their overall losses in this market justified the rate increase...," she said. "It really kind of brings them in line with the other carriers in the marketplace, and allows them to be able to continue to offer coverage."

Insurers have until Jan. 9 to submit their rate requests to the state, Miller said.
===================================

So in conclusion, the arguements on behalf of the med-mal insurance industry is now officially complete and utter BULLSHIT.

My only 'uninformed' opinion is on the exact state of the insurance industry. I don't think pointing out that defense costs are being ignored counts as an 'uninformed opinion'. This post makes strong claims. The title is 'scare tactics' and it claims to debunk the need for tort reform while ignoring the largest percentages of costs. That is an odd debunking.

well, if you're not uninformed, you base an awful lot of arguments on what you assume it's not unreasonable to base your opinions on, although you haven't done your homework.

An informative post, as far as it goes.

I was impressed by the deftness of this sentence near the beginning: "When discussing tort reform, and particularly medical malpractice reform, it is helpful to know the size of the problem."

In a 5 word aside, you completely change the terms of the debate. Agree to discuss tort reform, but use figures for only a fraction of the problem. There is a great deal of litigation money changing hands in other sectors. (I myself left the architecture profession some years ago because the liability premiums were outrageous.)

So, you all are very justified for all the back-patting and high fives on yet another successful deceptive argument.

farm subsidies (including both direct payments and higher food prices)

Then what about the higher medical costs (not to mention physical distress) caused by doctors practicing defensive medicine, i.e., scheduling unnecessary tests, etc. to discourage any possibility of being on the losing end of a future malpractice suit?

The cost of defending claims is not pertinent. Capping judgements does not reduce the cost to defend a case that goes to trial. Capping judgements only reduces number of cases filed.

Although the individual case costs are not reduced, the reduced number of cases filed lowers the OVERALL cost to society of defending malpractice cases. Duh.

Have to confess, Dwight's makeup analogy immediately reminded me of George Will's endlessly repeated comparison of the cost of campaigns to annual expenditures on pork rinds...

but...

Of course, the difference is that Dwight's analogy is perfectly on point, since the Tort Reformers' central talking point has long been that Problem Number One with our healthcare system is the crippling cost of frivilous malpractice suits by the eevuhl trial lawyers.

[Will's analogy, of course, is pure sophistry--the point of the campaign finance debate is not dollar figures but corruption; one might as well defend the Connecticut governor by conmparing the cost of his house with the State Housing budget]

Equitus ignores what the "reformers'" whole case has been, enagaging in a Pickler-esque bit of silliness: "This particular blogpost fails to be a 1,000 page treatise on macroeconomics and the civil justice system. Therefore, you are a fraud and a deceiver!"

Look, people. The point Dwight makes is pretty simple: this debate has been conducted with a maximum of (yes) scare tactics and bluster, and with a minimum of facts. Here's a pretty basic fact, however imperfect. Why have our newsmedia, amidst all the hype, failed to do the first bit of realtively easy research, much less report it?

Might it have something to do with the enormously powerful business interests at play here?

Of course, even to ask the question, these days, makes me an America hating Commie.

m

The comments above raise a number of issues to be addressed. The litigation costs of medical malpractice cases is a legitimate concern. I have some information on that subject that I will dig out and post relatively soon. I say relatively because I am drowning in Koufax stuff at the moment. I should note that all of the plaintiff's litigation costs and attorney fees are some fraction of the $4.2 billion as plaintiff's lawyers are usually paid on a contingency. I doubt that the defense bar's costs are a great deal higher.

The complaint that the post was narrowed to med mal rather than tort reform in general is true but two points need be made. First, I have written extensively on the subject of tort reform in general and have made advocated reform measures. Everything can not be put into one post.

Secondly, it is President Bush who is barnstorming the country saying the med mal cases are ruining the health care system and harming the economy. His proposal to remedy the problems he perceives withinthe tort system is to place a $250,000 cap on non-economic damages in med mal cases. Given that his proposal is limited to med mal cases, it is not unfair to ask whether or not med mal cases are a large problem.

The issue of defensive medicine is legitimate. In order to rationally discuss it, we need to know how much is paid out in med mal cases. Spending $100 billion on defensive medicine to try to avoid a $4 billion problem makes little sense, particularly when the person payingthe $100 billion is not the one reaping the financial benefit.

If doctors spend $100 billion of other people's money to save themselves $4 billion then it is hard to see why we should blame the lawyers.

I do have two questions for the pro-tort reform folks. The evidence shows that the doctors win most of the med mal cases that go to trial. If you believe that juries often make irrational decisions, how many of the defense verdicts in med mal cases do you think are wrongly decided?

What steps do you advocate to remedy the problem of incorrect defense verdicts?

Dwight

Just restating your position that the cost of defending cases matters is not a logical argument. Why do these costs matter? How does capping awards for non-ecomonic damages reduce the hourly fee the defendant's attorny charges for his services, the amount of work required to prepare the case and/or the length of the trial?

You need to explain why my assertion, that cost to defend is only pertinent if too many malpractice suits are frivolous/speculative, is wrong.

or

You need to provide evidence showing too many malpractice suits are without merit.

X

cost to defend x # of cases filed = Total cost

# of cases before reform > # of cases after reform

cost to defend before reform = cost to defend after reform

Therefore:
Total cost to defend before reform > Total cost to defend after reform

The above is implied in my original arguement. I didn't state it explicitly because I thought most people were smart enough to figure that out for themselves. And I was right, even you were able to do the math all by yourself.

My assertion was that if the total cost of malpractice litigation is really too high for society to bear.

Then capping non economic awards is only a legitimate remedy, if the number of frivilous/speculative suits filed is too high.

So far nobody has provided any evidence that there are too many frivilous suits nor has anybody explained why I am in error when I insist upon connecting awards caps and the total number of frivilous malpractice suits.

Or, are you making the assertion that crisis is so grave that benefit from reducing the total cost outweighs the injustice of denying due process to legitimate plantiffs?

A coupla thoughts:
First, one could argue that over the past few years, med-mal settlements+judgments really have increased sharply (from a bit over $3 billion in the early 90s to $4 billion+ in recent years). This is an increase on the order of 20-25%, apparently even after adjusting for inflation. So indeed, that would seem to be a sharp increase. But I'm assuming that the inflation adjustment here is being based on the CPI. However, if one were to look at the inflation that has occured in the health care sector over this period of time, and compare it to the actual-dollar increase in med-mal settlements+judgments over the period. Since health care costs have risen considerably faster than the overall inflation rate, doesn't that mean that med-mal costs have actually gone *down* in relation to the amount of health care services one could actual purchase with that amoung of money?

Second, although I certainly can appreciate the magnitude of "hidden" defense costs -- i.e. the costs associated with defendaning med-mal claims that somehow aren't included in these figures -- why are so many commenters focusing on these costs? I am sure they are high. But the settlements+judgments number gives us some idea of the magnitude of the problem (and I'm fairly sure that the size of that number came as a surprise to most). That's true, even if the number doesn't include *all* associated costs. To those who seem to argue that because the unreported costs of defense are not included in the $4 billion figure, and who would use the *unknown* costs of defense to argue that the crisis in med-mal insurance is far more serious than the $4 billion figure implies, I would suggest that it might be useful to think about the many instances in which a physician's mistake causes some harm, but nevertheless does not result in a med-mal claim. Certainly many such mistakes must occur. And yet, like the "hidden" costs of defending against med-mal claims, these low-level instances of "malpractice" also fall below the radar screen. Just as defense costs represent "hidden" costs to the health care sector, so do these minor instances of "malpractice" represent "hidden" costs to health care consumers. Do these "costs" balance out? I have no idea.

But even so, the med-mal figures are useful in gauging the costs of the more serious claims -- those that are perceived by plaintiff/defendant/courts to be strong enough to be worth litigating and thus to reach the point of settlement or judgment.

As to defense costs, if it was particularly high we would all know it already. We'd hear all over the place "the insurance industry spends $x billion on defense costs alone, not even including settlements!"

Secondly, if you want to know how much of the increase is settlements (and overhead) and how much is souring investments, check the increases in malpractice insurance costs in the late 90's, before the collapse.

My guess is annual increases ~5% from 95-99, and increases ~13% since.
I doubt there has been a significant change in the legal climate in the past 5-10 years.

Excellent breakdown. One quick question, Any idea what doctors have paid for malpractice insurance in 2002?

On this websitehttp://www.citizen.org/congress/civjus/medmal/articles.cfm?ID=8308
I found that there were 836,156 doctors in the US at the end of 2001.

It also has great stuff on who is causing most of the claims.

Two pseudo-symmetric arguments are used toward the end that I think are not as suggestive as their authors think.

Hidden costs--I am suggesting that the cost of defense is MORE than the cost of settlements+judgments. I am suggesting that a debunking ought to at the very minimum focus on the majority of costs. Pilgrim than suggests: "Just as defense costs represent "hidden" costs to the health care sector, so do these minor instances of "malpractice" represent "hidden" costs to health care consumers. Do these "costs" balance out? I have no idea." I don't see why these costs would balance, nor do I see why anyone would suspect they might balance. The cost of defense is at least equal to the cost of settlements. I suspect it is more like 5-10 times the cost of settlements but at the very least it is equal to them. The hidden costs of these minor acts of 'malpractice' certainly do not equal the cost of actual malpractice.

Another pseudo-symmetric argument is used by dwight here: "The evidence shows that the doctors win most of the med mal cases that go to trial. If you believe that juries often make irrational decisions, how many of the defense verdicts in med mal cases do you think are wrongly decided?"

Number of winning cases shows absolutely nothing about which cases ought to have been won. It could be near 100%, it could be near 0%, we can't tell from the statistic. Irrational decisions don't have to be made in a symmetric fashion. If we posit that juries are irrational X% of the time, that is no argument at all that 50% are for plaintiff and 50% are for defense. The argument has often been that juries focus on the bad outcome while sometimes ignoring that perfectly good medical practice can lead to bad outcomes. I really think that is could be an interesting tangent, but I'm not sure that the resolution of exactly how many irrational verdicts exist and how many go each way would help our discussion anyway.

There are two parts to the discussion. Is there a tort problem and what do you do to fix it if it exists. Dwight's post suggests that there really is not a problem. So discussing possible solutions, like damage caps, becomes a huge distraction. No solution is going to be acceptable to those who don't believe there is a problem, so it is probably best not to sucked into talking about the particulars of damage caps, jury rationality, etc. until we can all agree that there is a problem. My issue with this post is that Dwight analyzes the issue from a very narrow perspective (judgments/settlements) and ignores what I suspect are the majority of the real costs. In doing so, he suggests that he has debunked the existance of the 'tort problem'. I don't have the time to deeply research it, but I know from personal experience that he is ignoring a large portion of the actual costs, which suggests to me that the problem has not been debunked so far.

Toward the end of the messages there are lots of discussions suggesting that damage caps aren't an appropriate way of dealing with the problem. I think that is a distraction, because those who don't believe in the problem won't think any 'solution' is appropriate.

Sebastian:

Although I think that much of the discussion about tort reform consists of factually inaccurate and overblown rhetoric, I do believe that some tort reform proposals are useful and appropriate. I have suggested certain reforms http://pla.blogspot.com/2003_05_18_pla_archive.html#94702698 here, and http://pla.blogspot.com/2003_05_18_pla_archive.html#94743544 here, and
http://pla.blogspot.com/2003_08_10_pla_archive.html#106097003480974890.

I just do not believe that a cap on non-economic damages is an appropriate, useful or effective way to deal with the actual problems within the tort system.

I agree with you that the cost of defense is an important number. I doubt that your contention that it is in the range of $15 to $30 billion per year (5-10 times the approximately $3 billion paid in settlements) is anywhere close to correct. I do not, however, have a monopoly on wisdom and I will investigate the issue.

It would seem odd that the litigation costs to all med mal plaintiffs are a fraction of $4 billion per year if the cost to the defense was $30 billion per year. It is my recollection (often faulty) that the total of medical malpractice premiums paid in a year is on the order of $5 billion and out of that the insurance companies must pay claims, administrative costs, as well as defense costs.

Perhaps, however, it would be better for each of us not to speculate but rather to Google.

"What do you attribute [rising insurance rates] to? Please don't say greed, as I can point out to you many companies in the past 5 years who have gone bankrupt writing this business..."

Uhmmm... did somebody say RECESSION?

Or do you think insurance companies exist in a vacuum?

I'm sorry, Dwight, I was indeed confused, although not the way that you think.

I misread the post, and assumed that that $4.2b figure was for total settlements, not medmal. For total settlements, the subject of the post, that would indeed be ludicrously low. Moreover, having spent a fair amount of time on the question not too long ago, I'm damn near certain that there is no authoritative figure on the total value of settlements in this country, just a bunch of dueling guesses from various interested parties. Medmal isn't my area, and I'm not really all that worried about it -- if Nevada doesn't want trauma centers or ob-gyns, well, I feel bad for them and all, but I don't think I have much power to change it. Class action suits, where I put most of my focus, affect everyone.

And listing the total figure for judgements, rather than the much higher figure for settlements (I just read a report that suggested that 95% of cases settle out of court, but no one really seems to know what the right number is), is indeed an old trick beloved of those opposed to tort reform, just as those in favor like to pull up the most apalling anecdotes they can find. Between egregiously misrepresenting financial concepts, accusing insurance companies of having gambled away their medmal premiums in the stock market when most states restrict the equity component of an insurance company's portfolio to a trivial percentage, averaging medmal premium experience across the entire medical field in order to conceal the effects on the dozen or so specialties that are being catastrophically affected, and defending the worst sorts of junk science, the anti-reform camp is on no high moral ground to criticize the tort reformers for their colorful examples.

It's comforting to assume that those who oppose us ideologically are biased idiots . . . or are erring in a way that actually supports our case. The latter is not true in this case . . . and as for the former, I note only that I'm not the one whose arguments consists entirely of calling names and impugning the motives of my interlocutors.

Only ONE commenter has noted the only plausible argument here, which is the one the Bush administration has used--the claim that "defensive medicine" costs $50-100bn a year. Whether that's true or not is the key to the argument. Medmal suits and pay-outs are irrelevant--the total cost amounts to less than $10,000 per practicing physician while when (using very crude macro numbers) each doctor is responsible for something like $2.3 Million in total health care costs. The question is, do docs lump an extra $100-$200K each on health care costs by practicing unneccessary defensive medicine?

Of course the slightly cynical among us note that they get paid for (and the others in the system make good money off) that "defensive medicine".

Jane,

Are you insisting on the "you missed 95% of the problem" line or about something else?

Enjoyed the article and posts. Unsurprisingly, hard numbers about insurance industry expenses are hard to find. Some numbers i was able to locate... www.dir.ca.gov/chswc/carveoutreport/carveoutreport.html In 1997 for medmal 4.4% of premiums were spent on defense, while 12.5% of judgements were spent by plantiff's atts. It also notes that insurance companies spent 150% more on legal costs than plantiffs in general...
from the Institute of Ecomonic Democracy, 19 out of 20 victims of medmal get $0 and the DHHS says the 7% of hospitalized patients are injured in a manner entitling them to medmal payments...
More info about auto insurance, esp. in Ireland, www.house.gov/jec/tort/07-24-03.pdf (a republican bill) about auto insurance breaks down the costs of auto bodily injury liability as such; Attorneys (for plantiff and defense) 25.5% pain & suffering (noneconomic damages) 20.0%, medical bills & lost wages 19.3%, fraud & excessive claims 16.3%, commissions 9.5%, overhead 7.1% and taxes at 2.3%...
The Small Firms Association estimates that 20% of all insurance premiums are spent on legal fees in Europe...
I think that the meat and potatoes of the argument is that the real costs are hidden while the pro-reform side spouts off about 100 trillion dollars for spilling hot coffee on yourself ad naseum. Capping damages punishes people who were injured through no fault of their own while protecting bad doctors and making it easier for insurance companies to make a profit. It does nothing to limit the number of suits. If the problem is frivolous lawsuits $250k is alot of money for a hangnail or a scar, but not much if the doc takes off the wrong leg!

I have blogged on this issue often. Please come over to medrants and read about the issues rather than the hyperbole. I would suggest this reference which puts the problem into perspective. This is The Health Care Crisis in our country - which is impacting patients. Harris Interactive's Fear of Litigation Study: Executive Summary

After my anger subsided (this problem elicits a visceral response in most physicians), I have gathered my thoughts. I have just posted on this issue - and challenge the readers to a more inclusive view of this problem. More on malpractice - explication time

Jane Galt Then:

"if you're using the figures I think you're using, they don't include settlements, which have jumped dramatically in the wake of increasing verdict variance."

"It's much like, for example, choosing a dollar figure for litigation costs that includes only verdicts, when something like 95% of cases settle out of court."

Jane Galt Now:

"I was indeed confused... I misread the post, and assumed that that $4.2b figure was for total settlements, not medmal."

Conclusion - Jane Galt is a liar.

When a liberal confronts you with some inconvenient facts, reach for a 2 by 4...

Shorter Al: "An order of magnitude isn't really very much".