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Sanity on ‘malpractice reform’—from Florida, of all places

Los Angeles Times, 3/20/14

By Michael Hiltzik

March 19, 20141:11 p.m. 

"Tort reform"--read that as "shutting the courthouse door to malpractice victims"--again is rearing its ugly head as a means to reduce healthcare costs, most recently as a plank in the recent GOP healthcare proposals.

So it's refreshing to see the rationales for malpractice reforms authoritatively eviscerated, and even more refreshing to see that done by the heavily Republican Supreme Court of Florida.

By a 5-2 vote, the court last week overturned Florida's 2003 cap on malpractice damages, calling it discriminatory and therefore in violation of the state constitution. The court also took apart the claims of a malpractice insurance "crisis" that had driven the state legislature to impose the caps--the "alleged" and "purported" crisis, as the court majority accurately described the situation.

Members of Congress inclined to believe assertions that a malpractice "crisis" is driving up healthcare costs today should pay attention.

As Stephanie Mencimer of Mother Jones reports, the Florida case involved 20-year-old Michelle McCall, whose pregnancy and delivery of a healthy baby in 2005 went terribly wrong. Her family was awarded nearly $1 million in financial losses, and $2 million in nonfinancial losses, but under the state law the court was required to cut the latter sum to $1 million. That's because the law limits pain and suffering judgments in wrongful-death cases to $1 million, "regardless of the number of claimants."

The court called that limitation unfair and illogical--effectively "saving a modest amount for many by imposing devastating costs on a few--those who are most grievously injured, those who sustain the greatest damage and loss...simply based upon the existence of the cap."

The more interesting portion of the ruling by Justice R. Fred Lewis was his dissection of the malpractice "crisis." 

The cap was enacted in 2003 when its supporters claimed that Florida faced "a medical malpractice crisis of unprecedented magnitude."  Doctors were leaving the state in droves, it was claimed, because multimillion-dollar malpractice awards by juries were driving insurance premiums sky-high.

The facts didn't support that conclusion at all. During the "purported crisis," Lewis observed, the supply of doctors in Florida was increasing, not decreasing. Reports of physicians fleeing were anecdotal and often fabricated--the state medical society pointed to two counties that had lost all their neurosurgeons, but five neurosurgeons were found to be working in each county at the time.

Most malpractice awards of $1 million or more came from settlements, not jury awards, which tended to average less. As for rising premiums, these were found to result not from litigation claims but by the insurance industry underwriting cycle (that was also behind the purported malpractice crisis in California in the 1970s, which yielded this state's stringent malpractice cap). 

Put simply, the industry vacillates between under-reserving for claims and over-reserving. When it under-reserves, its profits look flush and carriers might even drop rates to win market share. When claims then outpace reserves, profits drop, premiums are driven higher and--presto!--there's your malpractice "crisis."

Finally, the court cited evidence that malpractice caps have no appreciable effect on malpractice rates. As has been the case in California, they fatten insurer profits without achieving anything for either the doctors who pay them or the patients turned away at the courthouse door. That tells you whose interests really are served by the GOP's incessant nattering about "tort reform." It's not doctors, hospitals or consumers; it's insurers. in Florida, the Supreme Court is telling them they'll have to earn their money honestly.

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