The peer-policing problem
Physician peer policing has become restrained and time consuming. You have to give the bad ones time to reform.
Juries, however, have no patience with peer policing. They extract impressive damages for allowing an inept physician to see even one patient, let alone practice for 6 months and hurt a number of people while under his or her peers’ watchful eyes.
Effects of growing severity
Frequency pales in comparison with the damage wrought by increasing severity. Two dynamics mainly control severity: 1) a combination of inflation and improved technology and 2) juries.
Inflation and improved technology
Compare how we have improved our care for injured parties versus the above-inflation cost of that care. Babies with cerebral palsy live longer and we are ever improving their care. This is good, but very expensive.
We should expect increases in severity to mimic increases in inflation and technology, to parallel the increase in health-care costs in general. However, the only place where this has happened is California.4
Most juries are reasonable…
Few states restrict the pain and suffering awards juries may grant. None restrict damage awards. Juries can award $100,000 or several million dollars for the same injury. They may disregard scientific data and expert testimony. Juries carry our wallets (and retirement plans, houses, cars, and kids’ educations) in their hip pocket.
Almost all jurors want to do the right thing, exhibiting an organic restraint. When interviewed after a case, jurors are typically sincere and responsible and want assurance that they made the right choice. The jury system usually works.5
…but there are outliers
The killers, however, are the outliers. Look what happens to our fairly strong insurance company’s combined ratio if a case that we thought was winnable results in a $15 million jury verdict. Our company shoots for a combined ratio of 105% to 110% (we plan to lose $5 million to $10 million a year, which our return on investments covers). All of a sudden, besides our planned losses, we’re assessed an extra $15 million. Then we are looking at a combined ratio in the crisis range: 125%. One case, one runaway jury. A volatile game.*
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Jury awards have been increasing faster than inflation and technology together can support. Perhaps it is because the value of the “mega dollar” has risen far greater than inflation. Perhaps it’s the fault of the lottery, the exceptional millionaire of the 1960s being replaced by the billionaire of the 1990s (a thousandfold increase) and the multibillionaire of the 21st Century (another hundredfold increase). I speculate that jury awards more closely follow this trend.
What have we learned?
Sad to say, the modern function is too similar to that of the 1970s. We have ruled out the “greedy” insurance companies and developed solid unbiased data—good steps— but we have not been able to avoid crises nor have we stabilized premiums to match medical inflation.
Where physicians “healed thyselves”
Under these circumstances, well-run physician-owned and -governed companies with a nonprofit but sound financial goal should continue to offer the best long-term rates and security. Based on reasonable combined ratio goals (105 to 110), income from the company’s invested assets can reduce physician premiums.
Physician owners and physician input throughout the corporate structure sustain the business model. Professional medical expertise in reviewing claims, peer review of physicians’ performance, and support for physicians through the onerous lawsuit experience augment a medical malpractice insurance company. Claims committees of multispecialty physicians ensure that we fight when right and settle expeditiously when wrong, saving time and money.
A positive side effect
Physician-owned companies have created a cadre of physicians schooled in the medical malpractice insurance business. This makes us much less vulnerable in the political arena. Our pooled data enable us to negotiate from truly informed positions.
If malpractice costs do hinge on inflation and technology, repeat offender doctors, aggressive attorneys, and runaway juries, then another crisis is imminent unless we can rein in attorneys and juries.
As physicians, if we hurt someone we expect them to be given reasonable restitution, and we strive to ensure the return of as much function as possible. We are making strides to find and limit incompetent physicians. Although frequency, which reflects frivolous lawsuits, has been stable recently, aggressive attorneys remain a threat.
Here are four ways to fix the problem:
Do your part. Remodeling juries is a political solution—with a capital “P.” In spite of our 30-year effort to hire lobbyists and, at times, an 85% approval rating by the general public for tort reform, most states have yet to enact truly effective limits on juries. To avoid the next crisis, we will need a grassroots, every-physician, hands-on movement to pass tort reform.