Jury Awards Forcing Doctors off the Job

Published March 1, 2003

Doctors in West Virginia and Nevada opened the new year by following through on threats to walk off the job in response to prohibitively high malpractice insurance premiums. In Pennsylvania, last-minute state action persuaded doctors to stay in their offices … at least for now.

In Georgia, nearly one in five doctors is refusing to perform high-risk medical procedures, including delivering babies. A survey of 2,200 Georgia doctors found 18 percent expect to stop performing such procedures in order to limit their liability. Nearly 11 percent have stopped or will stop providing emergency room services.

According to a new study by the Georgia Board for Physician Workforce, hundreds more are leaving the state or retiring outright because of high medical malpractice insurance rates. Four percent of the state’s doctors have decided to leave the state or retire from medicine.

The 2002 malpractice insurance rates reported by the Georgia doctors surveyed ranged from just under $8,000 a year for psychiatry to more than $60,000 for neurosurgery; obstetricians reported paying nearly $50,000. The surveyed doctors reported premium increases of anywhere from 11 percent to 30 percent in the last year. About 13 percent of doctors reported they had difficulty finding malpractice insurance coverage.

Doctors Walk in West Virginia

In West Virginia, neurosurgeons now pay an average of $134,000 every year in malpractice insurance premiums. Doctors assert their January 1 walkout was necessitated by their inability to continue paying skyrocketing malpractice premiums.

“This is not a strike,” said Dr. Gregory Saracco, a general surgeon at Wheeling Hospital. “I’m not protesting anything. I’m taking time to look at other options. But if I don’t get some help to offset my premium costs, I can’t operate in this state.”

Although many doctors were still practicing despite the walkout, the threat remains that more of them will be driven out of business if the state does not act soon.

“I’m afraid this is just the first bit,” said Parkersburg family practitioner David Avery. “If the governor and the legislature don’t act, this will be spread quickly across the state, and it will be all physicians, not just surgeons.”

Nevada Legislation Not Enough

In Nevada, many Las Vegas physicians stayed home from work to draw attention to their escalating insurance premiums. The Nevada legislature had passed a tort reform package that took effect October 1. The legislation caps pain-and-suffering damages at $350,000, but allows exceptions for gross malpractice and cases where a judge finds “exceptional circumstances.” Physicians have asserted the legislation has not gone far enough, and that malpractice insurance premiums have failed to moderate.

“An unprecedented number of doctors are leaving Las Vegas,” noted Dr. Tom Purdon, former president of the American College of Obstetricians and Gynecologists. “Southern Nevada has become the worst place in the country for women trying to find prenatal care.”

Pennsylvania Promises Reform

Democratic Governor Ed Rendell barely averted a physicians’ walkout by promising to seek reform … but the centerpiece of his short-term fix is already under attack. Rendell wants to take $220 million from the surplus funds of big health insurance companies and use that money to curb some of the liability premium inflation.

While doctors say they like the idea, major health insurance companies are gearing up to fight the plan. They don’t even write medical malpractice insurance, they say, and thus should not be forced to foot the bill.

According to James Richmond, a member of the governor’s emergency task force on health care and senior vice president of the Pennsylvania Hospital Association, “when you rob Peter to pay Paul, everyone is in favor of it except Peter.”

Florida out of Time

In Florida, Republican Governor Jeb Bush promises reform is at the top of his agenda. But some doctors can’t wait for reform to make its way through the legislature.

In Manatee County, comprised of Tampa suburbs, 40 percent of the local kidney specialists have been unable to renew their liability coverage for 2003. “Interruptions could extend way beyond the physician’s immediate practice,” warned Thomas Braxton, chief of staff at Manatee Memorial Hospital. “If none of the kidney specialists had found coverage, the crisis would have shut down open heart surgery centers at local hospitals, because Medicare requires a kidney specialist be on call during those procedures.”

Other areas of the state have similar problems, as doctors close up shop or move elsewhere in the wake of huge jury verdicts and hefty premium increases. Four years ago, more than 40 companies offered medical malpractice coverage to Florida physicians. Now only a handful remain, and premiums have risen by as much as 400 percent in just the past several months.

“I can tell you that based on my experience, if this starts to affect any large number of physicians, [a walkout] would rapidly be contemplated,” warned Braxton.

Tidal Wave of Awards

In the wake of increasingly hefty jury awards, insurance companies offering malpractice coverage have either been forced out of business or required to raise premiums dramatically. Jury Verdict Research, a database of more than 202,000 verdicts and settlements, reports that between 1999 and 2000, the latest year for which statistics are available, the median malpractice jury award rose 43 percent. The average award is now a whopping $3.5 million.

Jury Verdict Research serves both plaintiffs’ and defense attorneys, with an equal emphasis on plaintiff and defense verdicts and settlements, and with no intentional bias toward extreme awards or specific geographic regions.

The growing number of extreme awards and settlements has meant dramatic increases in malpractice insurance premiums. Between July 2001 and July 2002, average insurance rates across the country increased 29.1 percent for general surgeons, 17.6 percent for internal medicine specialists, and 12.5 percent for obstetricians/gynecologists. Some doctors now pay $200,000 a year or more for their malpractice coverage.

Malpractice insurance rate increases vary significantly from state to state, in large part reflecting the strength (or weakness) of each state’s protections against eye-popping settlements.

According to the American Medical Association (AMA), rising premiums have created a “crisis” in 12 states: California, Florida, Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington, and West Virginia. Another six sates are identified by the AMA as being on the verge of a crisis.

Some of the crisis states, including Mississippi, Nevada, Ohio, and Pennsylvania, have recently attempted to address their emergencies through various types of reform legislation. Most of those efforts appear to offer at best a partial solution.

Bush Proposes Reform …

Responding to the growing crisis in the states, President George W. Bush on January 16 proposed national malpractice tort reform before a cheering crowd in Scranton, Pennsylvania.

“You can pretty well blackmail a doctor into settlement if you continue to throw lawsuit after lawsuit,” said Bush. “And the system looks like a giant lottery.” He added, “It is a national problem that needs a national solution.”

Under the Bush proposal, non-economic damages such as emotional distress and pain and suffering would be capped at $250,000. The proposal is similar to legislation Bush supported last July–a measure defeated in the U.S. Senate by a 57-42 vote. The President is hoping Republican gains in the mid-term elections will give reform legislation a better chance in the current Congress.

… But Democrats Oppose It

Four Democratic senators wrote a letter in response to the Bush proposal, arguing it would deny justice to seriously injured plaintiffs and do little or nothing to reduce malpractice insurance premiums. The statement echoed arguments made by trial lawyer groups, who contend malpractice premiums mirror stock market gains and losses rather than the size of jury verdicts.

“The real beneficiaries of these proposals would be the liability insurance companies, not patients and not doctors,” said the letter from Senators Dick Durbin of Illinois, John Edwards of North Carolina, Edward Kennedy of Massachusetts, and Patrick Leahy of Vermont.

“The truth is the insurance industry has done poorly in the market and is simply passing those costs on to doctors and patients,” said Edwards, a millionaire trial lawyer before being elected to the Senate, in a separate statement.

On the other side of that argument, practicing physicians and the American Medical Association were quick to confirm the link between ever-increasing jury verdicts and their rising malpractice premiums. AMA President Donald Palmisano reported runaway juries are the primary cause of recent increases in malpractice premiums.

“Unfortunately, our medical-liability litigation system has become an increasingly irrational lottery driven by open-ended, non-economic damage awards,” said Palmisano.

Palmisano’s assessment was supported by Pat Hirigoyen, a spokesman for the St. Paul Companies, which insured 9 percent of the nation’s physicians before it was driven out of the malpractice insurance business a year ago.

“In 2001 alone, we lost $1 billion on this business even though we had been getting rate increases,” said Hirigoyen. He further reported the company had lost money for five straight years–long before the current stock market and economic downturn–before finally halting its underwriting of malpractice premiums.

Without congressional action on his reform legislation, said Bush, “Excessive jury awards will continue to drive up insurance costs, will put good doctors out of business or run them out of your community, and will hurt communities like Scranton, Pennsylvania. That’s a fact.”

Fair Compensation Needed

Writing in the January 27 Wall Street Journal Opinion, Philip K. Howard, a lawyer and author of The Collapse of the Common Good, suggests “America needs a special medical court or tribunal, just as we have separate courts for patents and other specialized problems. Sensible judgments will be possible only when doctors, hospitals and other providers feel that justice will reliably distinguish between right and wrong, make predictable judgments about fair compensation, and provide the right incentives for overall quality for health care.”

Howard further wrote, “A trusted system of justice is the key. Without it, health care will continue to careen downwards, driven by legal fear instead of humane care.”

James M. Taylor is an attorney and managing editor of The Heartland Institute publication, Environment & Climate News. Conrad F. Meier is senior fellow in health care policy and managing editor of Health Care News.