Questions and Answers: The Massachusetts Medical Liability Crisis

Download the Questions and Answers (.pdf, 202 KB, 4 pages)

Q: What’s the basic problem?

A: The most immediate problem is skyrocketing liability insurance premiums. Some physicians who provide critical high-risk services, such as those who deliver babies or perform neurosurgical procedures, have seen their insurance rates double, even if they have never been sued. Their rates are so high that many of them, especially in rural areas, can’t afford to provide basic obstetrical procedures anymore.

This comes in the midst of an already difficult practice environment, in which physicians have seen their reimbursements repeatedly cut, and their costs relentlessly rise. As a result, many have decided that the only feasible way to continue a viable medical practice is to stop providing high-risk services. It is a last resort. Others are simply leaving Massachusetts for other states where the environment is not nearly as difficult, or quitting practice altogether.

Q: Why does this affect patients?

A: It threatens patients’ access to care. In Massachusetts, access to care is already diminishing. A recent MMS study of physician workforce trends demonstrated that half of all hospital departments are already cutting back services because they cannot find enough physicians to do the work. As a result, it’s harder and harder for patients to get prompt appointments, especially in some specialties. As more physicians are forced to drop services, access to timely, necessary care will become even more difficult.

If not corrected, Massachusetts will experience the same access problems as other states, where some pregnant women have had to travel more than an hour to deliver their baby, and where regional trauma centers have had to close for weeks at a time.

Q: This sounds like a scare tactic. This would never happen in Massachusetts, the “medical mecca” of the world!

A: It not only could happen here, it already has. In Springfield, 10 obstetricians have stopped delivering babies because of the liability crisis, and another four are expected to do so. Milford has lost four obstetricians in the past year, leaving only seven for the region. So it’s starting to appear in other local communities. If we do nothing, the problem will spread.

People in other cities used to say it couldn’t happen in their communities either, and unfortunately they were wrong.

Q: What are doctors paying?

A: It depends on the specialty. Massachusetts obstetricians had to pay an average $84,000 for insurance coverage last year. Many are paying $100,000, which is double what they paid a year ago. There is every indication they will have to pay even more this year. Neurosurgeons paid an average of more than $70,000. Premiums for many other major specialties rose last year by 50% to 100%.

Q: Doctors make good money. Can’t they afford it?

A: A typical full-time obstetrician delivers about 150 babies a year. With the current liability premiums and reimbursement rates, he or she has to deliver about 100 babies just to pay the insurance bill. This cannot continue indefinitely. Eventually, the numbers can’t work, and something has to give. For some, it means giving up what they love to do, and what they were trained for years to do.

Q: Can’t they just go without insurance, as doctors in some other states have done?

A: No. By law, Massachusetts doctors must carry liability insurance.

Q: What’s causing the problem?

A: The size of jury awards and out-of-court settlements have been rising sharply, destabilizing the insurance market and forcing rates higher. Between 1994 and 2000, the average national jury award rose 175 percent. Out of court settlements rose 73 percent. For the first time, the average judgment is more than $1 million. During this same period, the number of injury claims remained steady.

Q: I’ve heard that this crisis was caused by bad investments by the insurance industry, and they’re trying to recover their stock market losses by raising premiums.

A: This is a smokescreen designed to distract people from the real issues. Reform opponents are playing the public masterfully, cynically exploiting our natural distrust of large corporations, especially large insurance companies. 

Most important, the facts don’t support the argument. Most insurance companies are generally not allowed by regulators to invest heavily in stocks. ProMutual, the largest liability insurer in Massachusetts, invests only 12% of its funds in stocks, and its return on investments has been 5% or better for the last five years. While it’s true that some insurers’ investment income has declined because of low interest rates, this is only a very minor factor in the issue. If it were only for the investment losses, we wouldn’t be in this fix, and we wouldn’t even notice a problem. The real cause is the soaring cost of those large judgments and settlements.

Some reform opponents use so-called “independent studies” to debunk the crisis. But they are so faulty that they should not be used to inform legitimate public policy. For example, the Medical Society of Pennsylvania has proven that a highly publicized report by Robert Hunter, which claims the insurance industry manufactured this crisis, is so deeply flawed that it cannot be taken seriously.

Worse, the opponents of liability reform have put forward no serious solution to solve the crisis. They acknowledge that physicians have a real problem, but their only “solution” is for physicians to wait out the storm until the insurance industry becomes profitable again. The patients of Massachusetts don’t have that luxury. Physicians are dropping services and leaving the state today. Patients need health care today when they’re sick, not some day in the distant future. Their illnesses will not wait. The solution is to address the problem now, not after our health care system melts down.

Q: What’s wrong with the status quo?

It is unfair. Only one in eight negligently injured patients ever receives compensation. When compensated, they receive only 40% of the premiums paid; the rest goes to lawyers’ fees and court costs. And, patients wait an average 5.6 years (7^th longest in the country) to resolve their cases.

It is arbitrary. A recent Harvard study has found no correlation between the size of awards and actual negligence. 

It is expensive and wasteful. The status quo encourages unnecessary defensive medicine, driving up health care costs and insurance premiums by an estimated 5% to 9%.

It’s harming our great health care system. It’s beginning to drive our physicians out of the state, forcing them to limit high-risk procedures, or deterring others from starting a medical practice here.

Q: What’s the solution?

A: The MMS has proposed comprehensive legislation, H.2842, that focuses on justly compensating injured patients, while trimming the excesses of the current tort system and still fairly compensate injured patients. It would eliminate the incentive to push for the jackpot judgment, and would actually allow more money to be paid more quickly to patients.

The bill would:

• Impose a mandatory $500,000 cap on “non-economic damages,” such as pain and suffering. 
• Reduce the artificially high interest rate of 12% on settlements, now set by law, to the prevailing market rate. 
• Allow judgments to be paid over time, rather than requiring lump sum payments, thus reducing costs. 
• Impose a mandatory collateral source rule. This would prevent the recovery of funds from two different sources for the same cost, also reducing health care costs overall.
• Eliminate joint and several liability, ensuring that defendants are liable only in proportion to their degree of fault.

Q: Why are you proposing to take money away from patients?

A: Under our bill, recovery for economic damages is unlimited. Patients are fully compensated for all medical bills, medical services, and lost wages, present and future. Patients who are negligently injured would be made whole for what they have lost.

The dispute centers on the very tiny fraction of people who receive large “non-economic” judgments. Though rare, the very real possibility of jackpot judgments has distorted the system so badly that fewer than one in eight negligently injured patients ever sees a nickel. It doesn’t make any sense to deny compensation for the vast majority of legitimate injuries for the benefit of a very, very few.

If we implemented reforms, funds would be available more quickly to more patients. Compensation would be forthcoming within months, not the average five years it now takes to resolve a case.

Q: Shouldn’t patients be compensated for their injuries?

A: Absolutely. We propose no limits on compensation for lost income or for medical care, or for rehabilitation, or any other hard costs resulting from their injury.

Q: Opponents say the cap hurts poor people the most. Why penalize poor people?

A: The prospect of a multi-million dollar jackpot is a cruel mirage. It almost never happens. Many trial lawyers won’t represent people if the injury isn’t bad enough or the possible payday isn’t big enough. They publicly admit that, and even justify that. So the result is predictable: Without adequate access to the courts, seven out of eight people never see a dollar. Our reform proposal would get more money to more people, more quickly.

Q: How can we know that this works?

A: Real life experience! California enacted a $250,000 cap in 1975. When adjusted for inflation, the average premium cost per person fell 52% over the next 25 years. In Nevada, which has no cap, the average inflation-adjusted premium cost per person rose 2073% and in Florida it rose 386%.

Further, patients have received their compensation more quickly. Before liability reform, Californians had to wait an average of more than five years to settle a case. Today, the average time to settlement in California is just 3.42 years, the 7^th lowest in the nation.

Q: Opponents say it was Proposition 103 -- not the cap -- that prevented the crisis in California. True?

A: This is another smokescreen. Proposition 103 was created to resolve automobile insurance issues, and had very little to do with medical liability issues. Liability rates had already begun to fall when Proposition 103 was enacted in 1989, 14 years after liability reform passed in California.

Q: Massachusetts already has a cap. Why are you proposing this?

A: The so-called “cap” in Massachusetts has an exception that has made the cap virtually non-existent in practice. The cap can be overridden by meeting a relatively easy threshold. The exception is meant to be used sparingly, but it is frequently invoked today, even for the less serious injuries. Our legislation would eliminate the loophole and restore balance to our health care system.

Q. I’ve heard it said that Massachusetts has 56% more obstetricians than in 1991. If that’s true, how can you say there’s a shortage?

A. That number comes from the state trial lawyers’ association, using a source that does not differentiate practicing physicians from researchers and teachers.

Since every practicing obstetrician must carry liability insurance, a much better data source is the insurers who write policies in Massachusetts. According to the insurers, the number of obstetricians insured in Massachusetts fell from 680 to 543 between 1992 and 2002. Meanwhile, the birth rate in Massachusetts has been rising steadily since the mid 1990s, according to the state Department of Public Health.

Q: Why let bad doctors go unpunished?

A: Doctors should be held accountable for their actions. This proposal lets no one off the hook.

Q: If doctors were really interested in liability reform, they’d clean up their own house and work harder for patient safety and to prevent medical errors. I read that doctors kill 100,000 people a year!

A: Medicine is deeply concerned about patient safety and medical errors. The Massachusetts Medical Society was one of the first state medical societies in the country to make it a strategic priority. We have a board seat on every major patient safety board in the region. We submitted legislation this year to strengthen and improve the effectiveness of the Betsy Lehman Center, which is the new state agency dedicated to reduce medical errors. We introduced the legislation that produced the nation’s first online physician profiles, which allow patients to learn their physician’s liability history easily, over the Internet (other states use our program as a model). Physicians take second place to no one in holding themselves accountable for their actions. No other profession does a better job of doing that.

Second, most errors are better explained by failures of the system, such as faulty equipment and system design, not by failures of the individual. The Institute of Medicine wrote, “A means of accountability that relies on blaming individuals stands little or no chance of achieving significant improvements.” 

The current system discourages open dialogue and discussion of errors, from which others could learn. Unreported errors are more likely to be repeated. A better system exists in commercial aviation, where the emphasis is on finding out what went wrong quickly, and fixing it quickly, and sharing that information with others.

Q: Does the Medical Society support President Bush’s liability reform legislation?

A: Yes.