MALPRACTICE….The New York Times has a pretty good overview of the medical malpractice “crisis” today that’s worth reading. To summarize, there appear to be three major reasons why malpractice insurance premiums have gone up recently:

  • Malpractice payouts have been rising faster than the rate of overall inflation (though lower than the rate of medical inflation).

  • Insurance company investments have done poorly in the past few years. Much of their income comes from investments, and they’ve had to make up for lower investment income by raising premiums.

  • During the 90s, intense competition kept insurance costs flat even though costs were rising. When the bubble imploded and several companies exited the market, the industry made up for lost time by massively increasing prices all at once, when they should have been raising them gradually during the entire decade.

    As the chart on the right shows, we’ve been through this before. Premiums increased dramatically in the mid-80s, flattened out, and then went up again starting around 2000. If they had risen gradually along with costs, we’d be at about the same place we are today but no one would be talking about “skyrocketing” premiums or a malpractice “crisis.”

To me, the weirdest thing about this whole mess is that doctors continue to follow the insurance companies’ lead and demonize trial lawyers as the cause of their problems. I certainly understand why doctors hate trial lawyers ? I would too if they were suing me all the time ? but common sense suggests that doctors should be genuinely interested in keeping premiums under control, something that even insurance companies admit won’t be accomplished by payout caps.

California is often held out as a model for the nation because we instituted payout caps a couple of decades ago. But so did a lot of states, and it hasn’t helped much. What everyone chooses to forget is that California also did something else: it instituted some of the toughest regulations in the country on insurance companies. That’s done a lot more to keep malpractice premiums under control than the payout caps.

If the AMA had any sense, they’d team up with the trial lawyers to agree on some sensible restrictions on malpractice suits and then train their collective guns on the insurance companies. That might not be as emotionally satisfying, but on the other hand it might actually work.