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Texas Reporter
Volume 05, Issue 078
April 1 - 14, 2005
By Robert A. Kraft
For many months before passage of Texas House
Bill 4 in 2003, lawyers and consumer rights
organizations tried repeatedly to get
legislators and the voting public to
understand the real reasons for the so-called
"medical malpractice crisis." The
huge increases in medical malpractice
insurance premiums charged to physicians and
hospitals had much more to do with the falling
stock market and low interest rates than with
medical malpractice litigation. Insurance
companies, in the years before 2003, were
losing money on their investments in the stock
market, and also in their "safer"
investments in interest-bearing accounts. In
addition, the terrorist attacks of September
11, 2001, cost insurance companies a great
deal of money.
Unfortunately, not enough members of the
legislature or the public listened or
understood the reasoning behind the arguments
of the consumer organizations, and the law was
passed. House Bill 4 essentially denies full
justice though the court system to patients
killed or injured by medical malpractice. The
law does this by limiting recovery of
non-economic damages to $250,000 from all
doctors involved in one case, and $250,000
from each hospital involved, with an overall
limit of $750,000. This limit is per claim,
not per plaintiff. So the negligent death of a
housewife with a husband and four children is
basically worth no more than $750,000, and
that would be only in the unusual situation in
which more than one hospital was responsible
for the death.
The real-life effect of the law is that fewer
lawyers are willing to accept these cases,
which involve huge investments of time and
money on the part of the lawyer.
Now that the damage has been done, some people
finally are beginning to realize this
draconian law purportedly solved a problem
that never even existed. The most dramatic
proof of that fact has just been produced in a
study conducted by law professors from several
universities, and released in March 2005.*
The study, titled "Stability, Not Crisis:
Medical Malpractice Claim Outcomes in Texas,
1988-2002," reaches the conclusion that
there is only a loose connection between
insurance rates and malpractice claim
payments. In other words, there may well be
occasional "medical malpractice insurance
crises," but they are not caused by
increases in payments for medical malpractice
claims. Therefore, attempted reforms of the
liability system will have little, if any,
effect on insurance premiums, and will do
little, if anything, to prevent future
insurance crises.
The forty-page study is based on a
comprehensive database of closed claims
maintained by the Texas Department of
Insurance, and covers the time period
1988-2002. Among many others, the following
facts emerge from the study:
• Adjusted for population growth, the total
number of closed claims, the total number of
large claims (payouts of at least $25,000 in
1988 dollars), and the percentage of claims
that produced large payouts were stable from
1990-2002.
• There was a sharp decline in the number of
smaller paid claims.
• Mean and median payouts per large paid
claim were stable in real dollars over
1988-2002, and declined if adjusted for
medical care cost inflation.
• In large paid claims tried to verdict,
both verdict amounts and actual payouts per
claim were flat or perhaps declined slightly.
• In 2000-2002, paid claims averaged 4.6 per
100 practicing Texas physicians per year, down
from 6.4 per 100 physicians per year in
1990-1992. Total claims averaged 25 per 100
practicing physicians per year in 2000-2002,
of which about 80% closed with no payout.
The study closes with this sentence, "Our
point, which has been largely neglected in the
furious battle over malpractice liability, is
that attempts to avoid crises in malpractice
insurance prices should focus on insurance,
not litigation."
That is exactly the point plaintiff lawyers
and consumer rights organizations spent so
much time and effort trying to convey to the
legislators and the voting public.
Unfortunately, the statistical proof came too
late to prevent the damage done by House Bill
4 to the legal rights and remedies of
consumers of medical services in Texas.
*Columbia Law & Econ Research Paper No.
270; U Illinois Law & Economics Research
Paper No. LE05-002; U of Texas Law &
Economics Research Paper No. 30: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=678601
Robert A. Kraft
Kraft & Associates Attorneys at Law
Injury and Disability Claims
2777 Stemmons Freeway, Suite 1300
Dallas, Texas 75207
(214) 999-9999
(817) 999-9999
(800) 989-9999
www.kraftlaw.com
Mailto: rkraft@kraftlaw.com
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