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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
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