10 years later, ‘tort reform’ has dramatic impact on suits, payouts

[TexasTowelie]

Ten years after a Texas law capped damages in medical malpractice lawsuits, the law called “tort reform” is hailed and reviled for this: It has sharply cut the number of suits and the amounts losers must pay.

Texas Department of Insurance data show that medical malpractice claims, including lawsuits, resolved in a year fell by nearly two-thirds between 2003 and 2011 (the most recent year for which data is available), to 450. The average payout dropped 22 percent, to $198,673.

The remainder of the story is behind the paywall at http://www.statesman.com/news/news/local/10-years-later-tort-reform-has-dramatic-impact-on-/nZhkC/# .

[font color=green]While this data sounds like tort reform is working effectively, there is actually an underlying story. Since the number of claims and the settlements were reduced, instead of having the medical practitioners and hospitals pay for liability or negligence, the burden of supporting the people that are injured is transferred from the private sector to the public sector in grants for welfare assistance (e.g. housing benefits, SNAP, medical assistance programs) and disability income payments.

While it does help bring medical practitioners into the state because of the favorable business climate, it also means that the taxpayers are providing a subsidy to the medical community at large. In essence, it is a way of providing corporate welfare to the insurance industry and to interests that operate clinics and hospitals.

This data sounds great in the headlines, but the underlying implications also need to be evaluated.[/font]

[hobbit709]

1. and the biggest argument for it failed too. The reduction in premium costs didn't happen.

[Ilsa]

3. That's what I was wondering about.

Is there a link for this?

Tort reform benefitted the insurance companies, not the availability of practicing physicians.

[TexasTowelie]

4. Yes.

The TDI Property and Casualty Reports are at

http://www.tdi.texas.gov/reports/report4.html

The information that reported by the AAS in this story was from the Closed Claim Annual Reports.

Another interesting link on that page is the Quarterly Legislative Report on Market Conditions. If you scroll about 9-10 pages within those reports you will find an exhibit that provides cumulative totals by line of business. The medical professional numbers near the bottom of that summary exhibit provide the number of insurance groups and insurance companies that wrote medical professional insurance, direct written premiums, and direct losses paid. I will state that the amount of written premium has shown only slight declines over the time period; meanwhile, the amount of losses have declined significantly which supports your assertion that tort reform benefits the insurance industry. Therefore, the overall loss ratios are getting more favorable to insurers over the time period.

In 2003 the issues that prompted a review of tort reform laws were:

--rate shock on premiums
--a business climate that was unfavorable to medical providers to locate within the state
--withdrawal of primary care providers in rural areas and specialists in those areas, particularly obstetricians
--unavailability of insurance coverage because of the decreasing number of underwriters (when St. Paul Insurance Company stopped underwriting it left a big gap in the market)

I read a report a couple of years ago that indicated that more physicians are serving the Texas market due to tort reform, so the legislation did help in that regard--I don't have a link to that report though. However, I also know that some counties no longer have primary care physicians (Live Oak and Duval are the two largest counties according a report I read in the Texas Tribune).

Ironically, the number of insurance companies that are underwriting policies has decreased. The following data is from the 4th quarter of each year of the quarterly market reports:

Year |#Groups/#Companies |Direct Written Premium |Direct Losses Paid |Ratio*
1996 | 38/58 |$274M |$215M |78.5%
1997 | 45/66 |$287M |$176M |61.3%
1998 | 39/59 |$314M |$244M |77.7%
1999 | 38/58 |$299M |$278M |93.0%
2000 | 38/65 |$302M |$381M |126.1%
2001 | 33/50 |$378M |$320M |84.7%
2002 | 36/51 |$485M |$302M |62.3%
2003 | 36/46 |$551M |$251M |45.6%
2004 | 34/42 |$444M |$228M |51.4%
2005 | 32/40 |$429M |$157M |36.6%
2006 | 32/40 |$362M |$111M |30.7%
2007 | 32/40 |$266M |$ 84M |31.6%
2008 | 33/40 |$242M |$ 97M |40.1%
2009 | 33/43 |$222M |$ 82M |36.9%
2010 | 28/40 |$236M |$ 66M |28.0%
2011 | 29/40 |$230M |$ 58M |25.2%
2012 | 27/40 |$247M |$ 47M |19.0%

* The loss ratio here does not actually indicate the actual loss ratio for the year; however, I made the calculations to show the downward trend over time. Most insurers consider the 60%-65% mark on loss ratio as the point of profitability after including overhead and other loss adjustment expenses (defense council, claim adjusters, etc.)

[Ilsa]

2. We had a local case of malpractice recently where

a middle-aged woman was diagnosed with cancer. She received chemo, the works. She went to MD Anderson for some follow-up work and they could not find that she had ever had cancer.

The diagnosing doctor died, and she is suing. Not only did she have immediate financial damages, but the treatment was so disabling that she lost her job and health insurance. Furthermore, if she ever actually has cancer in the future, there are questions as to whether existing therapies will be effective.

Limiting her payout for punitive damages to $250,000 looks unreasonable to a lot of folks. It is likely that her life was cut short by this doctor's mistakes.

Question: Did the doctors' malpractice premiums decrease during this period of study? reducing cost of malpractice premiums was supposed to be the reason for tort reform.

[gopiscrap]

5. fucking insurance company and business assholes

[Gothmog]

6. Tort reform in Texas has only helped the insurance companies

There has been no lower insurance premiums in Texas

[TexasTowelie]

7. I agree with the first part of your statement;

however, read post #4 because the second part of your statement doesn't appear to be accurate (at least in medical professional liability).

Exemplary damages were rarely awarded against physicians, but on occasion they would be awarded against hospitals and clinics. It is the cap on non-economic damages and the caps on public liability (for hospitals) that resulted in the decline of claims and direct losses paid. Also note that the payments for excess coverage also declined which would be tied to tort reform caps. Here is the some information to consider:

Year |Direct Losses Paid |Losses Paid for Excess Coverage |Number of Claims Closed During Year| Notes
1997 |169,640,378 |5,391,530 |1,248
1998 |243,782,343 |17,788,957 |1,155
1999 |280,307,255 |9,321,542 |1,249
2000 |392,591,136 |18,537,071 |1,325
2001 |290,813,265 |10,558,242 |1,210
2002 |277,477,224 |7,642,000 |1,181
2003 |224,981,129 |5,957,863 |1,275 Enactment of tort reform for losses occurring on or after 9/1/2003.
2004 |239,527,333 |5,214,827 |1,260
2005 |162,936,557 |80,904 |1,144
2006 |110,961,262 |1,837,081 |895
2007 | 85,377,705 |1,885,065 |750
2008 | 79,098,216 |59,712 |629
2009 | 70,845,465 |456,850 |577 Change of reporting threshold requirements occurred on 9/1/2009.
2010 | 66,092,190 |151,946 |508
2011 | 48,059,023 |157,898 |450

Source: http://www.tdi.texas.gov/reports/report4.html#closed_a
Closed Claim Annual Reports

Additional Notes:
The direct loss paid and losses paid for excess coverage come from the annual reconciliation report which is near the of each annual report.
There is usually about a 3.5 to 4 year lag time from when the between the date of the incident and the date of claim closing for medical malpractice claims.
The number of claims closed comes from Figure 28 of the Closed Claim Annual Reports.

The change of reporting requirements on 9/1/2009 would have a small effect on the number of claims reported since the threshold rose from $10K to $25K.
There usually weren't many medical malpractice losses that occurred in that range though.

There may have also been some decline in premiums that resulted from decreases in reinsurance premiums because of the caps, but I'm unaware of any sources that capture that information.