The Myth of Malpractice Costs, and What's Really Wrong with Healthcare

[Francine Frensky]

This is one of the biggest lies fed to the American people by republicans, that their healthcare costs are so high because of malpractice. In fact, malpractice premiums are 1-2% of the total cost, which is basically immaterial to the total cost.

I am sure Bush will lie about malpractice premiums again tonight.

This is a SMOKESCREEN to distract the real problem, these six little words that everyone is afraid to say, but here it is and I'll say it anyway: healthcare providers make too much money.

Drug companies make 20% returns compared to 6% for average manufacturing companies. Hospitals make 12% returns, and this is accomplished without almost ANY kind of efficient management (believe me, these hospitals are NOT run like well-oiled ships).

And then there's doctors, who as we know, make a good 10 times what the average American makes. Does anybody have a doctor living in their neighborhood? I would bet that 90% of Americans would answer No to that question. Doctor's didn't always make this much money, they don't make that much more in other countries, and there really is no good economic reason for them to make that much.

So WHY do healthcare providers make so much money?? I worked in the healthcare industry as a financial auditor for 8 years, saw the insides, and I can tell you point blank that EVERYBODY in this business makes money, makes a ton of it, and because of medicare and insurance, there is almost NO COMPETITION in the healthcare area. It's a huge part of our economy that operates outside of the influences of capitalism.

This is how I first discovered the problem: doing an annual audit on a children's hospital, I asked about an increase in revenue from services. The controller said "we raised our prices". I followed up with a "deeper" question, as we're instructed to do: "Why did you raise your prices?" The answer shocked me for it's truthfulness; "Because we could"

So that's why healthcare costs have been rising: because providers CAN raise prices, and they simply do. There's no COMPETITION, no capitalistic economics, at play to bring the system back to balance. People don't shop for healthcare the way they shop for cars. They just get the healthcare they need, or their doctor feels they need, then they file the claim with the insurer, most of the time never seeing the actual charges.

It's frustrating to me, knowing what I know, to watch this healthcare debate unfold. Honestly, I think the whole system is going to break before it gets any better. Because nobody is talking about the real problem.

[Tempest]

1. The Malpractice Myth

The malpractice myth

http://www.dmregister.com/opinion/stories/c2125555/21716886.html

President Bush said in his State of the Union address this year that the threat of lawsuits against doctors and hospitals was one of the "prime causes" of rising health-care costs. Bush's words suggest a correlation between health-care costs and the premiums physicians and hospitals pay to protect themselves in lawsuits.

Yet between 1988 and 1998, U.S. health-care costs increased 74.4 percent while malpractice premiums increased 5.7 percent. The total premiums paid in 2000 added up to 0.56 of the nation's total health-care bill.

<snip>

New information in a national database that collects reports of every judgment and settlement paid in malpractice demonstrates just the opposite. An analysis of that data by a consumer-advocacy group reveals malpractice payouts decreased by 8.2 percent between 2001 and 2002. Meanwhile, doctors" premiums didn't go down.

<more>

[ewagner]

7. Concerning competition

Healthcare (Clinics and Hospitals) require huge capital outlays to startup, especially if you're talking about state-of-the-art diagnostic equipment. In small and mid-sized markets it's not efficient to have two similar facilities in the same market because there isn't enough of a client base to make it feasible.

I see it similar to power companies being given a franchise to operate in a specific territory.

Having said that.....I think you're right about dispelling the malpractice myth.

[Francine Frensky]

14. Doctors are famously poor business people -- suckers if you will

Seriously, as a business major I read articles about how to cheat doctors, get them to invest in phony penny stocks, etc. (um, not a part of school curriculum, obviously, just articles in magazines and books).

Doctors are famous for totally believing that they are Very Smart, because we all know how hard it is to become a doctor, but they are often book-smart, and foolish -- suckers -- in the practical sense department.

So, every story about increased malpractice premiums is probably just a story of a sucker being taken by the insurance industry.

[genius]

2. If no one malpracticed, no one would collect.

[genius]

3. They are attacking the victims (those injured by malpractice)

[el_gato]

4. Another Article

The purpose of Proposition 12's severe restrictions on victims' rights was to lower malpractice insurance premiums, which had seen double-digit increases. In Texas, as elsewhere, the tort reformers exploited the rate hikes as part of a scare campaign to sell reform. However, the facts show that the legal system is not driving insurance rates. Tort actions at the state level--meaning personal-injury lawsuits, everything from product liability to traffic accidents to libel--have fallen 5 percent in ten years, according to the National Center for State Courts.

More specifically, malpractice filings declined nationally by about 4 percent between 1995 and 2000. And while a recent analysis of the Medicare population estimated that medical error kills 131,000 people annually, making it the fourth leading cause of death, medical suits are only 5 percent of personal-injury filings, with product liability cases another 5 percent. Plaintiffs lose 60 percent of product cases and 70 percent of malpractice suits.

Not only are socially significant lawsuits like malpractice and product liability a small fraction of the legal picture but numerous studies show that capping damages doesn't affect insurance premiums. One survey examined insurance rates between 1985 and 1998, then ranked the states according to the severity of their restrictions on lawsuits. Increased severity did not produce lower rates. In Texas, where malpractice filings dropped 20 percent in the nine years before Proposition 12, the liability picture has been little improved by its passage. About a third of doctors will see a decrease of 12 percent--after cumulative increases of 147 percent. The rest will either get no relief or double-digit increases.

According to J. Robert Hunter, Federal Insurance Administrator under Presidents Ford and Carter, caps don't work, because liability rates reflect not litigation costs but the insurance industry's own practices. During good times, insurers write policies even for the worst risks to generate cash for investment. When the stock market tanks, rates climb steeply to cover losses. The current liability crisis, Hunter notes, coincided with the market downturn that began in the summer of 2001. And since the insurance cycle is international, the "hard market" also drove up premiums in Canada, Australia and France. "And those countries have totally different legal systems," Hunter says.

The irony is that just as virtually the entire country finishes retooling its civil justice system, the hard market is easing and insurance costs are edging downward, a trend that became evident in late 2003 and for which tort reform is unjustly receiving credit, according to Hunter.

The numbers show that lawsuits are an insignificant cost both to businesses and to health providers, for whom they represent less than 2 percent of spending. In short, the lawsuit-abuse crisis is a hoax. Yet the Republican right has launched one of the great propaganda blitzes of recent American history to yank the teeth from the civil jury.

http://www.thenation.com/doc.mhtml?i=20041025&c=1&s=zegart

[Vincardog]

5. Tort reform and rising health care costs are both because the Insurance

Companies make a 30% profit. The calls for Tort reform and limits on lawsuits are Bu$h whoring for his INSURANCE COMPANY BACKERS. We need to take the profit out of health care. We need to pay Nurses MORE. We need more doctors. We need to get the insurance company Monkey off our backs. When the Government administers a program like Social security they do it at a 7% cost. If we went to a Government model for Medical Care we would have an immediate 23% savings. Read it and weep insurance co. executives.

[cthrumatrix]

8. look at states where "lawsuit limits" have been in place... I don't think

there has been a sudden drop in insurance and further drop in the cost of healthcare.

I think Florida is one of those states.

[Zing Zing Zingbah]

9. I don't think there are any law suit limits yet.

I think on of the issues on the ballot this election is about that. I could be wrong, though.

I've heard this has been done in Texas.
Doesn't seem like Bush is trying to turn this country into one big Texas?

[Vincardog]

10. Lawsuits are only 1% of Insurance cost Insurance co profit is the problem

[nothingshocksmeanymore]

11. California has had caps on malpractice since the 80's

it made no lasting difference in med mal rates and even the temporary reduction was minor.

[RaleighNCDUer]

6. I do believe we are the only country in the world where the

healthcare industry is known as the healthcare 'industry'.

Not that I believe we should return to the horse and buggy days, when the doctor was less esteemed than the blacksmith, but DAMN!

[Vincardog]

12. Exactly they are treating us like things. The Radical Right does not

believe we have any value except as cogs in their money machines.

[high density]

13. Heh, I got a letter from my health insurance company today

I have been insured with them for a only about a month and a half, and I got a letter saying that my premium is increasing by 15.99% as of January 2005. It feels just great to be unemployed!

:crazy: