“Lawsuit Lottery” Causes Medical Malpractice Crisis
Suggestions that Poor Investments Led to Crisis Don’t Pass Smell Test
• If the stock market argument were credible, the crisis in medical malpractice insurance premiums would affect all carriers participating in the medical liability market across the country. In reality, however, today’s medical malpractice crisis is limited to physicians who are unlucky enough to practice in those states that have not passed meaningful medical malpractice reforms. All state insurance departments and other state governmental agencies heavily regulate and monitor the solvency of medical malpractice carriers licensed in their states and require extensive reporting. As a part of this process, strict limits are placed on the types and “riskiness” of the investments medical malpractice insurers can purchase. Insurers are required to report on the status of their investments on, at the very least, an annual basis. One would have to suspend disbelief to accept the stock market argument, because only 13 percent of the assets of those medical liability insurance companies representing a majority of the market (physician-owned/operated companies) are invested in the stock market. From 1995 to 2001, most of their assets (80 percent) were invested in bonds. The rest of those assets were invested in mortgages, real estate, and working cash. Because of huge increases in malpractice jury verdicts, many carriers have stopped selling medical malpractice coverage altogether, including one of the largest in the nation, the St. Paul Companies. The fact that these insurers have pulled out of the malpractice market altogether demonstrates that there is a systemic problem within the malpractice system specifically and, until that problem is fixed, a viable business is not possible. States that have not enacted meaningful medical malpractice reforms have been particularly hard hit by insurers pulling out of the market. According to the U.S. Department of Health and Human Services, fifteen insurers have left the Mississippi market (a state without reforms) in the past five years.
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