Jackpot Justice The Need for Medical Liability Reform

Jackpot Justice: The Need for Medical Liability Reform PLI: A Primer  What is PLI? How do PLI policies differ? What are PLI financial risk factors?   First PLI Crisis: Mid 1970s  Problem: Insurance Availability Solutions:  Physician-owned and –directed insurance companies  State laws, including MICRA in California  Second PLI Crisis: 1980s  Problem: Insurance Affordability  Solutions: Reducing risk Closing practices Economic climate 1990s: No PLI Crisis  Stabilizing rates Doctors shop for best prices  Beginning the 21st Century: The Crisis Develops   The good times are disappearing. Reasons:  Claims frequency and severity  Defense costs rising  Reinsurers negotiating tighter terms or hiking rates. Underwriting at a Loss Formerly among the most profitable lines of insurance, PLI is now among the least, as claims costs exceed premiums Historical Medical PLI Combined Ratio 200% 153.3% 150% 100% 50% 0% 1996 1997 1998 1999 2000 2001 106.0% 107.9% 115.7% 129.5% 133.5% Source: Best’s Aggregates and Averages: Property-Casualty, US, 2002 Edition, p.276 . The Current Liability Crisis: Access to Care  78% of Americans fear limited access to care. (HCLA Survey, June 2002)  1,300+ health care institutions cutting back on services and/or eliminating units. (AHA survey, June 2002) The Current Liability Crisis: Access to Care  In past year, EDs and trauma centers have closed or downgraded in 8 states.  64.8% of America’s high-risk specialists have changed their practice – including no longer delivering babies, referring complex cases and more. In Florida, five Tallahassee-area hospitals have either closed or reduced their mammography services. Waiting times in Orlando for mammograms have reached 150 days.  The Current Liability Crisis: Patient Safety  Culture of safety requires supportive legal environment  Current litigation system threatens our health care system by:  Awarding excessive non-economic damages.  Encouraging defensive medicine.  Enriching trial lawyers at the expense of patients and physicians. The Current Liability Crisis: Costs  Medical liability adds $60 billion - $110 billion to costs of health care each year. Excessive medical liability adds up to another $60 billion per year to government health care entitlement programs. Most medical liability claims -- 57- 70 % -do not result in any payments to patients.   The Current Liability Crisis: Defensive Medicine  Defensive medicine:  May avoid frivolous lawsuits - But does not improve patient health  Adds billions of dollars to America’s health expenditures. The Current Liability Crisis: Defensive Medicine  Doctors changed behavior to protect against liability. Trends in Jury Awards: Median Awards and Settlements $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 '95 '96 '97 '98 '99 '00 Award Settlement Factors Behind Rise in Awards  Societal factors:  Managed care backlash,  Public desensitization to large numbers,  Increased focus by the media on large malpractice awards.  The 1999 IOM report bringing medical errors to the attention of the public. Long before the IOM report, the AMA helped launch the National Patient Safety Foundation.  MICRA Reduces Average Time to Settlements 33% Longer 1.8 years 2.4 years California States with no Noneconomic Caps The HEALTH Act: Help Efficient, Accessible, Low Cost, Timely Health Care.  Safeguards patients' access to care by enacting common sense reforms.  Based on California’s MICRA. Administration Stance  President Bush said in his State of Union address and repeated at ISMS in June 2003: “No one has ever been healed by a frivolous lawsuit.” At the AMA’s National Advocacy Conference in March , he said – “I want to sign good medical liability reform this year.”  Responses to the Crisis  Trial bar  Consumer groups Insurance companies Physicians   Trial Bar’s Response  Tort reforms unfairly penalize malpractice victims  Present insurance crisis is driven by the insurance underwriting cycle Consumer Groups’ Response  Insurance companies made bad business decisions. ~ Public Citizen Prevent such insurer investment . ~ Foundation for Taxpayer and Consumer Rights.   State regulatory system needs to keep rates in check. ~ Americans for Insurance Reform. Insurance Companies’ Response  Insurance is not magic: Only way to cover increasing claims costs is to increase revenue – raise rates. Many states have insurance regulation, yet states without medical liability reforms are seeing insurers go under, leave the state or stop writing new policies. This is not the case in non-crisis states.   The expense of investigating and defending claims and then paying any settlements or awards constitutes the main cost of underwriting liability insurance. Physicians’ Response  Approximately one of every six practicing physicians faces a malpractice claim every year. In high risk specialties, one claim for each doctor every 2 1/2 years.   70% of cases are found to be without merit. Physicians believe the legal system uneven and inequitable in resolving cases. Physicians call for federal health care litigation reform.   AMA Campaign Raising consciousness Supporting national political action    Supporting state activities Generating research Fundraising   800 262-3211 www.ama-assn.org