A Layman’s View of the Medical Malpractice Issue in 2011

A Layman’s View of the Medical Malpractice Issue in 2011

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  A Layman’s View of the Medical Malpractice Issue in 2011 A Layman’s Viewof theMedical Malpractice Issuein2011 Barry K. Sanders - © 2011 ittm Page 1 of 6  A Layman’s View of the Medical Malpractice Issue in 2011 The Medical Malpractice (Med-Mal) issue can be viewed as having four basic components:The needs for : ã Protection of the Patient form just that; Medical Malpractice ã Protection for the Practicing Professional from Indemnity ã An Insurer to provide such Coverage ã Government OversightIt is a simple task to find data that will site the rate of change for various criteria but little or no hardnumbers. You will find here my humble attempt at ferreting this data out. But first  a little about theauthor. I am a married white Christian grandfather of 56 years holding no secondary education. I amself taught in mechanical engineering, architecture, computer systems both hardware and software aswell as versed in both Hebrew and Cherokee (Tsalagi) languages. I am also self taught on variousstringed instruments, favoring the Banjo, Guitar and Mandolin. From a business prospective I haveformulated six formal business plans, worked with the State of Mississippi on economic development,designed Industrial Process Equipment, and served as a Regional Sales Manager for Engineering(CAE), Manufacturing (CAM) and Business (ERP/MRP) systems.Looking at these four basic components the gouging comes from A and C, and obviously D has theproclivity to serve as a detriment. I hesitate in using the massively overworked term FrivolousLawsuit yet find it expedient in describing what a slim majority of MedMal cases involve. Current TortReform in this area has both reduced these cases in number and award. The Insurer can simplyextract these absurd premiums from the Profession while the legalesee are trained to go after themoney . This writer views the Medical Profession as predominantly whole, with a few bad apples. Thevery fact that these professionals are required to pay exorbitant premiums for Professional LiabilityInsurance dictates that they closely monitor their peers, fellows and interns. The Numbers (Or Lies, Damn Lies and Statistics) The national average for liability insurance for a primary care physician is $16,042. (1) The national average for liability insurance for a specialist is $65,489. (1) A Dade County Florida Obstetrician can pay $250,000 where a General Surgeon in Idaho $4,000. (1) The CEO's of the major Insurers can expect a salary between $10,000,00 and $25,000,000. (2) Enter the legal profession into the mix. The Law Firm will reap approximately $200,000 per case.(3) (7) and probably in error  The Median Annual Household Income $50,221. (4) From 1997 to 2006, the median medical liability jury award more than tripled  from $157,000 to$487,500. The average award increased from $347,134 in 1997 to $637,134 in 2006.(a) Staggeringgrowth has not only occurred with jury awards, but also with settlement amounts. Average settlementamounts increased from $212,861 to $335,847 between 1997 and 2006.(b)Unfortunately, someawards greatly exceed these amounts. In Illinois and Massachusetts, 17 percent of claims paid wereat or above $1 million, as were 8.5 percent of claims in Nevada according to a 2007 Bureau of JusticeStatistics report.(c) (5) emphasis   mine (a) Physician Insurers Association of America, PIAA Claim Trend Analysis: 2006 ed. (2007).(b) Physician Insurers Association of America, PIAA Claim Trend Analysis: 2006 ed. (2007).(c) Bureau of Justice Statistic, Medical Malpractice Insurance Claims in Seven States, 2000 ‐ 2004,Department of Justice (March 2007). Barry K. Sanders - © 2011 ittm Page 2 of 6  A Layman’s View of the Medical Malpractice Issue in 2011 According to Towers Perrin, a global professional services firm, malpractice litigation costs $30 billiona year, and, since 1975, direct costs of litigation avoidance have grown at more than 10 percentannually. (6) Combined written premium for all three segments of the market peaked in 2004 at $270.4 million, andhas fallen every year to $200.4 million in 2009. (7) Total claims: Insuring entities and self-insurers reported 1,733† claims closed with an indemnitypayment, defense costs,†† or both types of payments. Commercial insurers††† reported 1,006 claims,self-insured entities reported 659 claims, and risk retention groups reported 68 claims.†The 2009 Medical Malpractice Statistical Summary published June 15, 2010 used data as of April 14,2010. One claim report was later modified by the insuring entity, and two claims that closed in 2010were reported in error, which has slightly altered the figures.†† For simplicity, this report substitutes “defense costs” for the technical phase “defense and costcontainment expenses.” Defense and cost containment expenses are expenses allocated to a specificclaim to defend an insured, including expenses such as court costs, fees paid to defense attorneys,and fees for expert witnesses.These expenses do not include the internal costs to operate a claimsdepartment. This term is defined in WAC 284-24D-020(1).††† Commercial insurers include both admitted and surplus lines insurers. Lawsuits resolved in the two-year period ending December 31, 2009 – Washington State Indemnity payments to claimants: Attorneys reported that claimants received total compensation of $159.5 million on 253 claims, or $630,388 per settlement. Attorney fees were $57.1 million, or anaverage of $225,792 per settlement with an indemnity payment.††††On average, the attorney fee was 35.8 percent of the total compensation paid to the claimant. Paidindemnity by type of settlement: Fifty percent of the settlements were the result of an alternativedispute resolution process; these settlements resulted in the lowest average indemnity payment of $569,308 and the lowest average attorney fee at $201,871. Regional comparisons: One-third of thelawsuits, or 95, came from King County. King County had the highest total paid indemnity at $63.3million, the third highest average paid indemnity at $708,900 and the third highest legal expense per lawsuit at $278,358. Settlement by age of claimant: The most expensive settlements involvedclaimants under the age of 21. In these cases, the average settlement was $1,495,071 and theaverage legal expense was $630,812. (7) †††† Attorneys in this area of litigation typically work on a contingency basis, and receive fees if theclaimant is compensated by the defendant(s).We need Tort Reform and Real Oversight. It seems to me that MedMal is a self fulfilling prophesy;the lawyers / lobbyist in one state demand the higher premiums, ostracizing the finer physicians,increasing the chances of more MedMal cases. The numbers involved are ridiculously difficult to ferretout. Flip the coin and look at provider CEO over the table salaries. Good grief! Talk about In Searchof Excess .http://www.graefcrystal.com/aboutus.html Barry K. Sanders - © 2011 ittm Page 3 of 6  A Layman’s View of the Medical Malpractice Issue in 2011 Insurance Co. & CEO With 2008 Total CEO Compensation (2) * Aetna, Ronald A. Williams: $24,300,112* Cigna, H. Edward Hanway: $12,236,740* Coventry, Dale Wolf: $9,047,469* Health Net, Jay Gellert: $4,425,355* Humana, Michael McCallister: $4,764,309* U. Health Group, Stephen J. Hemsley: $3,241,042* Wellpoint, Angela Braly: $9,844,212For those of you who would desire to look into all CEO Executive Pay:http://www.aflcio.org/corporatewatch/paywatch/ceou/index.cfmThese bloated salaries certainly invite manipulations of the industry and government. The 80/20rule likely applies with regard to practicing physicians; that is to say 80% of the MedMal cases can beattributed to 20% of the physicians; or more likely a fewer in number. Quotes Malpractice insurance costs amount to only 3.2 percent of the average physician's revenues. (8) The total amount spent on medical malpractice insurance in 2000 was $6.4 billion. (9) We in the insurance business avoid the term “malpractice.”The usual industry word is misadventure. (10) The standard attorney contingency fee contract in Florida provides (after a lawsuit is filed) that thelawyer gets 40% of the first $1 million recovered, 30% of the second million, and 20% of anythingabove that. (11) Florida once again led the nation in top rates physicians pay for malpractice insurance with thehighest insurer reporting a rate for internists in Dade County at $65,697, a 17 percent increase over 2002 report. The highest rate for Dade County, Florida obstetricians was reported at $249,196, a 24percent increase over the $201,376 reported in 2002. Rates for general surgeons in Dade Countywere reported at $226,542, a 30 percent increase over the 2002 reported rate of $174,268 in 2002. Atthe other end of the spectrum, Idaho internists had the lowest reported rate of $3,770 in 2003, thesame as reported in 2002. Iowa general surgeons had the lowest reported rate of $14,386, also thesame as reported in 2002 and Idaho obstetricians/gynecologists had the lowest reported rate in their specialty of $19,320, also the same as 2002. (12) In Illinois and Massachusetts, 17 percent of claims paid were at or above $1 million, as were 8.5percent of claims in Nevada according to a 2007 Bureau of Justice Statistics report. The 2009 CBOstudy estimated that providers incurred approximately $35 billion (two percent of total health careexpenditures) in medical malpractice liability costs in 2009. (5) Medical liability insurance premiums are at or near all ‐ time highs. According to a NASS surveyconducted between March and April of 2008 the average estimated annual liability premium between2002 ‐ 2006 rose from just under $50,000 in 2002 to just under $60,000 in 2006. et. Seq. (13) Barry K. Sanders - © 2011 ittm Page 4 of 6
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