In yesterday's New York Times, columnist Bob Herbert attacked tort reform as "all about greed." According to Herbert, "[w]hat tort reform will lead to, not surprisingly, is an unwarranted burst of additional profits for the insurance industry, which is why the industry is sinking so much money into its unrelenting campaign for 'reform.'" Herbert repeated the familiar trial lawyer canard that "there is no evidence that soaring malpractice premiums are the result of sharp increases in the amounts of money paid out for malpractice claims."
And the source of information for Herbert's contention? None other than the "Center for Justice and Democracy." Innocently called a "consumer advocacy group" by Herbert, the CJD is a Naderite group (its president, Joanne Doroshow, began working with Nader in 1986), heavily funded by the trial bar, and started with seed money by Michael Moore (yes, that Michael Moore), who remains on the group's board.
Problem is, the CJD's own data refute its claims that the "premium-gouging underwriting practices of the insurance industry have been widely exposed." The very "study" the CJD issued through its subsidiary group, "Americans for Insurance Reform," showed that since 1975, actual liability losses paid by doctors have escalated 1300%, versus a general 500% medical cost inflation, and only a 300% rise in actual premiums written per doctor. The result, of course, is that the paid-loss ratio -- the percentage of insurance premiums going to cover tort losses -- escalated from about 25% in 1975 to about 80% today. (CJD either doesn't understand its own data, or it deliberately misrepresents them. For more thoughts on the weakness of the CJD's claim that medical malpractice insurance rate increases are not linked to rising tort costs, see Ted Frank's earlier commentaries here and here.)
The medical malpractice insurance industry, therefore, has been a decidedly unprofitable business. In 2001, the country's biggest malpractice insurer, the St. Paul Companies, exited the business entirely after incurring nearly $1 billion in losses. In Pennsylvania, one of 20 states with out-of-control rates, only two malpractice insurers remain, down from ten only five years ago. In Mississippi, at least 15 insurers have exited the market since 1997.
In this environment, the majority of doctors today are insured through mutual insurance companies -- i.e., those owned by the doctors themselves. In other words, if the doctors' malpractice insurance rate hikes were "all about greed," it would be a peculiar greed indeed, since the doctors themselves control most the companies through which they are insured.
Herbert's column would be amusing were its implications not so deadly serious. Faced with potential bogus "botched delivery" suits, many obstetricians are limiting their practices to gynecology, forcing women in some areas to travel hours for prenatal care and delivery. High-risk specialists such as neurosurgeons are exiting some parts of the country entirely, meaning that stroke patients and head- and spinal-trauma victims have to be helicoptered to neighboring states.
Americans potentially have access to the best health care in the history of the world, but that health care is being threatened by a system that is reducing their access to care through a random and haphazard system of law. Of course, in medicine, mistakes happen, and some of those are due to doctor negligence. A system of deterring those mistakes, and compensating the victims of negligent mistakes, is extremely important. But that's not what our system is doing; our system is broken and it needs to be fixed. Instead of pointing a finger at the insurance industry, we should be thinking about solutions to the problem.