JACKSONVILLE -- Proposed state legislation to cap non-economic medical malpractice judgments is by itself unlikely to result in reductions of insurance premiums for doctors and hospitals, according to a new study prepared by the Florida Center for Public Policy and Leadership at the University of North Florida.
The study released today advocates a four-pronged strategy as offering the best hope of making permanent changes that would stabilize medical malpractice insurance premium rates over time in Florida. In addition to capping non-economic judgments, the report concludes that insurance industry regulation, better policing of the medical profession and having patients share part of the risk for certain elective procedures are potential solutions to the problem.
Dr. Adam Herbert, executive director of the Florida Center and co-author of the report, said the study is an objective, unbiased look at a very complicated issue. “This study is reflective of the Florida Center’s ongoing commitment to search for answers to some of the most significant public policy issues and challenges confronting the state. We hope the data collected and analyzed in this research project are helpful to the Governor and the Legislature as they search for solutions to the medical malpractice insurance crisis in Florida,” he said.
In preparing the report, the Center collected and evaluated a wealth of information including data on every Florida court action related to medical malpractice over the past five years. Utilizing the National Practitioner Data Bank, the Center was able to evaluate data on every reported medical malpractice act in Florida over the past decade. The report also evaluated insurance industry data and compared experiences in California and three additional states in which caps have been enacted.
In California, West Virginia, Missouri and Nevada, the report found that despite non-economic judgment caps, premiums for malpractice insurance continued to rise. In California, which adopted insurance industry regulation after caps failed to halt premium increases, the study found that a much higher degree of premium stability eventually was achieved.
By tracking Florida medical malpractice claim payments from 1991 to 2002, the report found that they have increased annually by 8.67 percent or a little over four percent per year if adjusted for inflation. The report also indicates that malpractice insurance companies are generally collecting substantially more in premiums than they are paying out in claims. Each year between 1991 to 2001, earned revenues of medical malpractice insurance companies were significantly higher than claims paid. In 2001, for example, earned revenues were nearly double claim payments.
Dr. George Perkins, director of data analysis at the Florida Center and co-author of the report noted that part of the misconception can be attributed to the National Association of Insurance Commissioners using “incurred losses” which represent paid
losses plus reserves for “possible “ future losses that may or may not ever occur. “During the period from 1991 to 2001, there were only two years in which insurance company premium earnings in Florida did not increase over the previous year. By 2001, insurers were earning premiums in Florida totaling more than $603 million dollars versus $328 million in claim payments he said. The average annual rate of premium increases in excess of payments was nearly 10 percent during the period examined, Perkins added.
But the insurance industry is not alone in undergoing report scrutiny. The study noted that policing Florida practitioners may be an effective policy that could help stem rising malpractice premiums. Noting that the state has many practitioners with multiple malpractice cases, the report concluded that closer scrutiny and sanctioning of such individuals may well make it possible for all doctors to obtain malpractice insurance at reduced rates. The report found, for example, that of the more than 55,000 practitioners in the state, 807 were involved in between three and 32 malpractice cases.
The report noted that one physician committed 32 malpractice acts over an eight-year period before the individual’s license was finally revoked. Over the 12-year period studied, the report found that of those Florida practitioners who had three or more malpractice paid claims, less than one in five had a licensing action imposed on them.
In addition, the report pointed to other factors that need to be taken into consideration such as caps in several states, including Florida, being declared unconstitutional at various times. The report also noted that, even with caps, if some automatic annual adjustments for inflation are not included, fixed caps would quickly deteriorate in real value.
The study is the first of several in The Center’s Medical Malpractice Study Project. A second study focuses on a national review and comparative analysis of medical malpractice legislation and constitutional amendments in the 50 states. A third study will focus on the challenges of policing the medical profession based upon experienced in Florida and other states that have sought to address malpractice issues.
The complete study can be found on the Center’s web site at
www.thefloridacenter.unf.edu . Dr. Herbert and Dr. Perkins are available for media interviews by calling the Office of News&Publications at (904) 620-2140.
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