Bad Medicine: Why Bush's Malpractice Policy Will Only Help Insurers
American Prospect
July 2003


For the third time in as many decades, doctors across the country are protesting rising medical-malpractice insurance premiums. The American Medical Association (AMA) is promoting its long-standing goal of medical-liability reform in the shape of a $250,000 cap on "pain and suffering" (noneconomic) damages in malpractice cases. Karl Rove must be thrilled. For an administration determined to deplete the coffers of Democratic trial-lawyer donors -- and damage presidential hopeful Sen. John Edwards (D-N.C.) in the process -- malpractice reform is a godsend.

President Bush's AMA-backed proposal to cap pain and suffering damages at $250,000 will satisfy the AMA's desire to shield doctors from liability while curtailing maimed patients' rights to sue. But in the end it is more likely to line the pockets of insurance companies than reduce rates for doctors.

Depending on whose statistics you use, the median jury award for malpractice ranges from $125,000 to $1 million. The Physician Insurers Association of America reports that claim payments of more than $1 million have increased from less than 2 percent in 1990 to almost 8 percent in 2001, driving the median up from $150,000 to more than $300,000. Contrary to insurance-industry claims, however, overall medical-malpractice payouts have not increased substantially. During market downturns, insurers set aside vast reserves to pay anticipated claims, counting these reserves as "incurred losses" -- even while these funds accrue investment income. But excluding these set-asides, actual insurance-company payouts increased only 15 percent from 1998 to 2001, according to Americans for Insurance Reform (AIR) -- far less than premium increases in most states.

For a copy of the complete article, contact AIR.