Last Monday, as is so common, I got an email from one of the several medical organizations of which I am a member. This was a fundraising pitch, and I can't recall the details, but it contained the usual breathless rhetoric regarding how important their advocacy efforts are to fix the SGR, enact tort reform, save the practice of medicine, ensure domestic peace and tranquility, yadda yadda yadda...
Honestly, I don't even read these things any more before I hit delete, and I have actually developed a blind spot over the text where they hysterically predict catastrophe and doom. But this caught my eye — tort reform? Who's still talking about that as a priority? Mostly because it's a pipe dream that couldn't get through a republican congress with a republican president. In this day and age it's a dead letter. But also because I kind of thought the medical malpractice crisis was over.
I'm so old now that I've been through a full cycle of the boom-and-bust in med mal. When I came into practice, insurance rates were low, and then they spiked, nearly driving our practice out of business. It was horrible. Several local groups went under, and several others were hit with huge costs as their insurers left the market or went belly-up. Ugly times. But also, long ago, and the world looks very different now. Recently we've had no trouble getting multiple carriers to bid on our professional liability insurance, and at competitive rates. We are shifting towards a self-insurance model and currently enjoying the lowest insurance costs in well over a decade.
So I got wondering -- what is really going on in medical malpractice these days? Are real numbers available? The answer turned out to be fairly difficult to find. But a nerd with a computer and a couple of days off work can be a dangerous thing. So I did some legwork (with the help of Austin Frakt and Aaron Carroll of The Incidental Economist, among others) and I was able to come to some decent conclusions.
The data I used came from several sources:
- The AMA has a nice mother lode of (member-only) data regarding medical liability and insurance.
- The Physician Insurers Association of America publishes a claim trend analysis annually, which is also member-only. However, my insurer is a member, so I got a copy of their 2011 report.
- The National Practitioner Data Bank had oodles of public data available, including a top-level summary of reported payments and a HUGE downloadable database of all 900,000 (!!) cases reported since 1985.
- For cost & demographic adjustment I used BLS and Census data.
I had a little trouble reconciling some of the variation in the data sources. For example, the median loss for a closed medical malpractice case in 2010 was $200,000 according to the PIAA, and $135,000 according to the NPDB. This refers to the amount paid to the claimant, whether by judgement or settlement, and excludes the cost of case management and defense. This variation was consistent across the board -- for all cost figures, the PIAA numbers were 15-30% higher. I am not sure why this would be. Not all carriers report to the PIAA; its dataset is much smaller, including only about 20% of all paid claims, so there may be a sampling bias at play. Payments made to claimants other than insurance payments would not be recorded in the PIAA data, and smaller insurers (or self-insured physicians) might be more tenacious in defending and thus the smaller payments might be excluded from that claimset. I would tend to view the NPDB numbers as more definitive. Still, the trends correlated well enough that I could draw some reasonable conclusions from the data. Additionally, the NPDB, which casts the wider net, gave better data on the total volume of cases, and the PIAA data had good numbers on the cost of defense.
The top line conclusion:
Medical malpractice costs are down quite a bit — about 35% from their 2001 peak:
This includes all professional liability claims against all individual providers: physicians, dentists, nurse practitioners, nurse anesthetists, etc. The vast majority is physician cost. I factored in the costs of defense as well, since that generally contributes about 25% of the cost of the median case. Note that the scale of the graph is adjusted to highlight the trend. Again, I suspect the PIAA line significantly overstates the actual cost, but I included it to show its trendline against the NPDB trend. I also note that the 2001-2003 peak in medical malpractice insurance rates did correlate with a historic high in malpractice losses. (At the time there was much speculation that the insurance companies were exploiting their rate-setting power to recoup reserve losses from the stock market implosion.) The actual cost is probably slightly higher since claims management and defense costs for cases the physician won are not included.
The decline in costs is not driven by increased losses per claim, which have remained remarkably stable over time:
Note that these costs are adjusted for inflation, and exclusive of defense costs. The median claim loss was in fact highly stable at the above-noted levels ($135,000), but the average cost was more reflective of real-world experience, I thought, since it shows the effect of the occasional very large verdicts/settlements. Which as it turns out, do not seem to be on the rise; quite the opposite.
However, the claim frequency is down dramatically. This seems to be the major driver of the decreased cost:
And even more when you control for population growth:
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So what we are seeing is a 40% reduction in the frequency of claims which result in payment to a patient. Not claims made, but closed claims with payments. Important distinction.
What's the driver of this trend? I have no idea. There could be fewer cases being filed, or physicians and insurers could be more aggressive in defending claims. Tort reforms were enacted in a couple of states, but I do not think that has contributed enough to change the national picture.
One suspicion I may have is that the lawyers who specialize in med mal cases may simply be more selective in the cases they are willing to take to trial. The costs of defending a malpractice claim has risen from $35,000 to about $50,000, and claims which go to trial cost about $150,000. If the plaintiff's costs are anywhere near that scale, it's a very expensive and risky proposition for a plaintiff's attorney to front that sort of money in the hope that they will win at trial. Since the very few cases which go to trial (about 8%) result in a defense verdict the vast majority of the time (~90%), it's quite possible that many lawyers are discouraged from gambling on a case which is anything other than a sure win. It's also possible that physicians (and their insurers) have become more savvy in settling losing claims quickly and at less cost.
There's a lot more to glean from the data, and when I get a chance I intend to break out the state-level distributions. I'm curious to see whether the "crisis" states are really in crisis, and how well state-level premiums really correlate with the case rates. But, in summary, it is accurate to say that malpractice cases and costs are significantly down across the nation. I would add, as a cautionary note, that the history of medical malpractice is quite cyclical and unpredictable, and it's highly likely that in the future we may —will — see another crisis when rates spike.
But for now, make hay while the sun shines!
I will post the raw data for those who are curious when I get a chance to clean it up a bit -- it's right now all helter-skelter in a huge, ugly spreadsheet.