Works In Progress - November 2005

Why have Washington doctors chosen to ally themselves with the two industries most responsible for the shameful state of health care in this country: the insurance industry and the pharmaceutical companies?

Initiative 330 was filed by doctors, but the financing is largely corporate. Together with hospitals, the insurance industry and the pharmaceutical lobby (PhRMA), they have amassed a war-chest of over $8 million -- and counting.

The issue at the center of I-330 is the high cost of malpractice insurance. Proponents cite "runaway jury verdicts" as the root problem and strongly imply that rates will come down if awards are capped. Yet, most studies find no correlation between premium rates and litigation awards -- which might be why the measure contains absolutely no promises or provisions for actually reducing premiums for doctors if it is passed into law.

In fact, the entire initiative is founded on a precarious aggregation of dubious claims.

What I-330 sponsors claim

Runaway Verdicts -- Proponents of I-330 claim that excessive "jackpot" jury awards and settlements are on the rise.

In its General Election Issues Guide, the League of Women Voters (LWV) examines two studies addressing the question of runaway verdicts: a study by the Office of the Insurance Commissioner (OIC) released in February 2005, and a September 2005 study by Public Citizen. (The references in this article to those studies are taken from the LWV election guide.)

The OIC found that in the state of Washington, between July 1994 and June 2004, the average amount per claim increased annually by 0.8% less than the rate of inflation for heath care costs. The study showed that, of the total 10,073 claims in the ten-year period, only 27% resulted in payment to the injured party. For the remaining 73%, no damages were awarded. Only fifty cases resulted in a jury verdict in favor of the plaintiff. Of all 10,073 claims, only 2% resulted in awards exceeding $1 million.

Public Citizen concluded that in Washington state "the number and value of medical malpractice payments made to patients has significantly declined and jury verdicts have remained flat. . . . Rather than providing windfalls to patients with minor injuries, Washington doctors' malpractice payments overwhelmingly benefit those most seriously injured by doctors."

A new study (similar to the previous one) by the OIC, released in early October, examined data for the period between July 1995 and June 2005. According to the Seattle Times (10/5/2005), Deputy Insurance Commissioner, Beth Berendt, indicated that, "she had expected to see extraordinary claims, high damage awards and far more verdicts for patients, based on anecdotes she had heard" during recent debates on the state initiatives addressing malpractice. But, "it just wasn't there," she said.

The Seattle Times: "In fact, the report showed there were only 45 jury verdicts favoring plaintiffs out of 10,212 closed cases for the 10-year period, down from 50 in the period reported in February.

"Including out-of-court settlements, there were 48 payments for damages that topped $1 million between 1995 and 2005, up from 44 in the earlier period. . . . In the February report, overall damage awards were increasing by more than 4 percent a year. The latest report shows that increase has slowed to 3.2 percent a year."

In a press release on 10/4/2005, insurance commissioner Mike Kreidler said, "The results of this study suggest that medical malpractice claim payments have stabilized over the last few years, which should be good news for physicians and surgeons -- at least in the near term."

Premium rates -- Initiative 330 sponsors claim that precipitous increases in malpractice premium rates over recent years are a direct reflection of payments to litigants.

In examining the question of cause and effect between damages and premiums in the state of Washington, the League of Women Voters focus on two studies: one by Americans for Insurance Reform (AIR) and a study prepared for the Center of Justice and Democracy (CDJ) in July 2005. (Again, references here are taken from the LWV election guide.)

The AIR study compared insurance premiums with "lost costs" -- the amount of each premium dollar paid out in malpractice claims. "The study found that, over the past five years, malpractice insurance premiums have skyrocketed, but that lost costs rose only 4% per year -- near the rate of medical inflation."

AIR found no relationship between malpractice premium rates and damage awards -- whether settled by a jury or out-of-court. "The study also noted that states with caps on non-economic damages have seen lost costs rise faster than in some states without caps."

The CJD study - whose analysis focused on the "15 best-rated medical malpractice insurance companies" in the U.S. - "determined that the surge in malpractice payments over the past five years had no corresponding surge in claims payments." In fact, the study concluded that these insurers have increased their surplus over this period by more than a third, yet continue to charge more for malpractice premiums than lost costs, present or future, would justify.

So, if awards for damages do not explain increases in malpractice premiums, then what does?

The LWV election guide also discusses a comprehensive analysis conducted in 2003 by the U.S. General Accounting Office (GAO) of all factors contributing to medical malpractice insurance rates. The GAO found that "multiple factors have contributed to increased premium rates." For instance, the GAO cites market conditions, including decreased investment income by malpractice insurers when bond rates fall. Although it did appear that, in some states, increased losses on malpractice claims were a factor, analysis was limited due to the "unavailability of comprehensive data."

Opponents of I-330 have often cited cycles of the market as a factor in malpractice rates. From an article by Nina Shapiro in the Weekly (7/27 -- 8/2, 2005): "According to state Insurance Commissioner Mike Kreidler, 2001 and 2002 were tough for the cyclic insurance market, in part due to the overall weak economy. Kreidler says conditions are changing. This year, Physicians Insurance, by far the state's largest provider of malpractice insurance, lowered its premiums by 7.7 percent in the face of record profits."

Doctors in Flight -- Initiative 330 sponsors claim that doctors are fleeing our state because of the high cost of malpractice insurance. Yet, the previously cited Public Citizen study showed that, "between 1992 and 2005, the number of doctors in Washington increased from 294.3 to 322.9 per 100,000 in population. The number of specialists also increased significantly, for internists, obstetricians and ER physicians."

These findings are based on "the number of active licenses issued to physicians in any given year during the course of the study." Physicians groups and others who argue that Washington state is experiencing a net loss of doctors have criticized this method since doctors may hold a license without actually practicing. Yet, they offer no statistics which challenge these figures, relying instead on anecdotal accounts of doctors who claim to have left the state because of insurance premiums.

(Another reason often given when doctors leave Washington state are the comparatively low reimbursement rates for federal health insurance programs: Medicare and Medicaid.)

What I-330 would do

Limit damages -- Initiative 330 would place a $350,000 cap (with NO real-world exceptions) on all non-economic malpractice damages. It would still allow full compensation for economic damages such as medical costs and lost wages.

But if a person is unemployed at the time the injury occurs, such as a stay-at-home Mom, there is no compensation for future wage loss - regardless of work history. Nor does the cap on non-economic damages take into account the seriousness of the injury.

Director of the Washington State Medical Association and I-330 spokesperson, Tom Curry, was asked to cite examples of frivolous lawsuits in Washington state. He referred to a case in Snohomish County which resulted in one of the largest malpractice jury awards in state history -- $17.1 million. "I don't know the specifics," he said. "But I would characterize a $17 million judgment as excessive on the face of it."

This quote is taken from the previously mentioned Weekly article by Nina Shapiro. The article discussed the case at some length, describing a series of errors resulting in injuries which left a now 6-year old boy "unable to move his limbs or talk or see properly or receive food other than from a feeding tube. His mother, all these years later, has to wake up several times a night to care for him."

According to the boy's attorney, economic damages do not include care attendants or special equipment like hydraulic lifts or account for any of the "profound, excruciating life changes that inevitably accompany" the kind of injury experienced by this boy and his family. (Nina Shapiro)

Limit plaintiffs' attorney fees -- Initiative 330 would impose strict limits on fees collected by attorneys representing plaintiffs in malpractice and wrongful death suits. These limits would not apply to attorneys representing the defendants in these cases, creating a huge advantage for defendants and their insurance companies -- not only in the courtroom, but also making it far less likely that an injured party could find and afford representation in the first place.

The rationale offered by I-330 supporters: to ensure that injured parties receive a greater share of a damage award and to create market pressures that make legal representation more affordable to more people.

Allow periodic payouts -- Initiative 330 allows the insurance companies to pay a malpractice damage award over a period of 20 to 30 years or more. If the injured party dies before the money is paid, the insurance company will keep the balance rather than pay it to that person's family.

Binding arbitration -- Initiative 330 allows care providers, hospitals, nursing homes, HMOs and insurance companies to require patients to sign binding arbitration contracts as a condition of service. The measure provides the exact language to be used in these contracts, which relinquishes the patient's right to a jury trial if something goes wrong: "By signing this contract you are agreeing to have any issue of malpractice decided by neutral arbitration and you are giving up your right to a jury or court trial."

I-330 opponents argue that these mandatory binding arbitration clauses will likely become standard procedure if the measure is passed. This is the component of I-330 which a Seattle Times editorial calls "an untenable flaw." (10/2/2005)

I-330 is an assault on patients' rights

There's no denying that malpractice premiums are exorbitant -- particularly for specialties like obstetrics and neurosurgery. The economic impact on doctors is real; their anxiety is valid. But instead of targeting the insurance industry for the gouging it clearly inflicts on them, doctors have instead chosen to join forces with this industry in a multi-frontal assault on patients' rights.

This isn't about reducing premiums; it's about minimizing liability for doctors, hospitals, and insurance companies. Surely the pharmaceutical industry is lending its support in hopes of opening the door to similarly reducing its own liability.

Eventually, as a society, we must radically reform our entire health care system. This will require taking on the insurance and pharmaceutical industries for the massive profits they rob from our health care delivery resources. In this effort, we will need doctors on our side, not in bed with these robber barons.

As a registered nurse, I can say that we are fortunate to have a wonderful community of physicians in our region. Our doctors need to know that we will support them and stand with them to bring about meaningful malpractice reform -- which must challenge the insurance industry rather than cater to it.

Vote NO on I-330.