June 2009

Time to Seize the Opportunity to Fix Med Mal

As Albany came to a screeching halt last month, one long-simmering issue nearly boiled over—medical malpractice insurance costs. On July 1, a yearlong moratorium on  “med mal” rate hikes expired, setting the stage for potentially massive increases in premiums and a resulting loss of doctors who could no longer afford the insurance—particularly in fields like obstetrics and neurosurgery. 

An immediate crisis was averted when the Department of Insurance declined to approve rate hikes, and the post-coup State Senate passed an Assembly-backed bill that would extend the moratorium for another year. Governor Paterson is expected to sign the extension into law.

While the rate freeze may prevent doctors from leaving the State in the short term, it’s a far cry from the comprehensive, long-term reform needed to decrease medical malpractice insurance costs. The Band-Aid approach epitomized by rate freezes fails to solve the problem; it simply postpones dealing with the issue for another year. And, as so often is the case, delays will make the problem harder to tackle in the future.

Already, New York obstetricians and gynecologists face some of the most expensive liability rates in America, making it difficult to remain in practice. According to the American College of Obstetricians and Gynecologists, only 1,800 of the approximately 4,000 board-certified physicians in New York still practices obstetrics and the number is decreasing. Eight counties have no practicing obstetrician at all.

The need for med mal insurance reform has been apparent for years, but in the last year, it reached a tipping point: Doctors and hospitals couldn't afford rising insurance rates, while insurance companies barely had enough cash to pay out legitimate claims.

When the rate freeze went into effect last year, doctors and hospitals faced potential malpractice premium increases of 14%—when some doctors were already paying upward of $180,000 a year in insurance. While the freeze spared doctors and hospitals higher costs, it put New York's insurers on a road to bankruptcy.

Two insurers still do business in New York. One has a negative surplus of $43 million and the other has approximately a third of the reserves it needs to run an effective business. Both are in danger of becoming wards of the State.

In June, the New York State Health Foundation hosted a forum on this issue with State officials, the insurance industry, hospitals, doctors, consumers, lawyers and business groups. The consensus was clear—there are several smart proposals we should explore as part of a comprehensive reform process:

Establishing patient compensation funds. These funds, particularly in areas like birth related injuries, pull some of the highest cost cases out of the litigious court system and provide families life long care and compensation through an alternate, no-fault process.  They have shown promising results in states like Florida and Virginia, where they hastened the time between when claims are filed and awarded and reduced overhead costs. They can struggle if they are undercapitalized, and require long-term commitments from both government and stakeholders to succeed.

Setting up disclose-and-offer programs.  Health care providers would talk with patients early on about medical errors, apologize, and make prompt offers of compensation.  Patients have the choice to reject the offer and retain their rights to sue, but few choose to go to trial. Programs through the University of Michigan and COPIC Insurance Company have seen some good results, decreasing the number of claims and costs and promoting patient safety. 

However diverting so many cases from the courts can be politically controversial, and providers often balk at opening themselves up to greater legal risk in telling patients about errors immediately. 

Creating financial caps on damage awards.  Caps are often mentioned as a solution to fix the med mal system but they have a mixed record of success. The best evidence shows that caps lower risks for insurers by modestly slowing the growth of malpractice premiums. Other studies find no effect. While caps should be kept on the table, they are politically divisive and other approaches will likely stand a better chance of implementation.

Each of these approaches has its own challenges. None, alone, would solve the problem. But all should be considered, along with other creative ideas. Leaders from multiple sectors are ready to come together to find a solution to this issue.

Some work is already underway. Here in New York, the Common Good Institute, Inc. is designing a disclose-and-offer type program with the assistance of a grant from the Foundation. The program will be designed so that participating health providers would disclose medical injuries to patients immediately, and patients would receive an initial offer of compensation. If patients decline the initial offer, the dispute would then be submitted to arbitration, an alternative to litigation, for a quicker verdict. Once it completes its design, Common Good hopes to begin signing up providers statewide to participate in its program. 

We need more movement of this type.

Having bought themselves more time, the governor and Legislature should seize the opportunity to convene these stakeholders and implement progressive medical malpractice reforms. We cannot continue to let this issue simmer, driving insurers and doctors out of business and reducing the quality of care for patients.