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Rising doctors' premiums not due to lawsuit awards

Study suggests insurers raise rates to make up for investment declines

Re-igniting the medical malpractice overhaul debate, a new study by Dartmouth College researchers suggests that huge jury awards and financial settlements for injured patients have not caused the explosive increase in doctors' insurance premiums.

The researchers said a more likely explanation for the escalation is that malpractice insurance companies have raised doctors' premiums to compensate for falling investment returns.

The Dartmouth economists studied actual payments made to patients between 1991 and 2003, the results of which were published yesterday in the journal Health Affairs. Some previous studies have examined jury awards, which often are reduced after trial to comply with doctors' insurance coverage maximums or because the plaintiff settles for less money to avoid an appeal. Researchers found that payments grew an average of 4 percent annually during the years covered by the study, or 52 percent overall since 1991, but only 1.6 percent a year since 2000. The increases are roughly equivalent to the overall rise in healthcare costs, said Amitabh Chandra, lead author and an assistant professor of economics at the New Hampshire college.

''One of the things we know about medical malpractice payments is that they're usually made when an injury occurred," he said. ''The injury has to be treated. And if it's more and more expensive to treat injuries, then that will be reflected in payments."

Meanwhile, malpractice insurance premiums for internists, general surgeons, and obstetricians have skyrocketed since 2000, jumping 20 to 25 percent in 2002 alone. In Massachusetts, ProMutual Group, which covers about one-third of the state's doctors, raised rates an average of 11 percent last year, 20 percent in 2003, and 12.5 percent in 2002. Some specialists, such as obstetricians, now pay almost $100,000 annually for their malpractice insurance. ProMutual executives said they will not raise premiums this July, primarily because increases in the number of claims have slowed.

''It's not payments that's causing this," Chandra said. ''The simple explanation that comes to mind is the underwriting cycle. If they're making less money from the investment side of things, it's going to cause [insurance companies] to raise rates."

The study's conclusions are sure to generate praise from some malpractice lawyers and outrage from many doctors and insurance company executives, who argue that jury awards are out of control and the solution is a cap on noneconomic damages for plaintiffs, commonly referred to as ''pain and suffering" awards.

The American Medical Association, a national organization based in Chicago that represents doctors, and the Physician Insurers Association of America, a coalition of malpractice insurers based in Maryland, are lobbying for a nationwide $250,000 cap, and President Bush has made a cap on noneconomic damages a key component of his malpractice reform proposal.

Another study published in the same issue of Health Affairs found that doctors are gravitating toward states that cap malpractice awards, particularly obstetricians. Between 1975 and 2000, the number of obstetricians increased 40 percent in states that enacted caps during the 1980s, compared to an 8 percent rise in states without caps.

Doctors and insurance executives criticized the Dartmouth study on payments for several reasons.

''We don't think this study will have much effect because there are too many other studies that contradict it," said Dr. Donald Palmisano, past president of the medical association and a surgeon in New Orleans.

He said other studies have found that doctors' malpractice premiums increased more quickly in states without caps on pain and suffering, bolstering the group's position that caps are a solution to the problem.

Dartmouth researchers drew their data from the National Practitioner Data Bank, to which insurers are required to report payments made on the behalf of physicians. The physician insurers association as well as the federal government have criticized the data bank because payments to hospitals are not reported -- unless a payment also was made to a doctor in the case. Because of this, Chandra acknowledged, his study could have slightly underestimated payments.

Dr. Barry Manuel, ProMutual's chairman and a surgery professor at Boston University, said that study's authors also did not account for the rising cost of defending malpractice cases. Last year, ProMutual paid $97.4 million to settle claims, plus another $20.5 million to defend unsuccessful claims and $11 million to defend claims in which the patient was successful in winning a monetary settlement or award.

''What we've seen at our company is there's been some moderation in frequency of claims but the severity continues to rise," Manuel said.

Marc Breakstone, a Boston malpractice lawyer, called the Dartmouth study a ''beacon of truth. This absolutely proves that the propaganda of the AMA and the PIAA is just that, it's nothing more than histrionics," he said.

Liz Kowalczyk can be reached at

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