Most medical cases are taken on contingency. This causes a huge disincentive for the plaintiff's lawyer to even take a medical malpractice case. So, unless an attorney or law firm is just swimming in cash, these cases go nowhere.
The cost is also not from the settlements that are awarded in malpractice cases.
The cost is also not derived from "frivolous lawsuits." That's not to say that there are not frivolous lawsuits. Sure there are. But, they simply do not take anywhere near the time and resources that is claimed.
There is a significant amount of money spent on litigation in the medical industry, but it is spent by the insurance companies trying to beat cases of actual wrongdoing. When there is actual wrongdoing involved, these cases take much more time and much more money to litigate.
Insurance companies use the Ronald Reagan approach. Spend money until your adversary does not have the resources to continue. No worries though, we can pass that cost on to the system.
This is just a myth painted by the PR (read: Propaganda) firms and lobbyists that work for the insurance companies.
What are the major costs?
After analyzing the growth in medical liability premiums J. Robert Hunter, director of insurance for the Consumer Federation of America concluded that premium rates do not track the amount of claims paid but instead rise and fall with the state of the economy. This is true across insurance lines. In 2002, for example, the costs of many types of insurance rose in Florida, medical malpractice by 26 percent, health insurance by 20-28 percent, auto by 10.6 percent, homeowners by 15.7 percent.[18]
When investment income was high insurance companies low-balled premium rates to attract more customers and thus more investment capital. During the 1990s insurance companies used the hefty returns from stock market investments to reduce premiums by an average of 32 percent.[19] According to the Government Accounting Office (GAO), "during the 1990s, insurers competed vigorously for medical malpractice business and several factors, including high investment returns, permitted them to offer prices that, in hindsight for some insurers, did not completely cover their ultimate losses on that business. As a result of this, some companies became insolvent or voluntarily left the market, reducing the downward competitive pressure that had existed through the 1990s."[20]
When stock prices and bond interest rates fell, insurer income fell, prompting them to hike rates. The Government Accounting Office (GAO) reports, "from 1998 to 2001 medical malpractice insurers experienced decreases in their investment income as interest rates fell on the bonds that generally make up 80% of these insurers' investment portfolios…a decrease in investment income meant that income from insurance premiums meant that income from insurance premiums had to cover a larger share of insurers' costs."[21]
A January 2004 report by the Congressional Budget Office(CBO) concludes, "annual investment returns for the nation's 15 largest malpractice insurers dropped by an average of 1.6 percentage points from 2000 to 2002—enough to account for a 7.2 % increase in premium rates. That figure corresponds to almost half of the 15 % increase in rates estimated by the CMS."[22]
If you want the links to the footnotes to work, you'll have to go here. Go read the rest.
-The Oklahoma Hippy
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