The Medical Malpractice Insurance Crisis – Affecting Our Access to Affordable Health Care

The obstetrics ward at a local hospital closes. Numerous obstetricians no longer deliver babies, they now only practice gynecology. Talented surgeons leave the practice to return to academic medicine. Florida medical practices trying to recruit the best and the brightest now lose out on recruits to states with a more favorable medical malpractice environment. Physicians relocate practices from Florida to other lower malpractice cost states.

Does it sound like science fiction? Maybe the premise to an episode of ER where the emergency room is flooded with a large number of baby deliveries for which it is not prepared?

Unfortunately, the above scenario is not set off in the future or in Hollywood but is occurring right now in the state of Florida, and specifically in Southwest Florida.

Several events have conspired to skyrocket the cost physicians and other health care providers pay for malpractice insurance. The terrorist attacks of September 11, 2001, were the largest insurance event in history, effectively wiping out the reserves of the world’s largest reinsurance companies. The subsequent stock market crash also destroyed the investment income portfolios of those same companies, meaning many of them no longer had the capacity to write new reinsurance policies. The resulting crunch in the reinsurance market had a domino effect that most dramatically affected one of the least profitable arms of insurance, professional medical liability insurance. The same reinsurance companies that insured the World Trade Center offered reinsurance, effectively “back-up” insurance, to the insurance companies insuring Florida’s physicians. Buying reinsurance enabled those companies to write more insurance than their cash reserves would otherwise allow. The unavailability of reinsurance, combined with their own stock market losses, left many of Florida’s medical malpractice insurance carriers with insufficient reserves to write as many policies as they had previously written. At the same time, larger than expected losses, due to high jury verdicts, combined with the loss in investment income to create substantial losses for those companies. As a result, many of the companies writing malpractice insurance simply refused to offer that coverage any longer.

Physicians were left to scramble to find coverage from the few remaining carriers at outrageous cost increases. Most Florida physicians saw their malpractice premiums increase between 30% and 50% this year. Most pronounced has been the increase in obstetrical premiums, which have risen to an average of more than $100,000 for a mere $250,000 in coverage limits. Considering the 50% or more increase from last year, this has been an especially difficult blow to obstetricians. Contrary to popular belief, obstetricians aren’t the most well paid of the physician specialties. As a result, just this year’s premium increase cost many of them at least 25% of their take-home pay. Not many of us can readily handle a 25% pay cut, yet more is on the way. Conservative estimates place obstetrics premiums next year at an additional 30% increase. Under similar circumstances, Nevada, the state with the biggest malpractice problem, lost more obstetricians this past year than opened practice in Nevada in the previous decade (a decade in which Nevada was a national leader in population growth.) Clearly, the situation is at a crisis point.

Increased malpractice costs have also affected the cost of having a child. Most obstetricians deliver between 100 and 200 babies per year. A $100,000 malpractice premium means that built into the cost of delivery of each baby born is between $500 and $1,000 in malpractice insurance cost. Next year, we can anticipate between $150 and $300 in additional cost per delivery. This cost is passed on to you through increased medical costs and increased health insurance premiums.

It is not limited to obstetrics. All specialties have seen significant increases, with neurosurgery, spinal surgery and cardiac surgery leading the way. All pediatric surgeries have seen disproportionate increases in malpractice costs. Hospital costs have increased, and it is now estimated that as much as $5,000 per bed per year of nursing home cost is malpractice insurance-related.

What can be done?

The medical societies are pushing strongly for legislative tort reform that would limit the “pain and suffering” type damages that can be attached to malpractice claims. Similar limits have helped curb malpractice cost increases in California and have kept good physicians from leaving that state. An economic turn around and some good insurance years may help the situation, but both are longer-term solutions.

As citizens, we can be aware of the issue, be more patient with our physicians this year and ask our legislators to address the problem. And, perhaps most importantly, before filing an insurance claim or before granting large pain and suffering damages as a member of a jury, we can think about the impact such actions have on our own ability to receive quality health care.