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Medical Malpractice Insurance Premium Spikes in New Jersey a Result of Economic Cycle, “Repeat Offenders,” Study Finds

Feb. 2, 2003

Medical Malpractice Insurance Premium Spikes in New Jersey a Result of Economic Cycle, “Repeat Offenders,” Study Finds

Overall Insurance Premiums, Malpractice Payments to Injured Patients Have Remained Steady

WASHINGTON, D.C. – The medical malpractice insurance premium spikes in New Jersey are not caused by the legal system but by cyclical economics of the insurance industry, according to a Public Citizen report released today. Frequent medical mistakes and a lack of doctor oversight and discipline jack up costs, are inhumane and threaten the quality of health care in New Jersey, the report concludes.

Contrary to the alarmist rhetoric being spread by the state’s medical and business lobbies, the annual amount of medical malpractice insurance premiums that doctors have paid in New Jersey has barely increased since 1992, data show. The amount of malpractice payments New Jersey insurers make annually to patients who have suffered from doctor errors has barely budged since 1992. Further, the number of malpractice lawsuits filed over the past two years has dropped significantly. In 1998, they numbered 1,776; in 2002, they numbered 1,656.

Public Citizen released the report in anticipation of Monday’s walkout by New Jersey doctors, which Public Citizen believes violates the American Medical Association code of ethics. The code states that “collective action should not be conducted in a manner that jeopardizes the health and interests of patients.”

“Doctors who stage walkouts are falsely demonizing America’s legal system,” said Public Citizen President Joan Claybrook. “Capping damages, which doctors are calling for, will only hurt those who have been most severely injured by doctor errors. The short-term insurance rate increases have nothing to do with the civil justice system and everything to do with insurance industry economics. The long-term problem is a crisis of medical negligence. If the state medical board remains unwilling or unable to seriously discipline doctors with multiple malpractice payouts, then the terrible human and financial costs will continue to cause preventable deaths and injuries.”

Repeat offenders are responsible for most malpractice costs in New Jersey, data show. Between September 1990 and September 2002, 5.5 percent of New Jersey’s doctors made two or more malpractice payouts worth a total of $939.4 million. These represented 61.1 percent of all payments, according to information obtained from the federal government’s National Practitioner Data Bank. Further, 2.1 percent of the doctors made three or more payments, representing 36.9 percent of all payouts. Only 10.8 percent of doctors who made four or more malpractice payments to patients have been disciplined by the state medical board.

According to Public Citizen’s report, Medical Misdiagnosis in New Jersey: Challenging the Medical Malpractice Claims of the Doctors’ Lobby:

  • Medical errors cause 1,316 to 2,930 preventable deaths in New Jersey each year. These errors cost families and communities $508 million to $867 million each year in lost wages, lost productivity and increased health care costs. In contrast, medical malpractice insurance costs New Jersey’s doctors less than $290 million annually.
  • Poor business strategies by Medical Inter-Insurance Exchange (MIIX), which had covered 37 percent of New Jersey’s doctors and announced in May 2002 that it would stop renewing policies, compounded the state’s problems.The state said the company had made ill-fated decisions to expand into other states and to increase its stock market investments.
  • New Jersey health-care providers paid $290 million in premiums for malpractice insurance in 2001, compared with $256 million in 1992. Adjusting for medical inflation (which has averaged just 5.2 percent per year) and a growing number of doctors in the state, this increase in malpractice premiums represents a significant decline in dollar values.
  • Annual malpractice payments to patients by New Jersey insurers have barely increased since 1992. The amount of malpractice payments made by insurers to New Jersey patients in 2001 was $235 million, compared with $231 million in 1992.
  • Malpractice insurance costs amount to only 3.2 percent of the average physician’s revenues.

Solutions lie in reducing medical errors, she said. In addition to effective doctor discipline, states should require hospitals and other health care providers to institute meaningful risk prevention programs. Hospitals should implement measures to curb errors, such as using computers to order and track prescriptions (these can cut errors by 55 percent), requiring proper hand-washing to reduce infections, addressing the nursing shortage and reducing the long hours of medical residents. Also, insurance risk should be spread, reducing the number of classifications of doctor specialties. Risk pools for some are too small and thus overly influenced by: 1) a few losses; and 2) the concentration in a few specialties of doctors handling the highest risk patients. Click here to view the report.

“Doctors are committing malpractice with numbers,” said Frank Clemente, director of Public Citizen’s Congress Watch. “The objective data show that the legal system is not the root cause of this temporary spike in insurance rates. As anyone who has personal investments knows, the stock and bond market, and the decline in interest rates, have caused insurers to lose money. They are now taking it out of doctors’ hides.”