They’re at It Again: Health Insurers’ “Busted” and “Rotten Apple” Ads Attacking Medical Liability Have No Basis in Fact

Aug. 4, 2005

They’re at It Again: Health Insurers’ “Busted” and “Rotten Apple” Ads Attacking Medical Liability Have No Basis in Fact

Insurers Seeking to Limit Victims’ Ability to Recover Damages In the Courts Dramatically Overstate the Costs of Medical Liability

WASHINGTON, D.C. – Following a misleading advertising campaign this spring, a health insurance industry group, America’s Health Insurance Plans, is back with a second effort that once again sensationally overstates the cost of the medical liability system.

Two new ads appearing in local publications and the District’s public transportation system show a rotting apple and a pair of handcuffs to bolster the claims of America’s Health Insurance Plans that “with the money D.C. residents will spend this year on the medical liability crisis,” the city could hire 4,728 new teachers or 3,463 new police officers. “These numbers are so fraudulent the purveyors should be prosecuted for false advertising,” said Frank Clemente, director of Public Citizen’s Congress Watch. “This is just the latest scare tactic from a group that wants to boost profits by denying compensation to victims of medical negligence.”

In fact, as Public Citizen found in a recent report, malpractice litigation and awards are on the decline in the District, and there is no evidence that lawsuits or the legal system are responsible for higher malpractice insurance premiums faced by some doctors in the city.

America’s Health Insurance Plans claims that the annual cost of the medical liability system nationally is $134.5 billion, with the District of Columbia’s share, based on population, at $255.6 million. But those numbers are bogus:

  •  About 80 percent of the cost, the group claims, is attributable to unnecessary tests and procedures done as “defensive” medicine aimed not at better patient care but at heading off lawsuits. The group cites a 2002 report from the Bush administration’s Department of Health and Human Services (HHS), which quotes a 1996 study by two economists, one of whom – Mark McClellan – is now a top-level HHS administrator. But two leading non-partisan federal investigative agencies – the Government Accountability Office (GAO) and the Congressional Budget Office (CBO) – have rejected the defensive medicine theory. “Some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians or by the positive (albeit small) benefits to patients,” the CBO said in a January 2004 report. “On the basis of existing studies and its own research, CBO believes that savings from reducing defensive medicine would be very small.” An August 2003 GAO study called into question the results of the research relied upon by the insurers and rejected applying results of the 1996 report to the overall U.S. health care system. While medical provider groups assert the existence of defensive medicine, they acknowledge that it is difficult to measure and that information is not available to document its extent or costs, the GAO said.
  • The remaining 20 percent of the cost is attributed to medical liability expenses as described in a Towers Perrin report on U.S.tort expenditures. But half the “costs” reported are compensation from wrongdoers to victims for injuries suffered – expenses that taxpayers, families and non-profits would otherwise bear if those liable for damages did not pay for them. Also among these other costs are insurance company marketing, overhead and profits. In addition, even Towers Perrin says that its calculations do not measure the benefits of the tort system, such as warning the public about hazards and deceptive practices or encouraging better quality products and services. The report also draws no conclusion as to whether liability costs are too high.

The best way to gauge the impact of medical malpractice is from the standpoint of those whom the system is supposed to serve – patients. In 2004, the amount of damages paid on behalf of District doctors to their patients, through jury verdicts or settlement of malpractice cases, totaled $19 million, according to a Public Citizen examination of malpractice payments reported to the National Practitioner Data Bank. The Data Bank is a federal program that tracks physician malpractice and disciplinary actions. The $19 million total is only 7 percent of the amount claimed by the insurers group.

With doctors and other insurers, America’s Health Insurance Plans is seeking to cap the amount of damages that victims of medical malpractice can recover in legal actions. Legislation limiting awards is under consideration in the current session of Congress and is being pushed by Mayor Anthony Williams. But Public Citizen has found that such targeting of the legal system is off the mark. In a May report on malpractice in the District, Public Citizen found that:

  • The value of medical malpractice payments to victims made on behalf of District doctors has declined 52.5 percent from 1991 to 2004 when adjusted for medical inflation. The decline was 64 percent from 2001 to 2004 – the peak years of the “crisis.”
  • The annual number of malpractice payments has declined 14.5 percent from 1991 to 2004, dropping from 55 to 47. Moreover, total payments have dropped 35.6 percent from 2001 to 2004, from 73 to 47, when warnings about the “crisis” began.

Additionally, the number of medical malpractice case filings is down 31 percent in the past decade, from a peak of 213 in 1997 to 148 in 2004.

“This latest campaign from the insurers is just another effort to ignore the facts and, through exaggeration and distortion, try to scare lawmakers into approving legislation that would produce windfall profits,” said Clemente.

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