CONTACT: Joanne Doroshow 212/267-2801

J. Robert Hunter 703/528-0062

NEW STUDY SHOWS AVERAGE MEDICAL

MALPRACTICE PAYOUTS ONLY ,000; VIRTUALLY

UNCHANGED IN 10 YEARS

In an astonishing refutation of insurance company claims that medical malpractice verdicts are "exploding" and forcing dramatic rates increases, a new analysis shows that insurance companies are paying victims of medical negligence on average only ,607.03. This is only slightly more than the average payout was a decade earlier -- ,093.31. Moreover, medical malpractice costs, as a percentage of national health care expenditures, are at an all time low, 0.55 percent.

The analysis, conducted for the Center for Justice & Democracy (CJ&D) by actuary J. Robert Hunter, Director of Insurance for the Consumer Federation of America, examined year 2000 insurance data, the most recent available from the National Association of Insurance Commissioners and A.M. Best and Co. Hunter, former Texas Insurance Commissioner and Federal Insurance Administrator, also cites Best's Review, which notes that medical malpractice is the eighth leading cause of death in the United States, killing more people than breast cancer, AIDS and traffic deaths. He concludes, "Medical malpractice insurance is amazing value, considering that it covers all medical injuries for about one-half of one percent of health system costs."

According to CJ&D Executive Director Joanne Doroshow, "Some recent reports are warning of an impending nationwide medical malpractice insurance crisis. Insurance companies are blaming judges and juries for the decision to make insurance unaffordable for doctors. This is a bogus public relations scam intended to pressure lawmakers to unfairly limit the rights of injured Americans to take negligent doctors to court. As Best's Review points out, several factors having nothing to do with lawsuits are to blame for possible rates increases nationwide, including earlier underpricing by insurance companies, rapidly changing consumer markets and the nation's conversion to managed care."

Copies of the study can be obtained from CJ&D at 212/267-2801 or center@centerjd.org

Center for Justice and Democracy

P.O. Box 3326 Church Street Station

New York, New York 10008-3326

info@centerjd.org

212.267.2801

Fax: 212.764.4298

medical malpractice is the 8th leading cause of death.

And yet the average award is only ,000.

That simply doesn't add up.

But I'd believe that it was a scam if it wasn't for the fact that almost ALL med. mal. insurers have been applying for premium rate increases nationwide.

If the rate increases were based on anything other than increasing claims histories, then at least one or two carriers would be able to reduce rates to increas market share. But it ain't happening.

Go figure.

Dr. Eve L writes:

"I'd believe that it was a scam if it wasn't for the fact that almost ALL med. mal. insurers have been applying for premium rate increases nationwide."

So if everyone tells the same lie, that makes it believeable? If everyone says the sky is green, it suddenly changes color?

"If the rate increases were based on anything other than increasing claims histories, then at least one or two carriers would be able to reduce rates to increas market share. But it ain't happening."

This is assumes that the insurance industry works like a fairy-tale competitve market. But it doesn't. It's a highly collusive market and it always has been. Sure, there's competition in certain arenas, within certain parameters, but historically, the industry has always missed a number of significant "rational opportunities" that according to the fairy tale it shouldn't have missed. Take health care, for instance. It's now a humongous cash cow. But the insurance industry didn't create that market. The "market" was created by outsiders, by non-profits such as Blue Cross/Blue Shield. People who COULDN'T get insurance from the industry found ways to collectively self-insure. It took decades for the industry to realize it could make money in the field.

Dr. Eve L also writes:

"medical malpractice is the 8th leading cause of death."

"And yet the average award is only ,000."

"That simply doesn't add up."

Sure it adds up--it adds up to a lot of questions. But first off, you should realize that the ,000 average includes all sorts of cases, of which deaths are necessarily a small percentage. One point that the authors of this report have made is that insurance companies used to devote a lot more time & money to reducing malpractice. They tried to limit their liability at the front end, rather than focusing on raising rates (making most of their money from investments), fighting lawsuits, and trying to destroy your right to sue.

There are a lot of complications between the real world and the world of fairy-tale free markets. Just one of them is the problem of imperfect information. The entire insurance industry is bedevilled by this problem--which just won Joe Stiglitz and two others the most recent Nobel Prize in economics. If the insurers paid more attention to getting better information about their risks--and then reducing them, this would move the entire market more in the direction of the mythical market with perfect information. But there's no inherent reason why an individual insurer should choose to do this. They will make their choices based on the total environment in which they operate. The more we reduce the cost of bad insurance risks, the more we undermine such incentives--pushing us in exactly the wrong direction.