Kevin Drum has a post on Health Care and Malpractice and argues that there is no reason to believe that there is crisis in healthc are due to malpractice claims. His conclusion is thus,
Analysts on all sides of this debate agree that reform of the malpractice process would be a good idea. But for the most part, the skyrocketing premiums we’ve seen over the past couple of years are the result of insurance company incompetence and greed, not actual increases in malpractice payouts. Until everyone figures this out, there’s not much chance of making any real progress.
While I think he has made a good case that there is no crisis due to malpractice lawsuits and payouts, I don’t see the incompetence and greed angle. Well, okay the greed angle I can see if one means profit maximization, but the incompetence? Let me see if I have this straight, incompetent companies are raising rates and there are no competitors out there smart enough to provide the same service with lower rates? Have I got the argument down?
How about the problem is that people keep thinking that insurance should cover things that really shouldn’t be covered by insurance. For example, pregnancy is not something that should be covered by insurance in the sense that a single male is never going to get pregnant. If he is stuck in a pool with women who have such benefits then the single male is helping to subsidize the reproductive decisions of others (or more simply the single males insurance rates are going to be higher through no fault of his own). If we keep adding on services like this to insurance the premiums are going to go up. Is this really all that shocking? Now maybe this is the way it should be done, but then don’t complain if insurance premiums go up.
Update: Damn, I should have known better. Kevin is once again playing fast an loose with the data and the study. He selected a graph that shows virtually no growth in malpractice payouts (including awards and settlements). The problem is that his graph is as a portion of overall health care spending. Thus, if say health care spending goes up by 10%/year and malpractice spending goes up by 10%/year then you’d see a flat graph…which is precisely what we see.
In reading the actual article we see that malpractice awards have gone up quite a bit.
The average payment grew 52 percent between 1991 and 2003 (4 percent per year) and now exceeds $12 per capita each year.
Now, this may not imply a crisis (and note a crisis in terms of malpractice premiums and malpractice payouts are different issues), but it sure doesn’t imply that malpractice payouts aren’t going up which is what Kevin’s graph shows. Kevin also claims that the number of judgements gradually went down, but the article says different.
The number of payments (which comprises the number of judgments and settlements) remained stable over the study period.
Now Kevin could say he was talking about judgements vs. payouts, but in looking at the data on settlements in Exhibit 1, I see that judgements are also pretty flat for the sample period. Further, the severity of payouts has gone up considerably, about 52%. According to the article in 1991 the average payout was $173,018, and by 2002 the average payout was $263,101.
Finally in the discussion section of the paper the authors themselves suggest that there is a crisis in regards to malpractice premiums and their rate of increase.
Payment size and frequency represent only one dimension of the currentmedical malpractice crisis.
In short, don’t look to Kevin Drum to represent a study accurately.
