As Chicago Medical Malpractice trial lawyers we are often confronted by people that cite the Medical Malpractice crisis in Chicago, Illinois and nationwide as the primary reason for escalating health care costs. People believe that medical malpractice lawsuits have resulted in escalating health insurance premiums due to an increase in lawsuit payouts by doctors and their insurance companies. This is a fiction advanced by Illinois insurance companies in the hopes of generating support for self serving caps on damages awards that do nothing except help protect profits for big business.
The truth behind the facts cited by the insurance industry and physicians is startling when the facts are actually exposed. Medical Malpractice claims in Chicago and throughout Illinois have been decreasing over the past five years. According to public data filed by ISMIE, the states largest malpractice insurer, In 2004, ISMIE paid 10 percent less in total claims than it did in 2003. The average amount ISMIE paid on a claim in 2004 was 20 percent less than in 2003 and less than the average amount in 2002. In 2004, the difference between the amount of premium dollars taken in and the amount paid out in claims was about $270 million. That means Illinois Physicians paid the insurance company $270 million dollars more in 2004 that was necessary to cover claims expenses. Even counting ISMIE’s overhead and other expenses that amount equals a staggering profit for the insurance company.
Caps on damages, the remedy contained in the Medical Malpractice Reform Act of 2005, are championed by supporters as the way to lower doctor’s premiums and return these savings to the patient. This has not been the case in other states where this type of tort reform legislation has been the law. California is the best proof of why caps on damages don’t lower premiums, while insurance reform does. In 1986, after a decade of caps on damages, California was once again mired in an insurance crisis, with medical malpractice premiums rising at a rate of 26 percent annually. Malpractice premiums increased 120% during the first 12 years after the enactment of the MICRA cap. Proposition 103, a ballot initiative passed by California voters in 1988, enacted the strongest insurance rate regulation in the nation. This law resulted in a rate freeze, a rate rollback, allowed doctors and consumer groups to appeal rate approval and enacted stringent regulation that reduced premiums in all lines of insurance.
Even if caps did lower premiums, ISMIE has said that a cap on damages would at best lower premiums 20 percent several years from now. But reducing the premiums 20 percent would not even reduce them to the level they were in 2002 before the huge rate increase in 2003 that supposedly caused the “crisis.”
If medical malpractice awards are not the cause of the medical malpractice crisis then what is the cause? Illinois’ insurance companies should look at their own business practices for these answers. That is why insurance regulation is the answer. A transparent insurance industry will protect the rights of both patient and doctor.