Malpractice issue needs attention, not spin control

Washington’s insurance regulator Wednesday ordered the state’s largest medical malpractice insurer to refund $1.3 million in premiums, plus interest, paid by doctors in 2003. On average, that will put $534 back into the hands of 2,490 doctors and, maybe, break the fever for reform of the state’s malpractice system.

We all could use a little relief.

The argument for a go-slow approach to solving Washington’s malpractice problems was reinforced by a new study that concludes the number of claims, while increasing, is not out of control. Year-to-year growth over the last 10 years has averaged 4.9 percent, according to the “Medical Malpractice Closed Claim Study.” Average compensation per claim has climbed 4.1 percent, so payouts to patients have grown about 9.1 percent annually. Too high, but not catastrophic. Of the more than 10,000 claims filed between 1994 and 2004, only 44 involved payments of more than $1 million, the kind that grab headlines.

But the cost to insurers of defending malpractice claims rose faster than the awards to patients. Cases for which insurers incurred defense costs increased 5.3 percent annually, and the cost per claim action grew 6.4 percent. More than 14 percent of those costs were incurred defending 1,914 claims plaintiffs later dropped.

The lack of solid information about the true state of malpractice litigation in Washington has frustrated officials for some time. Insurance Commissioner Mike Kreidler tried unsuccessfully to get more information-gathering powers from last year’s Legislature. Failing that, in November he issued a data call for what information he could get. Since December, a staff team led by Lisa Smego has been teasing out conclusions.

The information is incomplete because only those companies regulated by the state were subject to Kreidler’s order. Many doctors cannot buy policies from so-called admitted insurers, so they find themselves obtaining coverage in the “surplus” market for higher risk groups. Also, organizations that self-insure, like Group Health, are not subject to data calls because the commissioner cannot protect the confidentiality of the information submitted. Hospitals are exempted for the same reason.

Still, Smego calls what was available a tantalizing taste of what could be done with more information. Doctor and lawyer groups were certainly tantalized. Each side found ammunition in the study’s findings.

For the doctors, the figures reaffirm their assertion that damages are out of control. The total jumped from $29 million in 1995 to $66 million in 2004. Doctors for Sensible Lawsuit Reform want damages capped, and lawyer fees limited.

The Washington State Trial Lawyers Association says the slow if steady climb in claims and payments refutes physician “scare tactics.”

Both sides have reform proposals before the Legislature. Parts or all of both may well end up on the ballot next fall, with the not farfetched possibility voters will endorse both. The result will be real headaches.

Deputy Insurance Commissioner Beth Berendt says Smego and the other researchers kept their balance.

“There is a little for everyone to like,” she says. “We think it’s important to get away from the spin.”

Malpractice rates remain an important problem for Washington, Berendt says.

Meanwhile, a rate reduction for 2005 by Physicians Insurance is further evidence the malpractice insurance market may finally be softening, as it has for other insurance lines. The last few years have been hard on consumers and business alike.

Kreidler wants to take some of the volatility out of the malpractice market by creating a voluntary supplemental program for excess liability coverage. The fund would be self-supporting. He’s also wants to expand reporting requirements.

“With more accurate and consistent information, we’d be better equipped to assess the health of the market and could make public policy based on facts rather than anecdotes,” Kreidler says.

Maybe that’s as far as Washington should go this year. Let the market take care of rates for the time being, and get a better handle on the severity of the problem. If the pending, contending initiatives get on the ballot, the Legislature may have to find a cure for malpractice next year anyway.