Rosemary M, McAndrew
A Business Forum Book Review:
Captives: Here to Stay, by Rosemary M. McAndrew In this well researched book, Tom Baker, Director of the Insurance Law Center at the University of Connecticut School of Law and the Connecticut Mutual Professor of Law, systematically addresses and debunks several popular beliefs which give rise to the myth that the medical malpractice liability system is "out of control."
In an effort to inform the reader of the truth about the forces driving the medical malpractice problem, Baker presents cogent arguments from the perspective of insurance, medical, research, law and economics, and public health policy. The book explores myriad bases of the medical malpractice myth and methodically walks the reader through comprehensive, empirically sound counter arguments to the widely believed myth that there is more medical malpractice litigation than medical malpractice incidents.
The book's copious review of the empirical research about the issue shows that: 1) the real problem is too much medical malpractice, not too much litigation; 2) the real cost of medical malpractice has little to do with litigation; 3) medical malpractice insurance premiums are cyclical; it is not frivolous lawsuits or runaway juries that drive that cycle; and 4) "undeserving" people sometimes bring medical malpractice claims because they do not know that their claims lack merit and because they cannot find out what happened to them without making the claim.
Baker presents research results from the first hospital record study from the mid-1970s, jointly commissioned by The California Hospital Association and the California Medical Association. One expected outcome of the study was a change to a no-fault medical malpractice system similar to the California automobile insurance system would result in a reduction in medical malpractice premiums currently paid by doctors and hospitals. The researchers found that doctors and hospitals injured one out of every twenty patients discharged from the hospital, with one out of every ten of the injured patients dying as a result. Annualized, in 1974 doctors and hospitals in California injured at least 140,000 patients and killed nearly 14,000. Similarly robust statistical analysis is found throughout the book.
Baker argues that the rise in medical premiums has more to do with economic cycles and the competitive nature of the insurance industry than runaway juries. He exposes the internal accounting processes of insurance companies by explaining reserving, competition, reinsurance, long tail claims, and accounting practices used by the insurance industry in detail that only an economist or insurance actuary would truly appreciate.
Baker argues that "reducing total medical malpractice liability insurance premiums is not a worthy policy goal." (p. 62) He asserts that, if anything, the premiums paid for medical malpractice insurance are too low, "either to satisfy health-care provider's moral obligation to take responsibility for consequences of their mistakes or to provide an adequate incentive to avoid mistakes." (p.63) This argument is setting the reader up for an alternative to the highly publicized call for tort reform by both President Bush and the American Medical Association.
In the final chapter, Baker proposes his "evidence-based" reform. Its basic premise is to provide injured patients with a means to find out what caused their injuries without having to sue to obtain that information. It would become policy by being incorporated in a state statute to be called the Patient Protection and Healthcare Responsibility Act (PPHRA). While the overview presented is in need of several more iterations before it could be presented to naysayers with an acceptable level of confidence, it seems to be on the right track. I hope to see more from Tom Baker on this issue.
I would encourage Professor Baker to champion another issue that he raises in this book. In Chapter 5, Baker notes that malpractice lawsuits provide needed compensation to injured patients. Federal law requires all Medicare and Medicaid expenses related to the injury be repaid, and most employee benefit plans also require repayment. The vast majority of injured patients do not bring lawsuits; therefore, they are not compensated, leaving their health insurance company to pay the bills for their medical injuries. If Baker's proposed tort cap alternative, PPHRA, becomes law, and its aspiration of evidence-based liability and medical provider accountability takes hold, we should expect to see more people who are medically injured being appropriately compensated. Continuing along that line of thought, logic says there should be a substantial amount of money in subrogation going back to the health insurance companies. It would be interesting to estimate the amount of money that would be recovered by insurance companies without affecting the compensation received by injured patients.
This book can, and should, be read by everyone. One of the tremendous gifts of this book, outside its phenomenal research and transformation of complex concepts into every day language, is that it succeeds in encouraging the reader to consider, seriously consider, alternate explanations to long held beliefs and provides a methodology for doing so.
Rosemary M. McAndrew, CPCU, CIC, CRM, AAM, is principal of McAndrew Risk Management, Inc. in Boston, MA. See: Professional Profile of Rosemary M. McAndrew
Rosemary M. McAndrew, CPCU, CIC, CRM, AAM
McAndrew Risk Management, Inc.
139 Clement Avenue
Boston, Massachusetts 02132-2036
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Thomas A. Faulhaber, Editor
Brookline, Massachusetts 02446.2822 USA
Revised: January 11, 2006 TAF
© Copyright 2006 Rosemary M. McAndrew / McAndrew Risk Management, Inc., All Rights Reserved