NAIC: Why Does Med Mal Cost Soar? Who Knows?

By Steve Tuckey

NU Online News Service, 3:44 p.m. EDT, Anchorage, Ala.?The nation's insurance regulators, after trying to determine the forces behind soaring medical malpractice coverage costs, have reported that the answer to the politically charged issue pretty much eludes them.[@@]

At their meeting here Sunday the National Association of Insurance Commissioners adopted a report on medical malpractice insurance issues that essentially said there is not enough data to categorically determine what is driving the cost of coverage to health care providers.

While the regulators may have hoped the document would help in the debates going on in state houses and the U.S. Capitol over whether non-economic damages should be capped, the inconclusive nature of the findings may preclude such an occurrence.

The Market Conditions Working Group, chaired by Texas Insurance Commissioner Jose Montemayor, issued its findings after more than a year of discussions.

"Medical malpractice is a product that varies greatly from state to state and calls for different solutions based on local market circumstances," Mr. Montemayor told the plenary session that adopted the report.

While the report recommended that the NAIC assist states in taking steps to assure that appropriate data is collected in the future so suitable determinations could be made, it made no formal recommendations related to the adoption of reforms for the lawsuit process or other specific improvements.

At the session Montana Commissioner John Morrison criticized in particular the executive summary of the report which he said commended a list of tort reform measures to legislators, while the full body of the document presented a number of studies, some of which concluded that such measures were not effective in controlling premiums rises.

At issue in particular were caps on non-economic damage awards.

Birny Birnbaum, director of the Austin, Texas-based Center for Economic Justice, said he wondered why after all the so-called medical malpractice crises of the past few decades there are still not adequate mechanisms in place to collect the data needed to see what is at the root of the problem.

"I think this report misses an opportunity to place regulators squarely in the role of loss prevention," Mr. Birnbaum told the National Underwriter after the session. "The fight over tort reform has obscured the traditional role of regulators in promoting loss prevention, and there is very little mention of it such as in the area of medical errors and how to prevent them."

Mr. Birnbaum said that not enough attention was paid to the role that insurers' loss of investment income in the past several years played in driving up premium costs.

Investment income plays a much more important role in the medical malpractice line, due to its long-tail nature. Putting so much of the focus on court judgments will obscure an important factor in the figuring out the cost drivers of this line, he said.

Don Cleasby, assistant general counsel for the Property Casualty Insurers Association of America, said after the vote that although the conclusions of the paper were "watered down," it did assert that underwriting losses were the major factors driving rate increases.

But what drives those losses has been an issue that has split other groups such as the National Conference of Insurance Legislators, which last year adopted a report that essentially tilted toward the industry line in blaming court judgments as the primary factor. But some members unhappy with the thrust of those findings were able to get the group to look at the role medical errors play in the cost increases. A supplemental report will probably be issued at the group's annual meeting this November.

The political nature of the issue was spotlighted at the Republican National Convention when U.S. Senate Majority Leader Bill Frist, R-Tenn. spoke.

In a speech that mentioned medical liability Mr. Frist announced, "You can no longer be both pro-patient and pro-trial lawyer," and then assailed Democratic presidential nominee Sen. John Kerry, D-Mass., saying, "He put a trial lawyer on his ticket. By his votes and by his actions, he is the "Dr. No" of tort reform in America.

The Market Conditions Working Group was created in the aftermath of sharp spike in commercial insurance rates that followed the World Trade Center attack in 2001. It will now focus its attention on rates in the commercial residential sector.

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NAIC: Why Does Med Mal Cost Soar? Who Knows?

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