Rise in Rate of Super-Sized Medical Malpractice Payouts

 Total medical malpractice payouts have been on the decline in recent years but Insurance Business America reports that “super losses” – medical malpractice payments of $5 million or more – are on the rise. The conclusion is based on a report by Hiscox, an insurance company specializing in healthcare professions. The increase in rate of large malpractice payouts comes as the overall numbers of medical malpractice lawsuits continues to fall.

Rate of large medical malpractice payouts doubles

According to Hiscox’s data, claims payouts in the $5 million to $10 million range accounted for 7.5% to 10% of the claims in the early 2000s. Currently, these “super losses” account for 15% to 25% of the claims. And Hiscox expects the rate of large payouts to continue to rise.

The increase in the rate of “super losses” is seen universally across all healthcare practice sizes and practice areas. Hiscox vice president of underwriting Justin Keith attributes the increase partly to the rise in the medical system conglomeration – as smaller community hospitals join larger nationwide hospital chains, patients lose trust and are more willing to sue them. But he also concedes that healthcare reform has led to better risk management.

As rates of large payouts rise, overall malpractice claims fall

According to the Journal of the American Medical Association, medical negligence is the third leading cause of death in America, contributing to as many as 200,000 deaths annually. But medical malpractice claims only make up about 15% of the personal injury lawsuits filed. Because of the time and expense involved in taking a medical malpractice case all the way through to trial, malpractice attorneys will often turn down cases where the injuries and damages are not substantial, well-documented, and legally sound. Even so, most medical malpractice lawsuits – over 80% – end with no payment whatsoever to the patient or his or her family.

Part of the decline in the rate of medical malpractice lawsuits filed may be attributable to medical malpractice damage caps that over half of the states have enacted.

Malpractice and other personal injury awards apportion verdicts based on economic and non-economic damages – economic damages are the clearly measurable losses such as the cost of medical bills and lost wages, while non-economic damages are the unmeasurable losses such as pain and suffering, loss of enjoyment, and loss of companionship. Most commonly, damage caps limit the non-economic damages but leave the economic damages untouched.

Effect of malpractice damage caps

Proponents of damage caps argue that they will benefit everyone by keeping doctors’ insurance premiums, and therefore patients’ medical bills, lower, remove deterrents for doctors to practice in certain geographic or medical specialty areas, and prevent defense medicine. Opponents, meanwhile, believe that the caps are unfair in their restriction on compensation and in the end do little to affect the cost of healthcare.

Studies tackling the effect of damage caps on healthcare costs, however, have been mixed. Overall, there is limited evidence to truly determine whether damage caps and other forms of tort reform truly improve medical costs or patients’ access to physicians.

One possible conclusion is that as tort reform laws make smaller malpractice claims less profitable to pursue, it frees resources for those suffering the greatest injuries and shifts the proportion toward large payouts.

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