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Faulty Data and False Conclusions:

The Myth of Skyrocketing Medical Malpractice Verdicts

by

Lewis L. Laska, J.D., Ph.D., Professor of Business Law, Tennessee State University

Katherine Forrest, M.D., M.P.H., Co-Founder, Commonweal Institute

Executive Summary

A notion widely accepted by the public is that medical malpractice awards have been rising dramatically in the United States in recent years, driving up the cost of healthcare and forcing physicians out of practice. This impression has been fostered by physician organizations, the hospital and insurance industries, and other groups favoring “tort reform” as a rationale for imposing legislative caps on medical malpractice verdicts.

While healthcare costs have been rising and some physicians have curtailed their practices because of rising insurance costs, there are insufficient data to conclude that this is the result of rising medical malpractice awards. In fact, the preponderance of available relevant evidence indicates that this notion is a myth. 

This report examines the existing data about medical malpractice awards and the data sources, and discusses obstacles to understanding what is in truth happening with regard to medical malpractice awards. In particular, it discusses why present data sources are inadequate for determining the truth of this postulate, and shows that there are a number of reasons to suspect it is false. The report also makes the case that improved data are needed as a basis for rational policy decisions, and proposes options for obtaining those data.

To a large degree, those proposing “tort reform” have based their arguments on the misuse of large-loss data from Jury Verdict Research® (JVR). Jury verdict award data from JVR are intended to give monetary and other insights regarding specific injuries, e.g. loss of an eye or death of a small child, and other medical misadventures. 

However, the manner in which JVR jury award data are used by the media and by advocates seeking caps on liability awards is inappropriate. JVR data are misleading as a basis assessing the true dollar amount of medical malpractice awards for a number of reasons:

·         The data are incomplete and represent a statistically biased sample. JVR relies on newspaper clippings, local jury verdict reporting newsletters and voluntary reports. Since large, dramatic awards are more newsworthy than smaller awards, and doctors and even attorneys also talk about large awards, the data obtained by JVR tend to be biased upward.   JVR does not have a complete record of malpractice verdicts nationwide and seldom receives voluntary reports of zero verdicts or small ones.

·         The vast majority of malpractice cases (96%) are not decided by juries.  JVR does not collect data on cases that do not go to jury, whether they are settled out of court or dropped without any settlement. Even for cases in which juries make the decision, JVR does not track subsequent reductions in awards (which is common), nor appeals that often overturn the initial judgment.

·         Actual case outcomes are not reported by JVR; many high-award cases are tried under “high-low” agreements that over-ride what the jury decides.

·         JVR reports combine different types of data, both physician and hospital verdicts. 

·         While JVR provides median and mean (average) calculations for its limited data set, neither median nor mean is an appropriate summary statistic for the wide-ranging distribution of verdicts. The data are unevenly distributed, with a few very large verdicts compared to many smaller ones, and great variation from year to year.

·         Averages produced by JVR typically are used to claim there are “trends”, without considering the influence of inflation over time.

The problem from the standpoint of the media is fundamentally one of a dearth of data. Because JVR is the only source of aggregate data about averages and trends, the news media over-credit it and do not have a ready basis for questioning its use by “tort reform” advocates.   Allegations of “out of control lawsuits” by “tort reform” advocates are unlikely to be questioned by the public or the media, because they are consistent with the perception created by the reporting of dramatic individual cases.

Government policy-makers are also handicapped by the lack of data. There is no single source of reliable data about national averages on closed claims or any of the other parameters needed to inform public policy decision-making. State insurance departments do not require insurance companies to provide the data, despite the National Association of Insurance Commissioners’ longstanding approval of a form designed to report closed claims. The data that do exist are scattered, and may apply only to short time periods or a single state.

Piecing together published data from various sources, such as studies based on the Federal government’s National Practitioner Data Bank (NPDB),individual state reports, and the Consumer Federation of America, provides some insight. The report offers the following observations:

·         According to the Consumer Federation of America, less than 30% of those whose malpractice claims close (reach a final conclusion) receive any payment at all.

·         A sampling of various single-state reports shows that average payments to those plaintiffs who receive anything have ranged between $107,000 and $410,000 in recent years. This is considerably lower than the frequently-cited large-loss figures from JVR.

·         Payments on claims that were settled out of court appear to be roughly half those on cases that are settled in court.

·         However, well under half of plaintiffs who go to court get anything at all.

·         Punitive damages are awarded in only 1.1 percent of cases involving medical malpractice payments.

·         The recent spike in medical liability premiums was caused by the insurance cycle, not by increased numbers of new claims or “skyrocketing” jury verdicts.

It is incorrect to extrapolate from JVR’s large-claim data to make any statements about trial lawyers’ incomes. Contingency fee legal practice, which is common in the tort system, is always a gamble for plaintiff lawyers. They put up their time and out-of-pocket expenses for all cases. They receive payment out of the final award monies, but in zero-settlement cases, which are the majority, the plaintiffs and their attorneys receive nothing; in fact, in these cases the attorneys lose money.

In short, public officials and the media should be aware of the limitations of JVR data and not regard them as having any validity for describing “averages” or trends in malpractice outcomes. For the same reason, they should reject the use of such large-claims JVR data presented by “tort reform” advocates.

With medical malpractice a hot political issue, there is a clear need for adequate data on which to base public policy decisions regarding increasing medical costs.  Even insurance company representatives admit that the changes being advocated by the “tort reform” movement are not expected to result in much, if any, decrease in the cost of medical care. The many issues other than medical malpractice awards (such as an increasing number of medical procedures and an aging population) that are driving factors in rising medical costs to date have not gotten adequate attention and medical costs can be expected to continue to rise

The public has a stake in the medical liability system and the public should expect that policy will be based on accurate information.  Complete data should be collected systematically about numbers and types of malpractice cases filed, case outcomes, and closed case results for the nation as well as individual states. Such data could be used by health policy planners, epidemiologists, insurance companies and lawyers to study the nature, causes and prevention of medical errors and identify potentially risky new medical procedures. Individual case data could be used by medical boards to identify physicians with exceptionally high numbers of malpractice claims against them.

Doctors, lawyers, insurance companies, and policy makers, as well as the public should welcome data that are accurate and appropriate for addressing the real questions that exist about medical malpractice and its effects on society. In the long run, policy that is based on accurate data can be expected benefit all parties.