Medical Malpractice Court Award Caps in Illinois
Trevor A. Sondag
One of the most fiercely debated current topics in Illinois involves Medical Malpractice lawsuits and their resulting court awards. On one side of the debate, proponents of tort reform claim that Illinois is losing doctors because of the large volume of malpractice suits, and the high value of awards are driving the cost of medical malpractice insurance increasingly higher. The other side argues that doctors need to be held accountable, and that injured patients should be able to collect what they are entitled to. Democrats usually side with the trial lawyers and injured patients, while Republicans normally support the doctors and insurance companies. This is the most basic form of the debate.
The rising medical malpractice insurance rates in Illinois are causing doctors to either leave the state to practice elsewhere, or to quit practicing all together. Numbers vary among almost all sources, but internists and general surgeons experienced a 33% increase in premiums, obstetricians/gynecologists had a 22% increase, and the national average increase overall was 15%. (Congressional Budget Office, 2004) According to doctors and insurance companies, the high rates are directly caused by frivolous lawsuits, and the only way to fix the problem is to limit the amount of awards and attorney fees. The main portions of awards targeted are the amounts for pain and suffering. �Pain and suffering� is considered a non-economic damage, and is paid to injured plaintiffs to compensate them for the discomfort and inconvenience they experience that cannot be quantified easily. Other damages include past and future medical costs, continued care (for disabled), and past and future wage loss. These damages can be either calculated or estimated fairly easily, and therefore, are more difficult to dispute, but pain and suffering is based entirely on the jury�s discretion.
Currently, about 60 doctors in St. Clair and Madison Counties have left, or are planning to leave Illinois to escape the problem. Memorial Hospital in Belleville claims to have lost 59 physicians since January of 2003, and many hospitals are cutting back on the variety of services available. Anderson Hospital in Maryville is in danger of losing its six anesthesiologists, and St. Elizabeth�s Hospital in Belleville will lose all six of its current anesthesiologists in May. About 16 or 17 surgeries are performed per day at St. Elizabeth�s, compared to about 30 per day ten years ago. The cheapest malpractice insurance rate available, according to some doctors, is $300,000 per year for one doctor. (Powers, 2004)
Illinois� neighbor, Missouri, is experiencing an interesting, related problem. Missouri has capped pain and suffering awards at $540,000, but medical malpractice cases resulted in an average of only $84,000 for pain and suffering. Missouri also experienced a decrease in the number of malpractice claims filed in 2001, amounting to only half the number of suits filed in 1987. Economic damages also fell 8% from 2000 to 2001. However, Missouri was still experiencing an increase in medical malpractice insurance rates. (Their Pain, Your Suffering, 2002) How could this be?
Insurers pay for claims with money paid to them by the doctors they insure and from investment income. Investment income is relied upon heavily because premiums paid by doctors are not enough to cover the total cost of claims. With this in mind, it does not seem to be a coincidence that the recent malpractice insurance �crisis� was preceded by the economic recession the United States has been facing for most of this young decade. The General Accounting Office (GAO), a �nonpartisan investigative arm of the federal government�, reported that the amount paid out by malpractice insurers rose 8.2% per year from 1998 to 2001 (after inflation). This is not a large enough number to explain the huge rise in insurance rates. The GAO also stated that during most of the 1990s, rates were held �artificially low� because insurers were making so much money from investing their billions of dollars of cash reserves. (Proposed �Tort Reform��, 2004) So, of course when the recession hit, they had a problem. The insurance �crisis� appears to occur in a cycle. Similar situations existed in the mid-1970s and again in the mid-1980s. These cycles appear to be linked to poor investment market performance. (�Medical Malpractice Insurance: Stable Losses/Unstable Rates�, 2002)
Another reason for the �crisis� could be poor money management by the insurance companies. On January 1, 2003, Illinois State Medical Inter-Insurance Exchange Mutual Insurance Co. (ISMIE), the largest medical malpractice insurer in Illinois, stopped issuing new policies due to rising malpractice costs. (Adrian, 2004) Last year, though, ISMIE paid its Chairman of the Board and nine of its top executives bonuses totaling over $300,000. In addition to that, seven of its top executives received raises between $8211 and $60,298 according to the company�s annual report. ISMIE also made a profit of $19 million in 2003. (Lamb, 2004) �Struggling companies� should not be handing out raises and bonuses, especially in these amounts.
A similar event occurred in West Virginia in 2001. One of the country�s largest medical malpractice insurers, St. Paul Companies, quit insuring doctors in West Virginia and some other states. This move left 1000 West Virginia doctors uninsured. In response, the doctors filed a class action suit against St. Paul, alleging that the company artificially inflated its earnings in 1999 and 2000. The company then gave its executives over $45 million in raises, bonuses, and stock options. (Mencimer, 2003)
One interesting point made regarding the use of medical malpractice lawsuits as a policing measure, has to do with medical cost cutting. Medical insurance for individual patients has cut back on what it will pay for, so many health care providers and doctors have responded by doing the same to make their services affordable. Doctors are spending less time with patients, fewer nurses are employed, and other costs are cut. It has been suggested that these �shortcuts� have �compromised� the standards of care. If this is true, injured patients need some form of recourse. (�Proposed �Tort Reform� Bill makes Victims Pay Twice�, 2004)
Proposed Caps and Limitations
One of the most recent proposals in Illinois, by General Assembly Republicans, include a variety of actions. Attorney fees would be limited to $1 million per lawsuit. A $250,000 cap for non-economic damages was not included in this proposal, but House Minority Leader Tom Cross said it would probably be reintroduced later in the session. The proposal also would help pay for up to $25,000 of loans for new doctors, increase the Medicare reimbursement rate over three years, and expand a state grant program to assist all doctors to pay for insurance premiums. Expert witnesses would also be required to be board certified and to have spent 75% or more of their work time in the field of medicine in which they are testifying. (Adrian, 2004)
President Bush is trying to get support for a national cap on medical malpractice awards. The bill would limit pain and suffering to $250,000 and punitive damages at either twice the patient�s actual financial loss or $250,000. It would also limit attorney fees and limit patients� ability to file lawsuits for old cases. The President noted the problems of doctors being driven out of business and rising health care costs as the reasons for his proposal. His bill had been introduced in 2003, but stalled, so this is a reintroduction of the same bill. (Lindlaw, 2004)
Most proposals that included a $250,000 cap on non-economic damages have been amended to omit these items. This appears to be the most controversial piece of any proposals yet introduced, and it probably has not been successful because of the dominant power Democrats hold in Illinois. Many Republicans want to reintroduce these caps, but it will probably not work any time soon.
There are several problems with these award caps and attorney fee limitations. First, the plaintiffs that are awarded the incredibly high amounts for non-economic damages are usually the most severely injured. By capping these amounts, the most severely injured patients stand to lose the most. Injured plaintiffs who have proved that they have been seriously injured normally receive the largest court awards. People who do not have large incomes really lose. Stay-at-home mothers, elderly people, and children that have no income are already missing out on much of the economic damages available to injured working people. In addition, they would also be entitled to much less if non-economic caps were instituted. Stay-at-home mothers provide very valuable services for their families and childrens� activities. However, these activities do not generate income and would not be compensated adequately. About the only compensation they could receive would be for future medical treatments and continued care if they were disabled in some way, and the small amount allowed under non-economic damages caps (usually about $250,000). This amount is not much when it is divided over the remaining lifetime of young patients.
Pain and suffering awards can also be used like punitive damages are against large companies. In some severe cases, court awards need to be large enough to get the attention of the parties at fault (doctors, hospitals, etc.), both to punish them for wrongdoing and to help prevent a similar problem from occurring again in the future. This accountability is imperative to help police medical providers.
Limiting attorney fees could also lead to shortages of attorneys willing to take medical malpractice cases. Malpractice cases are very expensive to try. Attorneys must pay for expert witnesses, numerous depositions, collecting medical records, as well as other things. Without the hope of high contingency fees in return for the risk of taking on these expensive cases, many attorneys may decide not to take malpractice cases.
Existing Caps
A number of states have tried medical malpractice caps, mostly resulting in no change or continued increases in insurance rates. Missouri, as mentioned earlier, is one. Others include Florida, California, Nevada, Colorado, Oklahoma, and Texas. Illinois actually passed a law capping court awards about ten years ago, but it was declared unconstitutional by the Supreme Court. (Pierce, 2004)
In August 2003, a $500,000 cap on non-economic damages was enacted in Florida. This was done in response to insurance rates that had risen as much as 50% per year, forcing doctors to leave the state or quit practicing. The cap supporters argued that a limit would help reduce costs for insurance companies, and the savings could be passed on to doctors in the form of lower premiums. The state legislature ordered the Office of Insurance Regulation to calculate a �presumed factor� due to the expected amount of savings. It came up with a number of 7.8%, meaning that insurance companies that planned to increase premiums by 35% would now only raise them by 27.2%. So, rates would still increase in many cases, but at a slightly lower rate. A Florida lawyer said that he was not surprised by the low number, since there really had not been a large increase in malpractice lawsuits or award amounts. (Hellwege, 2004)
Texas also instituted a cap in September 2003, which capped non-economic damages in �health care lawsuits� at $750,000, and capped awards against doctors at $250,000. However, two months after the law passed, Jose Montemeyer, Texas� Insurance Commissioner, announced that the insurance company responsible for covering one-third of the state�s physicians (The Joint Underwriting Association) requested rate increases of 35.2% for doctors and 67.9% for hospitals. Another large Texas insurer (one-third of doctors also), Texas Medical Liability Trust, announced that it would reduce rates by an average of 12%. This sounds good, but is probably due mostly to the higher deductibles and reduced coverage limits that are being forced on doctors. So, even with the 12% reduction, doctors will still come out worse. (Hellwege, 2004)
Another state with a cap is California. The law was passed in 1976 and includes a cap on non-economic damages, periodic payments to victims for continued care (to prevent the money from being wasted), and a limit on attorney fees. From 1991 to 2000, however, the average premium paid by California doctors rose by 3.49%, higher than the 1.85% national average. (Snyder, 2002)
Weiss Ratings, Inc. and the U.S. GAO recently conducted two studies. Weiss Ratings found that states with non-economic damages caps had an average increase in malpractice premiums of 48% between 1991 and 2002. The average increase for states without caps was 36%. The GAO had similar findings. It studied seven states, and the one with the lowest rate increases was Minnesota, a state with no caps. (Hellwege, 2004)
Many insurance companies have admitted that caps do not save them enough money to allow for rate reductions. They stated that most awards are for amounts less than the caps anyway. So, whom do the caps affect? It appears that the few cases that do exceed the cap amounts, those of seriously injured patients (disabled, death, etc.) are the ones who �lose�, and it is not even enough to benefit the insurance companies and doctors much, if at all.
There are alternative solutions to this problem other than instituting a cap on awards and limiting attorney fees. One possibility is insurance regulation. Attorney Harvey Rosenfield introduced Proposition 103 in California, and it passed in 1988. The law requires insurance companies to submit intended rate increases for approval before they can raise them. Following the introduction of Proposition 103, medical malpractice insurance premiums in California decreased 20%. Insurance companies claim this was a coincidence, but California had experienced no results after passing the Medical Injury Compensation Reform Act (MICRA) in 1975, which limited pain and suffering awards at $250,000. (Brueggemann, 2004) If California�s insurance rates were unresponsive to a cap for 13 years, Proposition 103 has to be credited with the results.
Government regulation is something that economists normally do not support, and it has been argued that free market competition between insurance companies would better serve doctors. However, if insurance companies are mismanaging their money and trying to make up for investment losses by �gouging� doctors, perhaps regulation is needed. It has also been stated by a number of experts that insurance companies are holding onto profits and rewarding their executives rather than passing a savings along to the doctors. Regulation might help to eliminate these problems.
Another remedy that has been discussed is taxpayer help. Some proposals have included items such as taxes repaying doctors� student loans of up to $25,000 if they commit to work in Illinois for three years, or reimbursement of medical malpractice premiums. (A Costly way to Keep Doctors, 2004) Taxpayer relief sounds reasonable, if unpopular, since all citizens benefit from having doctors stay to practice in Illinois. To make it less offensive to taxpayers, perhaps the reimbursement of premiums proposal could be used only in years in which insurance companies experience poor investment returns. Another idea would be to increase the student loan repayments if doctors agree to stay longer than the three-year period previously mentioned.
U.S. Senator Dick Durbin (D - Illinois) along with Senator Lindsey Graham (R - South Carolina) introduced the Better Health Act. This bill focused on methods other than caps to solve the malpractice problem. It included a �three strikes and you�re out� clause that would allow judges to decide if a lawsuit filed is frivolous. Each time, the offending attorney could be fined, and the third time could result in a revoked law license. Another part of the act would give doctors with high-risk specialties a tax credit equal to 20% of their premiums, and doctors in low-risk specialties would get a 10% credit. A National Patient Safety Database would be created to help doctors reduce medical errors (44,000 to 98,000 people die every as a result of medical errors). The bill would also attempt to prevent price fixing by insurers. (Durbin, 2004)
State Senator Frank Watson (R) introduced a plan consisting of 20 separate actions. The most interesting is the proposed creation of a separate court to handle nothing but medical malpractice cases. The court would contain judges with �special expertise on medical cases�. It would also draw jurors from a very large area to prevent attorneys from choosing an area that is traditionally more sympathetic to plaintiffs, known as �venue shopping�. (Pierce, 2004)
Public hearings for malpractice insurance rate increases of 10% or more was proposed by State Senator Susan Garrett, along with a requirement for doctors to take courses in risk management. (Pierce, 2004) The Illinois State Medical Society drafted a proposal that would grant �good faith immunity� to free-clinic volunteers, increase minimum qualifications for expert witnesses, and repay loans for new doctors. (Powers, 2004)
Reducing the statute of limitations is another measure that has been proposed. This could be a problem because it would hurt people who contract diseases with long incubation periods, such as HIV from tainted blood. (�Fact Sheet�, 2004)
Of course, any one of these proposals must make it through the political tug-of-war. With so many of these measures, Democrats refuse to give up any attorney and plaintiff rights, and Republicans refuse to give up on the award caps and attorney fee limitations. With this being an election year, many legislators are worried about supporting their campaign contributors and supporters, so compromise is difficult to come by.
There is no doubt that there is a problem in Illinois. Skyrocketing medical malpractice insurance rates are forcing many doctors to quit their practices or leave the state and practice elsewhere. The dispute, however, is who to blame. The favorite targets of many doctors and insurance companies are the plaintiffs� attorneys, medical malpractice lawsuits, and court awards. It appears, though, that insurance companies along with the recent economic recession are the real causes. Insurance companies have relied heavily on invested cash reserves to help pay for claims, but following the recession, they had to hike premiums to make up for the money they lost or were not receiving from investments. At the same time, many insurance companies gave raises to their top executives, continued to make a profit, and tried to pass the blame on to attorneys and their clients.
Hopefully, with the economy recovering, insurance companies will not have to continue raising rates. Something must be done, though, to prevent this situation from occurring again someday when the U.S. economy finds itself in another recession. It will happen again if insurers continue to rely heavily on investment income. No guaranteed solutions exist, but some form of light regulation may be needed to ensure that insurance companies are acting responsibly, and perhaps emergency tax relief could be instituted to help doctors in extreme situations pay for insurance premiums.
The incorrect thing to do would be to pass tort reform measures. Court award caps are an infringement on the rights of injured plaintiffs. The cases that result in high non-economic damage awards have had to prove that they merit the large sums of money. This means that the patients involved were seriously injured and should be compensated for their loss, discomfort, or inconvenience. Medical malpractice award caps have not worked in many of the states that have adopted that policy, and it is not the right course of action to take in Illinois, or nationally.
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