Insurance Abuse
Wednesday, June 15, 2005


Healthcare costs are soaring. Doctor’s premiums for malpractice insurance continue to escalate. Health insurance companies are trying to make up for investment losses, according to a new study by Dartmouth College economists.

A Dartmouth College economic study suggests that insurance companies are continuing to raise rates for medical malpractice insurance to make up for investment losses. The study was comprised of data from claims payments from 1991 through 2003. Malpractice claims payments have increased an average of 4 percent annually, an increase that roughly correlates with the annual increase in overall healthcare costs. Meanwhile, malpractice insurance premiums have skyrocketed by as much as 20 percent annually. That exorbitant increase is not related to claims payments but rather to the investment losses suffered by a decline in the value of investments and stocks.

The Kaiser Family Foundation (KFF) recently published a study that concluded that the number of medical malpractice claims per doctor has actually declined over the past 12 years. After appropriate adjustment for inflation, the average claims payment has increased a mere 1.7 percent in that same time frame. The main argument for tort reform has been based upon the incorrect and fabricated concern that the number of medical malpractice claims and claims payments have been skyrocketing. In fact, according to KFF, the only thing that has been skyrocketing is the premiums. It seems the insurance companies have been misleading the public and lining their pockets with unjustified profits.

According to Douglas Heller, executive director of the nonprofit Foundation for Taxpayer and Consumer Rights (FTCR), “Doctors’ malpractice premiums have been rising, but the contention that increased patient claims and higher jury verdicts have anything to do with the rate hikes is false.”

It is true that the medical industry is in desperate need of reform. The solution is not tort reform or damage caps, but insurance reform. In order to design an appropriate solution, we must first understand the problem.