Turning Patients Into Hostages

Last week, virtually all surgeries at four major West Virginia hospitals were suddenly canceled. The reason was not a natural disaster or a health crisis. It was a crisis of a different kind: The profit margin for the medical industry is falling, allegedly because of increases in medical malpractice awards.

These doctors are demanding huge subsidies and legal protections in exchange for resumption of health care. It is a game of chicken being played by doctors across the nation, with their patients’ health in the balance -- and it is working.

In the last year, doctors have joined forces with insurance companies to demand sweeping legislative protections and, in some states, public subsidies for their annual insurance payments. Unable to win on the merits of their arguments in prior years, these doctors turned to a form of medical terrorism. They withheld medical treatment and used patients to force the government to yield to their demands.

For instance, last July in Nevada, 50 doctors unilaterally closed the only trauma center in Las Vegas for 10 days, exposing patients to extreme risk. They resumed treatment only when they were assured that the state would move to establish caps on malpractice awards. A similar walkout threat by 42 doctors forced Pennsylvania to cave to demands, including a promised $220-million bailout to help cover their insurance costs.

This issue is now on the fast track in Congress because of the change in Republican Senate leadership. The only organization more eager to see Trent Lott implode in the recent scandal than the NAACP was the American Medical Assn. Lott’s replacement is Bill Frist (R-Tenn.), a physician who is expected to make passing a federal law limiting medical malpractice awards a priority. President Bush has called for such a law modeled on California’s cap of $250,000 for pain and suffering.

Such legislation is a prescription for disaster because it would sharply reduce the deterrent to medical negligence. Given the notoriously low level of HMO care today, that would only further reduce the ability of patients to demand acceptable levels of treatment.

Medical malpractice insurance costs have risen. However, the responsibility lies with poor management decisions, not an increase in malpractice awards. The percentage of victorious malpractice plaintiffs has actually dropped in the last 10 years. Moreover, according to the Consumer Federation of America, the average for payments by insurance companies has remained virtually unchanged in the last decade. Finally, claims of excessive punitive damage awards have been discredited. Punitive damages are awarded in less than 3% of medical malpractice cases.

The most direct cause for increased medical malpractice costs can be traced to poor management decisions by the insurance companies. Their profits have fallen dramatically with lower interest rates, resulting in a lower return on investments by these companies. This means that companies have reduced assets to cover policies.

These policies are also part of the problem. In the 1990s, insurance companies recklessly engaged in a price war to gain new market shares. When these artificially low-priced policies became due for the companies, their other investments were tanking in the market. This resulted in major bankruptcies.

The real costs of these poor decisions will be borne by victims of malpractice, not doctors, who still average more than $200,000 a year in salary (with many banking more than a million a year). Consider California’s malpractice cap. This 1975 law “solved” a malpractice crisis by refusing to compensate victims to the full extent of their pain and suffering awards. However, the $250,000 cap has never been adjusted for inflation. If it were adjusted, it would be roughly $840,000 today.

Yet the Bush administration wants to use the 1975 figure. In 2001 dollars, the real value of the maximum award is only $72,385. The only public policy achievement of the caps in California is to make it cheaper to injure or kill Californians.

There is a need for a public debate on rising insurance costs and the instability of this important industry. However, the solution is not to have injured people subsidize medical profit margins or to yield to medical blackmail.

These latest walkouts are nothing short of hostage-taking: demanding huge benefits in exchange for basic medical care for captive patients. We have long followed a policy of not negotiating with hostage-takers; it shouldn’t matter whether they are from the SLA or the AMA.