When it comes to tort reform in Texas, physicians there say “so far, so good.”
In 2003, the state enacted a tort reform law similar to that of California, including a $250,000 cap on noneconomic damages. So far, that's been good news for Texas physicians, according to R. Moss Hampton, M.D., head of the Texas Association of Ob.Gyns.
“Everybody here would say it's been a success,” said Dr. Hampton, who practices in Amarillo. He noted that the Texas Medical Liability Trust, the state's largest medical malpractice insurer, has reduced its rates by 17% since the law went into effect.
“That's kind of set the tone for the state, and the state board of insurance is trying to get other carriers to do same thing, with some success,” he said.
“And a number of carriers are moving back into the state,” Dr. Hampton added.
However, “it's obviously early in the process,” Dr. Hampton cautioned. “Everyone told us to expect initially that claims would go down, and [the question is] how soon it would take to start going back up. … We've also seen bills in the legislature trying to erode some of the gains we made, but so far none [has] taken hold.”
Not everyone is pleased with the law. “I have no problems with my malpractice carrier, but this [law] is not the answer,” said Jerry Frankel, M.D., a urologist practicing in McKinney, Tex.
“The answer is to totally change the concept of malpractice,” Dr. Frankel said.
Instead of the current system, Dr. Frankel supports a no-fault liability system, in which injured patients are reimbursed based on a set formula. “The way the system works now, only a tiny percentage of people get compensation, and 70% of money goes to lawyers and the court system,” he said. “But if you leave the lawyers out and the courts out, 100% of compensation would go to victims of bad outcomes.”
Using caps to compensate patients who have been harmed is not a fair approach, Dr. Frankel said. “The trouble with caps is, we do have nightmares. One woman had a bilateral mastectomy, and she had benign disease. She got $100,000. If this had happened to my wife, a trillion dollars wouldn't be enough.”
To make sure that bad physicians are appropriately disciplined, Dr. Frankel said there should be a separate system to monitor them. “That would be much better than now, and once these doctors piled up enough points, there would be some sort of disciplinary action—retraining them, restricting their privileges, or having them lose their license.”
Dr. Frankel said the reason malpractice premiums had been going up does not appear to be related to lawsuits. “Maybe 1% of people who are injured get some kind of compensation, and nobody's shown that the number of injuries is growing or the number of bad doctors is increasing.” Instead, he said, “all that happens is when the stock market goes bad, premiums go up.”
Not so, according to Donald J. Zuk, president and CEO of SCPIE, a medical malpractice insurer that left the Texas market in 2002. “Insurers cannot raise premiums to cover past losses,” he said at a conference sponsored by the American Enterprise Institute in Washington. Rather, “premiums are tied to estimates of future paid losses.”
Mr. Zuk also noted that state insurance departments limit malpractice insurers in the amount of assets they can invest in the stock market. “Most companies, if they're going to do it, put in 10%–15%,” he said. “At SCPIE, we do 3%. You're not going to do [more] because you're not going to take the chance.”
Mr. Zuk said that his company left the Texas market because of losses from lawsuits. In 1999, for instance, the company's loss ratio in the state was 177%—it paid out 77% more in claims than it had taken in premiums. The loss ratio increased over the next 2 years to 228% in 2001; by 2004 it had dropped to 139%, still well over the amount it had taken in.
“The problem is not so much frequency as severity—that's where we're getting killed,” he noted.
Despite the new law, Mr. Zuk said his company has no plans to re-enter the Texas market. “We're out of Texas for the immediate future because it's just too dangerous.”
In the meantime, Dr. Hampton thinks that he might be seeing an upturn in the supply of ob.gyns. in the state of Texas. “In our area, we have not seen a big shift, but in Austin and some other metropolitan areas, we have seen the number of practicing ob.gyn. doctors increase,” he explained.