Tort Reform – Consider the Consequences – Lesson #1

Lost in all of this discussion about how tort reform and caps on damages will save the medical profession has been a discussion of what is really behind all this nonsense.  The Republicans claim that the reason the healthcare system is broken is because of the rising costs of malpractice insurance due to high verdicts, ‘out of control’ juries, the plaintiff lawyers and every other specious argument that sounds good but has no basis in reality.  Study after study has demonstrated that jurisdictions with caps do not affect malpractice insurance rates.

Has anyone really thought about why these naysayers are incessantly calling for a cap of $250,000 on non-economic damages?  It’s a simple matter of mathematics.  This number is not based in any reality of insurance rates – now is it?  Have you seen a single study that uses this ‘magic number’ to demonstrate how this will save healthcare?  If you have, please share it with the rest of us.  That comment will be posted in a heartbeat.

So what is behind this ‘number’?  What is the usual contingent fee being charged these days – 33 1/3 or 40 percent?  How much does it cost to investigate, file and try to conclusion a medical malpractice case of any consequence?   Answer: it can range anywhere from $75,000 to $150,000 (rough averages but pretty accurate). What is the largest cost?  Answer:  medical experts, who charge anywhere from typically $350 to $1,000 per hour.  What part of the population typically receives less than optimal (read ‘Cadillac’) care – answer: lower income patients without any coverage or without ‘the best coverage. ‘ When those patients seek care, how are those bills often financially covered?  Answer:  Medicaid or Medicare.  Do you have any understanding of what a ‘super lien’ is?  Answer: Medicare and Medicaid have an absolute right to complete reimbursement of any related medical expenses paid out in such cases.

So how do all these numbers, issues and forces play out in the real world of medical malpractice? What effect would a cap of $250,000 on non-economic damages have on whether a bona fide lawsuit (read: awful care causing serious injury) could ever be brought to court?

So that this posting can stay within the realm of reason in terms of length, I’ll just give you the above factors to ponder for a bit.  Later posts will give you more concrete examples of how, in the real world of malpractice cases, these specious arguments for caps and ‘tort reform’ are nothing more than an attempt to deny patients and their families of access to the courts.

Let’s leave you with a thought – a patient on Medicaid receives awful medical care leading to horrible injuries requiring hundreds of thousands of dollars in past and future care needs.   What do you think a client would recover in such a situation under ‘tort reform’ and a cap of $250,000?

Recovery of those costs do not go to the patient but are the subject of a reimbursable lien.  That potentially leaves recovery for non-economic damages only.  Apply a fee of one-third (answer:  just over $80,000) and costs of (let’s say) $125,000 (totally within the ‘usual’ range).  Have you done the math?  That’s about $45,000 to the client.  How does a lawyer satisfy a client’s needs in that scenario?  You can’t.  Do you do the case ‘on the cheap’ and not hire the experts or do the discovery you need to do?  You can’t – that runs of the risk for the client of not winning – in which case the recovery is nothing.

Now are you starting to get the picture what is really behind the proposed ‘tort reform’s cap’?  Don’t think for one minute that the medical profession and its insurers haven’t done the math.

More to come….

Maryland’s Cap and a Message from the former MAJ President re the Goings-On in Annapolis

Normally I don’t post materials from my News Feeds on Facebook – however – when you see a particularly well written piece that needs to ‘get out there,’ I make an exception.  The following is a wall posting from the past President of the Maryland Association for Justice, Wayne Willoughby.

by Wayne M. Willoughby                            
Past President, Maryland Association for Justice

In 2004, hysteria struck Annapolis. Hordes of physicians in white coats descended upon the State House demanding so-called “tort reform” as the fix to their rising malpractice premiums. The Maryland Association for Justice (then known as the Maryland Trial Lawyers Association) stood virtually alone in opposing the fear-driven throng.

MAJ retained a highly respected insurance analyst, Jay Angoff, to examine the recent malpractice premium hikes. Mr. Angoff was the third-longest serving insurance commissioner for the State of Missouri and previously had served the State of Maryland as the State’s insurance expert in other matters. His conclusion: the malpractice premium increases that caused the panic were totally unjustified; the doctors were being gouged by their insurance carrier.

So, MAJ advised the members of the General Assembly that they were being hoodwinked. What was needed was aggressive insurance regulation to prevent carriers from gouging doctors, not new laws depriving injured patients of full and fair justice in our courts.

Nevertheless, swept up in the frenzy, the General Assembly enacted House Bill 2 containing a premium subsidy for physicians and some measures that severely punished injured patients. One such measure lowered the damage cap on wrongful death and survival claims to the point that the life of a malpractice victim in Maryland is now worth at law only 50% of the life of a victim of other forms of negligence.

Time proved MAJ was correct, the malpractice “crisis” of 2004 had been a cruel hoax on the public and the General Assembly. Within seven months after passage of HB 2 – years before HB 2’s tort “reforms” could affect claims payouts and premiums – Maryland largest malpractice carrier, Medical Mutual, announced it would not increase premiums for 2006.

For 2007 the carrier lowered its base premiums by 8% and announced a $68.6 Million dividend for its insured physicians. With a new consumer friendly Governor in office, and his new insurance commissioner at the helm, Medical Mutual’s move was greeted by the Maryland Insurance Administration with a cease and desist order.

As a result, the taxpayers of Maryland were able to recoup from Medical Mutual the approximately $84.Million that had been paid to the company for rate stabilization under HB 2. Medical Mutual’s finances were so superb that it still issued a $13.8 Million dividend to physicians and lowered its premiums 8% for 2008 despite paying $84 Million back to the State.

Then, in 2009 Medical Mutual lowered its premiums by 31% (an 11% base premium reduction and a 20% dividend for renewing physicians). Again, in 2010, Medical Mutualannounced another 31% premium reduction (11% plus 20%).

Consequently, the events after the 2004 Special Session demonstrate the truth of what MAJ has said all along: The “crisis” of 2004 was no crisis at all. It was little more than a raid on the public treasury and the legal rights of injured patients accomplished though the use of fear to manipulate public opinion and the legislature.

Although the taxpayers of Maryland have been made whole because of the decisive actions of Governor O’Malley’s insurance commissioner, and doctors have access to “available and affordable” insurance (per the official Maryland Insurance Administration’s report), there is one group that has not been made whole from the damaging effects of the contrived crisis of 2004: injured patients.

Now pending before committees of the General Assembly is a cross-filed bill to rectify this situation. House Bill 622/ Senate Bill 769 will return the damage cap on medical malpractice claims to their pre-hoax levels. If this bill is enacted, injured Marylanders once again would be treated the same under the law irrespective of whether their injury resulted from negligent medical practice, negligent driving, or a defective product.

All people who believe in civil justice should contact the members of the House Judiciary Committee and the Senate Judicial Proceedings Committee and demand that they vote in favor of HB 622/SB769.

Keep up all your hard and good  work, Wayne.

Illinois medical malpractice cap: Illinois Supreme Court strikes down medical malpractice caps – chicagotribune.com

This just in from the Chicago Tribune.  The Illinois Supreme Court, on the rationale that the legislatively created cap on non-economic damages in medical malpractice cases violated the ‘separation of powers’ provisions of the constitution, has struck down the law applying caps to such damages.  See the report in the Tribune – Illinois medical malpractice cap: Illinois Supreme Court to rule on medical malpractice cap – chicagotribune.com.

Under the now-struck-down 2005 law of that state, there was a cap on non-economic damages of $500,000 in awards against physicians and a $1,000,000 cap on such damages for awards against hospitals.

As reported by the Tribune:

Justices writing (the majority opinion) said they were not persuaded by arguments used in other states. “That ‘everybody is doing it,” is hardly a litmus test for the constitutionality of the statute,” Justices writing for the majority opinion said.

Further, Justices said that what the statute allows for amounts to a “legislative remittur.” Chief Justice Thomas Fitzgerald delivered the judgment for the seven-member court and was joined in the opinion by Justices Charles Freeman, Thomas Kilbride and Anne Burke. Justice Robert Thomas took no part in the decision, the ruling said.

Justices Lloyd Karmeier and Rita Garman dissented on certain points of the decision and expressed sympathy to providers of medical care, citing President Obama’s recent address to a joint session of Congress that the justices said “admonished” the nation’s collective failure to enact health care reform.

“We have no business telling the General Assembly that it has exceeded its constitutional power if we must ignore the constitutional constraints on our own authority to do so,” Karmeier wrote.

From the history of the Illinois’ legislature’s ongoing battle with the Illinois Supreme Court on this issue of ‘caps,’ there seems little doubt that the legislature will once again go about the task of attempting to re-write the law so that ‘caps’ once again become viable in that state.  Apparently, that will be just the ‘top’ of the next inning on this issue.

Here’s a link to the court’s ruling.

Such rulings always raise the issue of what effect does such have on previously litigated cases in which awards in excess of the cap were reduced to meet the cap(s)?  What advice was given to those plaintiffs, who accepted the reduction of their awards?  How does this ruling affect the resetting of claims reserves by the insurers and self-insured trusts, who set their reserves based on the existence of a ‘cap’ on non-economic damages? This is just a sampling of the myriad issues that will now come to be.

I have very little doubt that this ‘separation of powers’ argument will spread like wild fire throughout the courts of this country.  This is definitely worth keeping an eye on over the ensuing months and years.  Will this have any effect on the current health care reform bills before the United States Congress?  Stay tuned!

Cap Survives in Maryland – LOCKSHIN v SEMSKER decided

Well for all those who thought there might be a ‘crack’ in the cap law of Maryland – not going to happen.

This morning, I received in my new decisions alert the Maryland Court of Appeals decision in Lockshin v. Semsker.  The highest court in Maryland, the Court of Appeals, reversed the decision of the Circuit Court for Montgomery County, MD, which had ruled that in medical malpractice cases that were not the subject of arbitration, the cap on non-economic damages did not apply.  The Court of Appeals, in a foreseeably lengthy and detailed opinion, has held that this was not the correct statutory interpretation and that the cap did apply.

Want to read this decision now?  Click here to