Center for Legal & Responsible Commerce

The Non-Existent Malpractice Crisis

     Back in 2004 we wrote that the medical malpractice crisis was a fake crisis supported only by myths. Finally, the largest medical malpractice insurer in Illinois (Illinois State Medical Inter-Insurance Exchange or ISMIE) has confessed that we were right and that they lied. Well actually, they did not admit to lying, they and their allies (ATRA, Illinois Civil Justice League, AMA, etc...) just deny that they ever claimed that there was a crisis or that medical malpractice rates were skyrocketing due to a spike in medical malpractice claims. Thanks in part to a law the tort reform movement pushed for, insurance regulators and companies now have access to the same statistical data that the proponents of malpractice reform previously had exclusive access to. That data shows:

  • From 1998 through 2009, the number of medical malpractice claims have consistently fallen from 400 to around 230 per year.

  • Claim severity peaked in 2003 and remained stable.

  • ISMIE's total claims payments have been stable since 1994, and ISMIE has recorded record profits.

  • According to the AMA, the number of physicians in Illinois has steadily increased since 1963, with particularly large increases between 1998 and 2008. Further, Illinois has more doctors per capita than 12 of its 13 neighboring states.

When reached for comment on the data that is now public, proponents of medical malpractice reform (and tort reform generally) stated:

"We wouldn't tell you or anyone that the reason to pass tort reform would be to reduce insurance rates." Sherman Joyce, President of ATRA.

"Many tort reform advocates do not contend that restricting litigation will lower insurance rates, and I never said that in 30 years." Victor Schwartz, General Counsel of ATRA.

"We have never made the claim that a cap is going to lower insurance rates." 
Ed Murnane, Chairman of ATRA and President of the Illinois Civil Justice League.

While they may not have said it will lower rates (because that would require insurance companies to want to base their rates on their expenditures and not on making supracompetitve profits), these individuals and the entities they represent justified the passage of medical malpractice caps on the basis that doctors were leaving Illinois due to soaring medical malpractice premiums. Therefore, their "solution" was to minimize further rate increases by capping damages. Of course, as has happened in every other state that has enacted caps on damages, insurance premiums only dropped in Illinois after the regulator asked to inspect ISMIE's books. However, this being Illinois, the head of the regulatory agency was placated by ISMIE agreeing to a measly 5% rate decrease. And even though we now know that ISMIE's 5% rate cut merely took its loss ratio from .50 to .55, no heads are rolling in Springfield.

The lesson learned here is that the tort reform movement cannot be trusted. Most of the tort reform organizations are heavily, if not entirely, funded by the U.S. and state chambers of commerce. What we know about most chambers of commerce is that they only represent a small portion of their members (in this case insurers). As our experience at the Center for Legal & Responsible Commerce has demonstrated, even businesses have a hard time getting their claims paid. Small and mid-size businesses often do not have the resources to fight their insurer's improper claim denial or lowball settlement offer. Larger businesses (especially publicly traded companies) need quick coverage determinations and allow their insurers to extract promises of future business in exchange for agreeing to pay existing obligations. Therefore, we respectfully submit that consumers need to demand that government more closely scrutinize insurers and implement laws and regulations that require greater transparency in the insurance market place. In Illinois, the first place to start is to remove (or at least significantly raise) the cap on damages allowed under 215 ILCS 5/155. Also, in terms of cutting down on malpractice claims, perhaps Illinois should suspend medical licenses before a doctor has 50+ lawsuits against him. As we have long argued, it is a small fraction of doctors who are responsible for the overwhelming majority of claims.