Malpractice: a good business

We recently posted about the supposed "vaccine crisis," i.e., the alleged failure of market forces to provide sufficient incentives for drug companies to make vaccines, requiring massive and costly concessions on liability provisions and patent extensions to coax them into the market. Poor dears. Except now they are fighting to get into the US flu market.

Now we learn that the alleged "malpractice insurance" crisis that made doctors demand limits on malpractice awards (but didn't place any limit on malpractice) is similarly bogus. Those awards are rising at the same rate as health care costs and "are not likely the main driver of soaring malpractice premiums as portrayed by many doctors," according to a new study published in the journal Health Affairs. The study found that the most publicized cases that attract huge awards are a tiny fraction of the total. Most cases are settled prior to trial.

"Premiums are going up for doctors and that is why they are up in arms, but there is a very weak link between the increase in payments (for malpractice cases) and premiums," said Amitabh Chandra, a professor and economist at Dartmouth University, and an author of the study.

Malpractice payments from settlements and juries increased 4 percent per year from 1991 to 2003, the report found, in line with the average overall increase in the cost of healthcare, the authors said. (via Yahoo News)

The AMA, with eager help from the Bush administration, has made capping awards a political priority and a number of states have obliged the doctors' lobby, despite lack of evidence that awards are driving the rise in premiums.

So what is the cause? Perhaps it is that insurance companies are, in reality, just banks. They take the money from premiums and invest it. And when the stock market does poorly they make up the difference by raising premiums.

Pretty good business. Win-win for them. Lose-lose for patients and doctors.