Malpractice Awards Increasing?

In an earlier thread, a debate broke out about whether malpractice awards have increased so rapidly as to contribute to the rise in health care costs. I decided to take the evening to research the topic while I watched an excellent History Channel documentary on Christopher Columbus’ last voyage. It turns out that the data isn’t that easy to find. I spent quite a while doing Internet searches and coming up with plenty of commentary but little hard data.
Finally, I came across the National Practitioner Data Bank, which takes in all reports of malpractice payouts. Since 1991, the government has directed all such payouts to be reported into a database that allows healthcare providers and patients to research physicians, nurses, and other caregiver types to see what actions have been taken against them. They have historical data prior to that year, but it’s not comprehensive. It also doesn’t list actions that don’t result in payouts, which create legal costs that also do not appear in the data.
Their website has its limitations. The data only comes in a large text file, which takes a lot of manipulation in Microsoft Access to use. I spent a couple of hours working the data into tables and building the first few queries. By the time I finished, I had a good idea why the data is so hard to find.
Still, it gives enough data to see trend lines, and the numbers look fairly oppressive — but stable. In the past 16 years of complete data, can see that the malpractice numbers went steadily upwards in both awards and amounts. In 1991, the NPDB shows 17,964 malpractice awards paid for a total of $2.3 billion. Ten years later, in 2001, malpractice awards peak at 20,425 awards totaling $4.823 billion, over double what it was in 1991. While the number of awards start declining, the amount of the awards remains high, peaking in 2003 at $4.859 billion.
The steady increase has come in dollars per award. In 1991, when the data first became complete, the average payout for a malpractice award was $163,192. It has increased in every year since, except in 2005 when it dropped slightly before exceeding 2004’s level in 2006. In those fifteen years, the average award went to $269,227. In 2007, with six months data on the books, the average award jumped significantly to $288,445.
Has there been an explosion in malpractice awards? No, but the awards have become much more lucrative in the last fifteen years. Last year, the number of awards paid dropped to the lowest level in the 15-year period — but it resulted in $4.259 billion in payouts, higher than the amount paid in the year with the second-highest number of awards. In those 15 years, insurers and practitioners have had to pay almost $60 billion just in awards, apart from legal fees and the like.
I’ll be playing with this database a little more. I’d like to analyze trends for states with malpractice caps, for example, to see whether that affects the number of awards. In the meantime, this data should start an interesting discussion in the comment thread.

S-CHIP Battle Moves To Vetoland, Population: 3

The Senate passed the expansion of the S-CHIP program yesterday with a veto-proof majority, 67-29, which sets up a standoff between Congress and the White House over the renewal of the politically sensitive program. The Bush administration favored renewing S-CHIP and even expanding it to a small degree, but the large expansion and the cigarette tax it uses has the White House talking veto. If Bush vetoes it, it may set up a standoff between Bush and Republicans looking towards tough re-election fights:

The Senate, with an overwhelming bipartisan vote yesterday, sent President Bush a $35 billion expansion of the State Children’s Health Insurance Program, setting up the biggest domestic policy clash of his presidency and launching a fight that will reverberate into the 2008 elections.
Bush has vowed to veto the measure, but he has faced strong criticism from many fellow Republicans reluctant to turn away from a popular measure that would renew and expand an effective program aimed at low-income children. Democratic leaders, while still as many as two dozen votes short in the House, are campaigning hard for the first veto override of Bush’s presidency.
They secured a veto-proof majority last night in the Senate, with the 67 to 29 tally including “yes” votes from 18 of the 49 Republicans, including some of the president’s most stalwart allies, such as Christopher S. Bond (Mo.), Kay Bailey Hutchison (Tex.) and Ted Stevens (Alaska). Democratic leaders are likely to send the measure to the White House next week, giving advocates a few more days to pressure Bush to sign it.
For Republicans, the issue is politically perilous. Every Senate Republican facing a difficult reelection bid bolted from Bush yesterday. Most House Republicans in swing districts abandoned him Tuesday when the House approved the bill 265 to 159. Those Republicans “took the vote that was easiest to explain,” said House Minority Whip Roy Blunt (R-Mo.).

The legislation that passed the Senate limits the S-CHIP application to households that earn 300% of the federal poverty line. This is an apparent change from earlier versions that had the limit at 400%, and that can be found in Section 110 (a)(8)(a) — except that 110 (a)(8)(b) allows states to make exceptions that could force the government to provide grants to others as well. At 2007 poverty levels, a family of three could make up to $52,000 per year and still be eligible in 2007, and in 2008 that number would likely go to $54,000 or more as the poverty level gets indexed to inflation. In Alaska, that number goes to $64,000.
Even with the reduction in application, this still moves money from primarily poorer people with the sharply regressive cigarette tax and gives it to the middle class. It also undermines the market for private insurance, which has better coverage than the government Medicaid coverage that will crowd out the free-market solutions. The expansion beyond the S-CHIP’s original intent to assist poor children dilutes the program and adds to entitlement programs that are already threatening to bankrupt the nation.
Will the President veto the legislation? He has only issued three vetoes in almost seven years, and two of those protected embryos. He has not vetoed an entitlement expansion, especially not the prescription program for Medicare that he championed. A veto on S-CHIP will put enormous pressure on a handful of Republicans who stuck to fiscal responsibility and who face tough re-election campaigns already in the House. It may also create some pressure on Senators who gave the bill a thin veto-proofing that the House failed to achieve in its bipartisan vote.
I don’t believe the President will veto the bill, although he should. He will probably want to save his political capital for Iraq and the appropriations bills that he will almost certainly veto in the next month or two. Those will require continuing legislation that will create a lot of contentiousness, and the gains from vetoing the S-CHIP expansion will be minimal among his base. His presidency has not been an exemplar of spending control as it is.
If he surprises and follows through on his veto threat, the pressure on Republicans will be enormous. It could set leadership on Republicans from safe seats to reverse their support for the expansion as written, hopefully by presenting the tax-break package that the GOP developed belatedly to combat this version of S-CHIP. That would keep incumbents in tough races from having to explain a vote against the original, while forcing Congress to do the right thing.
UPDATE: Rose asks about illegals using S-CHIP. I know that some have argued that S-CHIP would allow illegals to gain insurance for their children, but the text of the legislation makes it clear that children have to register by Social Security number, and that the state has to verify them with the federal government. Section 301, (dd)(1)(B), states clearly that children whose citizenship or legal residency cannot be verified must be disenrolled for the state to continue receiving S-CHIP grants.
There are good arguments to oppose S-CHIP, but this doesn’t appear to be one of them.

Take From The Poor, Give To The Middle Class

Investors Business Daily looks at the S-CHIP expansion and recognizes the political dangers for Republicans opposing it. Any vote against expanding health insurance coverage to children will prompt critics to paint the GOP as the party of Fagins, taking medical attention away from poor sick kids. However, in this case, the kids aren’t poor, although that’s where the funding will originate:

As passed by the House, the State Children’s Health Insurance Program, known as SCHIP, will create a major new middle-class entitlement even as we face looming national bankruptcy from our $50.5 trillion (yes, you read that number right) in planned spending under Social Security and Medicare.
Today, some 6.6 million kids are covered under SCHIP, at a cost of about $25 billion over five years. The new bill raises that to 9 million kids covered, at a cost of $60 billion. It pays for it with a 61-cent hike in the tobacco tax.
Sounds good, except that tax will hit the poor hardest. And those it helps are not poor. Under the new bill, families earning $83,000 a year could be eligible. If this bill were targeted at the poor, President Bush and the Republicans wouldn’t oppose it. But it isn’t. It’s a new, radically expanded middle-class entitlement.
That, by the way, includes families like the Siravos of New Jersey, profiled recently by Bloomberg News. The Siravos earn $56,000 a year, own their own home and drive two used cars. They also pay $9,000 a year to send their only child to a private school.
Yes, things are a bit tight for the Siravos, as with many American families. But should the working poor subsidize health care for the Siravos and other middle-class families?

The tobacco tax represents a couple of problems to this program. First, as almost everyone recognizes, tobacco taxes are regressive. Because smoking tends to be more prevalent among lower economic strata, the funds raised for the S-CHIP expansion will come in large part from people already in the program. Not only that, but since taxes tend to act as a disincentive, the taxes will not produce the revenue projected by Congress based on current sales figures. And the people who quit will most likely come from middle- and upper-income brackets, according to the Cato Institute. This tax will therefore become even more regressive.
Next we have the problem with existing entitlement programs. Both Social Security and Medicare will start running up red ink in the next decade or less. Both will need serious reform to keep them from gobbling up more and more of the nation’s GDP, and some of that reform will likely require means testing. Instead of applying that sensible approach to this entitlement — more accurately, keeping means-testing in place — we’re about to expand it to cover kids in families making over $83,000 a year.
Many of the children this expansion covers already have private insurance, with better coverage. They do not need government assistance. For those without coverage in families making over $40,000, one has to wonder why the families have not made choices which include health insurance, and why those choices should be subsidized — encouraged, even — with funds disproportionately taken from the working poor.
The only explanation is that S-CHIP serves as a Trojan horse for nationalized health insurance. It’s a particularly cynical method of forcing out private insurers by pushing government-controlled coverage onto children. It deserves a presidential veto, despite the inevitable demonization it will produce.
The Republicans have an alternative that uses tax incentives to level the playing field between those who get tax-sheltered employer-based insurance and those who have to pay for it directly. That approach may not be perfect, but it keeps entitlements from expanding when they should be contracting, and it provides assistance to the middle class without making the poor pay for it. That has to make more sense than this S-CHIP expansion.

Another National Health Care System Horror Story

The lack of facilities in a national health-care system has resulted in the death of a newborn. Japan, whose system has been cited as a model for the United States to consider, has few medical facilities in their rural areas, and the lack of obstetricians led one couple to be turned away from eight hospitals when the mother-to-be went into labor:

Japan’s health minister has pledged to address the shortage of doctors in the country after a woman in labour was turned away by eight hospitals.
A ninth hospital refused to admit her even after she miscarried in an ambulance and her baby died.
The woman, who was in the sixth month of her pregnancy, lived just three minutes away from a hospital.
But she was forced to travel 70km (45 miles) by ambulance looking for a facility that would admit her.

Actually, the ninth hospital initially agreed to accept the case. However, the ambulance crashed on the way, and the woman miscarried and the baby died. After they found out what happened, that hospital then refused to admit her.
It’s not the first time this has happened. Last year, a pregnant woman died under similar circumstances, only in that case twenty hospitals refused to admit her. None of them had bed space available, and Japan has a nationwide shortage of physicians, particularly in specialties such as obstetrics.
Why the shortage? Specialization costs more money, and in the Japanese system, the compensation does not make it worthwhile. Overall, compensation and malpractice costs have driven people away from studying to be physicians and surgeons. This is similar to the issues that Britain has had in the transplant specialties, first reported three years ago. Viable organ donations went to waste because the UK doesn’t have enough transplant surgeons.
Japan has a somewhat different system than Britain or Canada. It allows for private insurers and facilities, but the government controls the market. It regulates prices, compensation, and the manner in which insurance operates. The effect is similar to that seen in other national health-care systems, which is that health care gets rationed through a mechanism other than patient choice. The NYU study claims that Japan has twice the beds per capita rate as the US, but that hardly explains these two instances of refusals. It also notes, probably more to the point, that Japan has one of the lowest physician per capita rates among industrialized nations, and that they spend less than seven minutes on an average for patient contacts (American doctors spend over 20 minutes).
Any system that allows a woman to die because 20 hospitals refused to treat her from lack of resources has serious problems. Any system that would refuse an emergency admission for a miscarriage in progress at nine separate facilities — with an ambulance begging for assistance — is not a model which we want to emulate here in the US.

No Free Lunches

Yesterday, I interviewed Dr. Ken Thorpe from the Partnership to Fight Chronic Disease on CQ Radio about the PFCD’s efforts to fund preventive health care initiatives as a long-term cost saving initiative for Medicare and private insurance providers. The New York Times throws a dash of cold water on the underlying assumptions of the PFCD’s claims today, claiming that preventive intervention will cost more in both the short and long run (via Memeorandum):

The current health care system doesn’t pay hospitals, doctors and nurses to keep people healthy; it pays for tests, surgeries and drugs. So Americans often get expensive invasive care of dubious medical benefit while missing out on sensible basic care. Millions of other people go without any care for chronic illnesses like heart disease and diabetes. If Medicare and private insurers paid for more preventive care, Americans would be healthier than they are today and live longer.
But the current presidential candidates go one step further. They don’t merely argue that preventive care delivers good bang for the buck. They argue that it delivers good bang for no bucks whatsoever. And this is where the candidates are overreaching.
No one really knows whether preventive medicine will save money in the long run, let alone free up the billions of dollars a year needed to help pay for universal health insurance. In fact, studies have shown that preventive care — be it cancer screening, smoking cessation or plain old checkups — usually ends up costing money. It makes people healthier, but it’s not free.
“It’s a nice thing to think, and it seems like it should be true, but I don’t know of any evidence that preventive care actually saves money,” said Jonathan Gruber, an M.I.T. economist who helped design the universal-coverage plan in Massachusetts.

This may be true — as far as it goes. Even Dr Thorpe acknowledged that the plan relies on Americans to change their habits and take preventive steps themselves, even outside of medical supervision. Diabetics need to practice better dietary and exercise control, for instance, and all of the maintenance visits in the world won’t help until they take those steps themselves — and meanwhile, the maintenance visits cost more money.
The real solution to that problem is to expose the laggards to the costs of their decisions. Government-funded systems actually do this a little better than private insurance, which tends towards small co-pays, although that should encourage better use of preventive medicine. Unfortunately, how can a system be structured so that the costs of poor decisions gets borne by the decision-maker without making it seem punitive?
The best way to do that would be to encourage free-market health care rather than top-down management. In a free market, those decisions would lead directly to cost penalties or benefits. Insurance companies in a competitive market could structure costs based on the use of and adherence to preventive maintenance, and consumers could switch to insurers or providers that offered the best deal for the lifestyle they choose. It certainly would have less Big Brother implications than the government dictating cost for degrees of obesity, as an example.
Of course, others disagree. Our neighbor, Wisconsin, has decided to try the top-down method instead, and John Stossel warns taxpayers there of the consequences (via McQ at QandO):

The Wall Street Journal editorial-page editors are upset that Wisconsin’s state Senate passed “Healthy Wisconsin”, which will give health insurance to every person in the state. Of course, the Journal editors are right in saying that the plan is “openly hostile to market incentives that contain costs” and that the “Cheesehead nation could expect to attract health-care free-riders while losing productive workers who leave for less-taxing climes.”
In addition, as the Journal put it, “Wow, is ‘free’ health care expensive. The plan would cost an estimated $15.2 billion, or $3 billion more than the state currently collects in all income, sales and corporate income taxes.” …
Does it never occur to the progressives that the legislature’s intrusion into private contracts is one reason health care and health insurance are expensive now? The average annual health-insurance premium for a family in Wisconsin is $4,462 partly because Wisconsin imposes 29 mandates on health insurers: Every policy must cover chiropractors, dentists, genetic testing, etc. Think chiropractors are quacks? Too bad. You still must pay them to treat people in your state.

Stossel’s last point underscores what I wrote above. When government interferes in private markets through mandates, price-fixing, and/or competition with private enterprise, consumers pay more and get less. It also creates artificial shortages and distorts supply-demand equations in ways that create gaps for consumers. One of Dr. Thorpe’s points was that primary-care physicians are underpaid and we have a shortage of care at that level. In a free market, rates would rise to correct the imbalance — but because Medicare shortchanges primary-care efforts and that comprises a significant part of the compensation available, physicians tend to specialize to get better compensation.
I wish Wisconsin the best of luck — and hope that their experiment ends at the St. Croix River.