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  • DC eyes medical malpractice reforms - Should Virginia and Maryland be worried?

       March 16, 2005

    DC Mayor Anthony William is pushing for medical malpractice reform in the District, blaming skyrocketing insurance costs for driving doctors away from the city:

    The company that insures most doctors in D.C. says annual premiums for obstetricians and gynecologists have shot up from about $75,000 in 2000 to nearly $140,000 this year. It's projected to hit more than $235,000 by 2010.

    The Medical Society of D.C. says 88 percent of OBGYN's it surveyed last year have moved, or plan to move their practice out of the District. ...

    Williams says he'll reintroduce a bill he put forth last year, which would cap non-economic damages at $250,000, provide litigation immunity for health care workers at free clinics, and develop a system for reporting medical errors in hospitals.

    I'm not sure how I feel about this legislation - I recognize that the rising cost of medical malpractice insurance is a problem, however, I'm not sure that capping lawsuit recovery amounts is the best way to deal with that problem. Rather, I think that the real problem lies in the fact that the whole sector doesn't operate on free-market principles, but that's the subject of another post.

    I'm more interested in the immediate short-term effects of this legislation on the DC area medical community. Assuming that the law is passed, Maryland and Virginia physicians should be sufficiently incented to move their offices to the District, thus leaving a physician-vacuum in those states. This would lead to DC becoming a physician-rich area, which in turn would benefit the local economy and supplement the tax base.

    The increase in the supply of services would bring with it an increase in demand as well, so at least initially the supply/demand curve may be unchanged. But it probably wouldn't stay that way for long - given the disparity in the laws between jurisdictions, and the ease of travel, the rational patient should prefer to see a doctor in Maryland or Virginia, while a rational insurance company should prefer that the patients travel to the District for his medical care. Due to the unequal bargaining power between the parties, the insurance companies would likely win, leading to a shortage of availability of medical services in DC. (i.e. 10 times more docs, but 30 times more patients.)

    In addition, this disparity could also lead to a tiered system of medical care in the DC region - - those able to afford more expensive insurance would be treated in Bethesda and Arlington, while those least able to afford medical care would be stuck with a newly created and overburdened system plagued by long wait times and possible substandard care.

    Are my concerns in this area warranted? If so, then it seems to me that Virginia and Maryland residents have a huge stake in the outcome of the upcoming council hearings.

    Posted by jkhat at March 16, 2005 03:45 PM

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    #  March 16th, 2005 4:09 PM      mbrlr
    National Health Care. If the Dutch and the Canadians are so much healthier than we are, there has to be a reason.

    And capping lawsuits is nonsense. Many of the awards are cut by judges, and these proposals are primarily the work of insurance companies on doctors. They've persuaded the doctors and now others that this is the way to go, but the primary reason for the rise in costs for doctors is simply greed on the part of insurance companies. This greed will not go away if lawsuits are capped. What will go away is the rights of those injured.  
    #  March 16th, 2005 4:15 PM      james
    agreed that capping is nonsense and on the rights thing.

    but to say that canadians are "healthier" is than us is just plain silly. the canadian health care system is, by most accounts, a colossal failure. even if you disagree with that, that is another debate.
    #  March 16th, 2005 6:51 PM      JohnTant
    James, I don't think there would be an exodus of doctors to DC from VA and MD simply on passage of this bill. Considering most doctors bills are paid third party anyway, higher malpractice insurance costs will be passed along to the insurer. The insurer, in turn, can respond by increasing premiums and/or cutting benefits. Done across a wide enough pool, the individual likely won't notice too much...

    Plus, I'd think any savings in malpractice insurance would be quickly offset by the sheer cost of doing business in the District. Between the taxes, real estate, and other indirect charges and opportunity costs (traffic being one of them), it could actually turn out to be a net cost to move a shingle from VA to DC.

    The reality is whenever you're dealing wtih a third party payer, charges are going to skyrocket (Milton Friedman teaches us this...), as you alluded to. As long as the third party can recoup costs and make a profit on the side, they don't care if they pay $200 for an exam featuring that bloody rubber hammer thing on the knee. I mean, I don't like the idea of malpractice reform, but I really don't like third party payers being such a huge part of the system.

    Vis a vis Canada (a country I have some passing familiarity with...), I'd say Canada has the best health care system as long as you don't have to actually use it....  
    #  March 16th, 2005 7:06 PM      james
    i was assuming that the statement in the article (and given justification for mayor williams' move) was true - that 88% of OBGYN docs are leaving the district, impliedly b/c of insurance rate increases that would be lowered/reversed through this legislation.  
    #  March 16th, 2005 7:24 PM      JohnTant
    Oh, well....OBGYN. As long as we aren't talking important disciplines, like chiropractors. Anyway, I was thinking doctors were behaving more inelastically than the story suggests. I'll defer to the 88% number.

    So we know the marginal cost for an OBGYN to leave DC is around $70 grand. If malpractice awards are capped, will it drive the insurance costs down by that much? More? I don't know that would be the case. Wouldn't malpractice insurance costs have to be not only significantly lower than they are now in DC, but significantly lower than they are in VA and MD as well? Any idea what VA or MD malpractice insurance rates are?
    #  March 16th, 2005 8:51 PM      james
    nah, no idea what the costs are now.

    you're right, the costs would have to be significantly lower than VA and MD to incent the docs to make a run for the border. the article talked about 1 year of malpractice insurance running 230k by 2010. i was guessing that capping lawsuit recoveries around the same amount would have to lead to a much lower rate... after all, can there really be one recovery at or near the cap per year for every doctor in the district?

    the nice thing about hypos in law and politics is that you can just make insignificant things like facts up as you go. ("assuming, arguendo...") then you accountants come in and ruin all the fun by demanding silly things like "numbers" .....  
    #  March 17th, 2005 8:31 AM      JohnTant
    Why do you think arguing politics often gives me heartburn? Pity I can't find a decent doctor in DC to treat it.....

    One of the assumptions in the story is that malpractice insurance premiums are being driven up by malpractice suits (a reasonable assumption, I hasten to add...). Are those suits a function of the amounts of the judgements, the volume of the suits, or some combination of them? If it's more because of volume, would the cap be effective? If we're talking about 10 or 20 suits a year each pulling in a mill, then the legislation would certainly decrease payouts. But if we're talking 5,000 suits/year with an average payout of $200k, I don't see the legislation having much effect.

    I would think that would be taken into account in coming up with the $250k number, but then again we're talking about Anthony "No City Key Is Too Expensive" Williams here....  



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