Ballot Measure 35 advocates say malpractice lawsuits are driving doctors from Oregon. Opponents of the proposed malpractice liability cap say there’s a different agenda here that’s really about protecting the insurance industry.

By Dave Mazza

“Across Oregon, access to critical care services is in jeopardy... Skyrocketing insurance costs are forcing doctors to cut vital medical services...”
“Frivolous lawsuits and out-of-control jury awards are destabilizing doctors insurance costs and forcing them out of practice...”
“Now is the time for Oregon to return to a system that worked for our doctors, patients and communities...”
“Keep doctors in Oregon — Vote Measure 35.”
—Oregonians for Quality, Affordable and Reliable Health Care Web site

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These disturbing claims are what greet the visitor to the Web site voteyeson35.com. Advocates of a cap on non-economic jury awards in medical malpractice cases waste no time letting you know that Oregon is in crisis. Left without a remedy, Oregon physicians are leaving the state or moving out of the more risky areas of practice to avoid spiraling insurance premiums. But ballot measure opponents say the claims are without foundation and that caps — including the one in place in Oregon from 1995 to 1999 — either do nothing or make conditions worse. Opponents add that the focus on caps keeps people from moving towards real reforms for controlling insurance costs. One fact not in question is that this fight is turning into a struggle between some of the state’s more powerful institutions.

Under current law, anyone a court finds injured by the negligence or recklessness of a treating physician — in other words, a victim of medical malpractice — is entitled to both economic and non-economic damages. The former comprised verifiable expenditures required by the injury: the cost of surgery; physical therapy; special transportation and other related needs. Non-economic damages are assessed, however, for more subjective things: pain and suffering; mental suffering; emotional distress; loss of consortium; loss of society; and interference with usual activities. It is through the latter that juries attempt to compensate for the long-lasting effects of an injury.

Ballot Measure 35, if passed, would restrict non-economic damages to no more than $500,000 plus a cost-of-living allowance. Proponents of the measure argue that Oregon is experiencing a health care crisis driven by medical insurance costs that are in turn driven by “out-of-control jury awards” and frivolous lawsuits. Rising medical insurance costs are causing some of the more than 10,000 physicians practicing medicine in Oregon to give up the more risky areas of medicine like neurosurgery, obstetrics and gynecology. In rural communities, the loss of a practicing obstetrician or gynecologist can have serious impacts on the level of health care in that community, in some cases forcing patients to travel long distances to obtain the treatment they need. Rising insurance costs are also more than many doctors in rural communities — already having trouble staying in the black — can handle, causing them to close up shop and move to more profitable locations. Measure 35 proponents believe this problem has grown to the point where many doctors are leaving the profession completely. A cap on non-economic damages will relieve that pressure on the insurance companies and on physicians while still providing fair compensation to claimants. Proof of the cap’s effectiveness can be found in the positive impacts such a cap had on health care when it was in place in Oregon from 1995-1999.

The evidence for this argument may not just be a little thin, it may be just plain wrong.

“It’s disgraceful that the medical lobby is misleading the citizens of Oregon by spreading false information to influence the outcome of the proposed constitutional amendment on the November ballot,” said Public Citizen President Joan Claybrook. “Caps on payments to people injured by medical malpractice are not the determining factor in whether doctors practice medicine in a state. In fact, survey after survey has shown that the most important factors influencing where doctors choose to live and practice are wages and the quality of life, from education to recreation to the arts.”

A new 31-page report jointly issued by Public Citizen and the Oregon State Public Interest Research Group, or OSPIRG, supports Claybrook’s claims. Oregon’s Increased Number of Doctors: Government Data Refutes Medical Lobby Claims draws upon the latest federal, state and private-sector data and paints a far different picture of the state’s health care situation.

During the four years Oregon had a non-economic award cap in place, the number of active physicians in Oregon rose by 12 percent. In the four years following the finding of the cap as unconstitutional by the Oregon Supreme Court, the number of physicians increased by 11.9 percent. During that same 2000 to 2004 period, the number of physicians in rural communities also increased by 11.9 percent. Even adjusted for differences over whether out-of-state physicians licensed to practice in Oregon were counted in the calculations, these numbers suggest an “uncapped” system has had little impact on the growth of Oregon’s medical community.

In the area of high risk medical practices, the removal of the cap correlates with a sharp increase in the number of practitioners in rural communities. According to the Oregon Office of Rural Health, the number of obstetricians and gynecologists in rural communities increased by 27.6 percent during 2000-2004, a rate 56 percent greater than the 17.1 percent increase in these specialties for the entire state during the same four years. Emergency medicine practitioners in rural communities rose 27.5 percent from 2000 to 2004 as compared to an increase of 25.8 percent statewide.

In rural communities where there has been a decline in obstetrics, the cause is more likely demographics rather than litigation. In Reedsport, for example, the number of babies delivered each year has declined from 100 in 1991 to 40 in 2003. But a look at Reedsport residents, where young families move away in search of jobs, the median age went from 31 in 1980 to 47 in 2003. If there are fewer obstetricians in Reedsport, it appears that’s because there are fewer pregnant women.

“The claims of the HMOs and the medical lobby that doctors are fleeing Oregon because of malpractice lawsuits and a temporary spike in insurance rates is outright and patently false,” states Frank Clemente, director of Public Citizen’s Congress Watch. “A careful examination of the available official numbers confirms that no physician exodus has occurred in either urban or rural Oregon.”

What also appears questionable is the claim by Ballot Measure 35 supporters that our court system is out of control. A July 19, 2004 paper prepared by the Oregon AFL-CIO found that while national data showed a “ten-fold increase in average claims per physician in the 34 years between 1996 and 1990,” the trend in claims nationally and in Oregon appears flat over the last several years. The likelihood of a claim resulting in a jury award remains slim (see sidebar). The size of claims is increasing according to the Physician Insurers Association of America. Nearly 8 percent of awards exceed $1 million, a doubling over five years. Oregon has seen jury awards increase by 65 percent over three years, but there is no research suggesting a cap would reverse these trends. When put in perspective, however, this figure is far from alarming. Total U.S. healthcare spending in 2002 was $1,600 billion. With the annual cost of medical malpractice insurance running $3.2-6.3 billion, the direct cost of that insurance is less than one-half of one percent of total national spending on health care. In finding market forces creating the healthcare crisis Ballot Measure 35 is intended to address, the impact of lawsuits on overall healthcare spending seems minimal.

So, what is driving the rise in malpractice insurance rates if not frivolous lawsuits? Analysis by the Congressional Budget Office suggests that internal practices and investment strategies by the insurance industry may have more to do with increased insurance cost. They found a correlation between a drop in investment returns between 2000 and 2002 to a 7.2 percent increase in malpractice premium rates by the nation’s 15 largest malpractice insurers. That increase represented nearly half of the total 15 percent rate increase imposed by insurers during that time.

Weiss Ratings, Inc., the only major rating agency that receives no compensation from the companies it rates, also found that insurance companies were far more responsible for driving up rates than malpractice litigation was. In their 2003 ratings analysis, they determined that malpractice premiums were rising due to the medical inflation rate, a move by insurance companies to make up for 12 years of losses and failure to set aside enough reserves, and a decline in insurance investment income. In 2001 they saw investment income decline by 23 percent and in 2002 by 2.5 percent. They also found that non-economic award caps seemed to have no bearing on premium increases. In fact, states with caps experienced median premium increases of 48 percent compared to an increase of 36 percent by states without caps.

Why then, are big healthcare hitters like Kaiser Permanente and Providence Health Systems, each contributing $250,000 to the Yes on 35 campaign, and insurer Regence Blue Cross Blue Shield, adding $25,000 of their own dollars to the more than $3.5 million raised by the campaign, backing an awards cap if it isn’t effective? The cap is more about getting the healthcare and insurance industry beyond the reach of the courts. Caps are just one of a number of “reforms” being moved by the insurance and healthcare industries to free them from responsibility when their pursuit of profits leads to injury or death. Limitations on who can sue healthcare providers and shortened statutes of limitation are some of the other tools advocated to deal with a “health crisis” that actually only exacerbates it.

With cap advocates sitting on an enormous war chest, opponents of Measure 35 can expect a big push in the coming months. But with healthcare being a top concern for most Oregonians, there is the opportunity to not only persuade voters that a cap is not much more than a distraction from the real problems, but to start mobilizing them around real reforms like stronger public oversight of malpractice insurance carriers, mandating an end to dividing up the risk pool by geographical regions or types of practice, requiring carriers to maintain larger reserves and restricting insurance companies from making more risky kinds of investment in the stock market. Reforms, of course, can’t stop with the insurance industry if Americans are to enjoy a rational health care system. It will also take more controls on health care providers, returning the industry to patient care rather than pursuit of profits. Advancing that sort of program could make a defeat of the cap something that will felt long after November.

Dave Mazza is editor of The Portland Alliance.