If increasing malpractice insurance rates are due to a) greedy insurance
companies, or b) incompetently managed insurance companies, why haven't the
malpractice premiums gone way up in all states? Are the insurance companies
greedy in Florida and Louisiana, but not in California, Iowa and South
Dakota? That really doesn't make sense, does it?

--------
Medical Economics
July 12, 2002
Malpractice crisis? not here!

by Robert Lowes

A handful of states have bucked the litigation trend. Tort reform is one
reason. Demographics may be another.

South Dakota is known for bitter winters, but when it comes to medical
malpractice litigation, the climate is downright balmy.

An FP in Sioux Falls covered by Midwest Medical Insurance pays just $2,423 a
year in premiums-minus discounts-compared to the $21,000 that an insurer
might charge an FP in Cleveland. And while ob/gyns in southern Florida face
premium rates approaching $20,000, their South Dakota counterparts are
paying only $13,325.

South Dakota belongs to a handful of states that represent the closest thing
to safe havens in the current malpractice litigation crisis. Over the last
18 months, doctors in other parts of the country have endured blistering
premium increases, some as high as 50 to 80 percent in Texas, Pennsylvania,
and West Virginia. As a result, many physicians can't afford coverage and
are turning away high-risk cases.

In some respects, malpractice carriers are making up for having charged
doctors too little in the 1990s, when investment income could offset losses
on claims. A stumbling stock market and the financial fallout of Sept. 11
helped spell an end to that era. Tougher times over the past year or two
have prompted several carriers to exit the malpractice market.

Skyrocketing premiums also reflect the fact that doctors are getting hit
harder in courtrooms: Plaintiffs are not only winning more cases--38 percent
in 2000 compared with 34 percent in 1999--but coming away with more money,
according to Jury Verdict Research. The median jury award, which includes
damages levied against hospitals, rose from $700,000 to $1 million during
that same period. As insurers pay more in claims and legal fees, they raise
premiums accordingly.

What makes for a good litigation climate?

California, Colorado, Vermont, and Minnesota join South Dakota on our list
of safe havens. They scored well in several key measures of malpractice
calm. Premiums are low and stable. The states also were among those with the
lowest median malpractice payments--awards as well as settlements--reported
to the National Practitioner Data Bank from 1990 to 2000 on behalf of
doctors embroiled in a malpractice charge. And they brought up the rear in
Data Bank payments in 2000.

Similarly, these "oasis" states generated fewer payments per 100 doctors in
2000 than the national average. That suggests that doctors who practice in
those states were less likely to be accused of malpractice, or that they
fared better in court.

Not surprisingly, malpractice carriers in our safe havens collected more in
premiums than they paid out in claims, legal fees, and administrative costs
in 2000--a sign of financial strength in a troubled industry.

Predictably, too, trial attorneys in these locales have a tougher time than
colleagues elsewhere. Look at the membership of the Million Dollar Advocates
Forum, a group of trial lawyers who've won $1 million jury awards or
settlements in all areas of civil litigation. Only seven Million Dollar
Advocates hail from Colorado. Lawsuit-happy Nevada has less than half the
population of Colorado, but it's home to 41 such attorneys.

What makes the safe havens less litigious? Three -- California, Colorado,
and South Dakota--have laws curbing excessive jury awards. Except for
California, the civil court systems in the five states we've highlighted are
rated in the top 25 by corporate attorneys surveyed by the US Chamber of
Commerce. The survey focused on overall treatment of tort and contract
litigation, judicial competence and impartiality; jury fairness, and
scientific and technical evidence.

Demographics may also help explain why some regions have escaped the
malpractice crisis. Insurance executives and defense attorneys describe the
people in those areas as more self-reliant, with more common sense, and less
susceptible to "soak the rich" thinking than Americans elsewhere, especially
those in big cities. "There's a mindset in the urban population that they
should be taken care of," says defense attorney Walt Griffin in Flint, ML

To be sure, some legal experts say factors such as race, income, and
urbanization are overrated as predictors of litigiousness in a given region
and how juries will decide cases. And there are always exceptions to
generalizations. Still, when you notice that upper Midwestern states have
some of the lowest malpractice premiums around, it's hard not to suspect a
Lake Wobegon factor at work. "Swedish, Norwegian, and German farmers, when
they're on juries, don't give away money,' says St. Paul malpractice defense
attorney Rich Thomas.

Here, then, is a look at five states that have bucked the national trend--so
far. Think hard before deciding to move to escape malpractice bad weather,
however. Doctors in these bastions worry that the storm is coming their way.

California

The power of tort reform

California arguably qualifies as a safe-haven state even though its premiums
aren't consistently rock-bottom. Some ob/gyns in southern California pay
more than $60,000 for a mature claims-made policy with typical coverage
limits of $1 million for one incident and $3 million for all incidents.
However, a San Francisco internist can get coverage for only $6,064, less
than what some internists in rural Iowa pay. And recent premium increases
have been mostly mild compared with those in hot spots like Nevada.

What really distinguishes California is its median malpractice payment of
$41,500--the smallest in the nation--reported to the National Practitioner
Data Bank from 1990 to 2000. And California's rate of 1.9 payments per 100
doctors in 2000 was below the national average of 2.3. "California is
actually having a pretty good experience," says Cheye Calvo, who tracks
insurance issues for the National Conference of State Legislatures.

Calvo and others credit the Medical Injury Compensation Reform Act of 1975,
the envy of doctors nationwide. The centerpiece of MICRA is a $250,000 limit
on noneconomic damages--in other words, pain and suffering. The law also
caps contingency fees for plaintiffs' attorneys. An attorney is entitled to
no more than 15 percent of any amount over $600,000.

Another provision discourages plaintiffs from double-dipping by suing a
doctor for medical expenses even though a health insurer already paid the
plaintiff's bills. MICRA allows a defense attorney to disclose these and
other so-called collateral payments to a jury, which can choose to subtract
them from any award. In many states, evidence of collateral payments can't
be introduced in a malpractice trial.

Colorado

Educated jurors favor physicians

Denver physicians gripe about declining reimbursements, but not about the
cost of malpractice insurance, says internist David Downs, president of the
Denver Medical Society.

"It's not a big part of practice overhead," says Downs, who pays $5,600 in
premiums. "I really don't pay attention to it."

Copic Insurance, which insures most Colorado doctors, increased rates a mere
3 percent in 2001 compared to the national average of 15 percent. Another
5.6 percent hike-also relatively benign-occurred this year. Copic charges a
standard rate of $9,844 for an internist, but various discounts can chop
this down considerably. Plus, the company has maintained enough fiscal
fitness to give doctors premium credits that have translated into markdowns
as high as 20 percent. When all the math is done, that internist's premium
is more like $6,000.

Premiums are low in Colorado for good reason. Median malpractice payments on
behalf of Colorado doctors reported to the Data Bank were the fourth lowest
in the nation from 1990 to 2000. The payment rate per 100 doctors in 2000
was 1.6, compared to the national average of 2.3.

As in California, insurance executives give thanks for tort reform-in
particular, a $250,000 cap on noneconomic damages and $1 million on total
damages. "Tort reform is clearly a must," says Copic CEO and
pediatrician/allergist Jerome Buckley. "Too many juries have lottery
mentalities."

Then again, Colorado juries get credit for exercising restraint. Denver
defense attorney Mark Fogg says Centennial State jurors tend to respect a
doctor's decision-making process because they themselves are highly
educated. A shallow boast? In 1999, some 39 percent of Colorado residents
held a bachelor's degree or higher-tops in the nation, according to the US
Census Bureau.

Carol Golin, editor of Medical Liability Monitor, says another key to stable
premiums is Copic's solid risk management program. "If you prevent adverse
medical events," says Golin, you won't have as many claims."

Small may be better

South Dekota

In 1999, the average South Dakotan earned $23,765, fourth lowest in the
country. FP Mary Carpenter in Winner, SD, thinks that that statistic might
explain why the state's median malpractice payment between 1990 and 2000 was
the nation's eighth lowest.

"We're not a rich state;' says Carpenter, a past president of the South
Dakota State Medical Association. "A million dollars is a lot of money up
here."

Likewise, having only 755,000 residents- and cities no bigger than Sioux
Falls (pop. l24,000)-"promotes close relationships that work against
exorbitant verdicts," says David Gerdes, the medical society's legal
counsel. "Jurors are more likely to know the doctor who's on trial, so they
try to give each side a fair shake."

Better rapport between doctor and patient may also translate into fewer
suits, adds defense attorney Ed Evans in Sioux Falls. For that matter, Evans
thinks that South Dakotans may simply be afraid of scaring off doctors by
attacking them in court: South Dakota ranked 43rd in the nation in terms of
physicians per 100,000 residents in 2000.

To play it safe, South Dakota passed tort reform capping noneconomic damages
for malpractice at $500,000.

Minnesota

Jurors with missing fingers

Minnesota lacks a cap on noneconomic damages, but then, maybe it doesn't
need one. The Gopher State reported the 11th lowest median malpractice
payment from 1990 to 2000. And it was second to last in payments per 100
doctors in 2000.

Perhaps plaintiffs can't win much sympathy from Minnesota jurors turned
stoical by long, snowy winters. "I've asked people during jury selection
whether they've ever been injured," notes attorney Rich Thomas. "There will
be farmers with missing Fingers who won't raise their hands. I'll say, 'But
you've lost some fingers,' and they'll reply, 'Oh, this is nothing.'"

Malpractice premiums are as modest. Midwest Medical charges $3,803 for
internists, $3,169 for family physicians, and $10,142 for general surgeons.
Those rates apply to doctors in the Twin Cities metro area of 2.9 million as
well as doctors in Calumet (pop. 383), some 160 miles to the north. In other
states, a malpractice carrier may charge urban doctors twice as much as
rural doctors.

"We don't have a big-city jury award syndrome in the Twin Cities like you
see in Philadelphia or Chicago," says Midwest Medical president Jack Kleven.

Vermont

No sense of entitlement

Judging by Vermont's malpractice climate, the Yankee temperament persists
into the 21st century.

The state ranked seventh from the bottom in size of malpractice payments
from 1990 to 2000. It held the same rank for payments per 100 doctors in
2000.

"The population is independent-thinking and self-reliant," says malpractice
defense attorney David Cleary in Rutland, VT. "People don't look to
government or institutions to wrap them in swaddling clothes from birth to
death. They don't expect doctors to guarantee that they'll recover from an
illness."

"Vermonters are down to earth," adds Brattleboro internist Carolyn
Taylor-Olson, president of the Vermont Medical Society. "We're lucky to live
among the people we do."

Lucky, indeed. Vermont internists insured by ProMutual Group pay a standard
rate of $5,518 minus discounts. In contrast, ProMutual charges internists in
neighboring Massachusetts $11,031. Premium rates for Vermont general
surgeons are $15,239 compared to $27,244 for Massachusetts colleagues.

The times are a-changin' even in the good states

Right now, Vermont physicians have little in common with their Texas
colleagues, who protested in the streets and marched on county courthouses
in April because of runaway insurance premiums. Yet safe-haven states may
not be safe forever.

Insurance industry fallout. When PHICO Insurance folded recently, the
Vermont doctors that it insured had to scramble to find new coverage. The
same thing happened in South Dakota when The St. Paul Companies pulled out
of the medical liability business. FP Mary Carpenter was one of many South
Dakota doctors who switched from St. Paul to Midwest Medical. "We have fewer
insurance options, and that's a concern," says Carpenter. Noting that her
state lacks a homegrown malpractice insurer, she worries that the financial
problems of out-of-state companies will eventually hurt South Dakota
doctors. "Risk gets spread out to everyone."

Tort-reform challenges. Trial lawyers have convinced many state courts to
undo tort reform. Alabama, illinois, Kansas, New Hampshire, Ohio, Oregon,
Texas, and Washington put a lid on jury awards only to find those laws
declared unconstitutional, according to the Health Care Liability Alliance,
a lobbying group. California's MICRA has stuck so far, but the California
Medical Association stays busy defending it. The CMA has filed friend-of-the
court briefs in three pending cases where plaintiffs' attorneys have sought
to circumvent various aspects of the law.

In Colorado last year, the state supreme court removed physical
disfigurement and impairment from the $250,000 cap on noneconomic damages.

Less predictable rural juries, "You're seeing an erosion of the differences
between rural and urban venues, says Frank O'Neil, a senior vice president
with malpractice carrier ProAssurance in Birmingham, AL. "Places in the
South that never had a million-dollar verdict before have produced several
in the last three years. It's dangerous everywhere."

More enterprising plaintiffs' attorneys.

Defense attorney Ed Evans in South Dakota says the state's plaintiffs'
attorneys are becoming as aggressive and innovative as their peers in
Florida and Nevada. "We're seeing more claims like intentional infliction of
emotional distress, which is an attempt to win punitive damages:' says
Evans. "The lawsuit will contend that the doctor said something rude like
'Your pain is in your head.'"

One plaintiffs' attorney is taking a novel approach--for South Dakota, at
least--in a pending lawsuit filed by a woman unhappy with the results of
breast augmentation surgery. "He's arguing it as a warranty problem, not
malpractice," says Evans.

Regardless of what lies ahead, no state offers physicians a guarantee that
they won't be taken to court-a fact that isn't lost on Mary Carpenter in
South Dakota. Although she has never been sued, she's constantly afraid she
will be.

"I don't think I'm unusual," she says. "Everybody who cares for patients has
that on their mind."

Where malpractice payments are lowest

Payouts to plaintiffs typically are smaller in states with solid tort
reform measures.

Median payment,(1) Median payment,
State 1990-2000 2000 only

California $41,500 $55,000
Utah 49,950 90,000
Idaho 50,000 100,000
Colorado 55,000 84,997


Montana 60,000 125,000
Iowa 64,875 100,000
Vermont 65,000 75,000
South Dakota 65,500 100,000
Michigan 67,500 85,000
Nebraska(3) 70,000 116,250

Minnesota 72,555 100,000
National median 99,500 125,000

Limit on noneconomic
State damages

California $250,000
Utah 250,000
Idaho 400,000
Colorado 250,000 on noneconomic
damages; $1 million total
damages
Montana 250,000
Iowa None
Vermont None
South Dakota 500,000
Michigan 345,000 (2)
Nebraska(3) 200,000 per patient;
1.25 million total damages
Minnesota None
National median

Source: National Practitioner Data Bank, Health Care Liability Alliance

(1)Payments are those reported to the National Practitioner Data Bank
and include jury awards, settlements, and awards resulting from
arbitration and mediation. Payments represent what is paid on behalf of
an individual physician. (2)Initial limit of $82,000 was indexed to
inflation. (3)Median payments for Nebraska and other states with patient
compensation funds are understand because payments from these government
funds are excluded from the calculation.
States Where malpractice payments are less frequent

Number of Number of
Patient care payments
State physicians in 2000 in 2000 (1)

Wisconsin 11,365 71
Minnesota 11,497 86
Alabama 8,281 82
Oregon 7,220 82
Virginia 16,442 199
North Dakota 1,316 16
Vermont 1,785 23
Hawaii 3,118 40
North Carolina 16,955 217
Tennessee 12,738 179
Maryland 17,650 249
National 647, 430 14,691

Source: American Medical Associaton National Practitioner Data Bank
(1)As reported to the National Practiotioner Data Bank. Excludes
payments from state patient compensation funds that supplement payments
made by malpractice carriers in the same case.

RELATED ARTICLE: The malpractice climate can vary ant to in dramatically the
same state

Want escape the malpractice crisis where you live? Just move from one side
of your state to the other.

In Ohio, insurer ProAssurance charges its lowest rates in the Cincinnati
area. The standard rate for an FP is $12,650. That's not cheap, but it beats
$21,375 for FPs in Cleveland, where rates are highest. The percentage gap is
even wider for ob/gyns--$57,067 vs. $100,591.

Malpractice carriers charge less in Cincinnati because they spend less on
malpractice claims and legal fees there. Insurance broker Charles Black Jr.
in Columbus, OH, says Cincinnati is less litigious because it's culturally
and politically conservative. "Cincinnati identifies with the Midwest while
Cleveland identifies more with the East Coast," says Black, who also notes
that Cleveland is more of a union town.

Do political leanings have an impact on the litigation climate? Perhaps.
Hamilton County, home to Cincinnati, went for George W. Bush in 2000 while
Cleveland's Cuyahoga County went for Al Gore.

A similar story plays in a trio of Michigan cities- Grand Rapids on the west
side of the state, and Flint and Detroit on the east. An internist who
practices in Grand Rapids (pop. 197,800) can get a $200,000/$600,000
malpractice policy from American Physicians Assurance for $8,486. But if
he's in Flint (pop. 124,943), the rate jumps up to $13,500. And in Detroit
(pop. 951,270), that annual premium is $19,285.

The car-plant towns on the east side--heavily unionized and
Democratic--account for a disproportionate share of large verdicts in
Michigan. "Maybe blue-collar workers tend to expect medicine to be perfect
and to seek out legal reimbursements instead of accepting that complications
happen," speculates attorney Walt Griffin.

By all accounts, a different mindset prevails in Grand Rapids. "It's a
conservative, white-collar, Republican stronghold," says Griffin. Grand
Rapids urologist Brian Roelof notes the area's heavy concentration of
evangelical Christians and the presence of Zondervan, which calls itself the
world's biggest publisher of Bibles.

"People here tend to think you're supposed to make it on your own," says
Roelof, whose annual malpractice premium is $9,000. "So it's hard to get a
judgment against a physician. And when that happens, the award is usually
modest."

Best civil court systems

1. Delaware

2. Virginia

3. Washington

4. Kansas

5. Iowa

6. Nebraska

7. Colorado

8. Utah

9. South Dakota

10. Connecticut

Source: US Chamber of Commerce