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Lots of Money, But No Solution

Originally Published in The Baltimore Sun

By Michael I. Krauss
Published on Monday, December 27, 2004
OP-EDS

Proposed “stop-loss fund” provides little benefit for Marylanders

With state lawmakers scheduled to arrive in Annapolis next Wednesday (12/28) to consider reforming Maryland’s medical malpractice law, Gov. Robert Ehrlich and the state’s top Democratic leaders continue to haggle over what some of those reforms will be.

Some observers consider the lack of agreement troubling. But what should really worry Marylanders is the one matter on which political leaders agree: the need to create a $60 million public “stop-loss” fund to subsidize doctors’ malpractice insurance and partly offset the dramatic increase in malpractice premiums experienced in recent years.

Medical malpractice law has an important role in society: It enables a patient who has been harmed by a negligent doctor to receive just compensation for the injury. It also provides a powerful incentive for doctors to perform competently or else suffer financial losses through court judgments and higher malpractice premiums.

The dramatic recent increases in malpractice insurance premiums suggest that something has gone wrong. One of the following must be the case: Maryland doctors are becoming increasingly negligent, or plaintiffs are making—and winning—dubious claims about injuries, or else something is wrong in the malpractice insurance market.

Regardless of which of those possibilities is the case, the stop loss fund doesn’t fix the problem—it adds to it. If the problem is that Maryland doctors are prone to excessive error, the fund would diminish the economic incentive for them to do better. Instead, it would shift some of the cost of medical errors from doctors to those who would provide revenue for the fund—either HMO customers (as proposed by Senate President Mike Miller and House Speaker Michael Busch) or taxpayers (as proposed by Gov. Ehrlich).
If the problem is dubious claims, the stop-loss fund would continue to deliver malpractice bonanzas to plaintiffs and their lawyers, using money taken from HMO customers or taxpayers. And if the problem is mismanaged malpractice insurance firms, then the fund would encourage additional mismanagement by infusing those firms with millions of dollars from either HMO customers or taxpayers.

Hence, the irony of the stop-loss fund proposal: It shifts the costs of Maryland malpractice crisis away from those causing the crisis—either doctors, or plaintiffs and their lawyers, or malpractice insurers—and places the costs squarely on the shoulders of those who have surely committed no wrong—either HMO customers or taxpayers. How is that an improvement over the current situation?

Nonetheless, Annapolis is likely to implement the stop-loss fund because it is a political winner. It would benefit the physicians’ lobby because it would effectively cap their liability insurance premiums. And it would benefit the lawyers’ lobby because it would allow them to continue pursuing large judgments.

Put simply, the stop-loss fund is the classic politicians’ dream: the benefits are concentrated on two deep-pocketed special interests while the costs are dispersed among the general populace.

But not all doctors and lawyers are accepting of this largesse. Attorneys with reverence for the ideals of tort will find the cost-shifting reprehensible, while many doctors will bristle at the idea of being subsidized. As Hagerstown neurosurgeon Dr. John Caruso told me at a recent forum, “I don't want anybody paying my premiums. I want premiums to be fair.”

Maybe, instead of creating a slush fund, Maryland lawmakers will try to determine—and fix—the causes of the state’s medical malpractice problems.

Michael I Krauss, professor of law at George Mason University, is the author of the Maryland Public Policy Institute study “Medical Malpractice: Is It Time for Tort Reform in Maryland?”