Doctor insurer says malpractice rate increase not needed this year

After two years of hefty premium increases that touched off threats of a doctor exodus in Maryland and led to a legislative special session, the state's largest malpractice insurer said it does not need a rate increase for next year, leading some to question whether the much-debated malpractice crisis ever existed.

Medical Mutual Liability Insurance Society of Maryland, which insures more than three-quarters of the state's physicians, said in a letter to doctors that claims payouts and defense costs dropped about 15 percent last year from 2003's record level, and are on pace to drop slightly again this year.

That could recast the terms of one of the most heated policy debates in recent years on both the state and national levels.

"The burden has shifted," said state Sen. Brian E. Frosh, the Montgomery County Democrat who chairs the Senate Judicial Proceedings Committee, a body traditionally skeptical toward changes in the malpractice system.

"I wouldn't rule anything out," he said of possible reform legislation in the next session, "but they'd have to make a pretty strong case, and that would be hard to do."

One of those pushing hardest for broad changes in recent years, T. Michael Preston, executive director of the state medical society MedChi, said his group was likely to make "a more focused effort on incremental change."

Gov. Robert L. Ehrlich Jr. has introduced comprehensive bills on liability changes the past two years and toured the state to rally support for the issue, but his legislation died both years.

Shareese N. DeLeaver, a spokeswoman for the governor, said Ehrlich's strategy on the issue is "undecided at this time." Problems in the malpractice system "took years to develop, and whether the downturn is a trend or an anomaly, we'll have to wait and see," she said.

The downturn in Medical Mutual's claims payments comes after several years of steady growth capped by a big jump in 2003. Its payouts, including defense costs, grew from $47 million in 2000 to $93 million in 2003 -- a trend that was never entirely explained.

Advocates of reform blamed "runaway juries," but a review by The Sun of Med Mutual's records this year found that only about 10 percent of its malpractice payouts resulted from trials, with a majority of cases dropped without payment and the rest settled. Med Mutual, as most insurers do, won most of the cases that went to trial.

Last year, Med Mutual's payouts and defense costs dropped to $78.5 million. And payouts in the first six months this year are running at a slightly lower pace than last year, according to filing it made with the Maryland Insurance Administration.

The reasons for the reversal, and whether it is likely to continue, are as uncertain as the reasons for the 2003 jump.

"It's way too early to draw conclusions, because there's not nearly enough data, but we do know the number of cases is down, and juries appear more receptive to the physicians' point of view. Why that is, we don't know," Med Mutual President David L. Murray said via e-mail.

Dennis O'Brien, a Towson attorney and spokesman for the Maryland Trial Lawyers Association, said the 2003 increase was "a spike. It certainly wasn't indicative of a long-term trend." Now, he said, "It's a return to normalcy. There never was a crisis."

Larry L. Smith, vice president for corporate risk management for MedStar Health, a Columbia-based hospital system, said he hadn't seen any changes in jury behavior, although "I wish I could say I have."

Training and monitoring systems designed to reduce medical errors in recent years appear to be paying off but wouldn't account for the drop-off, either, he said. Cases typically take several years to process, so the payouts in 2004 represent primarily cases that stemmed from medical treatments in 1999-2001 -- before the latest round of safety improvements.

Similarly, legislative changes enacted in an extraordinary holiday-week emergency session called by Ehrlich at the end of last year aren't yet affecting costs, all parties agreed. They only apply to cases stemming from medical injuries after the bill became law in January. The changes included halving the limit on "pain and suffering" damages in death cases, tightening rules on expert witnesses and requiring more collection of data on medical errors.

Ehrlich vetoed the legislative package, but the legislature narrowly overrode his veto.

Med Mutual's claims experience, while not clearly explained, does mirror that of others in the state and nationally.

MedStar, which provides its own malpractice coverage for its hospitals and some doctors who practice there, paid out $15.9 million in 48 Maryland cases in 2003, then $9.3 million in 37 cases last year. As for the current year, Smith said, "it looks like its tracking the same as '04."

Nationally, malpractice payouts jumped from $5.9 billion in 2002 to $6.9 billion in 2003, then fell to $5.5 billion last year, according to Weiss Ratings Inc., a Florida company that tracks insurance trends. While claims fell last year, premiums rose 10.4 percent, said Melissa Gannon, a Weiss vice president.

In Maryland, the big surge in 2003 payouts led Med Mutual to impose rate increases of 28 percent last year and 33 percent this year. Doctors said that would drive them out of state or into retirement.

The state responded by creating a fund to help doctors pay their premiums, cutting the effective premium increase for doctors insured by Med Mutual to 5 percent.

For example, Dr. Steven Brand, a Frederick surgeon, said yesterday he was originally billed $52,500 for his liability insurance for this year, but qualified for a state subsidy of $13,951. The subsidies for the five surgeons in his group, he said, were roughly enough to pay for a new electronic health records system for the practice.

He was pleased that there would be another year of relative stability in premiums. "For one of our big line-item expenses to be held down for another year, that's helpful," Brand said.

The subsidy is scheduled to decline gradually over the next three years. With Med Mutual's base rate holding steady, that would mean doctors would face a slight increase in payments next year.

Alfred W. Redmer Jr., Maryland insurance commissioner, said yesterday he believed the subsidy would apply even though the rates are frozen but that he was seeking an attorney general's opinion to be sure.

Del. Robert A. Zirkin, a Baltimore County Democrat who described himself as "as strong a proponent of tort reform as there is in the legislature," said the need for changes did not end because rates had stabilized. "There are things to do to make sure this does not happen again, and to get rid of some of the junk cases that are clogging the system."