Caps don't cut it.

Byline: The Register-Guard

Oregonians' whisker-thin defeat of a ballot measure that would have capped noneconomic damages in medical malpractice lawsuits left the underlying problem unresolved.

Malpractice insurance rates are soaring, and not just in Oregon. For physicians in high-risk specialties, and particularly for the patients who need care from those specialists, skyrocketing malpractice premiums constitute a genuine crisis that can't be ignored.

But recent data from several credible sources clearly indicates that capping damage awards - the health care and insurance industries' preferred solution - is a disingenuous and ineffective strategy for controlling insurance rates.

The nation's largest medical malpractice insurer, GE Medical Protective, admitted in a regulatory filing in Texas that caps on damage awards and other efforts to limit recoveries for injured patients have an inconsequential impact on insurance rates.

"Noneconomic damages are a small percentage of total losses paid," the Medical Protective filing said. "Capping noneconomic damages will show loss savings of 1 percent."

The regulatory filing was obtained by the Foundation for Taxpayer and Consumer Rights, a nonprofit, nonpartisan education and advocacy organization. It came in response to a Texas Department of Insurance request that Medical Protective justify its proposed 19 percent malpractice premium rate hike.

No wonder Texas insurance regulators were aghast. The whopping increase came a mere six months after Texas lawmakers responded to intense lobbying from Medical Protective by enacting a $250,000 cap on noneconomic damages for victims of medical malpractice.

Using Medical Protective's own calculations, all the damage cap did was prevent the rate hike from clocking in at 20 percent. Thank goodness for tort reform.

Insurers have been playing both ends against the middle with malpractice rates for years. Legislators and voters are told that multimillion-dollar damage awards are spiraling out of control and that capping damages is critical to lowering insurance premiums.

But when compelled by state regulators to justify rate hikes - especially in states that have damage caps - insurance companies admit that caps do little to restrain rates. Eighteen years ago, a St. Paul Insurance company study provided to the Florida Department of Insurance reported that Florida's just-passed $450,000 noneconomic damage cap "and mandatory structured settlements on losses above $250,000 will produce little or no savings to the tort system as it pertains to medical malpractice."

Last Tuesday, The Wall Street Journal debunked the myth of runaway multimillion-dollar damage awards in a front-page analysis by Joseph Hallinan. A study by a Duke University law professor of 105 malpractice verdicts in the New York City area found that 44 percent of jury awards were reduced after the verdict. The bigger the award, the larger the reduction.

Hallinan cited one case with a total award of $90.3 million that was settled for $7 million and another with an award of $65.1 million that was reduced to $3.2 million.

Furthermore, defendants in malpractice jury trials - physicians and hospitals - win the vast majority of verdicts. The Journal cited a U.S. Justice Department survey indicating that in the largest U.S. counties in 2001, plaintiffs won their cases only 27 percent of the time, a win rate that has changed little over the past decade.

California's approach is often used as a model for states struggling with out-of-sight malpractice premiums. But California found that caps on noneconomic damages, enacted in 1975, were not the magic bullet they were made out to be by physicians and insurance companies.

Only when Californians voted in 1988 to set limits on insurance increases did malpractice premium rates begin to moderate. California currently has some of the lowest malpractice rates in the nation.

Fixing the medical liability system will require much more than one-sided solutions that benefit insurance companies at the expense of injured patients. Creating supplemental insurance funds, sanctioning lawyers who file frivolous suits, migrating toward an arbitration model that's more like workers' compensation and a host of other structural changes are needed.

It's time to stop playing the damage caps card and focus on real reform.