AIA: Latest Public Citizen Medical Liability Reform Wrong

A recent report from the consumer group Public Citizen misuses claim payment data in order to reach the incorrect conclusion that medical liability reform is not needed, according to the American Insurance Association (AIA).

According to AIA, Public Citizen’s faulty diagnosis of the medical liability insurance market is based on a review of incomplete claim payment data that includes very little information about claims incurred in the last few years. Among other things, this is due to the fact that medical malpractice claims often take a long time to close. For example, claims involving misdiagnosis take, on average, 4 to 5 years to close. While Public Citizen asserts that the data it used is current, it fails to acknowledge that this data is nowhere near complete.

“The National Practitioner Data Bank (NPDB), which Public Citizen used as a sole source for reporting that the number and size of medical liability claim payouts has dropped, has no data on one-half of the claim payments resulting from claims filed in 1999, because one-half of the claims have not yet closed and, therefore, have not been reported to the NPDB. For claims incurred more recently, in 2003 and 2004, virtually no information is included in the NPDB,” said David Corum, AIA assistant vice president. “Clearly, NPDB data is not a reliable source for serious researchers to use if their goal is to determine the current health of the medical liability insurance market.”

In short, added Corum, “Public Citizen analyzed the wrong numbers. Instead of looking at the incomplete claims losses paid data in the NPDB, they should have examined claims losses incurred – claims reported by insurance carriers but that have not yet closed with final payments made, and thus not included in the NPDB.”

AM Best reports the following numbers for medical malpractice incurred claim losses countrywide, for the latest 5 years available:

1999: $3.56 billion
2000: $4.07 billion
2001: $5.57 billion
2002: $5.76 billion
2003: $6.49 billion

“This data shows an 82 percent increase in claim losses during four years of relatively low inflation. From this data, it is evident that the ongoing difficulties in the medical liability insurance sector are real, as indicated by the recent increases in incurred claim losses,” said Corum.

“Insurers determining what to charge for a medical liability policy in 2005 are going to weigh much more heavily information about claims incurred in 2004 than claim amounts paid in 2004 for claims incurred several years earlier. The NPDB is not intended to be a source for accurately describing the current health of the medical liability market,” added Corum.