By John C. Wolf, D.O.
Associate Professor of Family Medicine
Ohio University College of Osteopathic Medicine

INSURANCE COSTS AND MALPRACTICE AWARDS PASSED ON TO PATIENT

Question: I just had some minor outpatient surgery. I was astounded when I got the bill from the hospital and again when I got the bill from my doctor. Does my doctor and everyone who works at the hospital expect me to send their kids to college? Why are these prices so stupidly high?

Answer: The cost of health care is certainly escalating -- as you have noticed. There are many factors involved in this price rise, including the increasing use of high-tech diagnostic procedures and miraculous new treatments. These technologies have substantial costs associated with their research and development. Then, there is always the most commonly blamed issue of profit.
Both Federal government health insurance programs (principally Medicare and Medicaid) substantially reduce payments for physicians and hospitals below the rates they normally charge. Managed care programs like HMOs and PPOs have done this too. Despite these cost-cutting efforts -- which also cut profits -- the price of health care continues to escalate at a rate that is causing major problems for employers, insurance companies and consumers.
The complexities of this "cost-of-heath-care" issue are so great that no one has come up with an acceptable solution yet. What I'd like to do today is to give you a perspective on one part of this problem that strikes a chord -- or more accurately, a discord -- with all doctors. The problem I refer to is malpractice insurance premiums.
Malpractice insurance rates reflect the doctor's training, type of practice, the type and number of procedures done, and the history of previous claims. In addition, some states have laws that limit the size of awards juries can impose or restrict the fees lawyers can charge. These variables are considered when a malpractice insurance company quotes a rate to an individual physician or physician group. Considering this, I'll draw my examples from my part of Ohio even though other areas will have different particulars.
An average family physician can expect to pay about $11,000 in malpractice insurance premiums this year as compared to $7,000 last year. A family doctor who delivers babies can expect to pay at least $30,000 to over $50,000 for insurance coverage. Ob/gyn, general surgery, radiology, pediatrics and other specialty groups are also being pummeled by 15 to 25 percent mid-year price increases.
Think about it this way. If you're having a baby, and your doctor delivers one baby per week, $1,000 of the doctor bill for your delivery could easily be spent on insurance premiums. Wow! Insurance is a significant part of health care cost.
This malpractice crisis is causing serious financial problems for most doctors and, indirectly, for many patients. Most doctors are paid by insurance companies at a reduced rate, and this rate isn't adjusted when the doctor's costs increase. A doctor's decision about whether or not he or she will continue to perform any given service -- like delivering babies -- for his or her patients is now in reality determined by the insurance companies rather than by the doctor's skills or patient needs.
You may be curious why insurance rates are so high. Well, it is because the insurance companies are faced with very large awards when a malpractice suite is settled. Million dollar awards are common and multi-million dollar ones aren't rare. Individuals and their lawyers look upon malpractice suits as if they are buying winning tickets for the super lotto, and current practices show that their odds of striking it rich are substantially better than with gambling.
So what can you and I do about this extraordinary health care cost? I wish I knew of a solution since none of the legal solutions tried in other states seems to have universal applicability.

"Family Medicine" is a weekly column. To submit questions, write to John C. Wolf, D.O., Ohio University College of Osteopathic Medicine, P.O. Box 110, Athens, Ohio 45701. Past columns are available online at http://www.FamilyMedicineNews.org.