The Real Meaning of Caps – A True Life Story
Let’s talk about what caps really mean, with a real case – and a real person. In most cases, caps simply mean immunity for negligent doctors and hospitals. Because of caps, those doctors and hospitals that commit medical malpractice often escape liability, except in cases where large economic damages exist.
Don’t be fooled into thinking that in a state with a cap of $250,000, a person with a clear liability case will actually recover $250,000. In fact, that will never happen. Here is a true story showing you why.
Florence was a vibrant seventy-year-old woman. She rode her bike everyday to her part-time job at Wild Oats Market in Evanston. She travelled extensively. She was active and involved in community and charitable work. One day she contracted an easily detectable condition called “temporal arteritis.” She had the classic signs and symptoms of the disease, but the signs were repeatedly ignored by her doctor. Although temporal arteritis is an easily curable condition, without treatment it will cause total blindness. And that’s what happened to Florence. She went completely blind, never even to see the light of day again. She would forever live in a totally dark world.
The doctor who had missed the diagnosis had a $1 million insurance policy. The insurance company settled early on, because a failure to do so would have been bad faith. In other words, if the insurance company hadn’t settled, the insured - the doctor - would have been subjected to personal liability for any verdict in excess of $1 million. Since Florence agreed to settle for $1,000,000, the insurance company’s failure to settle would have subjected it to unlimited liability for failing to protect its insured, the doctor. Because of that fear, the insurance company paid its full policy. If the verdict had been $10 million, the insurance company would have been on the line for the whole thing. But not with caps!
What If There Were Caps?
In the same scenario if there were caps, the insurance company wouldn’t face the risk of bad faith for failing to settle, for there would be no possibility of a verdict beyond the policy limits. If the cap were $1 million, because the damages for her pain and suffering and loss of a normal life would have been capped, there would be no possibility of liability beyond $1 million. No insurance company would willingly pay $1 million. Why would one, when the worst-case scenario would be that after a trial and appeal, its risk would be limited at $1 million? So it could take a chance on winning (with a frivolous defense) or agree to settle for maybe $500,000 or $600,000.
What If There Were A Cap Of $250,000?
The insurance industry and Republicans always try to set caps at $250,000, and have been successful in some states in doing so. In Florence’s case, had there been a $250,000 cap, she would have received nothing. Why? Because no lawyer anywhere in the country would take the case. That is what is happening in states like California and Texas.
A cap doesn’t mean that a victim of malpractice with horrific noneconomic losses like Florence, or people with horrific facial scarring or seniors with a loss of limbs would actually receive whatever the cap amount is. It means they would receive nothing because there would be no case. The out of pocket costs to bring a malpractice case to trial can be anywhere from $100,000 to $300,000. So if a homemaker mother of five dies from clear-cut malpractice – no case. Florence – no case.
Limiting justice is denying justice. That’s what caps really mean.
No Benefit From Caps
Are there any real benefits to caps? No. Not only do caps deny victims of malpractice real justice, studies show that they don’t matter anyway – they don’t create savings to the health care system, they don’t help retain doctors - doctors aren’t “fleeing” capless states -and they have no impact on the practice of so-called “defensive medicine.”
Increased Insurance Rates Not Linked To Increased Pay-outs
Insurance companies are often quick to blame the rising number of malpractice claims and payouts as the reason for the increase in malpractice rates, and hence the increase in health care costs.
Not true. Despite an 80 percent increase in insurance rates between 2000 and 2004, payouts stayed steady or declined in that period and have continued to drop. Further, despite the stability or decline in payouts, ISMIE (the principal insurer of Illinois doctors) has collected twice as much or more in premiums versus payouts each year since 2003.
Doctors Are Not Fleeing States Without Caps
Further, doctors are not fleeing Illinois or any other state without caps. The number of doctors in Illinois has increased every year since 1998 including high-risk specialties like neurosurgeons and obstetricians. This trend has been consistent even after “tort reform” measures were struck down throughout the years, despite claims by proponents of caps that doctors would flee.
Caps Have No Bearing On The Practice Of Defensive Medicine
Finally, medical malpractice claims have little or no effect on the cost of health care, either through jury awards or through the practice of defensive medicine. In fact, as pointed out in the June 2009 issue of The New Yorker magazine, the “fear of lawsuits” myth is totally discredited by the fact that those unnecessary tests are ordered most frequently in California, Texas and Michigan, all of which have draconian tort “reform” laws, and least commonly in Hawaii, which has no tort reform. Indeed, Hawaii has the lowest per capita Medicare reimbursement rate, while Texas, California and Michigan are among the highest. And the health care costs in McAllen, Texas are twice as high as at the Mayo Clinic. And Minnesota has no caps!
Further, a recent study conducted by the University of Michigan Health System found that when Michigan ($250,000 cap) doctors have an ownership in an outpatient surgery center, they perform on average twice as many surgeries as doctors with no financial stake (Health Affairs, Vol. 29, No. 4 April 2010.) Study after study demonstrates a doctor’s own financial motivation is the driving force behind unnecessary tests and procedures - not the practice of “defensive” medicine from fear of malpractice.
In short, caps do nothing to benefit society. To the contrary, they give negligent doctors and hospitals immunity from being accountable for their misconduct.