Capping Damages

Median vs. Mean: A couple of days ago CalPundit looked at this report (warning: pdf file) mentioned in this Time magazine story as evidence that noneconomic caps have no influence on rates of increase of malpractice insurance premiums. Calpundit correctly points out that the report relies on median malpractice payouts and premiums rather than the mean. This is important because it ignores the effect that a few large payouts or increases in premiums can have. In fact, using the median, the report comes to the conclusion that, based on figures from the Medical Liability Monitor:

* States with caps did have lower growth in malpractice payouts: a growth rate of 37% between 1991 and 2002 compared to 71% for states without caps.

* However, exactly the opposite was true for malpractice premiums. States with caps saw premiums grow 48% between 1991 and 2002, while states without caps saw premiums grow only 35%. So in states with caps, payouts went up more slowly but premiums went up more quickly.

Now, here’s what the folks at the Medical Liability Monitor came up with for the 2001-2002 period (admittedly a different period of time than that reported in the Weiss report which went from 1991-2002), using mean values:

Most of the average premiums in the 19 states with noneconomic damage caps during the 2001-02 study period fell below the nationwide premium average. Caps ranged from $200,000 to $1 million.

According to the report, in the states with caps:

* Only internists in Michigan had a higher annual premium than the national average. Nationwide the annual premium was $12,177. In Michigan, internists on average paid $26,146. The other 18 state averages ranged from $4,023 to $10,098.

* Only general surgeons in Michigan, Missouri and Utah paid more than the $36,354 national average. The Michigan average was $71,713; Missouri's was $38,326; Utah's was $37,290. The other 16 state averages ranged from $10,896 to $35,915.

* Ob-gyns in Michigan, Massachusetts and Maryland paid more than the $56,546 nationwide average. The Michigan average was $88,945; the average in Massachusetts was $84,566; and Maryland's average was $64,385. The other 16 state averages ranged from $17,786 to $55,084.

It’s all in how you spin the numbers. Which means that Calpundit is right. The Weiss Report appears not to be the impartial, nonpartisan look at the issue that it claims to be.

UPDATE: Overlawyered has even more details on this.