Med Mal Study Wrap Up

This is a busy week for med mal studies.  Luckily, some one else has summarized the major studies:

Caps have a modest positive effect on physician supply (JAMA I)

Docs actually engage in defensive medicine because of litigation fears (JAMA II)

Caps have a modest positive effect on the supply of physicians and the effect is greater in rural areas.  (Health Affairs I)

The growth in medical malpractice claims is less than the growth in physicians (Kaiser Family Foundation and my previous comments)

The evil insurance companies are ripping off doctors to make up for investment losses.  (Health Affairs II).

This last study doesn’t really say the insurance companies are evil, but it repeats a canard that just will not die.  Only last week the AMA put out a memo which describes the problem accurately. (via PointofLaw.Com)

Here is a chart that makes the point quite nicely.

[click here to enlarge]

The red line represents insurance underwriting income.  If it is negative it reflects the fact that losses are greater than premiums.  If we look at the yellow line, it reflects the investment income of the insurance industry.  Over the last couple of years it is decreasing slightly relative to premiums earned.  However, if we want to see what is driving operating income, it is clearly losses. Over this period of time, the real risk as measured by the standard deviation is due to underwriting income and not investment income as the standard deviation for the underwriting risk is over 3 times greater than the risk inherent in the underwriting income.