Evaluation of Medical Malpractice Tort ReformEvaluation of Medical Malpractice Tort ReformCasualty Actuarial SocietyCasualty Actuarial Society
Colorado Springs, COColorado Springs, COMay 17, 2004May 17, 2004
Presented by:Presented by:Richard S. Biondi, FCASRichard S. Biondi, FCAS
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Main Data SourcesMain Data Sources
National Practitioner Data BaseNational Practitioner Data Base– Physicians OnlyPhysicians Only– All Paid ClaimsAll Paid Claims– CountrywideCountrywide
Florida Department of Insurance Data BaseFlorida Department of Insurance Data Base– Only Commercially Insured ClaimsOnly Commercially Insured Claims
– Physicians & HospitalsPhysicians & Hospitals– More Detail per ClaimMore Detail per Claim– Florida OnlyFlorida Only
Texas Department of Insurance Data BaseTexas Department of Insurance Data Base
– Commercial, Bodily Injury Liability ClaimsCommercial, Bodily Injury Liability Claims
– Indemnity Payments Over $10,000Indemnity Payments Over $10,000
– Physicians & HospitalsPhysicians & Hospitals
– Texas OnlyTexas Only
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Other Data SourcesOther Data Sources
Physicians Insurance Association Physicians Insurance Association of Americaof America– Countrywide OnlyCountrywide Only
Annual StatementsAnnual Statements– All Insurers ConsolidatedAll Insurers Consolidated
Rate FilingsRate Filings
US Government (e.g. census) DataUS Government (e.g. census) Data
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Paid Losses Reported to Paid Losses Reported to the NPDBthe NPDB
0
1,000
2,000
3,000
4,000
5,000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year Claim Closed
To
tal
Pai
d L
oss
(x
$1 m
illi
on
) -
US
N
PD
B
0
100
200
300
400
500
To
tal
Pai
d L
oss
(x
$1 m
illi
on
) -
Flo
rid
a N
PD
B
NPDB - US Total (left Axis) NPDB - Florida (right axis)
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Severity of Claims Severity of Claims Reported to the NPDBReported to the NPDB
0
100,000
200,000
300,000
400,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year Claim Closed
Pai
d L
oss
($)
per
Cla
im
NPDB - US Severity NPDB - Florida Severity
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0.00
5.00
10.00
15.00
20.00
25.00
Year Claim Closed
Cos
t ($)
per
Pop
ulat
ion
NPDB - US Cost per Person NPDB - Florida Cost per Person
NPDB Cost per CapitaNPDB Cost per Capita
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Frequency of Malpractice Frequency of Malpractice Cases Reported to the NPDBCases Reported to the NPDB
0.0
1.5
3.0
4.5
6.0
7.5
9.0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year Claim Closed
Cla
ims
pe
r 1
00
,00
0 P
op
ula
tio
n
NPDB - US Frequency NPDB - Florida
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NPDB Loss Data for Largest NPDB Loss Data for Largest States and NationwideStates and Nationwide
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Californ
ia
Florid
a
Illinois
Mas
sach
uset
ts
Mich
igan
New Jers
ey
New York
Ohio
Penns
ylvan
ia
Texas
All Oth
ers
US Tot
al
1994 - 2003 2003 Only
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New York – Effect of Cap New York – Effect of Cap on Non-Economic Damageon Non-Economic Damage
Cap on Non-Cap on Non-Economic Economic
Damage AwardDamage Award
Physicians OnlyPhysicians Only
(Loss & ALAE)(Loss & ALAE)
LimitsLimits$1.3 million primary $1.3 million primary +$1 million excess+$1 million excess
Hospital OnlyHospital Only
(Loss & ALAE)(Loss & ALAE)
Unlimited Unlimited CoverageCoverage
Combined Combined Hospital and Hospital and
PhysicianPhysician
$250,000$250,000 24%24% 23%23% 24%24%
$500,000$500,000 16%16% 16%16% 16%16%
$750,000$750,000 11%11% 13%13% 12%12%
$1,000,000$1,000,000 8%8% 10%10% 9%9%
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Pennsylvania – Effect of Cap Pennsylvania – Effect of Cap on Non-Economic Damageon Non-Economic Damage
Physicians OnlyPhysicians Only
Cap on Non-Cap on Non-Economic Economic
Damage AwardDamage Award
PrimaryPrimary
(Loss & ALAE)(Loss & ALAE)
$500,000/$500,000/occurrenceoccurrence
ExcessExcess(Mcare)(Mcare)
(Loss Only)(Loss Only)$500,000 xs $500,000 xs
$500,000$500,000
Total Covered Total Covered LimitsLimits
(Loss & ALAE)(Loss & ALAE)
$250,000$250,000 11%11% 42%42% 18%18%
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Florida – Effect of Cap Florida – Effect of Cap on Non-Economic Damageon Non-Economic Damage
Cap on Non-Cap on Non-Economic Economic
Damage AwardDamage Award
Physicians OnlyPhysicians Only
(Loss & ALAE)(Loss & ALAE)
LimitsLimitsfollowing current following current
distributiondistribution
Hospital OnlyHospital Only
(Loss & ALAE)(Loss & ALAE)
Unlimited Unlimited CoverageCoverage
Combined Combined Hospital and Hospital and
PhysicianPhysician
$250,000$250,000 17%17% 29%29% 20%20%
$500,000$500,000 9%9% 22%22% 12%12%
$750,000$750,000 5%5% 17%17% 8%8%
$1,000,000$1,000,000 3%3% 14%14% 6%6%
In Sept. 2003, Florida passed non-economic cap of $500K-$1million for physicians In Sept. 2003, Florida passed non-economic cap of $500K-$1million for physicians and $750K-$1.5 million for hospitals. Florida estimated a savings of 5.3%.and $750K-$1.5 million for hospitals. Florida estimated a savings of 5.3%.
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$250,000 Cap on Non-Economic Damages$250,000 Cap on Non-Economic DamagesExample of Simulation ModelExample of Simulation Model
Hospital Settlement
$1,435,275
Physician Settlement
$106,872
Total Settlement
$1,542,147
Total Verdict Amount
$2,000,165
Stage A
Economic Damages:25%
$500,041
Non-Economic Damages75%
$1,500,124
Non-Economic Damages
75%-Capped at $250,000
$250,000
Economic Damages
$155,013
Pre-ReformNon-Economic Damages
$465,038
Post Reform
Non-Economic Damages
$250,000
Stage B Stage C Stage D Stage E
Post Verdict
Reduction (31%)
Post Verdict
Reduction (31%)
Post Verdict
Reduction (0%)
Pre-Reform Non-Economic – Post Reform Non-Economic 465,038 – 250,000Loss Savings = _________________________________________________ = ____________________ = 34.7%
Total Pre-Reform Loss 155,013 + 465,038
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Hospital Settlement
$1,435,275
Stage A
Physician Settlement
$106,872
Total Settlement
$1,542,147
Stage B
$250,000 Cap on Non-Economic Damages$250,000 Cap on Non-Economic DamagesExample of Simulation ModelExample of Simulation Model
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Total Settlement
$1,542,147
Stage B Stage C
Total Verdict Amount
$2,000,165
$250,000 Cap on Non-Economic Damages$250,000 Cap on Non-Economic DamagesExample of Simulation ModelExample of Simulation Model
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Economic Damages:25%
$500,041
Stage D
Non-Economic Damages75%
$1,500,124
Total Verdict Amount
$2,000,165
Non-Economic Damages
75%-Capped at $250,000
$250,000
Post Verdict
Reduction (31%)
Post Verdict
Reduction (31%)
Post Verdict
Reduction (0%)
Stage C
$250,000 Cap on Non-Economic Damages$250,000 Cap on Non-Economic DamagesExample of Simulation ModelExample of Simulation Model
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Economic Damages:25%
$500,041
Non-Economic Damages75%
$1,500,124
Non-Economic Damages
75%-Capped at $250,000
$250,000
Post Verdict
Reduction (31%)
Post Verdict
Reduction (31%)
Post Verdict
Reduction (0%)
Stage D
Economic Damages
$155,013
Pre-ReformNon-Economic Damages
$465,038
Post Reform
Non-Economic Damages
$250,000
Stage E
$250,000 Cap on Non-Economic Damages$250,000 Cap on Non-Economic DamagesExample of Simulation ModelExample of Simulation Model
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New York – Physician Loss New York – Physician Loss DistributionDistribution
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
8.1
10
.4
13
.4
17
.2
22
.0
28
.3
36
.3
46
.6
59
.9
76
.9
98
.7
12
6.8
16
2.8
20
9.0
26
8.3
34
4.6
44
2.4
56
8.1
72
9.4
93
6.6
1,20
2.6
Trended Claim Severity(x $1,000 - log scale)
Actual Fit
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New York – Hospital Loss New York – Hospital Loss DistributionDistribution
0.0%
3.0%
6.0%
9.0%
12.0%
15.0%
8.1
10.4
13.4
17.2
22.0
28.3
36.3
46.6
59.9
76.9
98.7
126.8
162.8
209.0
268.3
344.6
442.4
568.1
729.4
936.6
1,2
02.6
Trended Claim Severity(x $1,000 - log scale)
Actual Fit
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Percentage Split in Indemnity CasesPercentage Split in Indemnity Cases(all years combined)(all years combined)
Florida DOI - Hospitals
Economic - Wage3%
Economic - Other1%
Economic - Medical19%
Non-Economic77%
Texas DOI - Total
Non-Economic59%
Other11%
Economic30%
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Distribution of Non-Economic Damage PercentageDistribution of Non-Economic Damage PercentageBy Case Size RangeBy Case Size Range
Case Size Range ($) Mid-Point 0 500,000 2,000,000 5,000,000 Non-Econ % (for simulation) 500,000 2,000,000 5,000,000 Unlimited Exactly 0% 0% 12.5% 17.1% 24.7% 37.5% 0% - 10% 5% 2.3% 2.8% 4.1% 8.2%
10% - 20% 15% 2.5% 3.3% 4.1% 7.3% 20% - 30% 25% 2.9% 3.7% 4.2% 6.3% 30% - 40% 35% 3.2% 4.1% 4.3% 5.4% 40% - 50% 45% 3.6% 4.5% 4.3% 4.5% 50% - 60% 55% 3.9% 4.9% 4.4% 3.5% 60% - 70% 65% 4.2% 5.3% 4.5% 2.6% 70% - 80% 75% 4.5% 5.7% 4.6% 1.6% 80% - 90% 85% 4.9% 6.2% 4.6% 0.7% 90% - 100% 95% 5.2% 6.6% 4.7% 0.3%
Exactly 100% 100% 50.2% 35.8% 31.5% 22.1% Total 100% 100% 100% 100% Overall Average Non-Economic % 72% 63% 54% 35%
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Distribution of Post Verdict Distribution of Post Verdict Appeal FactorsAppeal Factors
Sustained Percentage*Sustained Percentage* FrequencyFrequency
15%15% 8%8%
25%25% 8%8%
36%36% 8%8%
45%45% 8%8%
55%55% 8%8%
65%65% 8%8%
75%75% 8%8%
85%85% 8%8%
95%95% 8%8%
100%100% 14%14%
105%105% 7%7%
115%115% 7%7%
TotalTotal 100%100%
Average SustainedAverage Sustained 69%69%
*Sustained percentage is the ratio of verdict amount after appeal / verdict amount before appeal.*Sustained percentage is the ratio of verdict amount after appeal / verdict amount before appeal.