Rise in insurance forces hospitals to shutter wards

New York Times
Sunday, August 25, 2002

Around the country this summer, at least half a dozen hospitals have closed obstetric wards, others have curtailed trauma services, and a string of rural clinics have been temporarily shuttered as a result of soaring costs for medical malpractice insurance. …

J. Robert Hunter, the insurance director of the Consumer Federation of America, attributes the soaring premiums to insurance companies' mismanagement. The insurers acknowledge that through most of the last decade they dropped premium prices while battling for more business from doctors and hospitals, depending for profits on financial reserves and returns from booming equity and bond markets. Now, with Wall Street in a slump, the insurers say they must increase prices to survive. Mr. Hunter and other consumer advocates say the price shock is intolerable.

Advocates of reducing the amount insurers have to pay for medical mistakes often cite California as a model. In the 1970's, California set a ceiling of $250,000 for jury awards for pain and suffering, and malpractice insurance prices have not soared there. But Harvey Rosenfeld of the Foundation for Taxpayer and Consumer Rights in Santa Monica, Calif., says patients have suffered. Because of the cap on payouts, he said, many lawyers refuse to represent malpractice victims, making it difficult for them to pursue claims.

Joanne Doroshow, the executive director of the Center for Justice and Democracy, a national consumer group based in Manhattan that focuses on the civil courts, says the threat of high jury awards helps keep doctors and hospitals practicing at their best.

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