By: Guy Boulton, Staff, Milwaukee Journal Sentinel

July 24, 2005, Milwaukee Journal Sentinel

As state after state became embroiled in furious debates about rising medical malpractice rates, Wisconsin was a bastion of civility.

That might change.

This month, the state Supreme Court declared that the state's cap on medical malpractice awards for non-economic damages, or "pain and suffering," is unconstitutional.

The ruling, which struck down the cap of $455,755, changes the ground rules in how people in Wisconsin are compensated when injured by a doctor or hospital. What that change means for doctors and patients is anybody's guess.

"The caps were just one of many factors that contributed to the good medical malpractice environment in Wisconsin," said Theresa Wedekind, director of the state's Injured Patients and Families Compensation Fund. "The rest hasn't changed."

The compensation fund, which pays medical malpractice claims in excess of $1 million, is one of those factors. So are the state's insurance market and its culture.

For certain, the court's decision could lead to larger medical malpractice settlements and awards in the state. But how many cases will be affected by the ruling is unknown. Few jury awards now exceed the cap.

The same holds for whether the Supreme Court's ruling will significantly increase the amount of money paid to victims of malpractice in the state - and, in turn, significantly increase the cost of malpractice insurance.

"The only way to know that," Wedekind said, "is through actuarial projections and time."

One thing's for sure: Medical malpractice will again become an issue in Wisconsin.

The Legislature is widely expected to revisit the issue, and some groups, including Wisconsin Manufacturers & Commerce, the state's largest business lobby, have made clear they will push for a cap that can withstand legal challenges.

Modest increase

Few issues in health care have been more contentious, and few have been marked more by emotion and hyperbole, than medical malpractice. Anecdotes and dire predictions are common, but they often are refuted by hard data.

The overall number of malpractice claims paid over the past decade has increased only modestly, according to a recent study by the Henry J. Kaiser Family Foundation, which researches health care policy. When the increase in the number of doctors was factored in, the proportion of claims filed between 1992 and 2003 fell.

Those findings were reiterated by a different study recently published in Health Affairs, a respected journal on health care policy.

The size of the awards and settlements has increased. But other studies note that the increase is only slightly more than the rate of medical inflation. In other words, medical malpractice awards are larger in part because providing health care to people injured by malpractice costs more.

Medical malpractice costs vary considerably among states and some have had sharp increases in premiums, sparking fiery battles.

Nationally and at the state level, the debate has centered on caps on jury awards for pain and suffering.

The American Medical Society, which represents about 30% of the country's doctors, has made caps on non-economic damages its top legislative priority. And limiting medical malpractice awards was one of President Bush's key proposals for health care reform in his last campaign.

Wisconsin has been a bystander in all this. In 1995, the state capped the pain and suffering awards at $350,000 and tied future increases to inflation. The state's malpractice premiums, among the lowest in the nation, have been relatively stable.

Non-economic damages

The state Supreme Court's July ruling dealt with one of the two components in malpractice awards: the cap on non-economic damages, otherwise known as the pain and suffering caused by the malpractice.

The other component is economic damages, such as medical bills and lost wages, and wasn't addressed in the ruling.

Non-economic damages are the part of any award in which juries have more leeway. They also can be more unpredictable. A large chunk of the multimillion-dollar awards that make headlines often stems from compensation for pain and suffering.

How do you compensate a young child, for instance, who has lost a mother or father?

For this reason, many states have put caps on non-economic damages with the goal of keeping malpractice insurance affordable for doctors and hospitals.

The majority of the state Supreme Court, however, concluded that a cap on non-economic damages was unreasonable and arbitrary because it could not be shown to lower malpractice insurance premiums.

David Skoglind, president of the Wisconsin Academy of Trial Lawyers, said the ruling concludes that caps are not a solution to the perceived problem of rising malpractice premiums.

The court also concluded that the cap deprived full compensation to victims with valid and substantial claims.

The issue ultimately comes down to what's fair - fair to the victims of medical malpractice and fair to the doctors and hospitals that must bear the cost of malpractice insurance.

"There are not good answers to the question of how do we compensate someone who has something terribly wrong happen to them," said David Dranove, a health care economist at Northwestern University.

"Nobody's right and nobody's wrong," he said.

Mistakes are as inevitable in health care as in any other field.

"You do your damnedest to never make a mistake, and that's not humanly possible," said Richard Roberts, a doctor and professor at the University of Wisconsin-Madison.

Roberts, who also is a lawyer, doesn't dismiss the issue of whether caps are fair. But he asks how someone can determine what's fair compensation for pain and suffering.

"We make judgments that some things are in the benefit of society, and we put limits on things for the public good," said Roberts, a former president of the Wisconsin Medical Society and of the American Academy of Family Physicians.

Defensive medicine

Proponents of caps often contend that large malpractice awards are driving up health care costs. Yet many policy experts note that malpractice suits and insurance premiums account for a minuscule percent of total health care spending.

Awards, legal costs and insurance cost an estimated $6.5 billion, or 0.46% of total health spending, in 2001, according to a recent article in Health Affairs by professors and researchers at Johns Hopkins University's Bloomberg School of Public Health.

That estimate does not include so-called defensive medicine - the tests or procedures ordered by doctors to protect against potential lawsuits. But the researchers noted that estimates on the amount of money spent on defensive medicine vary widely. They also note that it's difficult to determine when a test is purely "defensive" and when it is appropriate care.

Another common belief is that high medical malpractice rates are forcing some doctors, particularly those in high risk specialties, to flee some states.

Yet a study published in the May/June issue of Health Affairs challenges that contention.

The study, by Dranove and another professor at Northwestern University, looks at neurosurgeons and obstetricians, the two specialties with the highest medical malpractice premiums, in Florida. Rates in that state have soared since 2000. Yet the study found that patients' access to care was not affected.

Caps on pain and suffering come into play only when malpractice cases are decided by juries. Few cases reach that point, and of those that do, even fewer are won by the plaintiffs.

From 1989 through 2004, a little more than 10% of the malpractice lawsuits filed in Wisconsin resulted in verdicts, and of those, about 30% were won by the plaintiffs, according to the Supreme Court ruling.

Now, the prospect of larger awards for pain and suffering could result in more malpractice cases going to trial or cases being settled for larger amounts.

Settlements and expectations

"You make settlements based on what you expect the court to do," said Joan Schmit, a professor of risk management and insurance.

But Schmit also noted that the state compensation fund, by limiting insurer's liabilities, helps keep malpractice premiums low. And the state's largest malpractice insurance company, PIC Wisconsin, was founded by doctors and is controlled by doctors, clinics and hospitals.

In other states, she said, doctors and insurers often are at odds. PIC Wisconsin, which has 47% of the market, closed 90% of its claims without any loss, compared with an industry average of about 66%, said Bill Montei, the company's president and chief executive.

Even with the Supreme Court's ruling, Montei does not expect malpractice cases in Wisconsin to reach the levels seen in other states. But he believes the ruling could lead to double-digit increases in malpractice premiums.

"What it brings back to the marketplace," he said "is volatility."

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