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Wednesday, June 01, 2005

AMA on Malpractice Premiums

From Kevin, M.D. :

This is a talking points on malpractice reform myths put out by the American Medical Association.

I'm unsure if this figure cited in the AMA pamphlet can be contested. Perhaps, there are different ways to figure such ratios but I don't know how, if this figure is true, that anyone can claim the medical malpractice insurance industry is not in crisis if they paid out $1.53 in med mal claims for every $1.00 collected in premiums. There is no way, in my mind, that insurance companies have sources outside of premiums (i.e. investments) that account for over 1/3 of their income. That would need to be a case for them to pay out $1.53 for every dollar collected and still make a profit.

I suppose there still may be debate on what has caused this underlying financial strain -- bad investments, past undervaluation of premiums, or, as I believe, an increase in frivolous malpractice cases.


Blogger Elliott said...

The tail of the coverage. If the average medmal case takes 3 years from beginning to end and assume that the premiums are front loaded in the first part of the year then you have about 40 months to earn 53 cents on the dollar which works out to about 13% return. If it takes four years then it works out to about 9%. So that is probably a loss makng ratio, but the numbers the AMA quotes without context are designed to spin it much worse than actuality.

3:31 AM  
Blogger TXMed said...

So I'm still trying to understand this but...

What the AMA quoted study looks like it did is take the premiums collected in 2001, and look at the payouts over a three or four year period for policies written in that year and suits filed against them. The AMA quote doesn't appear to say that the med mal insurance industry collected this much in premiums this year and paid this much in claims this year. Wouldn't this method correct for the discrepancy the OP has noted?

8:43 AM  

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