Medicine and Malpractice Insurance: An Historical Alliance
By Matt Gracey and Dan Reale
June 2007
Now that malpractice insurance prices are falling again there will be less temptation for physicians to practice without insurance. All seem to agree there must be some remedy for patients who become seriously injured as a result of true medical negligence. Malpractice insurance accomplished this very well in the past when physicians could obtain adequate insurance coverage at affordable rates.
Since the early 1970’s, there have been three separate crisis periods when malpractice insurance rates increased dramatically to offset rising claim costs. This caused many physicians and malpractice insurance companies to “drop out” of the market and break their alliance all together. It is crucial to understand what has worked in the historic relationship between medicine and malpractice insurance to help restore this alliance.
Since its inception, the purpose of medical malpractice insurance is to cover physicians or healthcare professionals against any claim for liability arising from the care and treatment of their patients. Before medical malpractice insurance was developed, the first public casualty insurance originated for train travel in early 19th century England. There were many train accidents that caused serious injuries to the passengers and led to general distrust of train travel. The first casualty insurance policy was created to compensate train travelers for losses resulting from train accidents. This compelled greater safety standards for train operation, bringing more travelers and increased profits for the industry. Because lawsuits were pursued to recover greater damages, this provided greater incentive for the industry to become as safe as possible.
Medical malpractice insurance was developed for reasons similar to why casualty insurance became so successful for early train travel. History well shows that the public trust with early physicians and the practice of medicine was sorely lacking. Before the American Medical Association (AMA) was founded in 1847, physicians in this country had no formal medical education or training. Early medical students were often illiterate and had little or no prerequisite educational requirements to study medicine. Because of this poor public trust, the physicians’ ability to earn a satisfactory income was limited. Patients would often barter for the lowest medical fees because physicians lacked credibility to cure most ailments or even to relieve their patients’ suffering. Average life expectancy was only 47 years of age before the turn of the 20th century.
When the newly formed AMA established educational and training standards, Harvard University developed the first three-year medical education curriculum in 1869. Johns Hopkins University significantly improved their curriculum by adding clinical practice training in 1876. Universities developing these medical programs were rewarded with large grants, while other schools that lacked similar training were closed. As doctors became more educated and standards of care improved, their ability to earn greater incomes advanced as well.
Prior to medical malpractice insurance, if a patient had a bad outcome following treatment the physician was often at risk of physical harm from a family member or friend of the patient. Physicians welcomed malpractice insurance for more than financial protection since their physical well being was also at stake. Now that patients had a source to recover damages caused by medical negligence, greater emphasis was placed on their standards of care. This greatly increased the public’s trust in the practice of medicine. Lawsuits against physicians, although not welcomed, would further ensure that standards of care were not only met, but improved.
The earliest medical malpractice lawsuits, and arguably the first medical malpractice crisis, began in the 1840’s. This period coincided with an explosion of medical advertising that exaggerated claims of medical cures. Lawyers began to realize the opportunity of holding physicians accountable for their patients’ health. In a recorded malpractice survey in 1878, Eugene Sander, M.D. from the state of Maine cited the growing anti-lawyer sentiment by stating that malpractice attorneys “follow us as the shark does the emigrant ship.” This sentiment was considered subtle for the times, but illustrates the early rivalry that existed between physicians and attorneys that continues to this day.
The practice of filing lawsuits and recovering large verdicts became an industry unto itself in the early 1970’s. The rules restricting lawyers from advertising were loosened in the 1970s, creating an explosion of direct marketing campaigns by lawyers that centered on suing physicians. Now that we are recovering from our third crisis since then, physicians and insurance carriers must wonder if the insurance market will ever become stable again.
The very best malpractice insurance carriers all have experienced claim management teams that hire only top performing “outside” attorneys to defend physicians. These carriers do not hire the lowest fee attorneys in order to cut defense costs. If a defense attorney is not performing to the highest standards, then you can be assured they are quickly replaced. Many of these established carriers also provide Board of Medicine investigation defense, risk management services, government lobbying, medical society sponsorships, and much more for their physician policyholder’s.
Just like when casualty insurance revolutionized early English train travel, a strong and stable alliance between medicine and malpractice insurance is crucial to our healthcare system in this country. Although few physicians have gone bare over the past few years, the vast majority continue to support all the benefits and progress that is achieved from this alliance. Today, malpractice insurance remains the most important component to protect both the physician and patient when unfortunate events arise from even the best practice of medicine.
