Ted Frank responds to a paper in the May/June 2008 issue of Health Affairs.
First, the sole finding supporting the conclusion, that malpractice insurance rates declined 1 percent from 1990 to 2005, is an artifact of the Simpson Paradox. Rates for low-risk doctors increased 14 percent; rates for high-risk doctors increased 45 percent. The mean decreased entirely because the mix of doctors changed, and the percentage of insured doctors with expensive high-risk policies declined substantially--a change consistent with the American Medical Association allegation that the malpractice crisis is causing doctors to leave high-risk professions such as obstetrics because of insurance costs.
Moreover, the claim that insurance rates declined from 1990 to 2005 comes from the improper mixture of inflation-adjusted policy rates with the nominal dollar value of insurance policy coverage. If nominal dollars were used for both values, one would see insurance costs rising; if inflation-adjusted numbers were used for both, one would see that the same dollars were buying less coverage.
Even if one accepted that rates had declined slightly between 1990 and 2005, this permits only the inference that the Massachusetts medical malpractice crisis in 2005 is no worse than it was in 1990, not that there is no crisis.
But the choice of 1990 as a reference point appears to be cherry-picking. If Rodwin and colleagues had chosen any other year in their data series as a reference point, one would see insurance costs increasing. A regression would show a long-term increase over time. And although the study measures insurance costs from 1975 to 2005, the authors make no reference to the major constant-dollar increase in insurance premiums during 1975–2005: the entire set of data from 1975–1990, when the litigation explosion happened, is largely ignored.
Ted Frank is a resident fellow at AEI.