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Discussion Starter · #1 · (Edited)
Have we been scammed?

The election is over, so now is a good time to discuss some truth about what we've heard from political circles.

Many Republicans complain bitterly that trial lawyers, such as John Edwards, are running doctors out of business with "frivolous" lawsuits. The theory is doctors can't afford malpractice insurance, because of legal extortion. That's simply not true.

A few weeks ago, I was listening to Jim Kramer on Fox radio. He recommended buying stock in a medical malpractice company. Why? Because it had 6 Billion dollars in reserves! I was so stunned that I paid no attention to the company's name (I wish I had). Why in God's name would any malpractice insurance company keep 6 Billion Dollars in reserves? If you paid off every medical malpractice claim ever made in history, you would have money left over from that one company's reserve.

The answer is simple. The malpractice company is really an investment firm. Yes, it settles malpractice claims, but it uses malpractice premiums to invest, causing high premiums.

I did a quick web search to see if other companies had such grossly overadequate reserves. St. Paul, another malpractice company, has over 16 billion dollars in reserves! (St. Pauls also provided coverage for auto liability and other claims, which can justify much of its reserves - maybe - see following reply)

Remember how insurance companies claimed they lost money and had to raise their premiums? They did. My original thought was they lost money in the stock market when the corporate bubble burst, and that 911 hurt their reserve investments. That may have played a part.

So, is the medical malpractice insurance problem due to payouts, to wrongful business practices, or something else?
 

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Discussion Starter · #2 · (Edited)
Out of curiosity, I've read more on the subject. St. Pauls provided insurance other than med mal, which probably accounts for some of its large reserves. However, it pulled out of the med mal business, after being forced to repay $1.1 Billion in overaccumulated reserves. Many authorities claimed it quit malpractice coverage after losing money due to fraud, mismanagement, and unfair business practices.

I wish I remembered the name of the carrier mentioned by Kramer. Last year, there were less than 7 Billion dollars paid out nationally in med malpractice claims. Frankly, that amount surprised me as being high.

If anyone has any information, please share it. I wonder if it is available to us. The General Accounting Office has already requested the infomration, as have other consumer agencies, but I can't find anything provided. See, Consumer Group Calls on Insurance Industry to Make Medical Malpractice Data Available.
 

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Discussion Starter · #3 · (Edited)
I found the ultimate authority, the 2003 GAO study. It is available at:

http://www.gao.gov/new.items/d03702.pdf

There was no comprehensive data supporting a conclusion that increased payouts caused rising malpractice insurance premiums. However, there was evidence that higher premiums resulted from a falling bond market, as well as a business cycle.

Have Malpractice Carriers overcharged doctors? Yes, as evidenced by St. Pauls being forced to repay $1.1 Billion. Have other carriers overcharged? Don't know.

Many States limit malpractice carriers' investments to the Bond Market. Maybe, they should be allowed to invest, at least in part, in stock markets?

I ran into much information about caps on jury verdicts. Most reported the caps did not lower premiums. In one State, just 2 physicians accounted for most of the insurance payouts. Had the appropriate licensing boards taken appropriate action against them, the number of payouts would have been drastically decreased... and likely malpractice premiums.
 

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Man I hate the Insurance Companies. I remember that two or three days after 911 there was a woman interviewed on TV. She was a national representative for the Insurance Industry and was answering the question people were asking about how 911 will effect insurance rates. She said that it will not effect rates at all, and that the loss to the Companies involved only amounts to approximately ?One-half of One-Percent of the companies reserve?s? and shouldn?t cause a problem to their customers. I only saw this one time and never heard of it or her again. A few days later the Insurance Companies started to cry about how great the loss of the Tower?s where to then and that it will effect us all nation wide. What happened to it being ?One-half of One-Percent of the companies reserve?s????? I?ll bet she lost her job for telling the truth.
 

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DADDY WARBUCKS
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Reserves are most often not actual money but paper entries into the journal.

When established, it reduces income/profit and later if paid it is does not affect not affect income. If not used and the entry is reversed, it is added to income.

Reserves are a judgment called based on some math but a roll of the dice anyway.

Can it be abused? Sure but so can most accounting reserves.
 
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