Malpractice premiums are closely related to tort awards

This new study from the Manhattan Institute Center for Legal Policy debunks the myth that malpractice premiums are related to insurance industry price gouging.

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  • Elliott

    You’re an idiot Kevin. Don’t know crap about economics and you haven’t actually read the study in full.

    Nothing in all my criticism on this blog matches my contempt for this lying, weaselly post.

  • Kevin

    As always, I appreciate your input. Educate me – tell me what’s wrong with the study.


  • Elliott

    1. It’s not a peer-reviewed study. It’s paid political advertising which Alex pawned off on his assistant who apparently doesn’t even have a degree yet. (For G-d’s sake, she feels the need to explain “degrees of freedom” in her narrative.)

    2. It begins with a dishonest statement that medical malpractice premiums are at their highest level ever, but all reputable economic analysis is conducted with real numbers (adjusted for inflation) and not nominal numbers.

    3. They have to rescale the axis to “cointegrate” the awards and the premium line. This is unusual without more explanation. Furthermore, data sets are not provided or offered and results with 10% correlation are reported.

    4. No T-test reported and look at the R-squared (not even an adjusted R-squared). That’s hardly something to hang your hat on. In fact, it sucks given that, off the top of my head I can (and have in the past) constructed a function with inflation, blended investment rate of return (equity and bonds), per capita income, and medical expenditures that gives a better R-squared than this. Which, means that their hypothesis (being a worse fit than mine) is not a good hypothesis since it needs to add explanatory value rather than subtract.

    5. The little flight of fancy into medical review boards where some BS is made of it being a proxy for malpractice and finding no correlation with malpractice. They then contend this helps their thesis. Huh?

    6. There is no serious thought that long-term rates are not correlated with awards (and costs of defense). It’s a total BS strawman to say that the opposing people are saying that when nothing of the sort is being stated. The argument is about short-term variations since so much hype is generated on a regular basis when a tort reform law is passed and rates go down or when tort reform fails and rates go up (cf. Texas). Most of the time, this “analysis” is totally anecdotal.

    7. The idea that only pure monopolists have pricing power is utter BS and unworthy of a tenured economics professor.

    I really don’t have time to “fisk” this but that’s the top points that struck me. This is a hack job quickly and sloppily put together likely to counter the Health Affairs study showing that medical malpractice is not a big deal.

  • Anonymous

    Well, Kevin, looks like you got your answer.

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