Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

Unveiling the hidden impact of social inflation: Soaring costs for medical professionals revealed

Robert E. White, Jr. & The Doctors Company
Policy
June 16, 2023
Share
Tweet
Share

The Doctors Company

In Philadelphia, a family alleged that a birth injury had led to their baby’s cerebral palsy. They sued Penn Medicine and were awarded $183 million.

In Boise, a jury recently awarded the state’s second-highest-ever award, $13.5 million, in a suit against an emergency medicine group that was filed after a patient was disabled by a stroke. This verdict is especially notable because Idaho usually caps noneconomic damages at $400,000—but exceptions are possible if the jury determines that the plaintiff’s injuries arise out of “out of willful or reckless misconduct.” The jury’s holding that misdiagnosing the patient’s evolving stroke arose out of willful or reckless misconduct added over $8 million in noneconomic damages to their verdict.

Each of these verdicts shows us something about social inflation, a little-understood trend that is driving up costs for medical professionals all over the country.

What is social inflation?

The term “social inflation” is a variation on the more familiar “economic inflation.” Social inflation describes a trend of increasing loss costs that occurs when expenditures to resolve medical malpractice claims rise faster than economic inflation. To quantify these increasing loss costs: In the decade ending in 2021, social inflation added between $2.4 and $3.5 billion, or 8 to 11 percent, to medical malpractice losses incurred by insurers focused on the physician market.

As these cost trends continue, medical professional liability carriers may have to increase their rates to keep up with the losses. Therefore, although social inflation hits insurers first, it ultimately affects practices’ premiums.

What is the reptile strategy?

It takes many forces acting together to create momentum for social inflation, and one of these forces is a tactic of the plaintiff’s bar. This tactic is nicknamed an appeal to the “reptilian brain,” because it riles up our oldest brain structures, i.e., those shared by animals such as reptiles—which are related to our most primitive drives. This type of appeal attempts to activate a juror’s survival instinct, inducing fear to overcome logic. Attorneys use this tactic when they try to present the defendant’s conduct as a danger to the community. They argue that the jury needs to return a very large award in order to deter others from acting as the defendant has.

Our civil justice system was designed to compensate an injured party. Recognizing injuries and entitlement to compensation is valid and valuable. This is precisely why it is destructive when plaintiffs’ attorneys use fear-based persuasion to push far beyond compensating the plaintiff into punishing the defendant—that’s not what our civil justice system was designed to do.

What else drives social inflation?

Changes in attitudes and beliefs underlie social inflation, which is then buoyed along by new sources of litigation funding. Contributing factors include:

Plaintiffs’ and jurors’ expectations. Over time, societal attitudes have shifted relative to entitlements to compensation for injury and loss, and relative to people’s willingness to pursue litigation or file an insurance claim to obtain compensation.

The failure of large numbers to impress us. Big lotto jackpots go into the billions of dollars. College athletes are paid millions of dollars a year for their name, image, and likeness. Our society’s desensitization to big numbers permeates our culture, including our legal system.

Third-party litigation financing. Lately, we have people loaning either the plaintiff or the plaintiff’s lawyer money to tide them over until the completion of the suit. Third-party litigation financing may enable lengthy lawsuits.

What are nuclear verdicts, and how do they affect settlements?

ADVERTISEMENT

The prepandemic years featured an increase in the number of so-called nuclear verdicts, meaning verdicts in excess of $10 million—and even thermonuclear verdicts, meaning verdicts in excess of $25 million. These large verdicts startled insurance industry veterans when they began appearing in locations and judicial venues where they hadn’t been seen before, such as Nebraska, Alabama, and Utah.

Over time, unusually large verdicts can become the new usual, because each large verdict pushes upward on not only plaintiffs’ damages from other tried cases, but also on negotiations for medical malpractice settlements. This is because at the start of the settlement process, when a plaintiff’s attorney is drafting a demand letter, that attorney needs to know the value of that case in their local legal venue. Thus, a surprisingly large number of claims are affected by social inflation.

What proportion of claims are affected?

Plaintiffs’ verdicts are few and far between. Specifically, 93 percent of our claims are resolved between the parties before trial, and of the 7 percent that go to court, we win all but 1 percent. In that case, you might ask: How can social inflation affect costs across health care when it touches so few claims?

Plaintiffs’ verdicts influence the amount that cases settle for. Therefore, it’s not just the tried cases that social inflation affects—it’s all claims that result in a payment to the patient. This is how social inflation takes over a wider lane within the total claims pool. Thus, depending on the state: Social inflation affects between 20 and 35 percent of all our claims.

How does individual sympathy lead to system-wide imbalance?

People are, understandably, sympathetic to injured patients. Jurors can also form emotional bonds with credible, empathetic medical professionals, but it’s harder to be sympathetic to a hospital—if jurors perceive a health care organization as a faceless but deep-pocketed entity, then an enormous award may be easier for the plaintiff’s attorney to inspire.

Again, cases that settle are also affected, as demonstrated by a recent $15 million settlement in Massachusetts. In Boston, a couple’s baby died during a routine sleep study when a series of errors left him without oxygen for 20 minutes. Following this tragic event, the $15 million settlement might seem reasonable, on its face, to a sympathetic onlooker. However, to those of us in the industry, it is a clear sign that there is a new dynamic in play when it comes to valuing cases for settlement. A clear sign that insurers are concerned about letting the jury system price our cases. Eight-figure cash settlements prior to a jury verdict used to be a rarity, but now we see them happening more often.

How does social inflation affect rates for medical malpractice insurance?

Rates for medical professional liability insurance sit at the intersection of two forces: claim frequency and claim severity. Claim frequency is defined as the number of claims per 100 insured physicians. Claim severity (as distinguished from injury severity) is the cost to settle the average claim. Claim frequency is flat to decreasing nationwide, but social inflation has been amplifying severity for years. With medical malpractice insurance rates already affected by increases in severity, if claim frequency were to spike also, rates could be driven higher.

What’s next?

When we commissioned a social inflation study to dig into drivers of social inflation, evidence in the annual statement data pointed to an acceleration beginning around 2012, picking up steam in 2017, continuing through 2021, and expected to persist through 2023 and beyond. The study confirmed what an observer of the news headlines might surmise, which is that the pace of settlements larger than $1 million has been accelerating—and that these large settlements are the result of social inflation.

In addition, the study’s findings suggested that states that cap noneconomic damages may reduce the impact of social inflation. This finding reinforces the importance of tort reform.

To learn more about how social inflation is affecting the medical malpractice insurance industry, read the study.

Robert E. White, Jr. is president, The Doctors Company.

Founded and led by physicians, The Doctors Company is relentlessly committed to advancing, protecting, and rewarding the practice of good medicine. The Doctors Company helps hospitals and practices of all sizes manage the complexities of today’s healthcare environment—with expert guidance, resources, and coverage—and is the only medical malpractice insurer with an advocacy program covering all 50 states and the federal level. The Doctors Company is part of TDC Group, the nation’s largest physician-owned provider of insurance and risk management solutions. TDC Group serves the full continuum of care.

Prev

Unleashing the power of optimized operations, data connectivity, and technology for unparalleled patient care

June 16, 2023 Kevin 0
…
Next

Breaking barriers in Medicaid access [PODCAST]

June 16, 2023 Kevin 0
…

Tagged as: Malpractice

Post navigation

< Previous Post
Unleashing the power of optimized operations, data connectivity, and technology for unparalleled patient care
Next Post >
Breaking barriers in Medicaid access [PODCAST]

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

More by Robert E. White, Jr. & The Doctors Company

  • Third-party litigation funding threatens access to health care

    The Doctors Company
  • Are you protecting your career? 5 essential questions about your NP liability insurance

    The Doctors Company
  • AI, the physician shortage, and other health care trends [PODCAST]

    The Doctors Company & The Podcast by KevinMD

Related Posts

  • How the COVID-19 pandemic highlights the need for social media training in medical education 

    Oscar Chen, Sera Choi, and Clara Seong
  • Physician burnout: the impact of social media on mental health and the urgent need for change

    Aaron Morgenstein, MD & Amy Bissada, DO & Jen Barna, MD
  • Why social media may be causing real emotional harm

    Edwin Leap, MD
  • A physician’s addiction to social media

    Amanda Xi, MD
  • Are negative news cycles and social media injurious to our health?

    Rabia Jalal, MD
  • How I used social media to get promoted to professor

    David R. Stukus, MD

More in Policy

  • The lab behind the lens: Equity begins with diagnosis

    Michael Misialek, MD
  • Conflicts of interest are eroding trust in U.S. health agencies

    Martha Rosenberg
  • When America sneezes, the world catches a cold: Trump’s freeze on HIV/AIDS funding

    Koketso Masenya
  • A surgeon’s late-night crisis reveals the cost confusion in health care

    Christine Ward, MD
  • The school cafeteria could save American medicine

    Scarlett Saitta
  • Native communities deserve better: the truth about Pine Ridge health care

    Kaitlin E. Kelly
  • Most Popular

  • Past Week

    • What’s driving medical students away from primary care?

      ​​Vineeth Amba, MPH, Archita Goyal, and Wayne Altman, MD | Education
    • Make cognitive testing as routine as a blood pressure check

      Joshua Baker and James Jackson, PsyD | Conditions
    • How scales of justice saved a doctor-patient relationship

      Neil Baum, MD | Physician
    • The hidden cost of delaying back surgery

      Gbolahan Okubadejo, MD | Conditions
    • Rethinking patient payments: Why billing is the new frontline of patient care [PODCAST]

      The Podcast by KevinMD | Podcast
    • The broken health care system doesn’t have to break you

      Jessie Mahoney, MD | Physician
  • Past 6 Months

    • What’s driving medical students away from primary care?

      ​​Vineeth Amba, MPH, Archita Goyal, and Wayne Altman, MD | Education
    • What happened to real care in health care?

      Christopher H. Foster, PhD, MPA | Policy
    • Internal Medicine 2025: inspiration at the annual meeting

      American College of Physicians | Physician
    • The hidden bias in how we treat chronic pain

      Richard A. Lawhern, PhD | Meds
    • A faster path to becoming a doctor is possible—here’s how

      Ankit Jain | Education
    • Residency as rehearsal: the new pediatric hospitalist fellowship requirement scam

      Anonymous | Physician
  • Recent Posts

    • The hidden cost of malpractice: Why doctors are losing control

      Howard Smith, MD | Physician
    • How scales of justice saved a doctor-patient relationship

      Neil Baum, MD | Physician
    • Rediscovering the soul of medicine in the quiet of a Sunday morning

      Syed Ahmad Moosa, MD | Physician
    • An introduction to occupational and environmental medicine [PODCAST]

      The Podcast by KevinMD | Podcast
    • Does silence as a faculty retention strategy in academic medicine and health sciences work?

      Sylk Sotto, EdD, MPS, MBA | Conditions
    • Why personal responsibility is not enough in the fight against nicotine addiction

      Travis Douglass, MD | Conditions

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

Leave a Comment

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

  • Most Popular

  • Past Week

    • What’s driving medical students away from primary care?

      ​​Vineeth Amba, MPH, Archita Goyal, and Wayne Altman, MD | Education
    • Make cognitive testing as routine as a blood pressure check

      Joshua Baker and James Jackson, PsyD | Conditions
    • How scales of justice saved a doctor-patient relationship

      Neil Baum, MD | Physician
    • The hidden cost of delaying back surgery

      Gbolahan Okubadejo, MD | Conditions
    • Rethinking patient payments: Why billing is the new frontline of patient care [PODCAST]

      The Podcast by KevinMD | Podcast
    • The broken health care system doesn’t have to break you

      Jessie Mahoney, MD | Physician
  • Past 6 Months

    • What’s driving medical students away from primary care?

      ​​Vineeth Amba, MPH, Archita Goyal, and Wayne Altman, MD | Education
    • What happened to real care in health care?

      Christopher H. Foster, PhD, MPA | Policy
    • Internal Medicine 2025: inspiration at the annual meeting

      American College of Physicians | Physician
    • The hidden bias in how we treat chronic pain

      Richard A. Lawhern, PhD | Meds
    • A faster path to becoming a doctor is possible—here’s how

      Ankit Jain | Education
    • Residency as rehearsal: the new pediatric hospitalist fellowship requirement scam

      Anonymous | Physician
  • Recent Posts

    • The hidden cost of malpractice: Why doctors are losing control

      Howard Smith, MD | Physician
    • How scales of justice saved a doctor-patient relationship

      Neil Baum, MD | Physician
    • Rediscovering the soul of medicine in the quiet of a Sunday morning

      Syed Ahmad Moosa, MD | Physician
    • An introduction to occupational and environmental medicine [PODCAST]

      The Podcast by KevinMD | Podcast
    • Does silence as a faculty retention strategy in academic medicine and health sciences work?

      Sylk Sotto, EdD, MPS, MBA | Conditions
    • Why personal responsibility is not enough in the fight against nicotine addiction

      Travis Douglass, MD | Conditions

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

Leave a Comment

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...