In 1976, Nebraska’s medical and insurance lobbies argued that establishing “caps” or severe overall limits on compensation to injured patients was the only way to reduce periodically high malpractice insurance rates and keep doctors practicing. As a result of this lobbying, Nebraska succumbed to political pressure and enacted an overall “cap” on compensation for injured patients. But unlike the law in almost every other state, Nebraska’s cap, now at $1,750,000, is the total limit that any family may recover – even when a catastrophically injured child needing a lifetime of care is involved. This “one-size-fits-all” cap applies no matter how much merit a case has; or, the extent of the misconduct by the hospital, doctor or HMO; or, the severity of an injury. (See stories of Nebraska families harmed by the cap.) Nebraska doctors also benefit tremendously from an Excess Liability Fund, also established in 1976, which pays compensation that exceeds a doctor’s insurance policy. In 2010, this Fund, the assets of which total $86 million and which accumulated $8 million in investment income last year, paid out only $5.5 million in claims.
TAXPAYERS PAY. The cap creates serious burdens on Nebraska’s state budget. If someone is brain damaged, burned, or rendered paraplegic as a result of health care system recklessness but cannot obtain adequate compensation through the legal system, he or she may be forced to turn to taxpayer-funded health and disability programs, like state Medicaid. In other words, the costs of injuries are not eliminated by Nebraska’s cap, but merely shifted onto someone else – Nebraska taxpayers.
INSURANCE INDUSTRY MAKES OUT LIKE BANDITS. Even aside from the terrible impact on Nebraska’s families and the burdens on Nebraska taxpayers, the Nebraska cap has not helped doctors with lower medical malpractice insurance rates. Compare Nebraska with its next-door neighbor, Iowa. Iowa has never had any kind of cap on compensation. When Americans for Insurance Reform looked at comprehensive insurance data from both states, they found that in the prior five years examined (through 2008), Nebraska pure premium decreased 1%. But Iowa’s dropped even more - 6%!
In other words, insurer savings, which should be dramatic given how little they pay to victims, are not being passed onto doctors. Instead, they are being pocketed by Nebraska’s insurance industry, whose profits are through the roof. In 2007, when the Americans for Insurance Reform examined profit data, they found that Nebraska insurers had an extraordinary 27.6% return on net worth, far higher than the national average of 15.5%. Nebraska’s insurance industry is among the most profitable in the country.
NEBRASKA IS OUT OF STEP WITH THE COUNTRY. Nebraska’s cap on all recovery for injured patients is so severe that even the “tort reform” movement has disassociated itself from laws like this. Commenting in the New York Times about the documentary film Hot Coffee, which features Nebraska’s Gourley family, the American Tort Reform Association General Counsel, Victor Schwartz, noted how completely out of step Nebraska’s law is with the rest of the country (“economic caps like those that affected the Gourley's are relatively rare.”) Ted Frank, writing on the Manhattan Institute’s tort reform blog PointofLaw, recently wrote, “No [tort] reformer I know proposes per-accident caps or economics damages caps.” In fact, the entire national medical establishment disagrees with a cap like Nebraska’s, which covers all compensation for an injured patient. (See letter supporting “unlimited compensation for economic damages.")
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