By Ted Frank
Dear Professors Black, Silver, Hyman, and Sage,
I was surprised at the counterintuitive preliminary results in your study covered in Reuters for which Professor Hyman was quoted. I read your paper. It seemed that 1990 figures were unusually high, so I downloaded and took a quick look at the 1990 data from the TDI website. Your paper mentions the 1988 and 1989 data collection problems, and it appears to my eye that these problems were resolved by filing closed claim forms in 1990 for a number of settlements that were actually made in 1989. See, e.g., the $14.7 million of settlements and defense costs in TDI #7800282, #7800283, #7900170, and #7900318. The payments were made in 1989, but the claims "closed" in May and June 1990. TDI #9700276 settled in August 1989, but wasn't closed until October 1990, adding $7.9 million in settlement and defense costs to the latter year. If I took the time to construct a spreadsheet macro, rather than just scrolling through, I'm sure I could find additional and similar errors. In contrast, I used 1998 as a control, and a spot-check of the "closed claim" dates for larger settlements seemed to take less time to report, and much more likely to be in the same year.
Did your paper sort data by the Q1G "closed claim" field, or by the Q1E "Date of settlement" field? Because it would appear that there is a strong possibility that the 1990 "closed claim" data, sorted by Q1G, is not directly comparable to that of later years, where data collection was more consistent. From the tables and graphs in your paper, it would appear that a 1991-2002 dataset would result in substantially different conclusions than a 1990-2002 dataset.
In addition, it seems to me that, given the variance involved in medical malpractice verdicts, there are problems of small sample size even in a state as large as Texas. An outlier of two $14 million settlements (as happened in 1990 TDI #7700251 and #8500332) can throw off the entire study. Was there a reason that a three-year moving average wasn't considered?
Finally, how much do malpractice rates increase when subjected to the same deflationary factors that your paper applied to malpractice expenses? I didn't see a chart on that subject, though the former was repeatedly described as a "spike." It seems unfair to compare the real rates of malpractice insurance expenses to the nominal malpractice insurance rates.