Presented by: Richard S. Biondi, FCAS

1. Evaluation of Medical Malpractice Tort ReformCasualty Actuarial SocietyColorado Springs, COMay 17, 2004 Presented by:Richard S. Biondi, FCAS

2. Main Data Sources • National Practitioner Data Base • Physicians Only • All Paid Claims • Countrywide • Florida Department of Insurance Data Base • Only Commercially Insured Claims • Physicians & Hospitals • More Detail per Claim • Florida Only • Texas Department of Insurance Data Base • Commercial, Bodily Injury Liability Claims • Indemnity Payments Over $10,000 • Physicians & Hospitals • Texas Only Milliman

3. Other Data Sources • Physicians Insurance Association of America • Countrywide Only • Annual Statements • All Insurers Consolidated • Rate Filings • US Government (e.g. census) Data Milliman

4. Paid Losses Reported to the NPDB Milliman

5. Severity of Claims Reported to the NPDB Milliman

6. NPDB Cost per Capita Milliman

7. Frequency of Malpractice Cases Reported to the NPDB Milliman

8. NPDB Loss Data for Largest States and Nationwide Milliman

9. New York – Effect of Cap on Non-Economic Damage Milliman

10. Pennsylvania – Effect of Cap on Non-Economic Damage Milliman

11. Florida – Effect of Cap on Non-Economic Damage In Sept. 2003, Florida passed non-economic cap of $500K-$1million for physicians and $750K-$1.5 million for hospitals. Florida estimated a savings of 5.3%. Milliman

12. $250,000 Cap on Non-Economic DamagesExample of Simulation Model Stage A Stage B Stage C Stage D Stage E Economic Damages $155,013 Hospital Settlement $1,435,275 Economic Damages:25% $500,041 Post Verdict Reduction (31%) Total Settlement $1,542,147 Total Verdict Amount $2,000,165 Pre-ReformNon-Economic Damages $465,038 Physician Settlement $106,872 Non-Economic Damages75% $1,500,124 Post Verdict Reduction (31%) Post ReformNon-Economic Damages $250,000 Non-Economic Damages75%-Capped at $250,000 $250,000 Post Verdict Reduction (0%) Pre-Reform Non-Economic – Post Reform Non-Economic 465,038 – 250,000Loss Savings = _________________________________________________ = ____________________ = 34.7% Total Pre-Reform Loss 155,013 + 465,038 Milliman

13. $250,000 Cap on Non-Economic DamagesExample of Simulation Model Stage A Stage B Hospital Settlement $1,435,275 Total Settlement $1,542,147 Physician Settlement $106,872 Milliman

14. $250,000 Cap on Non-Economic DamagesExample of Simulation Model Stage B Stage C Total Verdict Amount $2,000,165 Total Settlement $1,542,147 Milliman

15. $250,000 Cap on Non-Economic DamagesExample of Simulation Model Stage D Stage C Economic Damages:25% $500,041 Post Verdict Reduction (31%) Total Verdict Amount $2,000,165 Non-Economic Damages75% $1,500,124 Post Verdict Reduction (31%) Non-Economic Damages75%-Capped at $250,000$250,000 Post Verdict Reduction (0%) Milliman

16. $250,000 Cap on Non-Economic DamagesExample of Simulation Model Stage D Stage E Economic Damages:25% $500,041 Economic Damages $155,013 Post Verdict Reduction (31%) Non-Economic Damages75% $1,500,124 Pre-ReformNon-Economic Damages $465,038 Post Verdict Reduction (31%) Non-Economic Damages75%-Capped at $250,000$250,000 Post ReformNon-Economic Damages$250,000 Post Verdict Reduction (0%) Milliman

17. New York – Physician Loss Distribution Milliman

18. New York – Hospital Loss Distribution Milliman

19. Texas DOI - Total Florida DOI - Hospitals Other Economic - Wage Economic - Other 11% 3% 1% Economic - Medical 19% Economic 30% Non-Economic 59% Non-Economic 77% Percentage Split in Indemnity Cases(all years combined) Milliman

20. Distribution of Non-Economic Damage PercentageBy Case Size Range Milliman

21. Distribution of Post Verdict Appeal Factors *Sustained percentage is the ratio of verdict amount after appeal / verdict amount before appeal. Milliman