Health Insurance - Death Spiral

Wisconsin has a special fund -- Injured Patients and Families Compensation Fund -- for paying out large settlements won in medical malpractice cases. The fund is worth around $1.2 billion. However, recent reports indicate that it has a surplus of $783 million, nearly twice the recommended amount of $406 million. This was discovered in March when the state audited the fund.

How It Works

The fund isn't used in all cases, but only when the total award goes over $1 million. For cases that award less than $1 million, insurance is typically used, as doctors have to carry such policies. However, the fund makes it so that doctors don't need ultra-expensive policies, and it also means that there is money on hand for families that win abnormally large settlements. Thirteen states, including Wisconsin, have these funds set up.

Why It Happened

The surplus exists for a few reasons, experts say, one of which is that it's simply not easy to win medical malpractice cases. This has often been cast in a negative light, as the fund continues to grow and families lose out on money to which they may feel entitled.

One thing to keep in mind is that there are caps on damages in Wisconsin. For example, when starting a wrongful death case, the cap for an adult is just $350,000, while the cap for a child is $500,000. Those who sue for non-economic damages have their rewards capped at $750,000.

The problem these caps create has been made clear in numerous instances. One man passed away after developing an infection that doctors missed. His family felt they had a valid case, but the damages cap for his case was set at $250,000. That was too low, and no one would take the case, so the family got nothing. Attorneys have been critical of these types of caps for this reason, saying that setting them too low means they can't afford to take the cases on with the time and effort required. As a result, fewer cases are started and the surplus in the compensation fund gets larger and larger, perfectly illustrating the issues with the system.

Know the Limits

This story sheds light on the problems that medical malpractice laws present. However, it also shows how important it is for people in any state to know about the limits and caps when considering a case.