One of the key contributions of the book is to assemble in one handy place the current literature about the amount of medical malpractice, the number of med-mal claims, the settlement/judgment costs and transaction costs of these cases, insurance premiums, and ups and downs in insurance markets. Baker argues convincingly that there is an epidemic of medical practice in the United States, nearly 100,000 preventable deaths annually, with only a fraction of claims being pursued (and most nonmeritorious claims are resolved before trial and often are dropped). The number of deaths annually exceeds automobile-related and workplace-related deaths combined, yet the medical-liability insurance premiums in toto are a small fraction of the premiums collected for auto and worker’s comp.

Baker approaches his study with an open mind and transparently – he shows the reader the evidence, the bases for his interpretation of the evidence, and honestly identifies where the data are uncertain, limited or unclear. The book is quite refreshing in this regard, given the jeremiads one usually sees in these discussions. Baker assembles the evidence that the pricing spikes we see in med-mal insurance are straightforward reflections of the insurance cycle and are not driven (much) by the tort-litigation side. As he writes, “the two most recent medical liability insurance crises did not result from sudden or dramatic increases in medical malpractice settlements or jury verdicts.” (p. 53-54) Baker’s analysis of the mechanisms of insurance markets and the insurance cycles is consistent with the analyses of Warren Buffett and Richard Stewart, even though most people seem to uncritically adopt the myth of actuarial pricing of insurance.

The Medical Malpractice Myth discusses the evidence of the impact on the supply of doctors and the costs of defensive medicine, arguing ultimately that med-mal claims have little effect. Baker takes the normative position that medical-malpractice claims are good for the system and that the legal system adequately sifts out nonmeritorious claims. Further, Baker tries to gauge the overall costs of the tort system, arguing ultimately that med-mal victims are undercompensated (especially bearing in mind the large majority of potential plaintiffs that do not seek recompense).

Baker further offers his suggestions for reforming the liability, compensation, and insurance systems for medically caused injury. Baker’s objective is to get the conversation started. The book is a plea – but not for his proposed reforms per se but rather for an evidence-based discussion of the issues.

Professor Baker bravely went into hostile territory recently at a forum sponsored by the American Enterprise Institute to discuss his book. The forum is available online (including video), and Baker’s AEI presentation, the critiques of the discussants, and Baker's rebuttal provide a good overview of the facts, issues, and areas for further research and discussion. I endorse the observation of Professor Martin Grace, one of the AEI “discussants” and a fellow blogger, that it would be profitable to understand better the impact of physician-owned mutual insurance companies on the med-mal insurance market and loss-prevention (i.e., malpractice-injury avoidance) efforts.

Much of Baker’s argument is confirmed by the Insurance Information Institute’s most recent issue update on medical malpractice (December 2005), which to its credit collects much recent data and leavens it only slightly with its political perspective. In what to me seems as ironic understatement, the III cites a recent Missouri study that “found that the leading grounds for malpractice awards in the state in 2004 were medical errors in diagnoses and surgery.” Like Baker, the III cites a study that only one in eight people who suffered from medical-malpractice injury filed a claim. The III further echoes Bush Administration experts who underscored the need to identify and discipline incompetent doctors and encourages risk-management by doctors and hospitals, including requiring doctors to study medical-malpractice prevention and mandating reporting of medical errors (also strongly endorsed by Professor Baker). Furthermore, the III cites a study by an insurance-consulting firm that predicts that the medical-malpractice insurance sector will be profitable in 2006; in 2004 the combined ratio for med-mal insurers was 109.2, meaning that the industry needs an investment return of 9.2 percent on the premiums collected in order to turn a profit. Baker argues that the data show that insurers rarely pay claims that do not substantially indicate malpractice and reports that claims take roughly seven years from premium collection to claim payment, thus giving insurers the opportunity to make their 9 percent investment return (total, not annualized) to be profitable.

It's easy for me to recommend this book, especially to policymakers and their staffs, stakeholders including doctors and their professional organizations, as well as to lawyers, insurers, and laity interested at all in the topic. The Medical Malpractice Myth is iconoclastic but calm and dispassionate in tone. It is informative, easy to read, and short (180 pages). It’s not meant to the be the last word on the subject, but rather aims to start a new conversation, one in which you’ll be equipped to participate once you read Baker's cogent analysis.