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Non-Economic Medical Malpractice Limits: What They Mean for All Players
by Bart LeFan
Introduction
One popular explanation for reduced patient access and
rising healthcare costs has been the soaring increase of medical malpractice
insurance premiums due to large jury awards in malpractice cases. The most frequent and highly-publicized
judgments have come in the form of non-economic damages – awards for suffering,
emotional distress, and other intangible damages. Many physicians – particularly specialists – must carry
significant insurance to cover potential judgments. In response, many states
have attempted to limit the amount of jury awards for medical malpractice
cases. These state statutes, or “tort
reforms,” have had both positive and negative effects on all players in the
healthcare system. Several possible
alternatives are being discussed nationwide, including “Early Offer Rules,”
patient indemnity insurance, and Health Courts.
Background
During the 1980s and 1990s, plaintiffs received record judgments
in medical malpractice cases. The
amount of these judgments forced some providers to cut services and causing
some physicians to relocate or close their practice altogether. These judgments also had significant effects
on the cost of malpractice insurance – the end of the 1990s and the beginning
of the century saw a “sharp increase in premiums for medical malpractice
insurance” (CBO 2004, 1). In
Pennsylvania alone, over 150 physicians – mostly surgeons – claimed to have
relocated, retired, or closed their practices due to “malpractice pressures”
between 2001 and 2003 (GAO 2003, 17). The
graph below shows the steady increase in the average award payment for closed malpractice
claims from 1986-2002.
Graph 1: Average Insurance Payment for Closed Malpractice Claims, 1986-2002
(Thousands
of dollars)
Source:
Physician Insurers Association of America.
Note:
These averages exclude closed claims that did not result in payments.
In response to physician relocation and declining access,
many states began instituting limits on non-economic damages. The first such law was California’s MICRA
law, passed in 1975, capping non-economic damages at $250,000 (Randolph, 2006). Following California’s
lead, 34 states currently have limits on non-economic damages. Most states with limits, including Utah,
have capped non-economic damages at $500,000 or less (NCSL 2007).
Figure 1: Caps on non-economic and total damages by state as of April 2006
Source: Mello 2006.
Medical malpractice limits have historically been enacted
solely by individual states, but the federal government is attempting to
address the problem as well. On
February 15, 2008, President Bush submitted a proposal to Congress in an
attempt to address Medicare shortages.
Title II of the bill addresses medical malpractice reform – implementing
a $250,000 cap on non-economic damages and a limitation on punitive
damages.
Malpractice limitations are also facing judicial review at
the state level. In Alabama, the Supreme Court ruled that the state’s $400,000
cap on non-economic damages was unconstitutional, leaving the state without any
malpractice limits (PIAA, 2008). The
Wisconsin Supreme Court held that limits on non-economic damages violated the
Equal Protection clause of the Wisconsin Constitution. These recent decisions could spark a
nationwide backlash against tort reforms, such as the overturn of Illinois’
caps in November 2007.
Current
Characteristics & Impact of Malpractice Caps
The impact of medical malpractice limits has been
wide-ranging. Both supporters and
opponents of limits agree on the resulting migration of physicians, but see
differing effects on access and patient rights. The migration has increased patient access in some states,
leaving non-cap states with fewer physicians per capita.
Proponents of the caps claim an increase in the supply of
physicians in states with these limitations.
Some states are experiencing a boom as a result of physician
relocation. “We found that there was an
83 percent increase in the median number of physicians per 100,000 residents
from 1970 to 2000 in the states that never had a cap on malpractice awards
before 2000” (Encinosa 2005, W5-253). A
Harris Interactive study showed that physicians shy away from high-risk
specialties out of fear of greater malpractice liability (Harris 20002). Studies also show a 17% decrease in
insurance premiums within those states with caps (Thorpe 2004).
Opponents of the malpractice limits argue that the caps are
ineffective and reduce patient access and rights. Even in states with caps, malpractice insurance premiums still
increased 83.3% between 1991 and 2002, often resulting in reduced physician
services. In Florida, over half of the
state’s physicians have reduced or eliminated services – change attributed to
increased liability premiums (Brooks 2005).
Studies show that even with caps, the number of insurance companies
writing malpractice policies has modestly increased since 1991 (Weiss 2003). The effect of “physician migration” can
leave patients in non-cap states with reduced access to care – particularly in
neurosurgery and obstetrics. Before
Texas’ tort reforms, 60% of counties did not have an obstetrician (Perry 2003). Opponents argue that malpractice caps limit
patient recourse against physicians in cases of negligence. Many legitimate cases are never brought to
trial due to the high costs of expert witnesses and lawyer fees.
Alternatives to Caps
There are several solutions that have recently been
implemented as alternatives to traditional medical malpractice caps. These include: 1) Early Offer Rule; 2)
Patient Indemnity Insurance policies; and 3) health courts.
The use of full disclosure, or the “Early Offer Rule,” is
becoming a popular trend in medical malpractice cases. Under this agreement, a physician or
facility admits an error has occurred and makes an initial offer to settle the
case. By accepting the offer, the
patient waves his/her right to seek additional damages through the judicial
system. Illinois and Vermont both passed legislation for pilot programs to test
full disclosure/early offer policies.
If successful, other states are expected to follow suit (Geier, 2006). Early offer policies have also been
considered on the federal level. The National
Medical Error Disclosure and Compensation (MEDiC) Bill was submitted jointly by
Senators Hillary Clinton (D-NY) and Barack Obama (D-IL) in 2005 (S. 1784), and
included an early offer rule in an effort to “reduce the cost of medical
liability for doctors.”
Another alternative to malpractice caps is the creation of
Patient Indemnity Insurance policies. These policies are issued to cover a
patient against an adverse medical outcome.
In the same way that many athletes insure their bodies against off-field
injuries, patients would be able to purchase policies covering the outcome of
medical procedures (Pate 2006).
A third alternative receiving bipartisan support is the
establishment of Health Courts. Under
this system, judges would receive topical medical training, expert witnesses
would be court-appointed, and participants would be encouraged to forego jury
trials in favor of “bench trials.”
Damages would be awarded on a previously arranged fee schedule. Specially trained judges could better analyze
the technical evidence submitted in such cases. Court-appointed experts could help ensure the integrity of
testimony. The use of “bench trials”
could save time, legal fees, and ensure equality of damage judgments (Pate 2006). Health Court legislation was introduced to
both houses of Congress in May 2007 (H.R. 2497 & S. 1481), and remains in
committee review.
Conclusion
Though medical malpractice limits have been adopted by a
majority of states, there remains significant debate regarding their effectiveness
in mitigating rising healthcare costs.
Many physicians have been stifled by the overwhelming cost of
malpractice insurance, and have relocated their practices to other states with
malpractice limits. Multiple
alternatives to malpractice caps continue to be pursued at both the federal and
state levels.
References
Brooks, Robert G., Nir Menachemi, Art Clawson, and Les
Beitsch. 2005. Availability of Physician Services in Florida, Revisited. Archives
of Internal Medicine 165 (18): 2136–2141.
Congressional Budget Office (CBO). 2004. Economic and Budget
Issue Brief: Limiting Tort Liability for Medical Malpractice, January 8, 2004. http://www.cbo.gov/doc.cfm?index=4968&type=0
Encinosa, William E., and Fred J. Hellinger. Have
State Caps On Malpractice Awards
Increased The Supply Of Physicians? Health Affairs Web Exclusive, May 31, 2005, W5-250-258. http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.250/DC1
Geier, Peter. 2006.
Emerging Med-Mal Strategy: ‘I’m sorry’ – early apology concept spreads. The
National Law Journal, July 24. http://www.law.com/jsp/article.jsp?id=1153472732197
Government Accounting Office (GAO). 2003. Medical
Malpractice: Implications of Rising Premiums on Access to Health Care,
GAO-03-836. http://www.gao.gov/new.items/d03836.pdf
Harris Interactive. 2002. Fear of Litigation Study: The
Impact on Medicine. Study No. 15780, for Common Good. http://commongood.org/assets/attachments/68.pdf
Mello, Michelle M. 2006. Medical Malpractice: Impact of the crisis and effect of state tort
reforms for the Robert Wood Johnson
Foundation. http://www.rwjf.org/pr/synthesis/reports_and_briefs/pdf/no10_researchreport.pdf
Mook, Bob. 2008 Colorado Senate OKs bill to raise medical
malpractice caps. Denver Business Journal,
February 28. http://www.bizjournals.com/denver/stories/2008/02/25/daily48.html?page=1
National Conference of State Legislatures (NCSL). 2007.
State Medical Liability Laws 2007. http://www.ncsl.org/standcomm/sclaw/StateMedliablitylaws2007.htm
Pate, Randolph W., and Derrek Hunter. 2006. Code Blue: The Case for Serious State
Medical Liability Reform (web memo #1908).
The Heritage Foundation. http://www.heritage.org/Research/HealthCare/bg1908.cfm
Perry, Rick. 2003. Taxes and Torts in Texas. The
Heritage Foundation. Washington,
DC.
Physician Insurers Association of America (PIAA). 2007. State Enactments of Selected Health Care
Liability Reforms. http://www.governmentrelations.piaa.us/PDF/States/State_Enactments_2007.pdf
Thorpe, Kenneth E. 2004. The Medical Malpractice ‘Crisis’:
Recent Trends and the Impact of State Tort Reforms. Health Affairs 23 (January
– June web exclusive): 20-30. content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.20
Weiss, Martin D., Melissa Gannon, and Stephanie Eakins. 2003. The Impact of Non-Economic Damage Caps on
Physician Premiums, Claims Payout Levels, and Availability of Coverage. http://www.weissratings.com/malpractice.asp
Note: Bart LeFan is enrolled in the MBA/MHA
program at the David Eccles School of Business, and is pursuing a career in
hospital administration. This policy
brief was originally written for his Health Policy course in June 2008.
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