Malpractice Awards

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Legal Issues in Healthcare Delivery HC260
Instructor: Brent Gilje
July 20, 2012
“Capping Malpractice Awards, Will it help lower physician malpractice premiums?”

INTRODUCTION
Researchers at the Agency for Healthcare Research and Quality (AHRQ) have examined the impact of different kinds of State laws in a number of studies.  The studies examined the impact of State legislation that caps damage awards in malpractice cases on decisions of physicians about where to practice medicine. Twenty-four States have laws that limit damage payments in malpractice cases.  Most of these laws limit the amounts paid for noneconomic damages (e.g., pain and suffering) but a few limit both economic (e.g., medical expenses and lost wages) and noneconomic damages. Supporters of legislation to cap damages in malpractice cases maintain that it reduces malpractice premiums and helps insure an adequate supply of physicians.  They also assert that escalating, multi-million-dollar jury awards are driving malpractice premium increases and that capping damage awards for pain and suffering helps restrain the rate of increase.  Without such a law, it is asserted that the loss of affordable medical malpractice insurance for physicians could eventually lead to the loss of affordable, accessible health care.  Opponents of this legislation maintain that insurance companies are trying to compensate for poor business decisions and fading investment income. Although there is some evidence demonstrating that physicians in States with tort reform laws capping malpractice awards enjoy lower malpractice premiums, there is no evidence about the impact of malpractice cap legislation on decisions by physicians regarding geographic location.  A simple comparison of the supply of physicians per capita between States that did and did not adopt a cap revealed that States with caps experienced a more rapid increase in their supply of physicians.  In 1970, before any States had a law capping damage payments in malpractice cases, States that eventually adopted a cap and States that did not eventually adopt a cap had virtually identical levels of physicians per 100,000 citizens per country. Thirty something years later, States that adopted a cap averaged 135 physicians per 100,000 citizens per county while States without a cap averaged 120. Adjusting for a variety of factors in a regression model, it was found that States with caps on noneconomic damages experienced about 12 percent more physicians per capita than States without such a cap.  So placing a cap on malpractice awards is not the answer to lower premiums and affordable healthcare; what then is the driving force behind this issue.

POINT ONE

(What is the relationship between health care costs and premiums?)

Rising health care costs and access to affordable coverage are prominent issues for Washington employers, health care providers, purchasers, and legislators, as well as in the daily lives of millions of its residents. The driving forces behind rising health care costs, however, are often misunderstood. Although increasing premiums are often blamed for driving up the cost of health care, premiums actually rise in direct response to health care costs. Instead, there are several other key cost drivers that combine together to drive up the cost of health care. Understanding why health care coverage costs are increasing is crucial for us to work effectively together to address these issues. The cost of health care has been continually rising for several decades, and continues to affect people's ability to afford health coverage. From 1990 through 2000, combined public and private spending in the United States nearly doubled from about $696 billion to about 1.3 trillion, according to the General Accounting Office (GAO) 1. Health care spending now represents 15 percent of our nation's GDP2. For most states, including Washington, health care spending is one of the...
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