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Limiting Tort Liability for Medical Malpractice 1 (January 2004)

handle is hein.congrec/cbo10065 and id is 1 raw text is: A series ofissue summaries from the Congressional Budget Office JANUARY 8, 2004 Limiting Tort Liability for Medical Malpractice The past few years have seen a sharp increase in premi- ums for medical malpractice liability insurance, which health care professionals buy to protect themselves from the costs of being sued (see Figure 1 on page 2). On aver- age, premiums for all physicians nationwide rose by 15 percent between 2000 and 2002-nearly twice as fast as total health care spending per person. The increases dur- ing that period were even more dramatic for certain spe- cialties: 22 percent for obstetricians/gynecologists and 33 percent for internists and general surgeons.1 (For a defini- tion of malpractice and other terms used in this brief, see Box 1 on page 3). The available evidence suggests that premiums have risen both because insurance companies have faced increased costs to pay claims (from growth in malpractice awards) and because of reduced income from their investments and short-term factors in the insurance market. Some ob- servers fear that rising malpractice premiums will cause physicians to stop practicing medicine, thus reducing the availability of health care in some parts of the country. To curb the growth of premiums, the Administration and Members of Congress have proposed several types of re- strictions on malpractice awards. Bills introduced in the House and Senate in 2003 would impose caps on awards for noneconomic and punitive damages, reduce the stat- ute of limitations on claims, restrict attorneys' fees, and 1. The figure for all physicians comes from survey data from the Centers for Medicare and Medicaid Services; the figures for vari- ous specialties come from annual surveys conducted by Medical Liability Monitor newsletter. Both sets of surveys collect data on base rates charged by insurers and thus do not reflect discounts or additional charges applied to individual policies. Moreover, the latter surveys do not incorporate the relative market shares of insurers, so the averages are not weighted. (Note that most of the numbers reported in this issue brief are for physicians; less infor- mation is available for other types of health care providers, but trends appear to be similar for them.) allow evidence of any benefits that plaintiffs collect from other sources (such as their insurance) to be admitted at trial. Limits of one kind or another on liability for mal- practice injuries, or torts, are relatively common at the state level: more than 40 states had at least one restriction in effect in 2002.2 Evidence from the states indicates that premiums for mal- practice insurance are lower when tort liability is re- stricted than they would be otherwise. But even large sav- ings in premiums can have only a small direct impact on health care spending-private or governmental-because malpractice costs account for less than 2 percent of that spending.3 Advocates or opponents cite other possible ef- fects of limiting tort liability, such as reducing the extent to which physicians practice defensive medicine by con- ducting excessive procedures; preventing widespread problems of access to health care; or conversely, increas- ing medical injuries. However, evidence for those other effects is weak or inconclusive. 2. That number comes from the Congressional Budget Office's database of state laws on medical malpractice torts. The database includes information from the National Conference of State Leg- islatures, the American Tort Reform Association, and the law firm of McCullough, Campbell, and Lane. For a discussion of whether tort liability issues are better addressed at the federal or the state level, see Congressional Budget Office, The Economics ofU.S. Tort Liability: A Primer (October 2003). 3. The 2 percent figure is a CBO calculation based on data from Tillinghast-Towers Perrin (an actuarial and management consult- ing firm) and the Office of the Actuary at the Centers for Medi- care and Medicaid Services.

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