U.S. Department of Health and Human Services

Special Update on Medical Liability Crisis

U.S. Department of Health and Human ServicesOffice of the Assistant Secretary for Planning and Evaluation

September 25, 2002

This paper was prepared by the Office of Disability, Aging and Long-Term Care Policy within the U.S. Department of Health and Human Services. For additional information, you may visit the DALTCP home page at http://aspe.hhs.gov/daltcp/home.htm or contact the office at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. The e-mail address is: webmaster.DALTCP@hhs.gov.

On September 24, 2002, Medical Liability Monitor (MLM), an independent reporting service which tracks medical professional liability trends and issues, released preliminary results of the MLM’s annual rate survey. This survey determined that the crisis in medical malpractice liability insurance identified in HHS’s report entitled, “Confronting the New Health Care Crisis: Improving Health Care Quality by Fixing Our Medical Liability System,” has worsened in 2002.

Insurance Premiums Have Risen More Rapidly in 2002

The cost of the excesses of the litigation system are reflected in the rapid increases in the cost of malpractice insurance coverage. Premiums are spiking across all specialties in 2002. When viewed alongside previous double-digit increases in 2000 and 2001, the new information further demonstrates that the litigation system is threatening health care quality for all Americans as well as raising the costs of health care for all Americans.

The data in Table 1 reflect an average of specialties in all states. Averaging disguises the different experience in states that have reformed their litigation systems and those that have not.

Rates Are Rising Fastest In States Without Reasonable Limits on Non-Economic Damages

As reported in “Confronting the New Health Care Crisis: Improving Health Care Quality by Fixing Our Medical Liability System,” 2001 premium increases in states without litigation reform ranged from 30%-75%. In 2002, the situation has deteriorated. States without reasonable limits on non-economic damages have experienced the largest increases by far, with increases of between 36%-113% in 2002. States with reasonable limits on non-economic damages have not experienced the same rate spiking.

The July HHS report identified 10 non-reform states that had significant premium increases in 2001 for three key physician specialists. Here is how those states fared in 2002.

The most recent data from MLM indicate that physicians in additional states without reasonable limits on non-economic damages are now facing similarly substantial premium increases. These new states in crisis appear in the table below.

Physician Premiums Are Lower in States That Have Reformed Their Litigation System

A comparison of the range of physician premiums, by specialty, in states that have not reformed their litigation system, to California, which has implemented reasonable caps on non-economic damages, reveals how excessive awards for non-economic damages affect premiums.

Impact of Year-After-Year Rate Increases in Select Crisis States

The recent data demonstrate the cumulative impact of year-after-year increases in premiums. In the 9 states which the American Medical Association deemed to be in a crisis, the Medical Liability Monitor compared the rate increases of 2001 and 2002. The results are clear:

Continuing and accelerating increases in insurance means more doctors are confronted with premiums they cannot afford to pay. More doctors will retire early, reduce their practice to patients who present less risk of litigation, or move to states that have reformed their litigation system. This reduces Americans’ access to quality care and increases the cost of care paid by all Americans. The litigation crisis is only getting worse.

With few exceptions, average premiums for states with reasonable limits on non-economic damages are lower than for the US as a whole. This holds true for all three specialties.

For more information on this subject, go to the Office of Disability, Aging and Long-Term Care website at http://aspe.hhs.gov/daltcp/reports.htm.