Can Damage Caps Limit Medical Malpractice Exposure

Can tort reform limiting damages in medical malpractice lawsuits reduce claims?

Yes, according to Tom Baker, JD, a professor of law and health sciences at the University of Pennsylvania Law School. “Damage caps do reduce liability insurance losses in the long term.”

This was a hot topic this year as lawmakers in Oregon, Florida and Virginia considered issues relating to medical malpractice damage caps.

A recent New England Journal of Medicine (NEJM) study found that three out of every four medical malpractice lawsuits are resolved with no payment to plaintiffs, which the study said demonstrates the need for effective tort reforms.

The American Medical Association (AMA) argues that liability caps on non-economic damages help to maintain a stable liability climate. According to the AMA, a study by an umbrella organization of insurers found that 64 percent of claims closed in 2009 were reportedly dropped, withdrawn, or dismissed.

Despite the study’s findings, costs related to medical malpractice claims are high.

Data from the Physician Insurer’s Association of America on claims that closed in 2009 indicated that for the 36 percent of claims that remained, the median indemnity payment on settled claims was $200,000. Average defense costs totaled $69,244 for cases that settled and ranged between $140,000 and $170,000 through trial, depending upon which side prevailed.

According to the NEJM study, some types of doctors were sued more than others. About 19 percent of neurosurgeons and heart surgeons were sued every year, making them the most targeted specialties. Pediatricians and psychiatrists were sued the least, with only about 3 percent of them facing a claim each year.

Most physicians will face at least one lawsuit during their career, the NEJM study found.

That represents a significant emotional cost for doctors, said study co-author Amitabh Chandra, an economist and professor of public policy at the Harvard Kennedy School of Government.

“They hate having their name dragged through the local newspaper and having to go to court,” he said.

Without damage caps, medical practitioners and their insurers argue that insurance premiums will increase as a result of unpredictable and runaway verdicts. This has led to doctors fleeing states like Illinois, according to a 2010 Illinois New Physician Workforce Study conducted by the Northwestern University Feinberg School of Medicine.

“Many of these new graduates cite Illinois’ toxic medical malpractice environment as a major reason,” said Russell Robertson, MD, a lead study author and professor and chair of family and community medicine at Feinberg.

According to the American College of Emergency Physicians, hundreds of physicians have moved to Texas as a result of the state’s medical liability reforms.

As of the beginning of this year, half of the states had enacted caps on non-economic damages, while six place a cap on total damages, according to the AMA. The Medical Liability Monitor reported the number of states with caps on damages is shrinking. Last year, damage caps were overturned by courts in Georgia and Illinois.

States with a cap on non-economic damages for personal injury or wrongful death include: Alaska, California, Colorado, Florida, Hawaii, Idaho, Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Texas, Utah, West Virginia and Wisconsin.

States with caps on total damages include: Colorado, Indiana, Louisiana, Nebraska, New Mexico and Virginia.

States with no medical liability cap on non-economic damages include: Alabama, Arizona, Arkansas, Connecticut, Delaware, Washington D.C., Iowa, Kentucky and Minnesota.

Caps can be distinguished as “hard” or “soft,” according to the AMA. “Hard” caps do not have exceptions, don’t adjust over time, and apply regardless of the number of defendants or plaintiffs. “Soft” caps, on the other hand, can be subject to exceptions, scheduled increases or inflation and are individualized per defendant or plaintiff.

It remains to be seen if reform at the federal level will work to reduce frivolous lawsuits; however, several medical organizations including the American College of Emergency Physicians (ACEP) and the AMA support the idea of a federal liability reform model with a $250,000 cap on non-economic damages. In an October 3, 2011 joint letter to the Joint Select Committee on Deficit Reduction, the groups urged Congress to pass a medical liability reform package to address “escalating and unpredictable awards, the high cost of defending against lawsuits, including those without merit.”

Despite their effectiveness, caps are ill-advised because they do nothing to address the underlying problem, according to Baker. Instead, he offers alternatives to medical liability reform in his book, “The Medical Malpractice Myth.” One suggestion involves improved tracking of medical injuries. The current National Practitioners Data Bank only records lawsuits against physicians, not claims or injuries, Baker said.

Mike Stobbe, of the Associated Press, contributed to this report.