The cost of medical malpractice insurance and the impact of malpractice lawsuits on the health care system has been an area of debate in health policy circles. However, there is limited data, uneven research, and considerable disagreement on the impact of litigation on quality of care and health care costs. At the heart of the issue is how to improve patient safety and how to make liability coverage more affordable for health care providers while assuring that there is a just system for compensating patients who have been injured as a result of medical malpractice or negligence.
Since malpractice law has traditionally been under the purview of state governments, nearly every state has some type of policy in place that addresses medical liability. This issue, however, is also of concern to Federal policymakers in light of rising health care costs, and the federal government has issued grants for states to implement malpractice demonstrations and test different strategies to improve patient safety, limit unnecessary malpractice cases, and reduce costs to the health care system.
Medical malpractice cases fall under the rubric of “tort” law, the branch of law that addresses injury to people or property. Cases of medical malpractice result from “negligence,” which refers to injuries caused by the failure of people to exercise care in their conduct towards others. Reforms to medical malpractice litigation would affect a broad range of providers, including primary care and specialty physicians, nurses, and hospitals.
Physicians generally must retain medical malpractice insurance to help protect themselves and their patients in the event of medical negligence and unintentional injury. There have been periods when the premiums that some physicians, particularly certain specialists, pay for this insurance have risen sharply. A number of factors related to lawsuits, including growth in the size of payouts to patients, the rising cost of health care for injured parties, and increased premiums for reinsurance are thought to contribute to premium hikes. Some policymakers claim that making reforms to malpractice policy will reduce overall health care costs, but the evidence for this is mixed. While estimates vary, according to the Congressional Budget Office (CBO), direct costs for malpractice liability in 2009 including insurance premiums and settlements and awards account for approximately 2% of total health care expenditures. However, indirect costs may be higher, including costs from the practice of “defensive medicine”, which are unnecessary health care services that are provided to protect physicians against possible lawsuits. Estimates that include the indirect costs incurred by “defensive medicine” tend to be much higher, with one analysis estimating to account for 10% of total health care spending. Whether tort reform can lower health care expenditures and use of services is often debated, along with what approach would be most effective.,
Impact on Health Care Costs, Quality, and Access to Care
Underlying the issue of malpractice premium costs is the impact of the medical liability system on the delivery of care. One concern is the potential impact of malpractice premium expense on access to and availability of health services. Anecdotal reports of physicians pulling out of clinical practice, halting the provision of certain higher-risk services such as deliveries in family practices, VBACs, and certain neurosurgeries, or relocating to regions in the country with lower premiums have been reported in the media. Similarly, there have been reports of patients not being able to find services, such as maternity care or neurosurgery services. However, there is a lack of solid research on whether the cost of malpractice insurance is the primary factor in these cases or if there are more systemic barriers to care.
The issue of patient safety and the need for a system that allows patients to take action when healthcare professionals make mistakes or are negligent are also important issues. However there is contradictory and insufficient evidence to assess how tort reform may impact health outcomes. Research suggests that many injuries and deaths are attributable to avoidable medical errors. However, it is not clear how or whether tort reforms alone would address this problem. One study found that 10% reduction in costs related to medical malpractice liability might actually increase the national mortality rate by 0.2 percent, while other research suggests that tort reform will not affect health outcomes significantly.. Some researchers and policymakers have suggested that the current system places too much emphasis on punishing providers, and are trying to identify strategies that provide just compensation to patients who have been harmed, and also promote education from medical errors both to providers and the health facility and system in which these mistakes occur.
State and Federal Policies
The issue of medical liability has traditionally been regulated at the state level, and many states have taken measures to reduce the incentives for filing malpractice lawsuits. By reducing the number of lawsuits, it is anticipated that insurance companies would incur lower costs, and the expectation has been that premiums would fall as a result. Over the past several decades, states have adopted a variety of administrative and legislative actions to that end, such as:
- Ending lawsuits in which one defendant can be responsible for paying all of the damages if other defendants lack the resources to pay (joint and several liability)
- Reducing damage awards by the amount available to an injured party from “collateral sources” (such as workers compensation and health insurance);
Limiting contingency fees (the share of any award that a lawyer can claim to cover fees and expenses);
Limiting the length of time after an injury that a lawsuit may be brought to trial (“statute of limitations”);
Permitting the award of future damages (e.g., future lost wages, health care costs, etc.) to be paid in installments instead of one lump sum;
Capping damages awarded in malpractice lawsuits
In June 2010, the federal Agency for Healthcare Research and Quality (AHRQ) sponsored seven state projects (IL, MN, TX, MO, WA, NY, and MA) at a cost of $20 million to implement a variety of reforms intended to reduce medical errors, compensate patients appropriately when warranted, improve quality of care and reduce costs due to defensive medicine.
The ACA authorized additional grants for state demonstration projects. Some ideas that are being tested in various projects around the country include the establishment of health courts, where medically trained judges rather than juries decide cases, the creation of safe harbors, which can help protect providers from lawsuits if they adhered to accepted evidence-based practices, and “early disclosure and offer” protocols, which facilitate prompt disclosure of a medical error after it has occurred. The goal of these projects is to support state-based efforts to understand and address underlying causes of medical errors, and hopefully to inform malpractice policy nationally.
Prepared by Esme Cullen and Usha Ranji of the Kaiser Family Foundation. Updated September 2011.