Malpractice Payouts Have Not Soared, Reports Say

The two studies suggest jury awards have little to do with skyrocketing liability insurance rates.

By Lisa Girion
Times Staff Writer

June 1, 2005

There may be a medical malpractice crisis, but studies released Tuesday suggested that jackpot jury awards were not the cause.

Many doctors blame such judgments for skyrocketing insurance premiums. But the average malpractice claim payout rose about 4% a year from 1991 to 2003, according to a study published online by the academic journal Health Affairs.

The increases slowed to less than 2% a year from 2000 to 2003, according to the study of 184,506 claim payments reported to a national databank.

Physicians and insurers may fear multimillion-dollar jury awards, but the average court judgment in 2003 was $461,000, said Amitabh Chandra, a Dartmouth College economist and one of the authors.

And 96% of malpractice cases that year were settled out of court for an average of $257,000, he said.

"Only 4% of the payments are these judgments that the [physicians and insurers groups] love to talk about," Chandra said. "It's very misleading to keep harping on a particular jury making a particular award to a particular physician that seems excessive."

The researchers concluded that malpractice payments had risen in line with medical care costs, while doctors' insurance premiums grew far faster — by double-digit percentages for some specialties. They suggest that recent malpractice premium increases may have had more to do with insurers' documented losses in the bond market from 1998 to 2001.

But Larry Smarr, president of the Physician Insurers Assn. of America, said investment losses accounted for no more than 16% of premium increases over the last few years.

"We don't deny that there are multiple reasons why [malpractice premium] rates are going up," Smarr said. But it's "mainly due to the increase in the value of claims."

A second study, funded by the Kaiser Family Foundation, echoed the Health Affairs report, finding that total malpractice payments rose an inflation-adjusted 3.8% a year from 1991 to 2003.

The study also found that a slight increase in the number of claims paid through settlements or jury awards from 1991 to 2003 was far outpaced by the growth in the number of practicing physicians. As a result, the average number of malpractice claims per physician fell.

"The tendency has been to focus on total dollar payments going up and total claims going up and to ignore the fact that there are a lot more doctors out there now," said Dr. Peter P. Budetti, the lead author of that study and a professor at the University of Oklahoma's College of Public Health.

"For most doctors, there is a perception of a serious problem," he said. But "the likelihood of having a claim paid on your behalf over the years has diminished."

The study relied in part on claims voluntarily reported by insurers to the association. Smarr, the group's president, said the actual number of claims paid might be higher.

In a coincidental rash of malpractice research, three other studies were released Tuesday that reached similar conclusions about the influence of damage caps on where and how doctors practice medicine.

One suggested that laws limiting malpractice jury awards might attract physicians. The 27 states with caps, including California, had grown to 2.2% more physicians per capita than states without the limits, according to a study by economists at the Agency for Healthcare Research and Quality, an arm of the U.S. Health and Human Services Department.

The American Medical Assn. said the research showed that caps on medical liability worked and that problems were worse in states without them.

"Skyrocketing medical liability premiums are forcing physicians in states without reforms to limit services, retire early or move to states with reforms — with devastating results for patients seeking medical care," said Donald J. Palmisano, former president of the American Medical Assn.

Palmisano said an obstetrician in Los Angeles, where certain malpractice damages are capped at $250,000, paid about $63,000 a year for insurance.

An obstetrician in Miami, where there are no caps on malpractice damages, paid $277,000.

But Douglas Heller, executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, said it was rate regulation — not liability caps — that had kept premiums relatively low in California. Over the last two years, Heller said, the group has defeated or won reductions in requested premium hikes that saved doctors and other medical professionals in California more than $62 million.

The state's "regulatory system doesn't allow frivolous rate hikes," he said. "When you look at the claims data around the country, it doesn't justify the premium increases doctors have seen."