Range of Malpractice Insurance Rate Increases, 2000-2001
| 2000 (%) | 2001 (%) | |
| Internists | 2.8-49.0 | 2.1-68.6 |
| General surgeons | 3.9-42.0 | 0.2-86.0 |
| OB/Gyns | 2.8-42.0 | 0.3-69.0 |
Why are premiums so high? Malpractice jury awards, according to insurance companies, President George W. Bush, and the American Medical Association.27 Every year about 10,000 medical malpractice lawsuits are filed. The average malpractice case takes nearly 4 years to resolve. According to the Health Care Liability Alliance, 43% of malpractice premiums are given out as jury awards. The other 57% are used for attorney's fees. According to insurers' figures, the average jury award in 2000 was $3.49 million, up 79% since 1993.
Other sources provide more modest figures. The graph below shows median individual awards given out by juries and settlements in malpractice cases. In 1999, the average jury award was $800,000.28 This was 60% higher than in 1993. Settlement awards rose 63% in this time period. The median individual payment insurance companies made to cover jury awards in 2000 was $132,312, according to the Pennsylvania Medical Society.29
Median Awards in Malpractice Cases, 1993-1999
Insurance companies in the states with the highest malpractice insurance rates (see graph on the previous page) don't necessarily pay out the most to cover jury awards. Michigan ranked 2nd and 3rd in the amount certain physicians pay for malpractice premiums. However, Michigan ranked 12th in the total amount insurers paid to cover jury awards in malpractice cases. The table on the next page shows the rankings for both malpractice insurance premiums and total amount insurance companies pay to cover jury awards. Obstetricians/gynecologists (OB/GYN) were chosen for the table because they pay the highest premiums in relationship to the other physicians mentioned above. A possible reason for this: "medical mistakes [in obstetric wards] have historically led to expensive jury awards and settlements." (Treaster).
Insurance Premium vs. Insurance Payment for Jury Awards Rankings, With Total Amount Paid by Insurance Companies, 2000
| Insurance premium ranking for OB/GYNs, 2001 | Insurance payment rankings for jury awards | Total amount paid by insurance companies ($) | |
| Florida | 1 | 3 | 321,079,744 |
| Texas | 2 | 5 | 217,518,136 |
| Michigan | 3 | 12 | 79,040,011 |
| New York | 4 | 1 | 632,996,221 |
| Illinois | 5 | 4 | 271,050,075 |
| Ohio | 6 | 6 | 205,148,823 |
| Nevada | 7 | 22 | 37,090,955 |
| West Virginia | 8 | 35 | 19,370,928 |
Is anything being done to curb skyrocketing insurance premiums? Tort reform legislation is being passed by many states (and proposed in the federal government) in order to cut back on "frivolous" lawsuits. But is tort reform the answer? According to Howard A. Richter, MD, president of the Pennsylvania Medical Society, it is. He states that California OB/GYNs averaged $23,000-$72,000 in malpractice insurance premiums, while those in Florida pay between $143,000 and $203,000. California caps its jury awards, Florida does not.
What do lawyers say? Bill R. Frame, president of the West Virginia Trial Lawyers Association, states that tort reform takes "away our fundamental right to seek and obtain compensation for a wrong." Limiting jury awards, according to trial lawyers, only increases the insurer's profits and does nothing to lower malpractice premiums. Some opponents to tort reform also point to a 1999 study by the National Academy of Science's Institute of Medicine which estimated that between 44,000 and 98,000 Americans die in hospitals each year due to medical errors.30 Therefore, some say, only a fraction of those who should seek compensation are doing so.
What do doctors say? 94% of doctors surveyed by The Harris Poll for the Common Good Fear of Litigation Study31 feel that malpractice lawsuits should be settled by "a medical court presided over by independent medical professionals and other experts that would have authority to review and decide injury cases."
Tort reform has met with challenges as far back as 1980. Since then 15 state courts have limited their states' medical liability reform, including jury award caps. California's Medical Injury Compensation Reform Act of 1975 has withstood court challenges, however.
Medical review boards have met a similar fate in North Carolina. In 2001, the state Court of Appeals ruled that it was unconstitutional to require expert-witness reviews of malpractice claims before lawsuits can be filed. The court ruled that the process limited a "plaintiff's access to the courts and [violated] the equal protection clauses of the state and federal constitutions."
Nevada is the latest state to enact medical liability reform legislation with jury award caps32 (Mississippi and New Jersey lawmakers are discussing the matter), but as of August 2002, insurance companies in Nevada had no plans of lowering their medical malpractice premiums. What will this mean for the future of accessible health care? Will more doctors move to states with lower premiums?33 Will more patients have to drive for hours (or possibly to another state) just to see a specialist?
Sources: "Medical liability rates continue their upward swing." Medical Liability Monitor, October 1, 2001. Retrieved August 20, 2002 from http://www.ama-assn.org/ama/upload/mm/395/malpractice.pdf. Humphrey Taylor, et. al. Common Good Fear of Litigation Study- The Impact on Medicine, April 11, 2002. Rita Rubin. "You might feel a bit of a pinch." USA Today, December 3, 2001. Retrieved August 21, 2002 from http://www.usatoday.com/news/healthscience/health/2001-12-04-insurance-usat.htm. Tanya Albert. "Nevada enacts bold tort reforms." AMNews, August 26, 2002. Retrieved August 21, 2002 from http://www.ama-assn.org/scipubs/amnews/pick_02/gv110826.htm. "Do damage caps restrain rising professional liability damages?" Physician's Weekly, August 19, 2002. Retrieved August 21, 2002 from http://www.physweekly.com/. Francis X. Clines. "Insurance-Squeezed Doctors Fold Their Tents." The New York Times, June 13, 2002. Retrieved August 21, 2002 from http://www.nytimes.com/. Leigh Somerville. "Doctors, insurers seek to reverse ruling they believe will lead to frivolous suits." The Business Journal, November 9, 2001. Retrieved August 20, 2002 from http://triad.bizjournals.com/triad/stories/2001/11/12/story3.html. Mike Strobbe. "Insured at premium prices." The Charlotte Observer, March 17, 2002. Retrieved August 20, 2002 from http://www.charlotte.com/. Linda T. Kohn, et. al. To Err is Human: Building a Safer Health System, 2000. Retrieved August 21, 2002 from http?/www.nap.edu/. "Medical Malpractice Lawsuits by the Numbers." Retrieved August 22, 2002 from http://www.aahpeckochamber.tv/malpractice/numbers.htm. National Center for Policy Analysis. "Jury Awards Boost Doctors' Malpractice-Insurance Costs." Health Issues, September 10, 2001. Retrieved August 22, 2002 from http://www.ncpa.org/iss/hea/pd091001d.html. Vicki Lankarge. "Doctors abandon patients as malpractice premiums soar." and "State-by-state chart of medical malpractice payments," April 3, 2002. Retrieved August 22, 2002 from http://www.insure.com/health/. Tanya Albert. "Malpractice awards pushing insurance premiums higher." AMNews, March 5, 2001. Retrieved August 21, 2002 from http://www.ama-assn.org/sci-pubs/amnews/pick_01/prl10305.htm. Joseph B. Treaster. "Rise in Insurance Forces Hospitals to Shutter Wards." The New York Times, August 25, 2002.
1 There was a transfer quarter from October 1, 1976 to December 31, 1976, during which the fiscal year was changed from July 1-June 30 to October 1-September 30. The drop in 1977 shown in the graph could be due to this transition period. Monies allocated during the transfer quarter do not appear in the graph.
2 Total nondefense R&D spending growth outpaced defense R&D spending growth in 29 of the 50 years shown.
3 And the most costly in terms of health care and lost wages. According to NIH, the national cost for heart diseases was $183 billion in 2000. That's $26 billion more than cancer and $83 billion more than diabetes.
4 Source for both quotes in this paragraph: Schiavone, Louise. "Cancer rally calls attention to the politics of medical spending." CNN interactive, September 25, 1998. Retrieved August 13, 2002 from http://www.cnn.com/HEALTH/9809/25/cancer.march.advancer/.
5 1950-1975 data for influenza and pneumonia and diabetes mellitus were extrapolated.
6 In 1996, the NIAID became the 5th most funded institute. During this year total NIH funding dropped off (see previous panel), and funding to the NIAID was halved. Funding returned to normal levels in 1997.
7 For more on the history of AIDS see the panel "Two Decades of AIDS" in Chapter 10.
8 The largest increase in funding for a NIH institute in history. Source: http://www.homelandsecurity.org. Full citation in source note.
9 In November 2000, a second edition was released.
10 Source: Centers for Disease Control and Prevention. National Center for Chronic Disease Prevention and Health Promotion. "Promoting Physical Activity Through Trails." Retrieved August 27, 2002 from http://www.cdc.gov/nccdphp/dnpa/physical/trails.htm.
11 A nonprofit association that represents over 170,000 outdoor and indoor public park and recreation facilities.
12 A quote by Dr. Eve E. Slater, Assistant Secretary for Health. Source: "National Recreation and Park Association and U.S. Department of Health and Human Services Working for the Nation's Wellness," February 26, 2002.
13 Source: "2001 iwalk photos and quotes." Retrieved August 27, 2002 from http://www.iwalktoschool.org/quotes/quotes4.hsql.
14 The states that receive funding are California (15-19%), Connecticut (15-19%), North Carolina (>=20%), Massachusetts (15-19%), Rhode Island (15-19%), Texas (>=20%), Colorado (10-14%), Florida (15-19%), Michigan (>=20%), Montana (15-19%), Pennsylvania (>=20%), and Washington (15-19%). The numbers in parentheses represent the percentage of obese people in the state in 2000.
15 Source: U.S. Department of Health and Human Services. Healthy People 2010: Understanding and Improving Health, 2nd ed., November 2000.
16 Funding for the programs comes from state appropriations (taxes, tobacco settlement monies, and other sources), federal (CDC Office on Smoking and Health) and non-government (Robert Wood Johnson Foundation and the American Medical Association) sources.
17 Smoking prevalence data is for 2000, the most recent year available.
18 In many cases, states used little or no tobacco settlement monies for tobacco control programs in 2002. In 2001, Tennessee and Michigan received $151.4 million and $258.9 million, respectively, in tobacco settlement monies, but spent none of it on tobacco control programs in 2002. Hawaii, on the other hand, received $35.8 million in tobacco settlement monies in 2001 and spent $22.2 million of it for tobacco control programs in 2002.
19 In 2002, 15.9 million people age 12 and older used illicit drugs according to a federal study. Source: "16 million use drugs, federal study says." The Detroit News, September 6, 2002.
20 Source: Packer, Lisa E, et. al. Substance Abuse and Mental Health Services Administration. 1998 National Household Survey on Drug Abuse, August 12, 1999. Retrieved August 28, 2002 from http://www.samhsa.gov/oas/NHDA/98DetailedTables/101112v1_2.pdf.
21 The increase in monies for substance abuse treatment is a part of the President's Drug Treatment Initiative. President George W. Bush's "number one priority in the mental health and substance abuse area is to reduce the 'substance abuse treatment gap' and reduce the waiting list for those seeking substance abuse services." In 2000, over 1 million people received treatment for substance abuse. Source: "Fiscal Year 2003 President's Budget: Substance Abuse and Mental Health Services Administration (SAMHSA)." APA Online. Retrieved August 30, 2002 from http://www.apa.org. U.S. Department of Health and Human Services. "Over 1 Million People Receiving Addiction Treatment." Retrieved August 30, 2002 from http://www.samhsa.org.
22 In 2000 constant dollars, the increase was 34% (from $71,036 in 1993 to $95,000 in 2000).
23 In 2000 constant dollars, the increase was 12% (from $4,743 in 1992-1993 to $5,308 in 1999-2000).
24 Since 1965, part of this salary was paid by Medicare. Direct graduate medical education payments are inflation-adjusted based on the average per-resident amount in 1984 and on the number of residents and the proportion of inpatient days used by Medicare patients. Congress has since modified the formula to reduce Medicare reimbursement payments.
25 The interest rate is based on a weighted average of the loans being consolidated, and rounded up to the next highest one-eighth of 1%. This is a federally mandated interest rate for educational consolidation loans and will be the same whether the consolidation loan is financed through the federal government, banks, or other lenders.
26 Source: Lankarge, Vicki. "Doctors abandon patients as malpractice premiums soar." Retrieved August 22, 2002 from http://www.insure.com/health/medliability201.html.
27 J. Robert Hunter, the insurance director for the Consumer Federation of America, blames insurance companies' mismanagement for high malpractice insurance premiums. The insurers agree that during the Wall Street boom times of the 1990s, they lowered premiums to attract more hospitals and doctors. Money for jury awards came from stock market profits and company reserves. But, now that the stock market is in a slump and company reserves are drying up, insurers claim that malpractice insurance premiums must be hiked in order to make up for the losses.
28 Source: Current Award Trends in Personal Injury, 2000 Edition; Jury Verdict Research, Horsham, Pa.
29 Some states have patient compensation funds (CAT). A jury award to a patient may be $1,000,000, but some of that amount may be paid from the CAT fund while the insurance company will pick up the rest. Of the states mentioned above, only Florida has such a program.
30 The study extrapolates these numbers from two studies (one in New York in 1984 and one in Colorado and Utah in 1992) and applies them to the number of patients admitted to hospitals in 1997. In New York, 3.7% of hospital admissions resulted in "injuries caused by medical management." Of this, 58% were considered preventable (i.e. medical error). In Colorado the numbers were 2.9% and 53%, respectively.
31 A survey conducted from March 4-20, 2002 polling 300 doctors around the U.S., 73% specialists and 27% primary care physicians.
32 In July 2002, Nevada's only Level 1 trauma center closed for 10 days because physicians could not afford pay their malpractice insurance premiums. The legislation was enacted in hopes of heading off such an event in the future.
33 By moving from Beckley, West Virginia to Blacksburg, Va. 80 miles away, orthopedic surgeon Dr. Joe Prud'homme saved $62,000 a year on his malpractice insurance. Dr. Prud'homme launched a letter-writing campaign in 2001 out of his office to urge the West Virginia legislature to pass tort reform legislation.
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