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1 Tacoma Family Medicine Residency Program, Department of Family Medicine, University of Washington, Seattle, Wash
2 Department of Pediatrics, New York University School of Medicine, NYU Center for Child Health Research, New York, NY
3 Robert Graham Center, Washington, DC
4 American Society of Anesthesiologists, Washington, DC
CORRESPONDING AUTHOR: Janelle Guirguis-Blake, MD, Tacoma Family Medicine Residency Program, 521 Martin Luther King Jr Way, Tacoma, WA 98405, jguirgui{at}u.washington.edu
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ABSTRACT |
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 TOP ABSTRACT INTRODUCTIONMETHODSRESULTSDISCUSSIONREFERENCES |
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METHODS For every state and the District of Columbia, we calculated the number of malpractice payments, total amount paid, and average payment from NPDB data reported from 1999 through 2001. We analyzed 44,913 claims using logistic regression to study associations between payments, physician premiums, and 10 state statutory tort reforms.
RESULTS Wide variations exist in malpractice payments among states. The reforms most associated with lower payments and premiums were total and noneconomic damage caps. Mean payments were 26% lower in states with total damage caps ($196,495.34 vs $265,554.50, P = .001). Mean payments were 22% less in states with noneconomic damage caps ($219,225.98 vs $279,849.86, P = .010). Total damage caps were associated with lower mean annual premiums, especially for obstetricians ($22,371.57 vs $42,728.68, P <.001). Hard noneconomic damage caps were associated with premium reductions for obstetricians (30,283.75 vs 45,740.88; P = .039).
CONCLUSIONS Significant reductions in malpractice payments could be realized if total or noneconomic damage caps were operating nationally. Hard noneconomic damage and total damage caps could yield lower premiums. If tied to a comprehensive plan for reform, the money saved could be diverted to implement alternative approaches to patient compensation or be used to achieve other systems reform benefiting patients, employers, physicians, and hospitals.
Key Words: Liability, legal • malpractice • legal liability, premiums • cost control • insurance, liability
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INTRODUCTION |
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TOPABSTRACTINTRODUCTIONMETHODSRESULTSDISCUSSIONREFERENCES |
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Studies analyzing data from the crises in the 1970s and 1980s have shown that state statutory reforms, specifically caps on noneconomic damages and collateral source offsets, are associated with lower total payments, although some of these studies have shown mixed results.8–11 Noneconomic damage caps and limitations on time to file suits have been associated with lower malpractice premiums.12 Most studies were conducted more than a decade ago, however, and were limited to samples of insurance companies. Given contemporary medical liability concerns, it is important to learn from recent experience and use more complete data to assess the associated effects of state tort reform on the state malpractice payment and premium variability that frame our current crisis.
We analyzed all payments made to settle claims or satisfy malpractice judgments on behalf of physicians in the United States for the years 1999 through 2001 as reported to the National Practitioner Data Bank (NPDB). These dates were chosen because many states instituted reforms in the mid-1990s, and we sought to capture subsequent claims data taking into account delays in data reporting, as well as lags in application of these reforms (eg, possible delays because of appeals). We also sought to capture a period after the first wave of reforms but before the second wave of reforms that occurred after 2001. We evaluated malpractice payments and medical liability premiums in relation to 10 common state tort statutes that originally were intended to curb claims. We also assessed the potential direct economic impact of implementing effective statutory reforms nationwide.
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METHODS |
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TOPABSTRACTINTRODUCTIONMETHODSRESULTSDISCUSSIONREFERENCES |
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We analyzed the 44,913 paid medical malpractice claims reported on behalf of physicians to the NPDB between January 1999 and December 2001 (public use data files). To standardize these total claims for numbers of physicians and people in each state, we used information from the 2000 American Medical Association (AMA) Physician Masterfile15 and the 2000 US Decennial Census.16 We calculated the reported number of medical malpractice payments, total dollar amount payments, mean dollar amount per payment, payments per 1,000 practicing physicians, and payments per 100,000 population. The payments were divided by the number of practicing physicians based on the state in which the physicians practiced. Likewise, we standardized payment amount by state population to provide an estimate of payments per person living in each state. State statutes were assessed as of January 1999 and were obtained from the AMA,17 Physician Insurers of Association of America,18 and American Tort Reform Association.19 We developed a coding scheme to categorize each state and the District of Columbia by the presence or absence of specific malpractice statutory reform. Two teams (one team included an attorney) independently coded state tort reform statutes, and the teams decided on the final coding by consensus.
Bivariate analysis was performed to study associations between malpractice payment rates/payments and physician liability premiums (dependent variables) and 10 common state tort reform statutes (independent variables). These state statutory reforms included total damage caps, noneconomic damage caps, joint liability reform, attorney fee caps, mandatory arbitration, excess coverage funds, permitted periodic payments, collateral source reform, certificate of merit requirements, and statute of limitations. Total damage caps are limits on total damages, which include economic damages (ie, medical bills, lost income, direct cost of injury) and noneconomic damages (ie, caps for "pain and suffering"). "Hard" noneconomic damage caps are those without any exceptions; "soft" noneconomic damage caps are those with exceptions (including adjustment for inflation, exceptions for particular injuries). (Supplemental Appendix 1, available online-only at http://www.annfammed.org/cgi/content/full/4/3/240/DC1, displays a complete list of statute definitions.) Because total damage caps showed a consistent and strong relationship across multiple payment characteristics, we controlled for the presence of total damage caps for all statutes that showed significant associations across one or more payment characteristics. We performed a multivariate analysis (with regression equations using each variable individually and then using all variables in combination); this multivariate analysis did not add further explanation to our model of the association between caps, payments, and premiums. Statute variables (other than total and noneconomic damage caps) did not obscure the effects of caps, nor did they add explanation to the model. We therefore report results from the bivariate analysis. We used the source for state medical premium information commonly cited by US General Accounting Office and US Congressional Budget Office and extracted annual premiums for 3 specialties for which information was available: internal medicine, obstetrics, and general surgery.20 Pearson’s coefficient was calculated for associations between payment characteristics and premiums. To calculate reductions in liability payments associated with certain statutes, we standardized the rates where we applied payment and premium characteristics of states with a specific statute to those states without that statute.
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RESULTS |
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TOPABSTRACTINTRODUCTIONMETHODSRESULTSDISCUSSIONREFERENCES |
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). For the years 1999 through 2001, the average dollar amount per payment ranged from $113,695 in Michigan to $560,059 in the District of Columbia. Total payments for the 3-year period ranged from $15.4 million in Wyoming to more than $1.8 billion in New York. Payment characteristics of all 50 states and the District of Columbia are displayed in Supplemental Table 1, available online-only at http://www.annfammed.org/cgi/content/full/4/3/240/DC1.
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). The mean dollar amount per payment was 26% lower in those 7 states having total damage caps compared with those 44 states not having total damage caps ($196,495.34 vs $265,554.50, P = .001). Total damage caps were not associated with fewer numbers of payments per physician or per person.
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). The average amount per payment was 22% less for those states with noneconomic caps than it was for those states without noneconomic caps ($219,225.98 vs $279,849.86, P = .010). Controlling for the presence of total damage caps, this association remained statistically significant (P = .029). When payments were divided by the state population, the dollar amount per person in the population was one-third less in states having noneconomic caps compared with states not having noneconomic caps ($28.60 vs $42.02 per person, P = .047). When controlled for total damage caps, these differences in number of payments per person were not statistically significant, P = .226. As with total caps, there was no difference between states with and without noneconomic damage caps in the number of payments made per physician or per person in the population. We then split noneconomic damage caps into hard and soft caps to see whether this distinction mattered. The amount per claim differed significantly between states not having a noneconomic damage cap and those having a hard noneconomic damage cap ($279,849.86 vs $194,543.66; P = .008).
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After rate standardization for mean payment rate and amount, had those 31 states without noneconomic damage caps adopted the payment characteristics of those 20 states with noneconomic damage caps, we estimated a $1.3 billion reduction in malpractice payments during the 3-year period (1999–2001). Likewise, had those 44 states without total damage caps adopted the payment characteristics of those states with total damage caps, we estimated a potential $2.4 billion payment reduction during the 3 years. The estimated reductions during the 3-year period could be $1.0 billion, $2.8 billion, and $5.1 billion if total caps of $1 million, $500K, and $250K, were applied, respectively, to all payments.
Liability Premiums
Bivariate analysis for each of the 10 state statutes and physician malpractice premiums showed the strongest associations between total damage caps and lower premiums (Table 4). Total damage caps were associated with lower mean annual premiums for all 3 specialties, with obstetricians having the greatest savings ($22,371.57 vs $42,728.68, P <.001). Although undifferentiated noneconomic damage caps showed a trend toward lower physician liability premiums, this trend was not statistically significant (Table 4). When we further differentiated hard from soft noneconomic damage caps, we found that the premiums for obstetricians varied significantly ($30,283.75 vs $45,740.88; P = .039) (Table 5).
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DISCUSSION |
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TOPABSTRACTINTRODUCTIONMETHODSRESULTSDISCUSSIONREFERENCES |
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It is important to begin a discussion of limitations of this study by stating the controversies that surround the NPDB.22 In 2000, the General Accounting Office made recommendations regarding the limitations of the NPDB, especially with regard to its findings of delayed submissions (more than 30-day delays), miscoding of information, lack of information about nonphysician clinicians, and systems’ use of the corporate shields to avoid reporting. Our use of aggregate data from a 3-year period minimizes issues around submission delays, we did not use specific claims information (subject to coding errors), and we were interested only in payments by physician clinicians. NPDB data represent payments made only on behalf of individual practitioners; therefore, we were unable to include payments made on behalf of corporations (eg, corporate shield technicality) or errors in double reporting. Despite these limitations of the NPDB, it remains the most complete source of payment data available.
None of the tort statutory reforms we studied was associated with lower rates of payments (ie, fewer payments per physician or per population). Because the NPDB is a repository for payments and not claims, claims that do not result in payments are not reported. Accordingly, some reforms may be associated with lower claims rates, an association that cannot be tested using the NPDB. There are instances in which the NPDB may report multiple payments for one claim (ie, by the insurance company as well as a state fund) in those states that have excess coverage funds. To ensure that mean dollar amounts per payment were not falsely decreased in states with excess coverage funds and caps, we repeated the analysis removing all 10 states with excess coverage funds and found that the same relationships between total caps and noneconomic caps and lower mean claim payment remained significant. Likewise, the association between total caps and lower premiums for obstetricians remained significant.
Conclusions of causation must be made cautiously because of complex, interacting, and other unmeasured factors. For example, the nonsignificant tendency for states mandating periodic payments to have higher malpractice payments might not mean that this reform leads to higher payments; rather, it might mean that states with high payouts have acknowledged a need to allow defendants to pay large awards over time. The lower payments and premiums in the 7 states that had total caps show a strong association between payments and caps despite a small sample size. Using dichotomous variables to describe other laws with subtle variations and major exceptions, however, may actually bias against finding significant associations where they may in fact exist, as any outcome differences are averaged.23 As a result of this concern, we chose to define and analyze hard and soft noneconomic damage caps separately.
Although other tort reform statutes showed tendencies toward lower payments, significance vanished when we controlled for total damage caps. This finding may reflect an overwhelming effect of total damage caps on payments. Alternatively, as argued in a June 2004 Congressional Budget Office report, analyzing the effects of individual statutes is complicated by an inherent difficulty in controlling for other unmeasured differences between states; these differences may have important effects on premiums.24 In fact, Thorpe’s recent analysis showed that the presence of caps is associated with lower physician malpractice premiums.21
Our estimates of payment reductions were limited to the direct savings, probably underestimating the financial impact of caps. Reductions in other indirect costs of litigation could generate considerable savings, as payments represent only a fraction of the total costs of medical liability.25 Our analysis supports the Congressional Budget Office estimates that tort reforms could increase federal revenues by $3 billion and save $14.9 billion over the next 10 years while reducing physician premiums by 25% to 30%.26
Given a sample size of 51, this study is at risk of poor power to detect significant associations. We chose to use a traditional standard of 95% certainty but recognize that policy makers may not need such a rigorous standard and may be comfortable with a lower threshold of certainty, in which case other associations between reforms and malpractice payments might bear further scrutiny.
Time lags also presented a limitation; time from statute enactment to effective date varied from immediately to several months, and time from a statute’s effective date to actual legal application could be years. Because most statutory reforms in the 1990s were enacted in the few years before 1999, we coded statute enactment as of January 1999 and analyzed payments made during the 3 subsequent years (1999–2001) in an effort to capture paid claims most likely affected by the statute. Future analyses could quantify payments and premiums before and after statute enactment to establish trends that may be explained by statute application.
Cost containment is certainly not the only goal of tort reform. The current medical liability tort system has failed clinicians and patients as a mechanism of rational compensation for injury and of improving the quality of care.27 The wide state-to-state variations in payments imply a lack of equitable compensation for injured patients. Previous studies have substantiated this failing and proposed innovative options for the malpractice tort system to promote justice and improve care.28 The United States could also learn from international models. In Spain, for example, the medical society and regional health service worked together to institute new systems to provide insurance coverage, professional education, and advice for physicians while continuing to protect and respect the rights of patients.29 Sweden has a no-fault system, which has been considered a model for US reform.30 For the United States, the sizable financial savings associated with total and noneconomic damage caps accrue not only to physicians but also to insurers, employers, and patients who ultimately bear these costs. Moving the current policy debates toward finding a broader solution to the inequities in our current liability system would mean that reform efforts would include strategies aimed at improving the quality and safety of the health system.
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ACKNOWLEDGMENTS |
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FOOTNOTES |
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Funding support: This research was performed by the Robert Graham Center funded by the American Academy of Family Physicians.
Disclaimer: The authors of this article are responsible for its contents. The information and opinions contained in research from The Robert Graham Center do not necessarily reflect the views or policy of The American Academy of Family Physicians. The views in this paper are the authors’.
Received for publication July 20, 2005. Revision received December 4, 2005. Accepted for publication December 15, 2005.
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REFERENCES |
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TOPABSTRACTINTRODUCTIONMETHODSRESULTSDISCUSSIONREFERENCES |
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