Fairness Aside, Do Caps on Medical Malpractice Damages Actually Work?

December 14, 2007

The insurance lobby, medical groups, and conservative politicians are all increasing calls for a federal cap on non-economic damages in medical malpractice cases. These groups argue that non-economic damages, those which compensate for pain and suffering and loss of a normal life, are directly causing the dramatic rise in medical malpractice insurance rates. If a federal cap on these damages is passed, individual states would be preempted from deciding this issue on their own.

Setting aside whether an arbitrary cap on damages in all medical malpractice cases is fair (regardless of patient' injury or the health professional' misconduct), do caps actually work? That is, do caps on non-economic damages in medical malpractice achieve the goal of reducing malpractice insurance premiums or is there another solution? Based on the results in California, Texas, and other states, as well an independent study conducted by Duke University, the answer seems to be no.

Malpractice Premiums in States with Caps on Non-Economic Damages

The malpractice premiums in states with caps on non-economic damages are 12.4% higher than in states without caps. (Medical Liability Monitor, October 2005) In five states that recently enacted medical malpractice caps (Mississippi, Nevada, Ohio, Oklahoma, and Texas), premiums rose to nearly double the rates as states that do not have caps on damages. (Medical Liability Monitor, October 2004)

Malpractice Premiums in Texas after Caps on Non-Economic Damages

In 2003, Texas passed a cap on non-economic damages in medical malpractice cases at $250,000. The cap was enacted after an intense campaign in which the Insurance Commissioner of Texas claimed caps would reduce insurance rates by 19%. However, just two months later, major malpractice insurance carriers requested rate increases of 35 % for doctors and 65% for hospitals despite earlier promises that the caps would lower rates. (See "Mythbuster: Specific State Examples that ‘Caps' Don't Work!" Center for Justice & Democracy, June 13, 2005).

In a document filed by GE Medical Protective to the Texas Department of Insurance, obtained by the Foundation for Taxpayer Consumer Rights, the company admitted "capping non-economic damages will show a loss savings of 1.0%." This document may be viewed at http://www.consumerwatchdog.org/malpractice/rp/2059.pdf, August 18, 2006.

Malpractice Premiums in California after Caps on Non-Economic Damages

About fifteen years ago, California passed their Medical Injury Compensation Reform Act capping non-economic damages at $250,000. Thereafter, malpractice premiums for physicians in California rose 450%. Rates did not fall until the 1988 passage of Proposition 103, an insurance reform initiative that lowered physicians' premiums 20% in the first three years after enactment. (Press Release, "Third Time' a Charm: Another Malpractice Insurer Admits Damage Caps Won't Lower Doctors' Premiums," Foundation for Taxpayer and Consumer Rights, February 15, 2005.)

Duke University Study on Med Mal Caps in Illinois and Insurance Premiums

In 2005, Illinois passed its own cap on damages in medical malpractice cases (which is now being appealed). Like in Texas, proponents of the statute argued malpractice insurance premiums were so exorbitant because of runway jury verdicts and went on to claim doctors were fleeing the state as a result. However, these arguments were dispelled by an independent Duke University study conducted by Professor Neil Vidmar. (Duke Study)

The Duke study shows the number of doctors in Illinois had actually increased between 1993 and 2003, including specialties like obstetrics and gynecology which are vulnerable to larger verdicts.

The study found that "[t]he Illinois Tort System does not appear to be the cause of the undisputed fact that doctors' liability insurance premiums showed dramatic rises." Regarding a cap on non-economic damages, the Duke study concluded a $500,000 cap "would have resulted in a minimal reduction in overall payouts to plaintiffs and would be unlikely to affect doctors' liability insurance premiums."

Posted by Jason Kroot, Chicago Medical Malpractice Attorney of Kroot Law, LLC

 
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