Analysis: Malpractice premiums lower where damage caps exist

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Medical malpractice insurance premiums are more than 17% lower in states that have capped court awards. But the absence of such tort reform measures in other states does not fully explain recent jumps in what physicians pay to cover the cost of malpractice suits, according to a new analysis.

Kenneth E. Thorpe, chairman of the health policy and management department at the Emory University Rollins School of Public Health, examined the effects of recent sharp increases in malpractice premiums in many states and states' efforts to keep malpractice premiums down. His results are published on the Health Affairs Web site, www.healthaffairs.org.

Awards caps exist in 24 states and are the only malpractice reform efforts that have affected physicians' premiums, reducing them 17.1%. While Thorpe says that such measures extended to other states or nationally through a federal law "would ultimately result in lower premiums," he questions whether taking that step would accomplish the goals of the liability system.

Malpractice premiums increased by 23% in 2002, although the increases varied by state and specialty.

"At issue is whether we should adopt short-term, stopgap solutions to slow the growth in premiums, or use the recent experience to more fundamentally evaluate and perhaps reform the liability system," Thorpe said. "The results suggest that capping awards may improve the profitability of malpractice carriers and reduce premiums. Whether this is socially desirable or improves the goals of deterrence and compensation remains an open question."

Three factors have been tabbed as the principal drivers of malpractice premiums: growing awards and settlements, increased frequency of lawsuits, and declines in investment income.