QUESTIONS AND ANSWERS ABOUT LIABILITY REFORM

1.   Is there really a medical liability crisis? What evidence exists to confirm this crisis? 

The evidence of a liability crisis is overwhelming.  For example, one in seven obstetricians no longer delivers babies and, as a result, nearly half of America's counties lack an obstetrician. Seventy-five percent of neurosurgeons will no longer operate on children.  Fifty-five percent of orthopedic surgeons avoid high-risk procedures. The liability crisis affects future doctors as well. Studies show that almost half of America's medical students indicate that the liability crisis was a factor in their choice of specialty. 

2.   If malpractice insurers are raising rates, forcing doctors out of business, why not have the government limit these price increases?

Price controls on premiums would not solve the problem and would leave even more physicians without access to insurance.  The cause of the liability crisis is an explosion in jury awards and claims.  Setting price controls on insurance premiums would simply drive insurers out of business faster, making the crisis even worse.

3. Wouldn’t caps on noneconomic damages leave patients who were harmed unable to be fairly compensated for their injuries?

It is important to understand the difference between “economic damages,” which would not be capped under reform proposals, and “noneconomic” damages, which would be capped at $250,000.  Economic damages can be millions of dollars and can compensate patients for what most of us think of when we speak of damages.   Economic damages include medical bills, therapy, lost wages, care for dependents and family, legal bills, and other actual damages. Noneconomic damages include “pain and suffering” and are the portion of awards that have reached astronomical proportions. 

California enacted medical liability reform in 1975 (“MICRA”) which capped noneconomic awards.  Interestingly, patients have received generous economic awards for their injuries and they receive them much faster because cases are not drawn out for many years as they are elsewhere when large “noneconomic” awards are appealed. While patients are fairly compensated in California, malpractice rates are relatively low, meaning that California has not experienced the access crisis many other states now suffer.

4.   Given physician incomes, can’t they absorb these increases in insurance premiums?

While most physicians are compensated fairly, many are still being forced to give up their practices by rising liability premiums.  Some specialties, such as ob/gyn, are facing shortages because liability insurance costs are pushing young physicians into other fields.

For example, according to a University of Michigan study, liability rates for ob/gyn doctors rose to an average $277,000 in 2004, an 11 percent increase from the previous year.  In Chicago, these specialists are paying, on average, $230,000 annually in liability premiums.  In Michigan, the average yearly cost was $194,000 in 2004.

5.   What proof is there that liability reform would lead to lower malpractice insurance premiums?

California enacted liability reforms in 1975, placing a cap on noneconomic damages.  Today, more than 30 years later, liability premiums in that state are still just 57 percent of the nationwide premium level.  Texas passed medical tort reform in 2003 and hospitals immediately felt a 17 percent decrease in liability premium rates. Additionally, 13 liability insurance companies filed for licenses to do business in Texas, increasing competition. 

6.   Why is federal legislation needed?  Why not allow states to enact their own reforms?

While legislation at the state level is needed, fixing the problem state-by-state cannot solve the crisis.  First, the delivery of health care is interstate for both health care providers and plans, as well as for patients; patients may live in one state, see doctors in one or more other states, and be employed and insured in another.  Further, many states have constitutional prohibitions on capping damages.  More than a dozen states have enacted liability reforms but many of them have seen these reforms repealed by their state Supreme Courts.

Finally, many health care professionals are insured for malpractice through national carriers. For instance, thousands of OB/GYNs and nurse midwives are covered through their national professional associations; reforming liability problems in a few states will not solve the problem.

7.   I understand how high malpractice rates hurt doctors and hospitals, but why should I care about their balance sheet?

Patients and consumers are the primary victims of the liability crisis because they lose access to physicians, hospitals, nursing homes, and new treatments for disease.  Patients also pay for the crisis through higher health insurance premiums and co-payments, and by being subjected to unnecessary tests and procedures called defensive medicine practices.

8.   What are "special health courts," and how might they pose a possible solution to the medical liability crisis?

Health courts are specialized administrative courts designed to handle medical injury disputes.  In the health court concept, trained judges, assisted by independent neutral experts, would settle malpractice disputes.  Victims would be compensated under a liberalized standard of avoidability.  A compensation schedule of predetermined values would provide horizontal equity between claimants.

There has been quite a bit of congressional attention focused on the idea of special health courts.  The Senate HELP Committee held a hearing in 2006 to consider bipartisan legislation, sponsored by Senators Mike Enzi (R-WY) and Max Baucus (D-MT), that would create pilot projects for special health courts.  Also in 2006, the Health Subcommittee of the House Committee on Energy and Commerce held a hearing on innovative medical liability reforms, which featured health courts. 

The improbability of damage caps legislation may fuel interest in alternative measures, such as the creation of special health courts to review the viability of liability suits. Proposals such as these may have a greater possibility of attracting bipartisan support.