oversight

Medical Malpractice: Effects of Varying Laws in the District of Columbia, Maryland, and Virginia

Published by the Government Accountability Office on 1999-10-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to Congressional Requesters




October 1999
                MEDICAL
                MALPRACTICE
                Effects of Varying Laws
                in the District of
                Columbia, Maryland,
                and Virginia




GAO/HEHS-00-5
          United States
GAO       General Accounting Office
          Washington, D.C. 20548

          Health, Education, and
          Human Services Division

          B-282171

          October 15, 1999

          The Honorable Dick Armey
          The Honorable Charles H. Taylor
          House of Representatives

          In both the mid-1970s and mid-1980s, medical malpractice insurance
          premiums grew significantly, causing the medical profession to be alarmed
          by a crisis in the affordability and availability of insurance. As a result,
          many states adopted various tort reforms1 designed to limit the number of
          malpractice claims and the size of payments. The states expected the
          changes to reduce insurance premiums—one component of medical
          liability costs. States took such actions as

      •   placing caps on the amount that could be awarded for damages for
          malpractice;
      •   amending “collateral source” rules that prevent providers from
          introducing evidence that the injured person’s expenses have been
          reduced by payments from third parties, such as health insurers;
      •   modifying statutes of limitations to decrease the time injured people have
          to file a claim in court; and
      •   implementing alternative dispute resolution systems, such as arbitration,
          where forums other than the courts are used.

          Furthermore, many tort reform advocates believed that by adopting tort
          reforms the costs associated with the practice of defensive medicine2—a
          second component of medical liability costs—would also decrease,
          thereby lowering overall health care costs and enhancing access to care.3




          1
           Medical malpractice lawsuits are generally based on tort law (which includes both statutes and court
          decisions). A tort is a wrongful act or omission by an individual that causes harm to another individual.
          Typically, a tort claim of malpractice would be based on the claim that the provider was negligent and
          the injured party would seek damages. To reduce the cost of malpractice insurance and for other
          reasons, some have advocated changes to the states’ tort systems. These changes are referred to as
          tort reforms.
          2
           The Office of Technology Assessment defined defensive medicine as follows: “Defensive medicine
          occurs when doctors order tests, procedures, or visits, or avoid high-risk patients or procedures,
          primarily (but not necessarily solely) to reduce their exposure to malpractice liability . . . .”
          3
           We previously reported that, in addition to costs associated with medical malpractice insurance and
          defensive medicine, medical liability costs include (1) liability-related administrative costs and
          (2) medical device and pharmaceutical liability costs. See Medical Liability: Impact on Hospital and
          Physician Costs Extends Beyond Insurance (GAO/AIMD-95-169, Sept. 29, 1995). As our work—both
          previous and current—only identified literature on malpractice insurance and defensive medicine
          costs, this report will focus on these two components of medical liability costs.



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                       Unlike the neighboring states of Maryland and Virginia, the District of
                       Columbia has not adopted multiple tort reforms. You expressed concern
                       about the District’s lack of significant tort reforms and the effect this may
                       have on the quality, availability, and cost of health care in the District. As a
                       result, you asked us to

                   •   identify the rationale behind selected reforms states have made to their
                       medical malpractice tort law;
                   •   report on whether selected tort reforms have reduced malpractice
                       insurance costs and the costs associated with defensive medicine;
                   •   describe the extent to which the District, Maryland, and Virginia have
                       adopted selected tort reforms; and
                   •   compare malpractice claim payments, insurance premiums, and numbers
                       of physicians in the District; Baltimore, Maryland; and Richmond, Virginia.

                       To meet these objectives, we reviewed health policy and legal literature,
                       state tort law and reforms, and data on malpractice premiums and claim
                       payments as well as data on the number of physicians in the District,
                       Baltimore, and Richmond. Appendix I provides more detailed information
                       on our methodology. We performed our work between February and
                       September 1999 in accordance with generally accepted government
                       auditing standards.


                       During the last 25 years, many states have adopted various changes to
Results in Brief       their tort law, collectively referred to as tort reforms. Generally, states that
                       adopted reforms were attempting to reduce malpractice insurance
                       premiums. Each type of reform is viewed as having a number of possible
                       benefits and negative consequences, as follows:

                   •   Capping damages lowers the highest awards but could restrict payments
                       to the most seriously injured people.
                   •   Amending the collateral source rule may prevent double recovery but
                       could shift payment of health care costs due to a malpractice injury from
                       the malpractice insurer to the health insurer.
                   •   Modifying statutes of limitations may reduce the number of malpractice
                       claims but may prevent recovery by victims of malpractice who do not
                       discover the injury until some time after it occurs.
                   •   Implementing alternative dispute resolution systems may remove claims
                       from the courts but could increase the costs associated with malpractice
                       by encouraging more claims.




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    Limited evidence shows that tort reforms may have had some effect in
    reducing medical malpractice insurance premiums. A 1993 synthesis by
    the Office of Technology Assessment of six studies done in the 1980s and
    early 1990s concluded that, while damage caps and collateral source rule
    changes reduced malpractice payments, only caps were demonstrated to
    reduce premiums. However, this research did not study tort reforms’ effect
    on a potentially larger medical liability cost—defensive medicine. A 1996
    study did attempt to relate the effect of tort reforms on defensive medicine
    costs, but it had a limited scope. This study found that in states that
    imposed a package of tort reforms including caps on damages and
    collateral source rule amendments, hospital costs grew 5 to 9 percentage
    points less than in other states for Medicare patients with heart conditions
    without adverse effects on selected outcomes, such as mortality. Because
    this study was focused on only one condition and on a hospital setting, it
    cannot be extrapolated to the larger practice of medicine. Given the
    limited evidence, reliable cost savings estimates cannot be developed.

    To date, the District has not adopted any major changes to its tort law,
    while both Maryland and Virginia have adopted selected tort reforms with
    differing approaches. For example, Virginia has a $1.5-million cap on total
    damages, whereas Maryland caps nonmonetary damages at $575,000. For
    filing claims, Virginia provides 2 years from the date of the injury with
    some stated extensions, while Maryland provides 5 years from the date of
    injury or 3 years from discovery, whichever is earlier. Neither state has
    amended its collateral source rule. While the District does not have a
    specific arbitration program for malpractice cases, as do Maryland and
    Virginia, the courts can order nonbinding arbitration or the parties can
    agree to binding arbitration.

    How these differences among the tort approaches of the District,
    Maryland, and Virginia have affected malpractice costs is unclear.
    However, limited data show the following:

•   Median malpractice claim payments for District, Baltimore, and Richmond
    physicians from 1996 through 1998 were $200,000, $150,000, and $112,500,
    respectively.
•   Malpractice insurance premiums for one traditionally high-cost specialty,
    obstetrics/gynecology, were higher in Baltimore than in the District in 1998
    but lower for internal medicine and general surgery. Premiums for these
    specialties were lowest in Richmond.




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             •   High malpractice claim payments or insurance premiums have not
                 reduced the number of physicians in the District relative to Baltimore or
                 Richmond. In fact, the number of physicians in the District per 100,000
                 people increased by about 24 percent between 1985 and 1997.


                 In the United States, patients injured while receiving health care can sue
Background       health care providers for medical malpractice under governing state tort
                 law, usually the law of the state where the injury took place.4 The law
                 governing malpractice varies from state to state, but among the goals of
                 tort law are compensation for the victim and deterrence of malpractice. To
                 prevail in court, the injured person must demonstrate that the injury was
                 caused by a health care provider’s negligence. In the context of
                 malpractice, negligence means proving that the provider failed to meet the
                 same standard of care expected of a member of the profession in good
                 standing in the same circumstances, and that the provider’s failure caused
                 the injury that resulted in damage or loss.

                 Critics of the system of malpractice resolution through the courts doubt
                 that it achieves any of the goals of the tort system in an efficient and
                 effective manner—neither compensating victims fairly nor deterring future
                 malpractice. Furthermore, the vast majority of patients injured by health
                 care providers do not pursue claims,5 and of those who do, most of the
                 claims are either dropped or settled outside of court.

                 Nearly all health care providers buy medical malpractice insurance to
                 protect themselves from claims. Under the insurance contract, the
                 insurance company agrees to investigate claims, to provide legal
                 representation for the health care provider if warranted, and to accept
                 financial responsibility for payment of any claims up to a specific
                 monetary level during an established time period. Therefore, in addition to
                 medical malpractice claim payments, insurers incur costs for investigating
                 and defending claims—even those closed without a payment. The insurer


                 4
                  The Employee Retirement Income Security Act limits the ability of a person covered by an
                 employer-based health care plan to sue the plan, instead of or in addition to the provider, for
                 malpractice. The Act preempts state law related to employee benefit plans. The courts have generally
                 interpreted this to prevent an employee’s suit against an employer-based managed care plan for injury
                 resulting, for example, from the plan’s decision that a procedure is not medically necessary. For more
                 information, see Employer-Based Managed Care Plans: ERISA’s Effect on Remedies for Benefit
                 Denials and Medical Malpractice (GAO/HEHS-98-154, July 13, 1998).
                 5
                  The findings of a comprehensive study conducted at New York hospitals showed that the number of
                 negligent adverse outcomes was eight times the number of tort claims filed. See A. Russell Localio and
                 others, “Relation Between Malpractice Claims and Adverse Events Due to Negligence,” The New
                 England Journal of Medicine, Vol. 325, No. 4 (1991), pp. 245-51.



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                        agrees to do this in return for a fee—the medical malpractice insurance
                        premium.6

                        Setting premium rates for malpractice insurance can be very complicated.
                        The environment that influences premium rate-setting changes over time,
                        affecting the number of claims or the amount of payments—the two
                        factors most directly affecting premiums. For example, inflation and
                        changes in legal theories can affect claims, payments, or both. The “long
                        tail” of malpractice insurance—the long amount of time that can pass
                        after the injury but before a claim is filed and closed—is a further
                        complicating factor. In addition, premiums for malpractice and other
                        insurance depend in part on projections of companies’ investment income,
                        which cannot be predicted with certainty.


                        Medical malpractice insurance premiums grew rapidly in the mid-1970s
States Adopted Tort     and mid-1980s. When costs increased several hundred percent for some
Reforms in Response     specialties in the 1970s, health care providers became concerned either
to Increasing Medical   about the availability or affordability of medical malpractice insurance, or
                        both. In response, the majority of states made some changes to their tort
Liability Costs         law. These tort reforms were adopted in part to limit the number of
                        malpractice claims and the size of payments, thereby ultimately reducing
                        malpractice insurance premiums. Also, tort reforms were intended to
                        lower overall health care costs by getting health care providers to practice
                        less defensive medicine as the threat of liability decreased. State tort
                        reforms adopted during the malpractice insurance premium increases in
                        the 1970s and 1980s included (1) capping malpractice damage amounts,
                        (2) changing collateral source rules, (3) changing statutes of limitations,
                        and (4) implementing alternative dispute resolution systems.7 Proponents
                        of malpractice reforms, including health care providers and insurers,
                        offered rationales for why each reform would be generally beneficial and
                        should be viewed positively. Conversely, opponents of tort reforms,
                        including consumer advocates and trial attorneys, offered reasons
                        intended to demonstrate the negative aspects of these reforms.




                        6
                         Most policies are sold on a “claims made” basis. In this type of policy, the insurer is only liable for
                        injuries that occur and claims that are filed while the policy is in effect. When changing or canceling
                        coverage, the health care provider may purchase a “tail” policy to cover those injuries that occurred
                        during the life of the “claims made” policy but for which claims were not yet filed.
                        7
                         Other types of tort reforms adopted by the states include paying for damages through periodic rather
                        than lump-sum payments, changing joint and several liability rules, controlling attorney fees, and
                        establishing patient compensation funds and joint underwriting associations.



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Caps on Damages Have       Some states enacted laws to limit the amount of money that can be
Been Controversial         awarded as damages for injuries resulting from malpractice. Caps on
                           damages were the centerpiece of many state tort reform packages.8 States
                           limited payments for damages in several ways—some, for example,
                           capped the total amount that can be paid as monetary and nonmonetary
                           damages; more commonly, states capped only the amounts payable to
                           compensate for nonmonetary losses.9 In some states, caps and other tort
                           reforms have been challenged. These challenges have argued that tort
                           reforms violate various provisions of federal and state constitutions, such
                           as the guarantees of equal protection, trial by jury, and the separation of
                           legislative and judicial powers.10

                           Cap proponents—health care providers and insurers—believed that
                           adopting statutory caps on nonmonetary damages would result in several
                           benefits that would help to reduce insurance premiums. For example, they
                           believed that nonmonetary damage caps would

                       •   help to prevent excessive awards and overcompensation. While monetary
                           damages have specific dollar values that can be calculated, juries have
                           considerable discretion and little guidance for nonmonetary damages.
                       •   ensure consistency among jury verdicts. More consistency in awards
                           would aid in setting insurance premiums because it is difficult for
                           actuaries to calculate realistic premiums without knowing all the financial
                           risks involved.
                       •   provide incentives for the injured person to settle claims rather than
                           pursue litigation. Caps help to eliminate the possibility of large jury
                           verdicts, with the result that both injured people and attorneys paid on a
                           contingency fee basis may have less incentive to go to trial.



                           8
                            See Randall R. Bovbjerg, “Lessons for Tort Reform from Indiana,” Journal of Health Politics, Policy
                           and Law, Vol. 16, No. 3 (1991), p. 466.
                           9
                            Monetary losses include medical bills, rehabilitation costs, and lost income. Nonmonetary losses
                           include pain, suffering, and the loss of a spouse’s companionship. (These are sometimes referred to as
                           noneconomic damages.) Some states have also limited payments for punitive damages—damages to
                           punish wrongdoers for egregious behavior. However, the literature on malpractice indicates that
                           punitive damages are rarely awarded in medical malpractice cases.
                           10
                            For example, Ohio’s statutory cap on nonmonetary damages was found to have violated several
                           provisions of the Ohio Constitution. See State ex rel Ohio Academy of Trial Lawyers v. Sheward, No.
                           97-2419, __ Ohio St. 3d __ (Ohio S.C. Aug. 16, 1999); Morris v. Savoy, 61 Ohio St. 3d 684, 576 N.E. 2d 765
                           (Ohio S.C. 1991). However, challenges to statutory caps on damages in some other states have not
                           been successful. For example, Virginia’s cap on total damages has been upheld, as has Maryland’s cap
                           on nonmonetary damages. See Etheridge v. Medical Center Hospitals, 237 Va. 87, 376 S.E. 2d 525 (Va.
                           S.C. 1989) and Edmonds v. Murphy, 87 Md. App. 133, 573 A. 2d 853 (1990), aff’d 325 Md. 342, 601 A. 2d
                           102 (Md. S.C. 1992), respectively.



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                               In contrast, cap opponents—trial attorneys and consumer
                               advocates—believed that caps on nonmonetary damages created several
                               disadvantages for people who were injured through medical malpractice
                               incidents. For example, they believed that nonmonetary damage caps

                           •   could restrict compensation for severe injuries. An injured person’s
                               damages based largely on pain and suffering could be undercompensated
                               compared to damages for someone with little pain and suffering but large
                               medical bills.
                           •   hurt deterrence. Reducing health care providers’ financial accountability
                               for losses associated with their mistakes could also reduce providers’
                               incentives to prevent mistakes and adverse outcomes.
                           •   were a disincentive to attorneys accepting some malpractice cases
                               because the potential for recovering a large amount of money is reduced.
                               Therefore, injured patients with legitimate claims may find it more difficult
                               to obtain legal counsel.

                               Furthermore, opponents stated that factors other than payment size affect
                               the premiums charged by malpractice insurers. They stated that
                               investment income changes also contributed to premium volatility.

                               Nonmonetary damage cap amounts vary among the states that have them.
                               For example, in 1975, California adopted a $250,000 cap on nonmonetary
                               damages, and the amount remains unchanged to date. Maryland, on the
                               other hand, adopted a $350,000 cap on such damages in 1986 that has
                               increased to $575,000 through legislation that included automatic annual
                               adjustments.11 Our review of the health and legal literature did not reveal
                               any particular reasons for the cap amounts states adopted.



Collateral Source Rule         A number of states modified or eliminated the collateral source rule. The
Reforms Affect Payments,       collateral source rule provides that payments for medical malpractice
but Are Complicated by         damages may not be reduced to account for the benefits that an injured
                               person received from other, unrelated sources such as health insurance.
Subrogation Clause             The rule prevents the provider being sued from introducing evidence in a
                               trial that the injured person’s insurance covers the health care costs
                               arising from the injury. Generally, states that have changed their collateral
                               source rule either permit or require malpractice payments to be reduced if
                               there is evidence that related costs have been or will be covered by other
                               sources.

                               11
                                 The law provides for the nonmonetary damage cap to increase $15,000 each October 1.



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                            Reforming the collateral source rule may have the effect of reducing the
                            size of a malpractice payment. Proponents of reform believed that the
                            injured person should not be paid twice for the same harm. In addition,
                            proponents believed that the rule undermines the jury’s role by
                            withholding information that it might use in calculating damages.

                            Opponents of reform, who support maintaining the collateral source rule,
                            believed that the provider causing the malpractice injury should be held
                            responsible for the full extent of the damages he or she caused. If not, the
                            deterrent effect of the malpractice damages awarded is reduced. Also,
                            opponents believed that allowing collateral sources to reduce the liability
                            of the provider found at fault results in an unfair financial gain for the
                            provider or his or her malpractice insurer. They contend that health
                            insurance should not bear the financial risk of malpractice acts—rather,
                            that is the purpose of malpractice insurance.

                            Health insurance contracts often contain a subrogation clause that can
                            mitigate the effect of the collateral source rule. Under a subrogation
                            clause, when the insurer has paid for health care needed by the insured
                            person as a result of malpractice, the insurer is entitled to be reimbursed
                            for that payment from whatever amounts the insured person collects from
                            a liable third party.12 Health insurance policies typically contain these
                            clauses, and to the extent that health insurers exercise them there is
                            already protection against double recoveries. However, if subrogation is
                            not available or is not pursued and the collateral source rule is changed,
                            the malpractice insurer of the provider at fault benefits at the expense of
                            the injured person’s health insurer.


Statutes of Limitations     Limiting the time to file medical malpractice lawsuits can help to reduce
Establish Time Limits for   the number of malpractice claims. Statutes of limitations—the period of
Filing Lawsuits             time during which lawsuits can be filed—help to protect health care
                            providers and the courts from “stale” claims by providing an incentive to
                            the injured person to file a timely claim. It can be difficult for the provider
                            being sued to gather evidence if a long time passes between when an
                            alleged injury occurs and when an injured person files a lawsuit. After a
                            period of time, needed documents can be lost or destroyed.

                            Unlike traumatic injuries that may occur in automobile accidents, for
                            example, medical malpractice injuries may not become apparent until

                            12
                              The federal government requires that medical expenses paid by Medicare and Medicaid be
                            reimbursed from medical malpractice awards.



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                              years after they occur. To allow for this, the limitation period in some
                              states does not begin to run until after the injured person has discovered,
                              or should have discovered, the injury. However, this “discovery rule”
                              makes writing malpractice insurance more difficult actuarially because of
                              the long period of time over which claims could be filed.13 Therefore, one
                              of the most common tort reforms states have undertaken has been to
                              change their statutes of limitations for malpractice claims. Many states
                              shortened the time during which lawsuits could be filed by either setting
                              an overall time limit or by modifying their discovery rule. However,
                              shortened statutes of limitations can prevent some injured people who had
                              no way of knowing that they were the victims of malpractice from having a
                              legal remedy.


Alternative Dispute           Critics have long charged that litigation—ending with trial by jury—is
Resolution Offers the         slow, inefficient, inconsistent, and expensive. States have established
Possibility of Avoiding       several ways to resolve medical malpractice claims other than through
                              litigation. Included among these alternative dispute resolution systems are
Litigation                    arbitration, mediation, and no-fault programs, described below:

                          •   Under arbitration, malpractice claims are submitted for resolution to one
                              or more professional arbitrators who generally are not bound by rules of
                              evidence and procedure that would apply in court. Depending on state law
                              and the agreements of the parties, the arbitrators’ decisions may not be
                              binding: a party who does not like the outcome may be able to take the
                              matter to court where the outcome of the arbitration may not be taken
                              into account.
                          •   Under mediation, a neutral third party helps the parties involved come to
                              an agreement.
                          •   Under no-fault programs, the injured person can be compensated for the
                              expenses associated with the injury without proving that the injury was
                              caused by someone’s negligence or other wrongful conduct.

                              Proponents of alternative dispute resolution generally say that these
                              systems can resolve claims in a faster, less costly manner. For example,
                              they contend that less severe malpractice claims may be resolved in a
                              relatively inexpensive manner, any excessive jury verdicts may be
                              eliminated, and claims may be settled quickly. Therefore, medical liability
                              costs, including premium costs, could be lower.



                              13
                               If the injured person is a minor or is otherwise not legally competent to sue, the statute of limitations
                              may also begin to run only when the person becomes competent.



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                       Opponents believe that litigation alternatives may encourage injured
                       people to pursue claims that they might not take to court, either because
                       the amount is not substantial or the evidence is weak, thereby increasing
                       liability costs. On the other hand, if voluntary, alternatives may seldom be
                       used. Also, if the decisions reached through alternative systems are
                       nonbinding, claims can still be filed in the courts, thus extending claim
                       resolution times and increasing overall liability costs. Furthermore, the
                       deterrent effect provided by the threat of litigation may be removed if
                       no-fault approaches are adopted.


                       While evidence on reduced premiums and defensive medicine costs is
Limited Evidence       limited, a review of studies done as of the early 1990s indicated that while
Shows That Some        two tort reforms—caps on damages and collateral source offsets—may
Tort Reforms May       reduce medical malpractice payments, only caps were shown to reduce
                       insurance premiums. Recent companion studies also found that these two
Reduce Premiums and    reforms may have some effect on reducing defensive medicine costs.
Defensive Medicine     However, these studies provide only a weak basis for estimating the
                       specific dollar savings associated with these two components of medical
Costs                  liability costs.


Damage Caps Found to   A 1993 Office of Technology Assessment synthesis of six empirical studies
Reduce Malpractice     found evidence which demonstrated that some tort reforms we reviewed
Insurance Premiums     had either direct or indirect effects on medical malpractice insurance
                       premiums—one component of medical liability costs.14 However,
                       according to the synthesis, only damage caps were shown to reduce
                       malpractice insurance premiums. For example, a 1990 study reviewed in
                       the synthesis found that caps on total damages reduced premiums by
                       one-third.15 None of the six studies demonstrated that collateral source
                       offsets directly reduced insurance premiums. However, the synthesis did
                       find that both caps and offsets reduced medical malpractice claim
                       payments, which in turn can affect premiums. According to a 1989 study,
                       damage caps reduced malpractice payments about 38 percent and
                       collateral source offsets reduced them by 21 percent.16 According to the


                       14
                        U.S. Congress, Office of Technology Assessment, Impact of Legal Reforms on Medical Malpractice
                       Costs, OTA-BP-H-119 (Washington, D.C.: U.S. Government Printing Office, 1993).
                       15
                        Stephen Zuckerman, Randall R. Bovbjerg, and Frank Sloan, “Effects of Tort Reforms and Other
                       Factors on Medical Malpractice Insurance Premiums,” Inquiry, Vol. 27 (1990), pp. 167-82.
                       16
                        Frank A. Sloan, Paula M. Mergenhagen, and Randall R. Bovbjerg, “Effects of Tort Reforms on the
                       Value of Closed Medical Malpractice Claims: A Microanalysis,” Journal of Health Politics, Policy and
                       Law, Vol. 14, No. 4 (1989), pp. 663-89.



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                             synthesis, by lowering claim payments, damage caps and collateral source
                             offsets could also indirectly reduce premiums. Studies assessing the effect
                             of shorter statutes of limitations on malpractice premiums showed mixed
                             results—one study found that they did reduce premiums while another
                             found that they did not. And, due to the limited amount of use, the
                             synthesis found that the effect of alternative dispute resolution systems on
                             premiums could not be assessed.

                             Estimating the actual savings generated by tort reforms from reductions in
                             malpractice premiums is difficult. Neither the synthesis nor more recent
                             studies have developed dollar-savings estimates. Moreover, insurance
                             premium costs are estimated at less than 1 percent of the total cost of
                             health care in the United States, a small component of overall health care
                             costs. Other tort reform studies have focused more on another component
                             of medical liability costs—defensive medicine.


Tort Reforms’ Effect on      Medical liability costs include a potentially more expensive component
Defensive Medicine Cost      than insurance premiums—defensive medicine. While several studies done
Savings Cannot Be Reliably   in the 1990s indicate that defensive medicine practices exist, the extent of
                             defensive medicine and the effects of tort reform on defensive medicine
Estimated                    have been difficult to quantify. For example, one 1993 study found that
                             obstetricians and gynecologists practicing in New York hospitals with high
                             malpractice insurance premiums and claims frequency performed more
                             cesarean sections than did physicians in hospitals with lower premiums
                             and claim frequency.17 The Office of Technology Assessment concluded
                             that this study presented strong evidence that hospitals with the excess
                             cesarean sections were practicing defensive medicine.18 The Office’s
                             broader study of defensive medicine, published in 1994, estimated that less
                             than 8 percent of diagnostic procedures might be caused by liability
                             concerns.19 However, the study stated that it is not possible to estimate the
                             level and cost of defensive medicine. There may be a number of other
                             reasons why a provider performs a particular service, including local
                             standards of care, academic training, or requirements of managed care
                             organizations. This study could not determine the primary motivation for a
                             provider’s decisions.


                             17
                              A. Russell Localio and others, “Relationship Between Malpractice Claims and Cesarean Delivery,”
                             The Journal of the American Medical Association, Vol. 269, No. 3 (1993), pp. 366-73.
                             18
                              U.S. Congress, Office of Technology Assessment, Defensive Medicine and Medical Malpractice,
                             OTA-H-602 (Washington, D.C.: U.S. Government Printing Office, 1994).
                             19
                               U.S. Congress, Office of Technology Assessment, Defensive Medicine and Medical Malpractice, 1994.



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                          A more recent study found that a package of reforms including damage
                          caps and collateral source rule changes may decrease some defensive
                          medicine costs. This 1996 study found the cost of annual hospital
                          treatment for newly diagnosed Medicare heart patients grew 5 to
                          9 percentage points less after states implemented this package of reforms
                          compared to other states.20 The slowdown occurred 3 to 5 years after tort
                          reform passed. Despite these reductions in treatment costs in the reform
                          states, there was no difference for selected adverse outcomes (such as
                          mortality) between patients in states with and without tort reforms. The
                          authors concluded that the reduced costs measure the size of defensive
                          medical practice and demonstrate the power of certain tort reforms to
                          reduce defensive medicine costs; in a follow-up study, they found similar
                          results.21 However, the limits of the study—focusing only on heart patients
                          with Medicare between 1984 and 1990—make generalization to overall
                          medical practice impossible and offer limited opportunities for estimating
                          cost savings resulting from tort reform.22


Tort Reforms’ Effect on   We found no studies of tort reforms’ effect on the two other categories of
Other Medical Liability   medical liability costs GAO previously identified—liability-related
Costs Unknown             administrative costs and medical device and pharmaceutical liability
                          costs.23 Furthermore, we found no studies specifically demonstrating how
                          the presence or absence of tort reform in the District, Maryland, or
                          Virginia affects any of the four components of medical liability costs.




                          20
                           Daniel Kessler and Mark McClellan, “Do Doctors Practice Defensive Medicine?” The Quarterly
                          Journal of Economics, Vol. CXI, Issue 2 (1996), pp. 353-90.
                          21
                            This latter study using nationally representative American Medical Association physician surveys for
                          the same period found that physicians’ perceptions of reduced malpractice pressure corresponded to
                          the tort reforms and reduced practice costs in the original study. See Daniel P. Kessler and Mark B.
                          McClellan, “The Effects of Malpractice Pressure and Liability Reforms on Physicians’ Perceptions of
                          Medical Care,” Law and Contemporary Problems, Vol. 60, Nos. 1 and 2 (1997), pp. 81-106.
                          22
                            The authors took several steps to assure that tort reform rather than any other factors explained the
                          pattern of reduced treatment costs. First, a simple comparison of states that reformed and states that
                          did not found similar baseline expenditures and outcomes. Second, they controlled for several other
                          factors, including proxies for regional differences that might have influenced trends in treatment costs,
                          and dismissed them as explanatory factors.
                          23
                            Liability-related administrative costs include certain risk management activities, time and travel
                          associated with litigation, and creating and maintaining records subject to discovery or required for
                          defense. Medical device and pharmaceutical liability costs include manufacturers’ insurance and
                          liability-related production and warning costs passed on in the price of their products.



                          Page 12                                          GAO/HEHS-00-5 D.C. Medical Malpractice Reform
                             B-282171




                             Each state and the District determines whether to adopt tort reforms and
Different Approaches         what forms they take. As a result, the law under which medical
to Tort Reform Found         malpractice claims are resolved varies considerably among states. For
Among the District,          example, there is considerable variation between malpractice reform in
                             the District, Maryland, and Virginia. The District has not adopted any
Maryland, and Virginia       major tort reforms, whereas the two neighboring states have adopted
                             various tort reforms. Even though Maryland and Virginia have
                             implemented similar types of reforms, they vary in their specific design.


The District Has Not         The District has not adopted any major tort reforms during the past 25
Adopted Any Major Tort       years. As shown in table 1, the District’s tort law
Reforms
                         •   has no limits on the amount of damages that may be recovered,
                         •   has a collateral source rule that prohibits introducing evidence that can be
                             considered in reducing the amount of an award,
                         •   provides for a 3-year statute of limitations for filing claims that begins after
                             the injured person discovers the injuries, and
                         •   makes arbitration available.24




                             24
                              District law provides for court-sponsored arbitration in all civil cases, not specifically for malpractice
                             or other torts. In addition, the District has adopted the Uniform Arbitration Act, which establishes
                             arbitration procedures to be followed when parties have an arbitration agreement.



                             Page 13                                           GAO/HEHS-00-5 D.C. Medical Malpractice Reform
                                    B-282171




Table 1: Implementation Status of
Selected Tort Reforms               Tort reform              District                    Maryland                  Virginia
                                    Caps on                  None                        Nonmonetary               Total damage cap of
                                    damages                                              damage cap of             $1.5 millionc,d
                                                                                         $575,000a,b
                                    Collateral source        Collateral source rule      Collateral source rule    Collateral source rule
                                    rule                     followed                    followed                  followed
                                    Statute of               3 years from date of        5 years from date of      2 years from date of
                                    limitations              injury or discovery,        injury or 3 years from    injury; for malpractice
                                                             whichever is later          discovery, whichever      cases involving
                                                                                         is earlier (statute       foreign objects—for
                                                                                         deals exclusively with    example, sponges left
                                                                                         medical malpractice       in the body—or fraud
                                                                                         cases)                    or concealment, time
                                                                                                                   is extended for 1 year
                                                                                                                   from discovery but no
                                                                                                                   longer than 10 years
                                    Arbitration              The District does not       All malpractice claims    Health care provider
                                                             have a specific             over $2,500 must be       being sued for
                                                             arbitration program         arbitrated by             malpractice may
                                                             for malpractice or for      state-appointed           request review by a
                                                             torts. However,             health claims panel,      court-appointed panel.
                                                             court-sponsored             unless one of the
                                                             arbitration is available    parties waives            Review panel issues
                                                             in all types of cases,      arbitration.              nonbinding opinion;
                                                             including medical                                     parties may proceed
                                                             malpractice; unless         Arbitration is not        with trial.e
                                                             parties agree               binding; any of the
                                                             otherwise, arbitration      parties may initiate
                                                             is not binding.e            court trial.e

                                                             Any of the parties
                                                             may initiate court trial
                                                             after nonbinding
                                                             arbitration.e
                                    a
                                    Nonmonetary damage cap increases $15,000 each October 1.
                                    b
                                        Does not include punitive damages, which are not capped.
                                    c
                                     Effective August 1, 1999, the cap increased from $1 million to $1.5 million. Under the law, it is to
                                    increase annually by $50,000 through 2006 and by $75,000 in 2007 and 2008.
                                    d
                                        Punitive damages are capped at $350,000 within the overall $1.5 million limit.
                                    e
                                    In addition, the Uniform Arbitration Act, which establishes arbitration procedures to be followed
                                    when parties have an arbitration agreement, has been adopted.

                                    Source: GAO analysis of District, Maryland, and Virginia tort law.



                                    While the District has not adopted any major tort reforms, its law, as in
                                    neighboring states, contains procedures to help prevent the filing of




                                    Page 14                                             GAO/HEHS-00-5 D.C. Medical Malpractice Reform
B-282171




frivolous lawsuits. Attorneys filing a lawsuit, whether for medical
malpractice or any other cause of action, certify that it is evidence-based
and not frivolous.25 Attorneys can be disciplined by the courts for violating
these requirements. Other procedures, such as pretrial conferences,
pretrial discovery, and the need for expert testimony to support
malpractice claims, also seek to discourage frivolous legal actions in the
District.

Legislation to change the District’s tort law has been introduced but major
changes have not been adopted.26 In 1991, for example, the Council of the
District of Columbia considered but did not adopt any major reforms.
Changes considered at that time included capping nonmonetary damages
at $350,000 and amending the collateral source rule. More recently, the
House version of the District of Columbia appropriations bill for fiscal
year 1998 (H.R. 2607) contained provisions which would have, among
other things, capped nonmonetary damages at $250,000, amended the
collateral source rule, and eliminated the right of subrogation by collateral
sources. However, the District’s appropriation as adopted into law did not
contain these provisions.27

Though it did not include the tort reform provisions in its version of the
District’s fiscal year 1998 appropriations bill, the Senate Appropriations
Committee did direct the District’s Financial Responsibility and
Management Assistance Authority to study the need for malpractice
reform in the District. In reports issued in March 1998 and February 1999,
the Authority found that District-specific evidence did not support the
need to adopt tort reforms.28 On the contrary, the Authority found
evidence that malpractice premiums in Baltimore, with tort reforms in
place, were often as high as or higher than in the District.




25
 Under District court rules, by filing a lawsuit an attorney certifies that it is (1) not being presented for
any improper purpose, (2) warranted by existing law or a nonfrivolous argument, and (3) based on
evidentiary support.
26
  The District has adopted certain limited tort reform measures. For example, the District provides
limited civil immunity from damages for a health care professional who provides voluntary health care
or treatment at one of the city’s free health clinics.
27
  See P.L. 105-100, Nov. 19, 1997.
28
 See District of Columbia Financial Responsibility and Management Assistance Authority, Report on
Medical Malpractice Liability (Washington, D.C.: 1998) and District of Columbia Financial
Responsibility and Management Assistance Authority, 1999 Report to Congress on Medical Malpractice
(Washington, D.C.: 1999).



Page 15                                           GAO/HEHS-00-5 D.C. Medical Malpractice Reform
                           B-282171




Maryland and Virginia      In contrast to the District, its two neighboring states have adopted changes
Adopted Tort Reforms but   to their tort law, but each in somewhat different ways. For example, while
Chose Different            both states have limited the size of malpractice payments, Virginia capped
                           total damages, including punitive damages, whereas Maryland capped
Approaches                 nonmonetary damages but not monetary or punitive damages.
                           Furthermore, Virginia established a no-fault program to provide a
                           mechanism for resolving some of the most expensive malpractice claims
                           outside the court system—those resulting from very severe birth-related
                           neurological injuries.29 Also, Virginia has a different time period for filing
                           medical malpractice claims than Maryland. Neither state has chosen to
                           amend its collateral source rule.


                           Comparisons of malpractice claim payments, liability insurance premiums,
Limited Data Show          and number of practicing physicians in the District, Baltimore, and
Mixed Results of Tort      Richmond provide some indications of the effects of the varying tort law
Law for the District,      in each jurisdiction. However, results are inconsistent across these
                           indicators. Moreover, any differences in these indicators cannot be fully
Baltimore, and             attributed to differences in malpractice law; other legal, social, and
Richmond                   economic factors also influence the indicators.

Malpractice Claim          Reported payments for claims against physicians varied among the
Payments Made for          District, Baltimore, and Richmond. Table 2 shows that the District had
Physicians                 higher median and average cumulative claim payments than the other two
                           cities for the years 1996 through 1998, as reported to the National
                           Practitioner Data Bank. Five of the claims closed during this 3-year time
                           period by the largest malpractice insurer of physicians in the District were
                           for $1 million or more. Such high claims, though relatively infrequent,
                           contribute to the higher average claim payments in the District. These
                           payments would have exceeded the total damage cap in effect in Virginia
                           until August 1, 1999. See appendix II for more information on malpractice
                           claim payments as reported by the District’s largest physician insurer.




                           29
                             Under the Virginia Birth-Related Neurological Injury Compensation Act, which was passed in 1987,
                           claimants in cases involving birth-related neurological injuries may recover compensation awards,
                           covering enumerated losses, without having to prove that the health care provider caused the injury.



                           Page 16                                        GAO/HEHS-00-5 D.C. Medical Malpractice Reform
                                    B-282171




Table 2: Physicians’ Paid Medical
Malpractice Claims and Payments     Cumulative for 1996, 1997, and 1998
                                                                                District            Baltimore             Richmond
                                                             a
                                    Number of paid claims                           190                    203                        49
                                    Median paymentb                           $200,000               $150,000               $112,500
                                    Average paymentb                          $425,813               $299,058               $218,843
                                    a
                                     These data represent the years that the insurance company considered the claims to be closed
                                    and reported them to the National Practitioner Data Bank. They do not represent the years in
                                    which the medical malpractice incident occurred or when the claim was filed.
                                    b
                                     Data do not include allocated loss adjustment expenses unless they are included in a medical
                                    malpractice payment. These expenses include, but are not limited to, fees for legal services,
                                    expert witnesses, court reports, and medical records. Medical malpractice claims closed without
                                    any payments can incur significant allocated loss adjustment expenses.

                                    Source: Unpublished special analyses by the National Practitioner Data Bank, Bureau of Health
                                    Professions, Health Resources and Services Administration, U.S. Department of Health and
                                    Human Services, at the request of GAO.




Malpractice Insurance               Medical malpractice insurance premiums, another possible indicator of
Premiums Vary for Three             the effect of tort reforms, varied by physician specialty in the District,
Physician Specialties               Baltimore, and Richmond in 1998. Table 3 shows that the Richmond
                                    insurer had the lowest medical malpractice insurance premiums compared
                                    to the premiums of the District and Baltimore insurers. However, the
                                    insurance rating territory that includes Richmond includes some rural
                                    areas as well, which may lower rates. While the District’s premiums for
                                    internal medicine and general surgery, which are traditionally relatively
                                    low-cost specialties, were higher than were those in Baltimore City and
                                    County, the premiums for obstetrics/gynecology, a traditionally high-cost
                                    specialty, were lower. These premium variations also occur for 1999
                                    premiums for several specialties when comparing the District’s and
                                    Baltimore’s largest malpractice insurers of physicians. Appendix III shows
                                    1999 medical malpractice insurance premiums for selected physician
                                    specialties as written by the leading physician malpractice insurers in the
                                    District and Maryland.




                                    Page 17                                       GAO/HEHS-00-5 D.C. Medical Malpractice Reform
                                         B-282171




Table 3: Medical Malpractice Insurance
Premiums for Three Physician                                                         Districta           Baltimoreb               Richmondc
Specialties, 1998                        Internal medicine                           $11,051                  $8,109                  $2,585
                                         General surgery                             $36,467                 $32,414                $10,340
                                         Obstetrics/gynecology                       $75,143                 $77,619                $18,094
                                         a
                                         Shows premiums for the National Capital Reciprocal Insurance Company.
                                         b
                                          Shows premiums for the Medical Mutual Liability Insurance Society of Maryland. Premiums are
                                         for the rating territory that includes Baltimore City and Baltimore County.
                                         c
                                          Shows premiums for the Mid-Atlantic Medical Insurance Company (Medical Mutual of Maryland).
                                         Premiums are for the rating territory that includes Richmond and counties such as Henrico,
                                         Goochland, and Chesterfield.

                                         Source: “Trends in 1998 Rates for Physicians’ Medical Professional Liability Insurance,” Medical
                                         Liability Monitor, Vol. 23, No. 8 (1998), pp. 2, 5, and 12.




Number of Physicians per                 The total number of active, nonfederal physicians in the District,
100,000 People                           Baltimore, and Richmond increased between 1985 and 1997. The number
                                         of physicians per 100,000 people in each of the three cities either increased
                                         or stayed the same for all categories, as shown in table 4. Overall, the
                                         number of physicians per 100,000 people increased by about 24 percent in
                                         the District, and by about 29 and 14 percent in Baltimore and Richmond,
                                         respectively. Appendix IV provides information for more physician
                                         specialties in the three cities in 1997.

Table 4: Number of Physicians per
100,000 People for Three Specialties,                                  District                  Baltimore                Richmonda
1985 and 1997                                                        1985         1997           1985        1997         1985          1997
                                         Active physicians            567          704            672         864           464             528
                                         Internal medicine            125          149            158         197            92             103
                                         General surgery               47            47            57           57           29             33
                                         Obstetrics/
                                         gynecology                    39            45            46           52           27             31
                                         a
                                         Shows the number of physicians in Richmond and neighboring Henrico County.

                                         Source: GAO analysis of the Area Resource File, Bureau of Health Professions, Health Resources
                                         and Services Administration, U.S. Department of Health and Human Services, February 1998 and
                                         February 1999.




                                         Page 18                                        GAO/HEHS-00-5 D.C. Medical Malpractice Reform
B-282171




As agreed with your offices, unless you announce the report’s contents
earlier, we plan no further distribution of it until 10 days after the date of
this letter. At that time, we will make copies available upon request. If you
or your staff have any questions, please call me or Kathryn Allen at
(202) 512-7114. Other major contributors to this report are listed in
appendix V.




William J. Scanlon
Director, Health Financing
  and Public Health Issues




Page 19                             GAO/HEHS-00-5 D.C. Medical Malpractice Reform
Contents



Letter                                                                         1


Appendix I                                                                    22

Methodology
Appendix II                                                                   24

Medical Malpractice
Payment Data for the
Largest Physician
Insurer in the District
of Columbia
Appendix III                                                                  26

Medical Malpractice
Insurance Premiums
for Selected Physician
Specialties in the
District of Columbia
and Baltimore, 1999
Appendix IV                                                                   27

Number of Physicians
by Specialty in the
District, Baltimore,
and Richmond per
100,000 People in 1997
Appendix V                                                                    28

GAO Contact and Staff
Acknowledgments




                          Page 20   GAO/HEHS-00-5 D.C. Medical Malpractice Reform
         Contents




Tables   Table 1: Implementation Status of Selected Tort Reforms                      14
         Table 2: Physicians’ Paid Medical Malpractice Claims and                     17
           Payments
         Table 3: Medical Malpractice Insurance Premiums for Three                    18
           Physician Specialties, 1998
         Table 4: Number of Physicians per 100,000 People for Three                   18
           Specialties, 1985 and 1997
         Table II.1: Number of Medical Malpractice Claims and Claim                   24
           Payments for Physicians at the Largest Insurer in the District of
           Columbia
         Table III.1: Medical Malpractice Insurance Premiums by                       26
           Specialty, 1999
         Table IV.1: Number of Physicians per 100,000 People by                       27
           Specialty, 1997




         Page 21                            GAO/HEHS-00-5 D.C. Medical Malpractice Reform
Appendix I

Methodology


                     The objectives of our study were to (1) identify the rationale behind
                     selected reforms states have made to their medical malpractice tort law;
                     (2) report on whether selected tort reforms have reduced malpractice
                     insurance costs and the costs associated with defensive medicine;
                     (3) describe the extent to which the District, Maryland, and Virginia have
                     adopted selected tort reforms; and (4) compare malpractice claim
                     payments, insurance premiums, and numbers of physicians in the District
                     with those in a large city within each of the two neighboring states:
                     Baltimore, Maryland; and Richmond, Virginia.


                     To identify the rationale behind selected reforms states have made to their
Literature Review    medical malpractice tort law, we reviewed health policy and legal
                     literature. We identified the literature to be reviewed by searching 17
                     different databases. We searched such databases as MEDLINE, HealthStar,
                     Social SciSearch, Sociological Abstracts, Social Sciences Abstracts, Legal
                     Resource Index, and Westlaw. We selected, reviewed, and synthesized
                     more than 100 health policy and legal articles found through the literature
                     search and published since 1990.

                     We also used information obtained through our literature search and
                     through contacts with experts and affected parties to report on whether
                     selected tort reforms have reduced malpractice insurance costs and the
                     costs associated with defensive medicine. To ascertain whether selected
                     tort reforms reduced medical malpractice insurance premiums, we
                     primarily relied on the results found in a 1993 literature synthesis
                     published by the Office of Technology Assessment. This Office synthesized
                     the results of all six known studies published in the 1980s and early 1990s.
                     We relied on more recent literature to show the relationship between tort
                     reforms and defensive medicine costs.


                     To describe the state of tort reform in the District and to compare selected
Statute Review       provisions of its law to those of Maryland and Virginia, we reviewed
                     applicable state statutes, law review articles, and relevant case law.


                     We used medical malpractice claim payment data obtained from the
Claim Payment Data   National Practitioner Data Bank. The Bank, administered by the Bureau of
                     Health Professions, Health Resources and Services Administration,
                     Department of Health and Human Services, collects data on medical
                     malpractice payments made for physicians, dentists, and other types of



                     Page 22                            GAO/HEHS-00-5 D.C. Medical Malpractice Reform
                    Appendix I
                    Methodology




                    health care practitioners. Malpractice payment data must be reported to
                    the Bank when an insurance company or a self-insured entity makes a
                    payment of any amount for these health care providers to settle or satisfy
                    a judgment on any malpractice action or claim. We asked the Bank to
                    provide data on the number of malpractice claims and median and average
                    malpractice payments reported for physicians during calendar years 1996
                    through 1998 in the District, Baltimore, and Richmond.


                    We used insurance premium data published in the Medical Liability
Insurance Premium   Monitor, which annually compiles a comprehensive premium rate
Data                overview. The Monitor obtained malpractice insurance premium data for
                    three specialties—internal medicine, general surgery, and
                    obstetrics/gynecology—through a survey of 47 companies writing
                    insurance in 49 states in 1998. Premiums were reported by the insurers’
                    rating territories within each state. While the District has only one
                    insurance rating territory, Maryland and Virginia have multiple rating
                    territories. These premiums represent rates for mature (generally defined
                    as having been in force with the insurer for 5 or more consecutive years)
                    claims made coverage of $1 million per claim/$3 million in total. Almost all
                    members of the Physician Insurers Association of America participated in
                    this survey.


                    We analyzed physician data obtained from the Area Resource File. This
Physician Data      file, maintained by the Bureau of Health Professions, Health Resources
                    and Services Administration, Department of Health and Human Services,
                    centralizes several kinds of health-related and other data obtained from
                    different sources. Included on the file are physician data from the
                    American Medical Association. While specific data are reported for the
                    District and Baltimore City, Richmond data are reported along with
                    Henrico County. Among the categories of physicians reported, we
                    analyzed active, nonfederal physicians practicing in 1985, 1990, 1995, and
                    1997 in total and by selected specialties.


                    We contacted several other sources including (1) the primary physician
Other Information   malpractice insurer in the District, (2) malpractice insurers of physicians
                    in Maryland and Virginia, (3) the Physician Insurers Association of
                    America, (4) the District’s Financial Responsibility and Management
                    Assistance Authority, and (5) the Association of Trial Lawyers of America.




                    Page 23                            GAO/HEHS-00-5 D.C. Medical Malpractice Reform
Appendix II

Medical Malpractice Payment Data for the
Largest Physician Insurer in the District of
Columbia
                                         The National Capital Reciprocal Insurance Company is the largest
                                         malpractice insurer of physicians in the District of Columbia in terms of
                                         market share. Table II.1 shows that between 16 and 22 percent of the
                                         claims closed in the District by this insurer were closed with a payment in
                                         each year between 1996 and 1998. When paid, about 46, 62, and 48 percent
                                         of the payments were for $250,000 or more in 1996, 1997, and 1998,
                                         respectively. Even though the percentage of paid claims stayed relatively
                                         consistent over the 3-year period, median and average medical malpractice
                                         claim payments changed each year.

Table II.1: Number of Medical
Malpractice Claims and Claim                                                               1996                    1997                     1998
Payments for Physicians at the           Number of claims closed      a
                                                                                            129                      130                     124
Largest Insurer in the District of
                                         Percentage of closed
Columbia
                                         claims paid                                          22                      16                          19
                                         Median paymentb                              $221,000                $348,486                 $237,500
                                         Average paymentb                             $314,442                $450,475                 $219,228
                                         Number and (percentage)
                                         of payments $250,000 or                             13                       13                       11
                                         moreb                                               (46)                    (62)                     (48)
                                         Number and (percentage)
                                         of claims $1 million or                               2                       3                           0
                                         moreb                                                (7)                    (14)                         (0)
                                         a
                                          Data are shown for the year in which the insurance company considered the claim to be closed.
                                         These data do not show when the incident occurred or when the claim was filed.
                                         b
                                          Payment data do not include allocated loss adjustment expenses. These expenses include, but
                                         are not limited to, fees for legal services, expert witnesses, court reporters, the court, and medical
                                         records.

                                         Source: National Capital Reciprocal Insurance Company, Inc.



                                         The National Capital Reciprocal Insurance Company closed 11 medical
                                         malpractice claims with payments of $250,000 or more in 1998 in the
                                         District. As shown in the following list, these 11 claims involved several
                                         different types of physician specialties, including internal medicine,
                                         pediatrics, and orthopedic surgery. Almost half of the injuries occurred
                                         because of the physician’s failure to diagnose a problem:

                                     •   General surgery—Improper performance of a surgical procedure
                                     •   Internal medicine—Failure to diagnose disease
                                     •   General surgery—Failure to treat malignant mass
                                     •   Internal medicine—Medication error




                                         Page 24                                          GAO/HEHS-00-5 D.C. Medical Malpractice Reform
    Appendix II
    Medical Malpractice Payment Data for the
    Largest Physician Insurer in the District of
    Columbia




•   Obstetrics and gynecology/traumatic surgery—Improper performance of a
    surgical procedure
•   Cardiothoracic surgery—Improper management/monitoring of condition
•   Pediatrics—Failure to diagnose disease
•   Obstetrics/gynecology—Failure to diagnose malignant mass
•   Internal medicine—Failure to diagnose disease
•   Pediatrics—Failure to diagnose disease
•   Orthopedic surgery—Improper performance of a surgical procedure.




    Page 25                                        GAO/HEHS-00-5 D.C. Medical Malpractice Reform
Appendix III

Medical Malpractice Insurance Premiums
for Selected Physician Specialties in the
District of Columbia and Baltimore, 1999
                                   Medical malpractice insurance premiums vary by specialty and by area of
                                   the country. For example, areas like the District of Columbia and
                                   Baltimore, which are close to each other in distance, can have very
                                   different premiums. Table III.1 shows that for several specialties in 1999,
                                   medical malpractice insurance premiums are higher in Baltimore than in
                                   the District of Columbia. Of particular note are premiums for
                                   obstetrics/gynecology, a specialty long associated with among the most
                                   expensive medical malpractice claim payments. Higher premiums in
                                   Baltimore occur even though Maryland adopted a cap on nonmonetary
                                   damages more than a decade ago.

Table III.1: Medical Malpractice
Insurance Premiums by Specialty,   Specialty                                   District premiumsa,c           Baltimore premiumsb,c
1999                               Internal medicine                                         $11,051                             $8,325
                                   Ophthalmology                                               12,156                            13,190
                                   General surgery                                             36,467                            33,334
                                   Anesthesiology                                              16,576                            20,152
                                   Obstetrics/gynecology                                       75,143                            79,850
                                   a
                                   Premiums written by the largest physician malpractice insurer in the District.
                                   b
                                    Premiums written by the largest physician malpractice insurer in Maryland. These premiums are
                                   for the rating territory that includes Baltimore City and Baltimore County.
                                   c
                                    Premiums represent a mature claims made policy with coverage limits of $1 million/$3 million. In
                                   a claims made policy, the insurer is only liable for injuries that occur and claims that are filed
                                   while the policy is in effect. A mature claims made policy is generally defined as having been in
                                   force with the insurer for 5 or more consecutive years.

                                   Source: District premium data are from the National Capital Reciprocal Insurance Company, Inc.
                                   Baltimore premium data are from Medical Mutual of Maryland.




                                   Page 26                                        GAO/HEHS-00-5 D.C. Medical Malpractice Reform
Appendix IV

Number of Physicians by Specialty in the
District, Baltimore, and Richmond per
100,000 People in 1997
                                       The number of physicians in total and by specialty per 100,000 people
                                       varies for each of the three urban areas—the District, Baltimore, and
                                       Richmond. However, table IV.1 shows that, with the exception of general
                                       practitioners, Baltimore had more physicians per 100,000 people in total
                                       and in each specialty than either the District or Richmond in 1997.

Table IV.1: Number of Physicians per
100,000 People by Specialty, 1997                                                 District            Baltimore            Richmonda
                                       Active physicians                              704                    864                    528
                                       General practitioners                            30                    33                        46
                                       Cardiologists                                    15                    24                        19
                                       Internists                                     149                    197                    103
                                       Pediatricians                                    74                    80                        46
                                       Surgeons                                         47                    57                        33
                                       Neurosurgeons                                     7                      9                        6
                                       Obstetricians/
                                       gynecologists                                    45                    52                        31
                                       Anesthesiologists                                20                    32                        20
                                       Diagnostic radiologists                          15                    19                        17
                                       Emergency medicine                               12                    20                         7
                                       Gastroenterologists                               9                    11                        10
                                       a
                                       Shows the number of physicians in Richmond and neighboring Henrico County.

                                       Source: GAO analysis of the Area Resource File, Bureau of Health Professions, Health Resources
                                       and Services Administration, U.S. Department of Health and Human Services, February 1999.




                                       Page 27                                      GAO/HEHS-00-5 D.C. Medical Malpractice Reform
Appendix V

GAO Contact and Staff Acknowledgments


                  John Dicken, (202) 512-7043
GAO Contact
                  In addition, Barry Bedrick, Barbara Chapman, Robert Crystal, Joseph
Staff             Petko, and Roger Thomas made key contributions to this report.
Acknowledgments




(101801)          Page 28                          GAO/HEHS-00-5 D.C. Medical Malpractice Reform
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