“Investment Returns and Size of Damage Caps Impact Rising Cost of Malpractice Premiums”
While the call for federal medical malpractice reforms has cooled with the change in leadership in the Congress, the American Medical Association and nine other physician organizations continue to identify tort reform as a key element in reforming the U.S. health care system. A number of laws have been introduced that attempt to stabilize premium prices, damage caps being the most well-known, but their effectiveness has been unclear. Researchers at the Lister Hill Center for Health Policy, University of Alabama at Birmingham conducted a rigorous analysis of more current data to help eliminate some of the confusion created by the conflicting findings of past studies.
The research team, led by Michael Morrisey, Ph.D., Meredith Kilgore, R.N., MSPH, Ph.D., and Leonard Nelson, J.D., L.L.M. found that damage caps do have an impact on premium growth, though other tort reforms have either minimal or no effect. In fact, they found that the impact caps have on premium growth is related to the size of the cap. Damage caps set at $250,000 or less in 2004 dollars were estimated to reduce internal medicine premiums by 25%, caps of $250,000 to $500,000 reduced premiums by 11.5% but caps of $500,000 to $750,000 increased premiums by an estimated 7.9%. Caps above $750,000 increased premiums even more. They also determined that investment returns do play a role in the cost of premiums.
Morrisey and his colleagues argue that this study is important so that, “as the states and perhaps Congress debate legislation, they will have a rigorous analysis of the current environment to identify the effects that may result from changes in the law.”
