Medical Liability Reform — The Federal and State Race

S. Diane Turpin, J.D., Assistant Director
Office of Governmental Affairs


For the last couple of years, Congress has been debating the need for medical liability reform legislation. The House of Representatives has again passed a bill, placing the fate of reform in the hands of the Senate. Meanwhile state legislatures, perhaps recognizing that Congress is moving too slowly, have been grappling with the issue on their own. There has been some progress this year, particularly at the state level, but Senate action appears elusive.

This year most state legislatures (41 by some counts) have considered legislation related to medical liability reform; at least 18 states considered caps on noneconomic damages, but only seven states (Arkansas, Florida, Idaho, Ohio, Oklahoma, Texas and West Virginia) enacted laws that include a cap. Of these seven states, four (Florida, Ohio, Texas and West Virginia) are considered by the American Medical Association (AMA) to be in crisis.

On the federal level, the House of Representatives passed H.R. 5 in March that includes a $250,000 cap on noneconomic damages as well as other reforms based on the California Medical Injury Compensation Reform Act widely supported by physicians. The Senate tried but failed to obtain the 60 votes needed to bring a companion bill, S. 11, up for debate. There is much anticipation that the Senate will again schedule roll-call votes on some version of a medical liability reform bill before the session adjourns later this year. As the session winds to a close, however, it is becoming increasingly less likely that the Senate will be able to pass a bill this year, leaving medical liability reform as unfinished business for next year.

Whether there is a need for medical liability reform and what form it should take continues to be studied. The General Accounting Office (GAO) released two studies this summer. The first, released in June, examined seven states (California, Florida, Minnesota, Mississippi, Nevada, Pennsylvania and Texas) in an effort to determine why there have been increases in some medical liability insurance rates. The study found that since 1999, medical liability premium rates for physicians in some states have increased dramatically and that the extent of the increases and the premium levels varied greatly, not only from state to state but also across medical specialties and among areas within states. The GAO identified four factors contributing to the increases in these states with the most dominant being the rapid increase in insurers’ losses on medical liability claims. The other factors included a decrease in insurers’ investment income attributed to the decreased interest rates on bonds that make up approximately 80 percent of the insurers’ investment portfolios, inadequate pricing of products and a rapid increase in reinsurance rates.

In August, the GAO released another study titled “Implications of Rising Premiums on Access to Health Care.” The GAO looked at five states with reported insurance-related problems (Florida, Nevada, Pennsylvania, Mississippi and West Virginia) and four states without reported problems (California, Colorado, Minnesota and Montana). The GAO found reduced access to hospital-based services in the five states with reported problems; the GAO, nevertheless, determined that overall access to care was not affected on a widespread basis but occurred primarily in rural areas, possibly for reasons unrelated to the availability and affordability of medical liability insurance. The GAO also looked at Medicare claims data and failed to find any major reductions in the utilization of certain services such as orthopedic surgeries and mammograms. The GAO also discounted studies that have shown an increase in defensive medicine as not being reliable.

AMA has criticized the GAO’s scope of work as insufficient to support its determinations. The study does acknowledge, however, that the average premium rates from 2001 to 2002 increased more in states without caps on noneconomic damages than they did in states with caps and that rates have risen dramatically for some physicians in some states since 1999. This mirrors previous information from the Department of Health and Human Services’ Office of the Assistant Secretary for Planning and Evaluation (one of the many studies on insurance rates released this year), which showed that from 2001 to 2002, certain specialties in states with a cap of $250,000 to $350,000 on noneconomic damages saw average combined premium increases of 18 percent, while those in states without caps on noneconomic damages (or higher caps) experienced average increases of 45 percent.

While the GAO may doubt the severity of access problems, a report by the Department of Health and Human Services’ Agency for Healthcare Research and Quality found that states with caps on noneconomic damages have about 12 percent more physicians per capita than states without a cap.

As Congress prepares to adjourn for the year and state legislatures begin to prepare for the next session, advocates for medical liability reform must continue to work to keep this issue at the forefront of the agenda at both the federal and state levels.