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Report to Congressional Requesters:

United States General Accounting Office:

GAO:

August 2003:

MEDICAL MALPRACTICE:

Implications of Rising Premiums on Access to Health Care:

Medical Malpractice and Access to Health Care:

GAO-03-836:

GAO Highlights:

Highlights of GAO-03-836, a report to congressional requesters 

Why GAO Did This Study:

The recent rising cost of medical malpractice insurance premiums in 
many states has reportedly influenced some physicians to move or close 
practices, reduce high-risk services, or alter their practices to 
preclude potential lawsuits (known as defensive medicine practices). 
States have revised tort laws under which malpractice lawsuits are 
litigated to help constrain malpractice premium and claims costs. Some 
of these tort reform laws include caps on monetary penalties for 
noneconomic harm, such as for plaintiffs pain and suffering. Congress 
is considering legislation similar to some states tort reform laws.

GAO examined how health care provider responses to rising malpractice 
premiums have affected access to health care, whether physicians 
practice defensive medicine, and how growth in malpractice premiums 
and claims payments compares across states with varying tort reform 
laws. Because national data on providers responses to rising premiums 
are not reliable, GAO examined the experiences in five states with 
reported malpractice-related problems (Florida, Nevada, Pennsylvania, 
Mississippi, and West Virginia) and four states without reported 
problems (California, Colorado, Minnesota, and Montana) and analyzed 
growth in malpractice premiums and claims payments across all states 
and the District of Columbia. 

What GAO Found:

Actions taken by health care providers in response to rising 
malpractice premiums have contributed to localized health care access 
problems in the five states reviewed with reported problems. GAO 
confirmed instances in the five states of reduced access to hospital-
based services affecting emergency surgery and newborn deliveries in 
scattered, often rural, areas where providers identified other long-
standing factors that also affect the availability of services. 
Instances were not identified in the four states without reported 
problems. In the five states with reported problems, however, GAO also 
determined that many of the reported provider actions were not 
substantiated or did not affect access to health care on a widespread 
basis. For example, although some physicians reported reducing certain 
services they consider to be high risk in terms of potential 
litigation, such as spinal surgeries and mammograms, GAO did not find 
access to these services widely affected, based on a review of 
Medicare data and contacts with providers that have reportedly been 
affected. Continuing to monitor the effect of providers responses to 
rising malpractice premiums on access to care will be essential, given 
the import and evolving nature of this issue.

Physicians reportedly practice defensive medicine in certain clinical 
situations, thereby contributing to health care costs; however, the 
overall prevalence and costs of such practices have not been reliably 
measured. Studies designed to measure physicians defensive medicine 
practices examined physician behavior in specific clinical situations, 
such as treating elderly Medicare patients with certain heart 
conditions. Given their limited scope, the study results cannot be 
generalized to estimate the extent and cost of defensive medicine 
practices across the health care system.

Limited available data indicate that growth in malpractice premiums 
and claims payments has been slower in states that enacted tort reform 
laws that include certain caps on noneconomic damages. For example, 
between 2001 and 2002, average premiums for three physician 
specialtiesgeneral surgery, internal medicine, and obstetrics/
gynecologygrew by about 10 percent in states with caps on noneconomic 
damages of $250,000, compared to about 29 percent in states with 
limited reforms. GAO could not determine the extent to which 
differences in premiums and claims payments across states were caused 
by tort reform laws or other factors that influence such differences.

In commenting on a draft of this report, three independent reviewers 
with expertise on malpractice-related issues generally concurred with 
the report findings, while the American Medical Association (AMA) 
commented that the scope of work was not sufficient to support the 
finding that rising malpractice premiums have not contributed to 
widespread health care access problems. While GAO disagrees with AMAs 
point of view, the report was revised to better clarify the methods 
and scope of work for this issue. 

www.gao.gov/cgi-bin/getrpt?GAO-03-836.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Kathryn G. Allen at 
(202) 512-7118.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Implications of Rising Malpractice Premiums on Access to Health Care:

Physicians Reportedly Practice Defensive Medicine, but Prevalence and 
Costs of Such Practices Are Not Reliably Measured:

States with Certain Noneconomic Damage Caps Had Lower Recent Growth in 
Malpractice Premium Rates and Claims Payments:

External Comments and Our Evaluation:

Appendix I: National and State Provider Associations Contacted:

Appendix II: Scope and Methodology:

Appendix III: Summary of Selected Research Designed to Measure Defensive 
Medicine Prevalence and Costs:

Appendix IV: GAO Contacts and Staff Acknowledgments:

GAO Contact:

Acknowledgments:

Related GAO Products:

Tables:

Table 1: Assertions of Numbers of Physicians Moving, Retiring, or 
Closing Practices in Response to Malpractice Pressures in Five States:

Table 2: State Provider Associations GAO Contacted:

Table 3: Tort Reforms and Average Rates of Premium Increases in Nine 
States:

Table 4: State Tort Reform Categories, Based on Reforms in Place as of 
1995:

Table 5: Summary of Selected Research Designed to Measure Defensive 
Medicine Prevalence and Costs:

Figures:

Figure 1: Rates of Medicare-Covered Orthopedic Surgeries in 
Pennsylvania Have Increased:

Figure 2: Rates of Medicare-Covered Spinal Surgeries in Five States 
with Reported Problems Have Recently Increased:

Figure 3: Rates of Medicare-Covered Joint Revisions and Repairs in Five 
States with Reported Problems Have Not Recently Declined:

Figure 4: Rates of Medicare-Covered Mammograms in Florida and 
Pennsylvania Remain above the National Average:

Figure 5: Premium Rates for Three Physician Specialties Rose After 
2000, but to a Lesser Extent in States with Noneconomic Damage Caps:

Figure 6: Recent Premium Growth Was Lower for Three Physician 
Specialties in States with Noneconomic Damage Caps:

Abbreviations:

AHA: American Hospital Association:  

AMA: American Medical Association:  

CBO: Congressional Budget Office:  

CMS: Centers for Medicare & Medicaid Services:  

ER: emergency room:  

FSMB: Federation of State Medical Boards:  

HCPCS: Health Care Common Procedure Coding System:  

HEALTH: Help Efficient, Accessible, Low-cost, Timely Healthcare Act of 
2003:  

HHS: Department of Health and Human Services:  

ISO: Insurance Services Office:  

MLM: Medical Liability Monitor:  

MMCC: Medicare Managed Care Contract:  

NAIC: National Association of Insurance Commissioners:  

NCSL: National Conference of State Legislatures:  

NPDB: National Practitioner Data Bank:  

OB/GYN: obstetrics/gynecology:  

OTA: Office of Technology Assessment:  

PCF: patient compensation fund:  

PIAA: Physician Insurers Association of America:

United States General Accounting Office:

Washington, DC 20548:

August 8, 2003:

The Honorable F. James Sensenbrenner, Jr. 
Chairman 
Committee on the Judiciary 
House of Representatives:

The Honorable W.J. "Billy" Tauzin 
Chairman 
Committee on Energy and Commerce 
House of Representatives:

The Honorable Steve Chabot 
Chairman 
Subcommittee on the Constitution 
Committee on the Judiciary 
House of Representatives:

Medical malpractice insurance premium rates increased rapidly in some 
states beginning in the late 1990s after several years of relative 
stability, similar to previous cycles of rising premiums that occurred 
during the 1970s and 1980s. Between 2001 and 2002, premium rates for 
the specialties of general surgery, internal medicine, and obstetrics/
gynecology (OB/GYN) increased by about 15 percent on average 
nationally, and over 100 percent for certain of these specialists in 
some states. In response to these rising premiums, representatives of 
health care providers--including physicians, hospitals, and nursing 
homes--and the media have reported that physicians have moved out of 
states experiencing the highest increases, retired, or reduced or 
eliminated certain high-risk services. Policymakers are concerned that, 
if these provider actions are occurring, they may limit consumers' 
access to health care. Additionally, fear of malpractice litigation may 
encourage physicians to practice "defensive medicine," for example, 
ordering additional tests or procedures, thus increasing total health 
care costs. In an effort to mitigate rising malpractice costs, states 
have passed various tort reform laws, some of which include caps to 
restrict the size of damage award payments and other measures to limit 
costs associated with malpractice litigation, and Congress is 
considering similar federal legislation.[Footnote 1]

Because of your concerns about rising malpractice insurance premiums 
and associated implications for the health care system, we agreed to 
examine the following questions:

1. How have health care provider responses to rising malpractice 
insurance premiums affected consumers' access to health care?

2. What is known about how rising premiums and fear of litigation cause 
health care providers to practice defensive medicine?

3. How does the growth in medical malpractice insurance premiums and 
insurer payments for malpractice claims compare in states with varying 
levels of tort reform laws?

GAO also recently issued a related report that more fully describes the 
extent of malpractice insurance premium growth and the factors that 
contributed to that growth.[Footnote 2] Its findings are summarized on 
pages 9 through 11 of this report.

To evaluate how actions taken by health care providers in response to 
malpractice premium increases have affected consumers' access to health 
care, we interviewed providers and their representatives, including the 
American Medical Association (AMA), the American Health Care 
Association, the American Hospital Association (AHA), and many of their 
state-level counterparts. (See app. I for the complete list of national 
and state associations we contacted during the course of our work.) In 
the absence of reliable national sources of data concerning provider 
responses to rising malpractice premiums, we focused our review on nine 
states selected to encompass a range of malpractice premium pricing and 
tort reform environments. Five of these states were among those cited 
by AMA and other national health care provider organizations as 
malpractice "crisis" or "problem" states based on such factors as 
higher than average increases in malpractice insurance premium rates, 
physicians' reported difficulties obtaining malpractice insurance 
coverage, and reports of actions taken by providers in response to the 
malpractice-related pressures of rising premiums and litigation. The 
remaining four states were not cited by provider groups as experiencing 
malpractice-related problems.[Footnote 3] In the five states with 
reported problems, provider organizations reported through surveys and 
anecdotal reports several actions taken by physicians in response to 
rising malpractice premiums. Although we did not attempt to confirm 
each report cited by state provider groups, we targeted follow-up 
contacts with local providers where the reports suggested potentially 
acute consumer access problems or where multiple reports were 
concentrated in a geographic area. In these five states, we contacted 
49 hospitals and 61 physician practices or clinics to corroborate the 
reports and explore the implications for consumers' access to health 
care. We also analyzed Medicare part B physician claims data from 1997 
through 2002 to assess whether utilization of certain services deemed 
to be of higher risk for a malpractice claim, such as spinal surgery 
and mammograms, has declined for the Medicare-covered 
population.[Footnote 4] Because of limitations in the Medicare data 
that precluded its use in analyzing utilization of certain other 
physician services such as hospital emergency and obstetrical care, we 
relied exclusively on the reports of access problems provided by state 
provider associations and our follow-up with local providers to assess 
access to these services.

To determine what is known about the extent of defensive medicine 
practices, we reviewed available empirical studies, including those 
examining the costs of defensive medicine and the potential impact of 
tort reform laws on mitigating these costs. We also explored the issue 
with medical provider organizations and examined the results of recent 
surveys in which physicians were asked about their own defensive 
medicine practices.

To assess premium growth, we analyzed malpractice premium rates 
reported by insurers to the Medical Liability Monitor (MLM) for the 
specialties of general surgery, internal medicine, and OB/GYN--the only 
three specialties for which these data are reported--across all states 
and the District of Columbia from 1996 through 2002.[Footnote 5] To 
assess growth in malpractice claims payments, we analyzed state-level 
data on claims paid on behalf of all physicians reported by insurers to 
the National Practitioner Data Bank (NPDB) from 1996 through 2002 for 
all states and the District of Columbia.[Footnote 6] We compared trends 
in 12 states with tort reforms that include caps on noneconomic 
damages, such as for plaintiffs' pain and suffering (4 states with a 
$250,000 cap and 8 states with a $500,000 or less cap[Footnote 7]) to 
11 states (including the District of Columbia) with more limited tort 
reforms and to the average for all states. We focused our analysis on 
those states with noneconomic damage caps as a key tort reform because 
such caps are included in proposed federal tort reform legislation and 
because published research generally reports that such caps have a 
greater impact on medical malpractice premium rates and claims payments 
than some other tort reform measures. We also reviewed available 
empirical studies that examined the relationship between tort reforms 
and malpractice insurance premiums and claims payments.

We conducted our work from September 2002 through June 2003 according 
to generally accepted government auditing standards. Appendix II 
provides more details about our scope and methodology, and a list of 
related GAO products is included at the end of this report.

Results in Brief:

Actions taken by health care providers in response to malpractice 
pressures have contributed to localized health care access problems in 
the five states we reviewed with reported problems.[Footnote 8] We 
confirmed instances in the five states where actions taken by 
physicians in response to malpractice pressures have reduced access to 
services affecting emergency surgery and newborn deliveries. These 
instances were not concentrated in any one geographic area and often 
occurred in rural locations, where maintaining an adequate number of 
physicians may have been a long-standing problem, according to some 
providers. For example, the only hospital in a rural county in 
Pennsylvania no longer has full orthopedic on-call surgery coverage in 
its emergency room (ER) because three of its five orthopedic surgeons 
left in the spring of 2002, largely in response to the high cost of 
malpractice insurance. Similarly, pregnant women in rural central 
Mississippi must now travel about 65 miles to the nearest hospital 
obstetrics ward to deliver because family practitioners at the local 
hospital, faced with rising malpractice insurance premiums, stopped 
providing obstetrics services. In both areas, providers also cited 
other reasons for difficulties recruiting physicians to their rural 
areas. We did not identify similar examples of access reductions 
attributed to malpractice pressures in the four states without reported 
problems. In the five states with reported problems, however, we also 
determined that many of the reported provider actions taken in response 
to malpractice pressures were not substantiated or did not widely 
affect access to health care. For example, some reports of physicians 
relocating to other states, retiring, or closing practices were not 
accurate or involved relatively few physicians. In these same states, 
our review of Medicare claims data did not identify any major 
reductions in the utilization of certain services some physicians 
reported reducing because they consider the services to be high risk, 
such as certain orthopedic surgeries and mammograms. Continuing to 
monitor the effect of providers' responses to rising malpractice 
premiums on access to care will be essential, given the import and 
evolving nature of this issue.

In response to rising premiums and their fear of litigation, research 
indicates that physicians practice defensive medicine in certain 
clinical situations, thereby contributing to health care costs; 
however, the overall prevalence and costs of such practices have not 
been reliably measured. Recent surveys of physicians indicate that many 
practice defensive medicine, but limitations to these surveys suggest 
caution in interpreting and generalizing the results. For example, the 
surveys typically ask physicians if or how they have practiced 
defensive medicine but not the extent of such practices. In addition, 
very few physicians tend to respond to these surveys, raising doubt 
about how accurately their responses reflect the practices of all 
physicians. Some empirical research has identified defensive medicine 
practices, but under very specific clinical situations that cannot be 
generalized more broadly. For example, one study examined Medicare 
patients with two specified heart diseases and concluded that certain 
tort reforms that reduce malpractice pressures, such as caps on 
damages, may reduce hospital expenditures for treatment of the two 
conditions by 5 to 9 percent. However, subsequent preliminary research 
that expanded this study to additional Medicare patients with a broader 
set of conditions did not find similar savings.

Limited available data indicate that rates of growth in malpractice 
premiums and claims payments have been slower on average in states that 
enacted certain caps on damages for pain and suffering--referred to as 
noneconomic damage caps--than in states with more limited 
reforms.[Footnote 9] Premium rates reported for the specialties of 
general surgery, internal medicine, and OB/GYN were relatively stable 
on average in most states from 1996 through the late 1990s and then 
began to rise, but more slowly among states with certain noneconomic 
damage caps. For example, from 2001 through 2002, average premium rates 
rose approximately 10 percent in states with noneconomic damage caps of 
$250,000 compared with approximately 29 percent in states with more 
limited tort reforms. Although payments for claims against all 
physicians from 1996 through 2002 tended to be lower and grew less 
rapidly on average in states with caps on noneconomic damages than in 
states with limited reforms, the averages obscured wide variation in 
claims payments and rates of growth across states and over time. 
Moreover, claims payments we reviewed were limited to claims against 
physicians and did not include claims against institutional providers 
such as hospitals and nursing homes. Differences in both premium rates 
and claims payments are also affected by factors other than damage 
caps, including the presence of other tort reform measures, the 
presence of state laws regulating the premium rate-setting process, and 
certain market forces, including the level of market competition among 
insurers and interest rates that affect insurers' investment 
returns.[Footnote 10] We could not determine the extent to which 
differences in premiums and claims payments across states were 
attributable to states' tort reform laws or to these additional 
factors.

We received comments on a draft of this report from three independent 
health policy researchers and AMA. Each of the researchers has 
expertise in malpractice-related issues and has conducted and published 
research on the effects of malpractice pressures on the health care 
system, and two of the three are physicians. The health policy 
researchers generally concurred with our findings. AMA, however, 
questioned our finding that rising malpractice premiums have not 
contributed to widespread health care access problems, expressing 
concern that the scope of our work limited our ability to fully 
identify the extent to which malpractice-related pressures are 
affecting consumers' access to health care. We disagree that the scope 
of our work limited our ability to identify the extent of malpractice-
related access problems. In the absence of current and reliable 
national data on provider responses to rising malpractice premiums, we 
used a variety of qualitative and quantitative methods as a basis for 
our findings on the effect of provider actions on access to care in the 
five states we reviewed with reported problems. While we did not 
attempt to generalize our findings beyond these five states, we believe 
that--because they are among the most visible and often-cited examples 
of "crisis" states--the experiences of these five states provide 
important insight into the overall problem. In response to AMA's 
comments, however, we clarified the report's discussion of the scope of 
work and methods used for this issue.

Background:

In the United States, patients injured while receiving health care can 
sue health care providers for medical malpractice under governing state 
tort law, usually the law of the state where the injury took place. 
Laws governing medical malpractice vary from state to state, but among 
the goals of tort law are compensation for the victim and deterrence of 
malpractice.

Nearly all health care providers buy medical malpractice insurance to 
protect themselves from potential claims that could cause financial 
harm or even bankruptcy absent liability coverage. For example, the 
average reported claims payment made on behalf of physicians and other 
licensed health care practitioners in 2001 was about $300,000 for all 
settlements, and about $500,000 for trial verdicts.[Footnote 11] Under 
a malpractice insurance contract, the insurer agrees to investigate 
claims, to provide legal representation for the health care provider, 
and to accept financial responsibility for payment of any claims up to 
a specified monetary level during an established time period. The most 
common policies sold by insurers provide $1 million of coverage per 
incident and $3 million of total coverage per year. The insurer 
provides this coverage in return for a fee--the medical malpractice 
premium.

Medical malpractice premium rates differ widely by medical specialty 
and geography. Premiums paid by traditionally high-risk specialties, 
such as obstetrics, are usually higher than premiums paid by other 
specialties, such as internal medicine. Premium rates also vary across 
and within states. Across states, for example, a large insurer in 
Minnesota charged base premium rates of $3,803 for the specialty of 
internal medicine, $10,142 for general surgery, and $17,431 for OB/GYN 
in 2002 across the entire state.[Footnote 12] In contrast, a large 
insurer in Florida charged base premium rates in Dade County of $56,153 
for internal medicine, $174,268 for general surgery, and $201,376 for 
OB/GYN, and $34,556, $107,242, and $123,924, respectively, for these 
same specialties in Palm Beach County. In addition to the wide range in 
premium rates charged, the extent to which premiums increase over time 
also varies by specialty and geographic area. Beginning in the late 
1990s, malpractice premiums began to increase at a rapid rate for most, 
but not all, physicians in some states. For example, between 1999 and 
2002, the Minnesota insurer increased its base premium rates by about 2 
percent for each of the three specialties, in contrast to the Florida 
insurer that increased its base premium rates by about 98, 75, and 43 
percent, respectively, for the three specialties in Dade County.

Rising Claims Costs Among Factors Contributing to Malpractice Insurance 
Premium Increases:

Since 1999, medical malpractice premium rates for certain physicians in 
some states have increased dramatically. In a related report issued in 
June 2003, we examined the extent and causes of these recent 
increases.[Footnote 13] More specifically, we reported on (1) the 
extent of increases in medical malpractice insurance rates in seven 
states,[Footnote 14] (2) factors that have contributed to the 
increases, and (3) changes in the medical malpractice insurance market 
that may make the current period of rising premium rates different from 
earlier periods of rate hikes. Key findings from that report include 
the following.

* Among the seven states we analyzed, the extent of medical malpractice 
premium increases varied greatly not only from state to state but 
across medical specialties. For example, among the largest writers of 
medical malpractice insurance in the seven states, increases in base 
premium rates for general surgeons from 1999 to 2002 ranged from 2 
percent in Minnesota to 130 percent in and around Harrisburg, 
Pennsylvania. Across specialties, one carrier raised premiums for the 
area in and around El Paso, Texas, during this period by 95 percent for 
general surgery, 108 percent for internal medicine, and 60 percent for 
OB/GYN.

* Multiple factors have contributed to the recent increases in medical 
malpractice premium rates. First, since 1998, the greatest contributor 
to increased premium rates in the seven states we analyzed appeared to 
be increased losses for insurers on paid medical malpractice claims. 
However, a lack of comprehensive data at the national and state levels 
on insurers' medical malpractice claims and the associated losses 
prevented us from fully analyzing the composition and causes of those 
losses. Second, from 1998 through 2001, medical malpractice insurers 
experienced decreases in their investment income as interest rates fell 
on the bonds that generally make up around 80 percent of these 
insurers' investment portfolios.[Footnote 15] While almost no medical 
malpractice insurers experienced net losses on their investment 
portfolios over this period, a decrease in investment income meant that 
income from insurance premiums had to cover a larger share of insurers' 
costs. Third, during the 1990s, insurers competed vigorously for 
medical malpractice business, and several factors, including high 
investment returns, permitted them to offer prices that, in hindsight 
for some insurers, did not completely cover their ultimate losses on 
that business. As a result of this, some companies became insolvent or 
voluntarily left the market, reducing the downward competitive pressure 
on premium rates that had existed through the 1990s. Fourth, beginning 
in 2001, reinsurance rates for medical malpractice insurers also 
increased more rapidly than they had in the past, raising insurers' 
overall costs.[Footnote 16]

* While the medical malpractice insurance market as a whole had 
experienced periods of rapidly increasing premium rates in the mid-
1970s and mid-1980s, the market has changed considerably since then. 
These changes are largely the result of actions insurers, health care 
providers, and states have taken to address increasing premium rates. 
Beginning in the 1970s and 1980s, insurers began selling "claims-made" 
rather than "occurrence-based" policies, enabling insurers to better 
predict losses for a particular year.[Footnote 17] Also in the 1970s, 
physicians, facing increasing premium rates and the departure of some 
insurers, began to form mutual nonprofit insurance companies. Such 
companies, which may have some cost and other advantages over 
commercial insurers, now make up a significant portion of the medical 
malpractice insurance market. More recently, an increasing number of 
large hospitals and groups of hospitals or physicians have left the 
traditional commercial insurance market and sought alternative 
arrangements, for example, by self-insuring. While such arrangements 
can save money on administrative costs, hospitals and physicians 
insured through these arrangements assume greater financial 
responsibility for malpractice claims than they would under traditional 
insurance arrangements and thus may face a greater risk of insolvency. 
Finally, since the periods of increasing premium rates during the mid-
1970s and mid-1980s, all states have passed at least some laws designed 
to reduce medical malpractice premium rates. Some of these laws are 
designed to decrease insurers' losses on medical malpractice claims, 
while others are designed to more tightly control the premium rates 
insurers can charge. These market changes, in combination, make it 
difficult to predict how medical malpractice premiums might behave in 
the future.

States Use Tort Reform to Help Contain Costs Associated with Medical 
Malpractice:

In order to improve the affordability and availability of malpractice 
insurance and to reduce liability pressure on providers, states have 
adopted varying types of tort reform legislation.[Footnote 18] Tort 
reforms are generally intended to limit the number of malpractice 
claims or the size of payments in an effort to reduce malpractice costs 
and insurance premiums. Also, some believe tort reforms can lower 
overall health care costs by reducing certain defensive medicine 
practices. Such practices include the overutilization by physicians of 
certain diagnostic tests or procedures primarily to reduce their 
exposure to malpractice liability, therefore adding to the costs of 
health care.[Footnote 19] State tort reform measures adopted during the 
past three decades include:

* placing caps on the amount that may be awarded to plaintiffs for 
damages in a malpractice lawsuit, including noneconomic, economic, and 
punitive damages;

* abolishing the "collateral source rule" that prevents a defendant 
from introducing evidence that the plaintiff's losses and expenses have 
been paid in part by other parties such as health insurers, or damage 
awards from being reduced by the amount of any compensation plaintiffs 
receive from third parties;

* abolishing "joint and several liability" to ensure that damages are 
recovered from defendants in proportion to each defendant's degree of 
responsibility, not each defendant's ability to pay;

* allowing damages to be paid in periodic installments rather than in a 
lump sum;

* placing limits on fees charged by plaintiffs' lawyers;

* imposing stricter statutes of limitations that shorten the time 
injured parties have to file a claim in court;

* establishing pretrial screening panels to evaluate the merits of 
claims before proceeding to trial; and:

* providing for greater use of alternative dispute resolution systems, 
such as arbitration panels.

Among the tort reform measures enacted by states, caps on noneconomic 
damage awards that include pain and suffering have been the focus of 
particular interest. Cap proponents believe that such limits can result 
in several benefits that help reduce malpractice insurance premiums, 
such as helping to prevent excessive awards and overcompensation and 
ensuring more consistency among jury verdicts. In contrast, cap 
opponents believe that factors other than award amounts affect premiums 
charged by malpractice insurers and that caps can result in 
undercompensation for severely injured persons.

Congress is currently considering federal tort reform legislation that 
includes several elements adopted by states to varying degrees, 
including placing caps on noneconomic and punitive damages, allowing 
evidence at the trial of a plaintiff's recovery from collateral 
sources, abolishing joint and several liability, and placing a limit on 
contingency fees, among others.[Footnote 20]

Implications of Rising Malpractice Premiums on Access to Health Care:

Actions taken by health care providers in response to rising 
malpractice premiums have contributed to reduced access to specific 
services on a localized basis in the five states reviewed with reported 
problems.[Footnote 21] We confirmed instances where physician actions 
in response to malpractice pressures have resulted in decreased access 
to services affecting emergency surgery and newborn deliveries in 
scattered, often rural areas of the five states. However, we also 
determined that many of the reported physician actions and hospital-
based service reductions were not substantiated or did not widely 
affect access to health care. For example, our analysis of Medicare 
utilization data suggests that reported reductions in certain high-risk 
services, such as some orthopedic surgeries and mammograms, have not 
widely affected consumer access to these services. To help avoid 
consumer access problems, some hospitals we contacted have taken 
certain steps, such as assuming the costs of physicians' liability 
insurance, to enable physicians to continue practicing.

Health Care Provider Actions Taken in Response to Malpractice Pressures 
Have Limited Access to Certain Services in Some Localities:

We confirmed examples in each of the five states where access to 
services affecting emergency surgery and newborn deliveries has been 
reduced. In these instances, some of which were temporary, patients 
typically had to travel farther to receive care. The problems we 
confirmed were limited to scattered, often rural, locations and in most 
cases providers identified long-standing factors in addition to 
malpractice pressures that affected the availability of services.

* Florida: Among several potential access problems we reviewed in 
Florida, the most significant appeared to be the reduction in ER on-
call surgical coverage in Jacksonville. We confirmed that at least 19 
general surgeons who serve the city's hospitals took leaves of absence 
beginning in May 2003 when state legislation capping noneconomic 
damages for malpractice cases at $250,000 was not passed. According to 
one hospital representative, the loss of these surgeons reduced the 
general surgical capacity of Jacksonville's acute care community 
hospitals by one-third. The administrator of the practice that employs 
these surgeons told us that at least 8 are seeking employment in other 
states to avoid the high malpractice premiums in Florida. Hospital 
officials in Jacksonville told us that other providers, including some 
orthopedic surgeons and cardiovascular surgeons, had also taken leave 
as of May 2003 due in part to the risks associated with practicing 
without surgeons available in the ER for support in the event of 
complications. According to one Jacksonville area hospital official, 
her hospital has lost the services of 75 physicians in total due to 
leaves of absence taken by the physicians. Hospital and local health 
department officials said that the losses of surgeons have caused a 
reduction in ER on-call surgical coverage at most acute care hospitals 
in the city; the health department official said patients requiring 
urgent surgical care presenting at an ER that does not have adequate 
capacity must be transferred to the nearest hospital that does, which 
could be up to 30 miles away. Within the first 11 days after most of 
the physicians took leave, 120 transfers took place.[Footnote 22] 
Although the hospital officials we interviewed expected that some of 
the physicians would eventually return to work, they believe timing may 
depend on passage of malpractice reform legislation during a special 
legislative session expected to take place this summer.

* Mississippi: Reductions in ER on-call surgical coverage and newborn 
delivery services have created access problems in certain areas of 
Mississippi. We confirmed that some surgeons along the Gulf Coast who 
formerly provided on-call services at multiple hospitals are 
restricting their coverage to a single ER and others are eliminating 
coverage entirely in an effort to minimize their malpractice premiums 
and exposure to litigation. Officials of two of five hospitals we spoke 
with in the three Gulf Coast counties told us they have either 
completely lost or experienced reduced ER on-call surgical coverage for 
certain services. These reductions in coverage may require that 
patients be transferred greater distances for services. Some family 
practitioners and OB/GYNs have stopped providing newborn delivery 
services, creating access problems in certain rural communities. An 
official from one hospital in a largely rural county in central 
Mississippi told us that it closed its obstetrics unit after five 
family practitioners who attended deliveries stopped providing newborn 
delivery services in order to avoid a more than 65 percent increase in 
their annual premium rates. Pregnant women in the area now must travel 
about 65 miles to the nearest obstetrics ward to deliver. Loss of 
obstetrics providers in other largely rural areas may require pregnant 
women in these areas to travel farther for deliveries. A provider 
association official told us that malpractice pressures have worsened 
long-standing difficulties associated with recruiting physicians to the 
state, and providers also said that low Medicaid reimbursement rates 
and insufficient reimbursement for trauma services also influence 
physician practice decisions.

* Nevada: Reductions in ER on-call surgical coverage have created 
access problems in Clark County. To draw attention to their concerns 
about rising medical malpractice premiums, over 60 orthopedic surgeons 
in the county withdrew their contracts with the University of Nevada 
Medical Center, causing the state's only Level I trauma center to close 
for 11 days in July 2002.[Footnote 23] The center reopened after a 
special arrangement was made for surgeons to temporarily obtain 
malpractice coverage through the Medical Center and the governor 
announced his support for state tort reform, prompting the return of 
approximately 15 of the surgeons, according to medical center staff. 
Another hospital in the county has closed its orthopedics ward and no 
longer provides orthopedic surgical coverage in its ER as orthopedic 
surgeons have sought to reduce their malpractice exposure by decreasing 
the number of hospitals in which they provide ER coverage, according to 
a hospital official. Clark County has had long-standing problems with 
ER staffing due in part to its rapidly growing population, according to 
providers.

* Pennsylvania: Some areas in Pennsylvania have experienced reductions 
in access to emergency surgical services and newborn delivery services. 
For example, one rural hospital recently lost three of its five 
orthopedic surgeons. As a result, orthopedic on-call coverage in its ER 
has declined from full-time to only one-third of each month. At the 
same hospital, providers reported that four of the nine OB/GYNs who 
provide obstetrical care in two counties stopped providing newborn 
delivery services because their malpractice premiums became 
unaffordable and another left the state to avoid high premiums. Some 
pregnant women now travel an additional 35 to 50 miles to deliver. 
According to a hospital official, the remaining four OB/GYNs were each 
in their sixties and near retirement. This hospital reported that the 
loss of the physicians was largely due to the rising cost of 
malpractice insurance, but also identified the hospital's rural 
location, and the area's large Medicaid population and low Medicaid 
reimbursement rates as factors contributing to the physicians' 
decisions to leave. Trauma services in Pennsylvania have also been 
affected in some localities. For example, a suburban Philadelphia 
trauma center closed for 13 days beginning in December 2002 because its 
orthopedic surgeons and neurosurgeons reported they could not afford to 
renew their malpractice insurance. The situation was resolved when a 
new insurance company offered more affordable coverage to the surgeons 
and the governor introduced a plan to reduce physician payments to the 
state medical liability fund, according to a hospital official.

* West Virginia: Access problems due to malpractice concerns in West 
Virginia involved ER specialty surgical services. One of the state's 
major medical centers lost its Level I trauma designation for 
approximately 1 month in the early fall of 2002 due to reductions in 
the number of orthopedic surgeons providing on-call coverage. During 
this time, patients who previously would have been treated at this 
facility had to be transferred to other facilities at least 50 miles 
away. The hospital's Level I designation was restored when additional 
physicians agreed to provide on-call coverage after the state extended 
state-sponsored liability insurance coverage to physicians who provide 
a significant percentage of their services in a trauma setting. The 
state's northern panhandle lost all neurosurgical services for about 2 
years when three neurosurgeons who served the area either left or 
stopped providing these services in response to malpractice pressures, 
requiring that all patients needing neurosurgical care be transferred 
60 miles or more, limiting patients' access to urgent neurosurgical 
care. Full-time neurosurgical coverage was restored to the area in 
early 2003 through an agreement with a group of neurosurgeons at one of 
the state's major academic medical centers. A hospital official from 
this area reported that efforts to recruit a permanent full-time 
neurosurgeon have been unsuccessful. Provider groups told us that 
malpractice concerns have made efforts to recruit and retain physicians 
more difficult; however, they also identified the rural location, low 
Medicaid reimbursement rates, and the state's provider tax on 
physicians as factors that have made it difficult to attract and retain 
physicians.[Footnote 24]

Some Reported Provider Actions Were Not Substantiated or Did Not Widely 
Affect Access to Health Care:

Despite some confirmed reductions in ER on-call surgical coverage and 
newborn delivery services that were related to physicians' concerns 
about malpractice pressures and affected access to health care, we also 
identified reports of provider actions taken in response to malpractice 
pressures--such as reported physician departures and hospital unit 
closures--that were not substantiated or that did not widely affect 
access to health care. Our contacts with 49 hospitals revealed that 
although 26 confirmed a reduction in surgeons available to provide on-
call coverage for the ER, 11 of these reported that the decreases had 
not prevented them from maintaining the full range of ER services and 3 
reported that the surgeons had returned or replacements had been found. 
Hospital association representatives reported that access to newborn 
delivery services in Florida had been reduced due to the closures of 
five hospital obstetrics units. However, we contacted each of these 
hospitals and determined that these units were located in five separate 
urban counties, and each hospital reported that demand for its now 
closed obstetrics facility had been low and that nearby facilities 
provided obstetrics services.[Footnote 25] In West Virginia, although 
access problems reportedly developed because two hospital obstetrics 
units closed due to malpractice pressures, officials at both of these 
hospitals told us that a variety of factors, including low service 
volume and physician departures unrelated to malpractice, contributed 
to the decisions to close these units. One of the hospitals has 
recently reopened its obstetrics unit.

Provider groups also asserted that some physicians in each of the five 
states are moving, retiring, or closing practices in response to 
malpractice pressures. In the absence of national data reporting 
physician movement among states related to malpractice concerns, we 
relied on state-level assertions of departures that were based on a 
variety of sources, including survey results, information compiled and 
quantified by provider groups, and unquantified anecdotal reports. (See 
table 1.):

Table 1: Assertions of Numbers of Physicians Moving, Retiring, or 
Closing Practices in Response to Malpractice Pressures in Five States:

Florida; Neurosurgeons: [A]; Orthopedic surgeons: [A]; Other surgeons: 
[A]; OB/GYNs: [A]; Other physicians: [A].

Mississippi; Neurosurgeons: 5; Orthopedic surgeons: 3; Other surgeons: 
11; OB/GYNs: 5; Other physicians: 50.

Nevada; Neurosurgeons: 0; Orthopedic surgeons: 2; Other surgeons: 9; 
OB/GYNs: 34; Other physicians: 28.

Pennsylvania; Neurosurgeons: 12; Orthopedic surgeons: 30; Other 
surgeons: 30; OB/GYNs: 24; Other physicians: 63.

West Virginia; Neurosurgeons: [A]; Orthopedic surgeons: [A]; Other 
surgeons: [A]; OB/GYNs: [A]; Other physicians: [A].

Source: State provider organizations.

Note: GAO summarized data from state provider organizations, generally 
for 2001 through 2003.

[A] Provider organizations provided anecdotal reports that were not 
systematically collected or quantified.

[End of table]

Although some reports have received extensive media coverage, in each 
of the five states we found that actual numbers of physician departures 
were sometimes inaccurate or involved relatively few physicians.

* Reports of physician departures in Florida were anecdotal, not 
extensive, and in some cases we determined them to be inaccurate. For 
example, state medical society officials told us that Collier and Lee 
counties lost all of their neurosurgeons due to malpractice concerns; 
however, we found at least five neurosurgeons currently practicing in 
each county as of April 2003. Provider groups also reported that 
malpractice pressures have recently made it difficult for Florida to 
recruit or retain physicians of any type; however, over the past 2 
years the number of new medical licenses issued has increased and 
physicians per capita has remained unchanged.[Footnote 26]

* In Mississippi, the reported physician departures attributed to 
recent malpractice pressures were scattered throughout the state and 
represented 1 percent of all physicians licensed in the state. 
Moreover, the number of physicians per capita has remained essentially 
unchanged since 1997.[Footnote 27]

* In Nevada, 34 OB/GYNs reported leaving, closing practices, or 
retiring due to malpractice concerns; however, confirmatory surveys 
conducted by the Nevada State Board of Medical Examiners found nearly 
one-third of these reports were inaccurate--8 were still practicing and 
3 stopped practicing due to reasons other than malpractice. Random 
calls we made to 30 OB/GYN practices in Clark County found that 28 were 
accepting new patients with wait-times for an appointment of 3 weeks or 
less. Similarly, of the 11 surgeons reported to have moved or 
discontinued practicing, the board found 4 were still practicing.

* In Pennsylvania, despite reports of physician departures, the number 
of physicians per capita in the state has increased slightly during the 
past 6 years.[Footnote 28] The Pennsylvania Medical Society reported 
that between 2002 and 2003, 24 OB/GYNs left the state due to 
malpractice concerns; however, the state's population of women age 18 
to 40 fell by 18,000 during the same time period. Departures of 
orthopedic surgeons comprise the largest single reported loss of 
specialists in Pennsylvania. Despite these reported departures, the 
rate of orthopedic surgeries among Medicare enrollees in Pennsylvania 
has increased steadily for the last 5 years, as it has nationally. (See 
fig. 1.):

Figure 1: Rates of Medicare-Covered Orthopedic Surgeries in 
Pennsylvania Have Increased:

[See PDF for image]

Notes: GAO analysis of Medicare part B claims data.

Rates are based on Medicare part B allowed services per thousand 
Medicare part B fee-for-service beneficiaries and include all 
musculoskeletal surgeries provided by orthopedic surgeons.

[End of figure]

* In West Virginia, provider groups did not provide us with specific 
numbers of physician departures, but did offer anecdotal reports of 
physicians who have moved out of state or left practice. Despite these 
reports, the number of physicians per capita increased slightly between 
1997 and 2002.[Footnote 29]

Some Providers Report Reducing Certain Services, but Access to Care Not 
Widely Affected:

Some providers in each of the five states also reported that physicians 
have recently cut back on certain services they believe to be high risk 
to reduce their malpractice insurance premiums or exposure to 
litigation. Evidence was based on surveys conducted by state and 
national medical and specialty provider groups and anecdotal reports by 
state provider groups, generally between 2001 and 2002. The most 
frequently cited service reductions included spinal surgeries and joint 
revisions and repairs (all five states), mammograms (Florida and 
Pennsylvania), and physician services in a nursing home setting 
(Florida and Mississippi).

Survey data used to identify service cutbacks in response to physician 
concerns about malpractice pressures are not likely representative of 
the actions taken by all physicians. Most surveys had low response 
rates--typically 20 percent or less.[Footnote 30] Moreover, surveys 
often did not identify any one specific service as widely affected or 
identified service reductions in a nonspecific manner. For example, in 
responding to one recent survey, neurologists reported reducing 12 
different types of services; however, the most widely reported 
reduction for any one service type was reported by fewer than 4 percent 
of respondents.[Footnote 31] AMA recently reported that about 24 
percent of physicians in high-risk specialties responding to a national 
survey have stopped providing certain services; however, the response 
rate for this survey was low (10 percent overall), and AMA did not 
identify the number of responses associated with any particular 
service.[Footnote 32]

Our analysis of utilization rates among Medicare beneficiaries for 
three of the specific services frequently cited as being reduced--
spinal surgery, joint revisions and repairs, and mammography--did not 
identify recent reductions. For example, utilization of spinal 
surgeries among Medicare beneficiaries in the five states generally 
increased from July 2000 through June 2002, and is currently higher 
than the national average. (See fig. 2.) Utilization of joint revision 
and repair services among Medicare beneficiaries in the five states is 
slightly below, but has generally tracked the national average and has 
not recently declined.[Footnote 33] (See fig. 3.) Contrary to reports 
of reductions in mammograms in Florida and Pennsylvania, our analysis 
showed that utilization of these services among Medicare beneficiaries 
is higher than the national average in both Florida, where utilization 
rates have recently increased, and in Pennsylvania, where the pattern 
of utilization has not recently changed. (See fig. 4.) We also 
contacted selected hospitals and mammography facilities reported to 
have had problems in these two states and found that the longer wait 
times cited by provider organizations were more likely due to causes 
other than malpractice pressures.[Footnote 34]

Figure 2: Rates of Medicare-Covered Spinal Surgeries in Five States 
with Reported Problems Have Recently Increased:

[See PDF for image]

Notes: GAO analysis of Medicare part B claims data.

[End of figure]

Rates are based on Medicare part B allowed services per thousand 
Medicare part B fee-for-service beneficiaries and include selected 
services (hip, knee, and shoulder repairs/revisions that were 
identified as high risk) provided by orthopedic surgeons.

Figure 3: Rates of Medicare-Covered Joint Revisions and Repairs in Five 
States with Reported Problems Have Not Recently Declined:

[See PDF for image]

Notes: GAO analysis of Medicare part B claims data.

[End of figure]

Figure 4: Rates of Medicare-Covered Mammograms in Florida and 
Pennsylvania Remain above the National Average:

[See PDF for image]

Notes: GAO analysis of Medicare part B claims data.

Rates are based on Medicare part B allowed services per thousand female 
Medicare part B fee-for-service beneficiaries and include all 
mammograms performed by radiologists.

[End of figure]

Although data limitations preclude an analysis of physician services in 
a nursing home setting, interviews with industry representatives did 
not reveal widespread reductions of services provided in these 
facilities. Nursing home representatives in all five states reported 
that facilities are facing increasing malpractice pressures due to 
higher premiums or decreased availability of coverage and in two states 
reported that these pressures are causing some physicians to stop 
providing services in these facilities. However, they also told us that 
residents still receive needed physician services.

Health Care Providers Have Taken Actions to Avoid Access Problems:

Some health care providers have taken certain actions to avoid access 
problems in the face of malpractice-related pressures. Several hospital 
officials we contacted reported they are assuming physicians' liability 
insurance costs to avoid any access problems related to malpractice 
pressures. Officials in 9 of 49 hospitals contacted in the five states 
reported that, in order to retain needed staff, they have either hired 
physicians as direct employees, thereby covering their malpractice 
insurance premiums in full, or provided them with partial premium 
subsidies. An unpublished survey completed by The Hospital & 
Healthsystem Association of Pennsylvania found that 5 of 89 hospitals 
or health systems responding had taken these measures to maintain 
adequate staffing. An official at a small hospital in a largely rural 
Mississippi county told us that the hospital recently hired six family 
practitioners who provide all of its obstetrics services in order to 
assume their liability insurance costs and prevent loss of these 
services after the physicians' premiums increased significantly. An 
official at a West Virginia hospital reported that increasing numbers 
of newly recruited physicians are coming to the area as direct 
employees of hospitals.

In addition, where allowed by state law, some providers are going 
without malpractice insurance coverage. For example, a provider group 
in Mississippi reported that increasing numbers of nursing homes are 
going without coverage for some period of time because insurers are not 
renewing their policies or are raising premiums to rates that are 
unaffordable. According to an official from one insurer of Mississippi 
nursing homes, more than 40 homes statewide were without coverage at 
some point during 2002 as compared to fewer than 5 homes in 2001. 
Similarly, while Florida law does not require that physicians carry 
malpractice insurance, hospitals may impose such a requirement on 
affiliated physicians.[Footnote 35] One hospital contacted in the state 
told us it has loosened this requirement in response to physicians' 
concerns over increasing malpractice premiums.[Footnote 36]

Physicians Reportedly Practice Defensive Medicine, but Prevalence and 
Costs of Such Practices Are Not Reliably Measured:

Several recently published surveys report that physicians practice 
defensive medicine in response to malpractice pressures.[Footnote 37] 
In addition, most published studies designed to measure the prevalence 
of and costs associated with such practices generally conclude that 
physicians practice defensive medicine in specified circumstances and 
that doing so raises health care costs. However, because the surveys 
generally had low response rates and were not precise in measuring the 
prevalence of these practices, and because the studies examined 
physician practice behavior in only narrowly specified clinical 
situations, the results cannot be used to reliably estimate the overall 
prevalence or costs of defensive medicine practices.

Physicians Report Practicing Defensive Medicine, but Surveys Must Be 
Interpreted with Caution:

Physicians responding to surveys reported that they practice defensive 
medicine to varying extents, but low response rates and imprecise 
measurements of defensive medicine practices preclude generalizing 
these responses to all physicians. For example, a 2003 AMA survey found 
that, of the 30 percent of responding physicians who reported recently 
referring more complex cases to specialists, almost all indicated that 
professional liability pressures were important in their decision; and 
an April 2002 survey conducted by the American Academy of Orthopaedic 
Surgeons found that, of the 48 percent of responding orthopedists who 
reported that the costs of malpractice insurance caused them to alter 
their practice, nearly two-thirds reported ordering more diagnostic 
tests.[Footnote 38] However, the response rates for the AMA and AAOS 
surveys were about 10 and 15 percent, respectively, raising questions 
about how representative these responses were of all physicians 
nationwide. Another 2002 survey of 300 physicians conducted by a 
polling firm found that, due to concerns about medical malpractice 
liability, 79 percent of respondents reported ordering more tests, 74 
percent reported referring patients to specialists more often, and 41 
percent reported prescribing more medications than they otherwise would 
based only on medical necessity.[Footnote 39] However, these survey 
results do not indicate whether the respondents practice the cited 
defensive behaviors on a daily basis or only rarely, or whether they 
practice them with every patient or only with certain types of 
patients.

Officials from AMA and several medical, hospital, and nursing home 
associations in the nine states we reviewed told us that defensive 
medicine exists to some degree, but that it is difficult to measure; 
and officials cited surveys and published research but could not 
provide additional data demonstrating the extent and costs associated 
with defensive medicine. Some officials pointed out that factors 
besides defensive medicine concerns also explain differing utilization 
rates of diagnostic and other procedures. For example, a Montana 
hospital association official said that revenue-enhancing motives can 
encourage the utilization of certain types of diagnostic tests, while 
officials from Minnesota and California medical associations identified 
managed care as a factor that can mitigate defensive practices. 
According to some research, managed care provides a financial incentive 
not to offer treatments that are unlikely to have medical 
benefit.[Footnote 40]

Some Research Identifies Defensive Medicine in Certain Clinical 
Situations:

Most research that has attempted to measure defensive practices has 
examined physician practices under specific clinical 
situations.[Footnote 41] For example, based on clinical scenario 
surveys, records review, and a synthesis of prior research, a 1994 
study concluded that the percentage of diagnostic procedures related to 
defensive medicine practices is higher in specific clinical situations, 
such as the management of head injuries in ERs and cesarean deliveries 
in childbirth, but lower when measured across multiple 
procedures.[Footnote 42] The same study also surveyed physicians about 
nine hypothetical clinical scenarios likely to encourage defensive 
medicine practices and found the share of physicians reporting taking 
at least one clinical action primarily out of concern about malpractice 
varied widely depending on the situation--from 5 percent for back pain 
to 29 percent for head trauma. A more recent 1999 study that used 
records review found that reduced malpractice premiums for OB/GYNs were 
related to a statistically significant but small decrease in the rate 
of cesarean sections performed for some groups of mothers, a procedure 
researchers believe to be influenced by physicians' concerns about 
malpractice liability.[Footnote 43]

Some studies have also concluded that certain tort reforms may reduce 
defensive medicine as evidenced by slower growth in health care 
expenditures; however, these studies have not fully considered the 
range of factors that can influence medical spending.[Footnote 44] For 
example, a 1996 study using records review found that for a population 
of elderly Medicare patients treated for acute myocardial infarction or 
ischemic heart diseases, certain tort reforms led to reductions of 5 to 
9 percent in hospital expenditures.[Footnote 45] However, this study 
did not control for other factors that can affect hospital costs, such 
as the extent of managed care penetration in different areas. When 
controlling for managed care penetration in a 2000 follow-up study, the 
same researchers found that the reductions in hospital expenditures 
attributable to direct tort reforms dropped to about 4 
percent.[Footnote 46] Moreover, preliminary findings from a 2003 study 
that replicated and expanded the scope of these studies to include 
Medicare patients treated for a broader set of conditions failed to 
find any impact of state tort laws on medical spending.[Footnote 47] 
Appendix III summarizes the methods, findings, and limitations of 
published studies examining defensive medicine.

Studies Cannot Be Generalized to Reliably Estimate Defensive Medicine 
Prevalence and Costs:

Although available research suggests that defensive medicine may be 
practiced in specific clinical situations, the findings are limited and 
cannot be generalized to estimate the prevalence and costs of defensive 
medicine nationwide. Because the studies focused on specific clinical 
circumstances and populations, even slight changes in these scenarios 
could yield significant changes in the degree of defensive medicine 
practices identified. Consequently, reports that use the results of 
these studies to estimate defensive medicine practices and costs 
nationally are not reliable. For example, recent reports by the U.S. 
Department of Health and Human Services (HHS) applied the 5 to 9 
percent hospital cost savings estimate for Medicare heart patients to 
total national health care spending to estimate the total defensive 
medicine savings that could result if federal tort reforms were 
enacted.[Footnote 48] Because the 5 to 9 percent savings only applies 
to hospital costs for elderly patients treated for two types of heart 
disease, the savings cannot be generalized across all services, 
populations, and health conditions.

States with Certain Noneconomic Damage Caps Had Lower Recent Growth in 
Malpractice Premium Rates and Claims Payments:

Premium rates reported for the physician specialties of general 
surgery, internal medicine, and OB/GYN--the only specialties for which 
data were available--were relatively stable on average in most states 
from the mid-to late 1990s and then began to rise, but more slowly 
among states with certain noneconomic damage caps.[Footnote 49] 
Malpractice claims payments against all physicians between 1996 and 
2002 also tended to be lower and grew less rapidly on average in states 
with these damage caps than in states with limited reforms; however, 
these averages obscured wide variation between states in any given year 
and for individual states from year to year. Like the premium rate 
data, these claims payment data do not depict the experience of all 
providers; they exclude institutional providers such as hospitals and 
nursing homes, for which comprehensive data were not available. 
Moreover, differences in both premiums and claims payments are also 
affected by multiple factors in addition to damage caps, and we could 
not determine the extent to which differences among states were 
attributable to the damage caps or to additional factors.

Premium Growth Was Lower in States with Noneconomic Damage Caps Than in 
States with Limited Reforms:

The average medical malpractice premium rates across the three 
specialties reported by MLM (general surgery, internal medicine, and 
OB/GYN) remained relatively stable during the mid-to late-1990s. From 
1996 to 2000, average premium rates for all states changed little, as 
did average premium rates for states with certain caps on noneconomic 
damages and states with limited reforms, increasing or decreasing 
annually by no more than about 5 percentage points on average.[Footnote 
50] After 2000, premium rates began to rise across most states on 
average, but more slowly among the states with certain noneconomic 
damage caps. In particular, from 2001 to 2002, the average rates of 
increase in the states with noneconomic damage caps of $250,000 and 
$500,000 or less were 10 and 9 percent, respectively, compared to 29 
percent in the states with limited reforms. (See fig. 5.):

Figure 5: Premium Rates for Three Physician Specialties Rose After 
2000, but to a Lesser Extent in States with Noneconomic Damage Caps:

[See PDF for image]

Notes: GAO analysis of MLM base premium rates, excluding discounts, 
rebates, and surcharges, reported for the specialties of general 
surgery, internal medicine, and OB/GYN.

Premiums are adjusted for inflation to 2002 dollars.

[A] This category excludes states with caps of $250,000.

[End of figure]

The recent increases in premium rates were also lower for each reported 
physician specialty in the states with these noneconomic damage caps. 
From 2001 to 2002, the average rates of premium growth for each 
specialty in the states with these noneconomic damage caps were 
consistently lower than the growth rates in the limited reform states. 
(See fig. 6.):

Figure 6: Recent Premium Growth Was Lower for Three Physician 
Specialties in States with Noneconomic Damage Caps:

[See PDF for image]

Note: GAO analysis of MLM base premium rates, excluding discounts, 
rebates, and surcharges, reported for the specialties of general 
surgery, internal medicine, and OB/GYN.

Premiums are adjusted for inflation to 2002 dollars.

[A] This category excludes states with caps of $250,000.

[End of figure]

In addition to including rates for only three specialties, premium 
rates reported by MLM are subject to other limitations. First, because 
MLM relies on a voluntary survey, its data do not include all insurers 
that provide coverage in each state. Certain companies that may have a 
large market share in a particular state may not be included. MLM 
estimates that its 2002 survey may exclude about one-third of the total 
malpractice insurance market nationwide. Second, insurers that do 
report rates have not consistently done so across all the years, or 
have not consistently reported premiums in different geographic areas 
within each state. We generally excluded data from insurers that did 
not consistently report premium rates across most of the years studied. 
Third, premium rates do not reflect discounts, premium offsets, or 
rebates that may effectively reduce the actual premium rate, or 
surcharges that are assessed in certain states for physician 
participation in mandatory state-funded insurance programs. These 
surcharges can range from a small amount to more than the base premium 
rate.

Other studies have found a relationship between direct tort reforms 
that include noneconomic damage caps and lower rates of growth in 
premiums.[Footnote 51] For example, in a recent analysis of malpractice 
premiums in states with and without certain medical malpractice tort 
limitations, the Congressional Budget Office (CBO) estimated that 
certain caps on damage awards in combination with other elements of 
proposed federal tort reform legislation would effectively reduce 
malpractice premiums on average by 25 to 30 percent over the 10-year 
period from 2004 through 2013.[Footnote 52] A 1997 study that assessed 
physician-reported malpractice premiums from 1984 through 1993 found 
that direct reforms, including caps on damage awards, lowered the 
growth in malpractice premiums within 3 years of their enactment by 
approximately 8 percent.[Footnote 53]

Average Claims Payments and Growth Lower in States with Noneconomic 
Damage Caps Than in States with Limited Reforms:

Average per capita payments for claims against all physicians tended to 
be lower on average in states with noneconomic damage caps than in 
states with limited reforms.[Footnote 54] From 1996 through 2002, the 
average per capita payments were $10 for states with these damage caps 
compared with $17 for states with limited reforms. Within these 
averages, however, were wide variations among states. For example, in 
2002 the per capita claims payments among states with these caps ranged 
from $4 to $16, compared with $3 to $33 among states with limited 
reforms. In addition, two states among those with limited reforms had 
consistently higher average claims payments, raising the overall 
average among this group of states.[Footnote 55] Absent the claims 
experience of these two states, the average claims payment for states 
with limited reforms from 1996 through 2002 would decrease to $11, only 
slightly higher than the $10 in states with these damage caps.

Average growth in per capita claims payments for all physicians was 
also lower among the states with caps on noneconomic damages than among 
the states with limited reforms. From 1996 through 2002 average per 
capita claims payments grew by 5 and 6 percent in the states with 
noneconomic damage caps of $250,000 and $500,000 or less, respectively, 
compared to 10 percent in the states with limited reforms. However, the 
growth in these payments also varied widely among states in any given 
year and within individual states from year to year. For example, from 
2001 to 2002, the average growth in claims payments on an individual 
state basis ranged from a 68 percent decrease in the District of 
Columbia to a 70 percent increase in Wyoming. Within the same state, 
growth rates fluctuated widely from year to year. For example, 
Mississippi experienced an 18 percent decrease in claims payments from 
1999 to 2000, followed by a 61 percent increase in 2001, and a 5 
percent decrease in 2002.

The claims payment data reported to NPDB that we analyzed contain 
certain limitations. The data include malpractice claims against 
licensed physicians, and not against other institutional providers such 
as hospitals and nursing homes, thus limiting the overall completeness 
of the data across all providers. In addition, as we have previously 
reported, certain claims payments may be underreported to NPDB. When 
physicians are not specifically named in a malpractice settlement, the 
related claims payments may not be reported.[Footnote 56] Nevertheless, 
because insurers must report payment of claims against physicians 
subject to federal law and not varying state laws, NPDB data are useful 
in comparing trends across states. Other sources of claims payment data 
are subject to limitations of completeness or comparability.[Footnote 
57] See appendix II for more information on the limitations of NPDB and 
other claims data sources.

For states that have adopted certain tort reforms, especially caps on 
noneconomic damages, other studies have also found associations with 
lower claims payments. In its recent analysis of malpractice premiums 
and claims payments in states with various medical malpractice tort 
limitations, CBO found that caps on damage awards result in lower 
malpractice costs.[Footnote 58] Another study based on claims data in 
19 states showed that direct reforms were associated with a smaller 
percentage of claims resolved with some compensation to plaintiffs and 
reduced claim frequency.[Footnote 59] In contrast, other researchers 
who have examined the effect of indirect tort reforms on malpractice 
costs have found mixed results.[Footnote 60] One study found that 
indirect reforms did not reduce malpractice cost indicators, while 
another found that a greater number of reforms (both direct and 
indirect) were associated with lower malpractice costs.[Footnote 61] 
These studies have also relied on claims data that have limitations in 
terms of their completeness and comparability.

Factors Other Than Caps on Noneconomic Damages Also Affect Premiums and 
Claims Payments Trends:

Differences in malpractice premiums and claims payments across states 
are influenced by several factors other than noneconomic damage caps. 
First, the manner in which damage caps are administered can influence 
the ability of the cap to restrain claims and thus premium costs. Some 
states permit injured parties to collect damages only up to the 
specified level of the cap regardless of the number of defendants, 
while other states permit injured parties to collect the full cap 
amount from each defendant named in a suit. Malpractice insurers told 
us that imposing a separate cap on amounts recovered from each of 
several defendants increases total claims payouts, which can hinder the 
effectiveness of the cap in constraining premium growth. Second, tort 
reforms unrelated to caps can also affect premium and claims costs. For 
example, California tort reform measures not only include a $250,000 
cap but also allow other collateral sources to be considered when 
determining how much an insurer must pay in damages and allow periodic 
payment of damages rather than requiring payment in a lump sum, among 
other measures. Malpractice insurers told us that these provisions in 
addition to the cap have helped to constrain premium growth in that 
state. In Minnesota, which has no caps on damages but has relatively 
low growth in premium rates and claims payments, trial attorneys 
maintain that prescreening requirements reduce claim costs and premiums 
by preventing some meritless claims from going to trial. Third, state 
laws and regulations unrelated to tort reform, such as premium rate 
regulations, vary widely and can influence premium rates. Some states 
such as Minnesota and Mississippi tend not to regulate rates, while 
others, such as California, require state approval of the premium rates 
charged by insurers.[Footnote 62] Finally, insurers' premium pricing 
decisions are affected by their losses on medical malpractice claims 
and income from investments, and other market conditions such as the 
level of market competition among insurers and their respective market 
shares.[Footnote 63] We could not determine the extent to which 
differences in premium rates and claims payments across states were 
attributed only to damage caps or also to these additional factors.

External Comments and Our Evaluation:

We received comments on a draft of this report from three independent 
health policy researchers and from AMA. Each of the researchers has 
expertise in malpractice-related issues and has conducted and published 
research on the effects of malpractice pressures on the health care 
system, and two of the three are physicians. The independent 
researchers generally concurred with our findings and provided 
technical comments, which we incorporated as appropriate.

In its written comments, AMA questioned our finding that rising 
malpractice premiums have not contributed to widespread health care 
access problems, expressing concern that the scope of our work limited 
our ability to fully identify the extent to which malpractice-related 
pressures are affecting consumers' access to health care. We disagree 
with AMA, as explained below. However, in response to AMA and the other 
reviewers' comments, we clarified the report's discussion of the scope 
of work and methods used to assess health care access issues. AMA's 
comments fell into four general areas: completeness of evidence 
examined, measures used to assess access problems, time lags in 
available data, and the cost and impact of defensive medicine.

Completeness of Evidence Examined:

AMA questioned our finding that access problems were not widespread 
based on our work in 5 states, whereas it has identified 18 states "in 
a full-blown liability crisis." It further cited results from its own 
recent physician survey on professional liability as evidence that 
medical liability concerns are causing physicians to limit their 
practices. The report clearly states the scope of our work and does not 
attempt to generalize our findings beyond the 5 states with reported 
problems that we reviewed. However, these 5 states were among the most 
visible and often-cited examples of "crisis" states by AMA and other 
provider groups. We believe that our finding that malpractice-related 
concerns contributed to localized but not widespread access problems in 
these states provides relevant and important insight into the overall 
problem. With respect to AMA's reference to evidence available from its 
own survey, our report notes that the low response rate of 10 percent 
to its survey precludes the ability to reliably generalize the survey 
results to all physicians.

AMA suggested that we withhold release of the report until we contacted 
state and national medical and specialty associations to obtain more 
complete and accurate information about access to care problems and it 
provided contacts for associations in each of the five states with 
reported problems and for four national specialty associations. We made 
these contacts throughout the course of our work, and the information 
these associations provided formed the basis for many of our findings. 
As the draft report noted, we contacted state medical, hospital, and 
nursing home association representatives in each of the five states 
with reported problems. We also contacted nine national medical and 
specialty associations, including three of the four AMA cited, which 
were specified in the draft report. In response to AMA's comments, we 
added an appendix to specify the names of each national and state 
provider association we contacted during the course of our work.

AMA commented that we failed to account for the two clinical areas of 
patient care in which impairment of access has been the most egregious: 
obstetrical and ER services. It attributed its concern to our 
acknowledgment in the report that we were unable to use Medicare claims 
data to investigate reported concerns about these services. Because of 
the recognized limitations of Medicare claims data for these and other 
services, we used other methods to explore whether malpractice-related 
pressures had affected access to ER on-call surgical services and 
newborn deliveries and indeed found--and reported--evidence of access 
problems for these services in localized areas. In response to AMA and 
technical comments from the other reviewers, we clarified the report's 
discussion of our methodology for this issue.

Measures Used to Assess Access Problems:

AMA commented that using aggregated data on physician supply to draw 
conclusions about access to care is problematic. It said that 
physicians tend to hold multiple state licenses and typically retain 
their licenses when they relocate their practices, thus potentially 
obscuring the supply of practicing physicians, and overall counts of 
physicians can obscure the impact of changes for different specialties 
and different jurisdictions. We agree that measuring changes in 
physician supply--especially changes due to malpractice-related 
issues--and the related effects on access to care is problematic. 
Sharing AMA's concerns, during the course of our work we obtained 
available data reported by state medical licensing agencies for newly 
licensed physicians and for physicians practicing in the state whenever 
possible rather than for all licensed physicians and contrasted those 
data with reports of departing physicians. As noted in the draft 
report, although we reported physician supply and practice changes at 
the state level, the number of recent departures attributed 
specifically to malpractice concerns was relatively small and usually 
not concentrated in particular locales. Also as noted in the draft 
report, we further explored reports of specialty-specific problems, 
such as orthopedic surgeons in Pennsylvania and OB/GYNs in Nevada. For 
example, we analyzed rates of all procedures performed by orthopedic 
surgeons in Pennsylvania and found them to be growing, and called a 
random sample of OB/GYN practices in Clark County, Nevada, and on that 
basis determined that obstetrical care was readily available. Moreover, 
our Medicare claims analysis of certain high-risk services was 
specialty-specific. For example, to assess assertions by orthopedic 
surgeons that they have reduced the provision of spinal surgeries and 
joint revisions and repairs, our analysis was limited to only those 
services performed by orthopedic surgeons.

Time Lags in Available Data:

AMA commented that our analysis of Medicare claims data as of June 2002 
does not capture the current experience of physician decisions to 
curtail certain services or to retire or relocate their practices, the 
impact of which takes time to develop. We agree it is challenging to 
identify data that are sufficiently current and reliable to describe 
the effects of reported problems. However, we reported that premium 
increases began about 2000, and others have found that premiums began 
increasing as early as the late 1990s. We therefore believe that 
analyzing Medicare claims data through June 2002 provides important 
insights into at least 2 years of this most recent period of rising 
premiums. Moreover, we augmented our Medicare claims analysis with more 
recent qualitative data, such as interviews in late 2002 and early 
2003, with national and state provider associations and local providers 
in areas where access problems were reported to exist.

The Cost and Impact of Defensive Medicine:

AMA commented that while specific estimates of defensive medicine costs 
have not been conclusive, the vast majority of peer-reviewed research 
indicates that those costs are enormous, in the tens of billions of 
dollars per year. To support this point, AMA cited three recent 
government studies. As our report notes, the peer-reviewed literature 
attempts to quantify the extent and sometimes the cost of defensive 
medicine under narrowly defined clinical circumstances that cannot be 
generalized more broadly. Two of the three government studies that AMA 
cited are examples of what we believe to be overgeneralizations of 
prior study results. We cite one of these by way of example in our 
report. The third government study AMA cited does not address the cost 
of defensive medicine but instead explicitly notes the difficulty of 
estimating such costs and the speculative nature of existing estimates.

AMA also commented that our draft report ignored the impact of 
defensive medicine costs in terms of patient access, expressing the 
view that these costs are ultimately reflected in rising health 
insurance premiums that contribute substantially to the number of 
uninsured. Our draft report noted that, because of the absence of data 
to reliably measure overall malpractice-related costs--such as the 
combined cost of malpractice insurance premiums, litigation, and 
defensive medicine practices--we did not assess the indirect impact on 
access to care that may result from any added costs that malpractice 
pressures impose on the health care system. In response to AMA's 
comment, we moved our discussion of this point to the report's Results 
in Brief.

As agreed with your offices, unless you publicly announce this report's 
contents earlier, we plan no further distribution until 30 days after 
its issue date. At that time, we will send copies to other interested 
congressional committees and Members of Congress. We will also make 
copies available to others on request. In addition, this report is 
available at no charge at the GAO Web site at http://www.gao.gov.

Please call me at (202) 512-7118 or Randy DiRosa at (312) 220-7671 if 
you have any questions. Other major contributors are listed in appendix 
IV.

Kathryn G. Allen 
Director, Health Care--Medicaid and Private Health Insurance Issues: 

Signed by Kathryn G. Allen: 

[End of section]

Appendix I: National and State Provider Associations Contacted:

During the course of our work, we contacted a number of national and 
state health care provider associations in order to identify the 
actions health care providers have taken in response to malpractice 
pressures and the localized effects of any reported actions on 
consumers' access to health care.

National Provider Associations:

American Academy of Neurology American Association of Neurological 
Surgeons American Association of Orthopaedic Surgeons American College 
of Emergency Physicians American College of Obstetricians and 
Gynecologists American College of Radiology American Health Care 
Association American Hospital Association American Medical 
Association:

State Provider Associations:

Table 2: State Provider Associations GAO Contacted:

State: California: 

Provider association: California Association of 
Health Facilities.

Provider association: California Healthcare Association.

Provider association: StateColorado[A]: California Medical 
Association.

State: Colorado[A]: 

Provider association: Colorado Health and Hospital 
Association.

State: Florida: Provider association: Florida Health Care Association.

Provider association: Florida Hospital Association.

Provider association: Florida Medical Association.

State: Minnesota; Provider association: Minnesota Health and Housing 
Alliance.

Provider association: Minnesota Hospital Association.

Provider association: Minnesota Medical Association.

State: Mississippi; Provider association: Mississippi Health Care 
Association.

Provider association: Mississippi Hospital Association.

Provider association: Mississippi State Medical 
Association.

State: Montana; Provider association: Association of Montana Health 
Care Providers.

Provider association: Montana Medical Association.

State: Nevada; Provider association: Nevada Health Care Association.

Provider association: Nevada Hospital Association.

Provider association: Nevada State Medical 
Association.

State: Pennsylvania; Provider association: The Hospital & Healthsystem 
Association of Pennsylvania.

Provider association: Pennsylvania Health Care Association.

Provider association: Pennsylvania Medical Society.

State: West Virginia; Provider association: West Virginia Health Care 
Association.

Provider association: West Virginia Hospital Association.

Provider association: West Virginia State Medical Association.

[A] We also contacted officials from the Colorado Medical Society and 
the Colorado Health Care Association, but they did not respond to our 
request for an interview.

[End of table]

[End of section]

Appendix II: Scope and Methodology:

In response to concerns about rising malpractice premiums, we examined 
how health care provider responses to rising premiums have affected 
access to health care, what is known about how rising premiums and fear 
of litigation cause health care providers to practice defensive 
medicine, and how rates of growth in malpractice premiums and claims 
payments compare across states with varying levels of tort reform laws.

Consumers' Access to Health Care:

To evaluate how actions taken by physicians in response to malpractice 
premium increases have affected consumers' access to health care, we 
focused our review at the state level because reliable national data 
concerning physician responses to malpractice pressures were not 
available. We selected nine states that encompass a range of premium 
pricing and tort reform environments. Five of the states--Florida, 
Mississippi, Nevada, Pennsylvania, and West Virginia--are among those 
cited as "crisis" or "problem" states by the American Medical 
Association (AMA) and other health care provider organizations based on 
such factors as higher than average increases in malpractice insurance 
premium rates, reported difficulties obtaining malpractice coverage, 
and reported actions taken by providers in response to their concerns 
about rising premiums and malpractice litigation. Four of the states--
California, Colorado, Minnesota, and Montana--are not cited by provider 
groups as experiencing malpractice-related problems. (See table 3.):

Table 3: Tort Reforms and Average Rates of Premium Increases in Nine 
States:

Extent of malpractice problems: States with reported problems[D]: 
 
State: Florida[E]; Tort reforms in place as of 1995[A]: Noneconomic 
damage cap of $250,000: No; Tort reforms in place as of 1995[A]: 
Noneconomic damage cap of $500,000 or less[B]: No; Tort reforms in 
place as of 1995[A]: Other tort reforms: Yes[F]; Tort reforms in place 
as of 1995[A]: Limited tort reforms[C]: No; Average annual premium 
rate increase, 2001-2002 (percentage change): 23.

State: Mississippi; Tort reforms in place as of 1995[A]: Noneconomic 
damage cap of $250,000: No; Tort reforms in place as of 1995[A]: 
Noneconomic damage cap of $500,000 or less[B]: No; Tort reforms in 
place as of 1995[A]: Other tort reforms: No; Tort reforms in place 
as of 1995[A]: Limited tort reforms[C]: Yes; Average annual premium 
rate increase, 2001-2002 (percentage change): 45.

State: Nevada; Tort reforms in place as of 1995[A]: Noneconomic 
damage cap of $250,000: No; Tort reforms in place as of 1995[A]: 
Noneconomic damage cap of $500,000 or less[B]: No; Tort reforms 
in place as of 1995[A]: Other tort reforms: No; Tort reforms in 
place as of 1995[A]: Limited tort reforms[C]: Yes; Average annual 
premium rate increase, 2001-2002 (percentage change): 28.

State: Pennsylvania; Tort reforms in place as of 1995[A]: Noneconomic 
damage cap of $250,000: No; Tort reforms in place as of 1995[A]: 
Noneconomic damage cap of $500,000 or less[B]: No; Tort reforms 
in place as of 1995[A]: Other tort reforms: No; Tort reforms in 
place as of 1995[A]: Limited tort reforms[C]: Yes; Average annual 
premium rate increase, 2001-2002 (percentage change): 35.

State: West Virginia; Tort reforms in 
place as of 1995[A]: Noneconomic damage cap of $250,000: States without 
reported problems: No; Tort reforms in place as of 1995[A]: 
Noneconomic damage cap of $500,000 or less[B]: States without reported 
problems: No; Tort reforms in place as of 1995[A]: Other tort 
reforms: States without reported problems: Yes[G]; Tort reforms in place 
as of 1995[A]: Limited tort reforms[C]: States without reported 
problems: No; Average annual premium rate increase, 2001-2002 
(percentage change): States without reported problems: 12.

States without reported problems: 

State: California; Tort reforms in place as of 1995[A]: Noneconomic 
damage cap of $250,000: Yes; Tort reforms in place as of 1995[A]: 
Noneconomic damage cap of $500,000 or less[B]: No; Tort reforms in 
place as of 1995[A]: Other tort reforms: Yes; Tort reforms in place as of 
1995[A]: Limited tort reforms[C]: No; Average annual premium rate 
increase, 2001-2002 (percentage change): 6.

State: Colorado; Tort reforms in place as of 1995[A]: Noneconomic 
damage cap of $250,000: Yes; Tort reforms in place as of 1995[A]: 
Noneconomic damage cap of $500,000 or less[B]: No; Tort reforms in 
place as of 1995[A]: Other tort reforms: Yes; Tort reforms in place as of 
1995[A]: Limited tort reforms[C]: No; Average annual premium rate 
increase, 2001-2002 (percentage change): 8.

State: Minnesota; Tort reforms in place as of 1995[A]: Noneconomic 
damage cap of $250,000: No; Tort reforms in place as of 1995[A]: 
Noneconomic damage cap of $500,000 or less[B]: No; Tort reforms 
in place as of 1995[A]: Other tort reforms: Yes[F]; Tort reforms in 
place as of 1995[A]: Limited tort reforms[C]: No; Average annual 
premium rate increase, 2001-2002 (percentage change): 5.

State: Montana; Tort reforms in place as of 1995[A]: Noneconomic 
damage cap of $250,000: Noneconomic damage cap of $250,000: Yes; Tort 
reforms in place as of 1995[A]: Noneconomic damage cap of $500,000 or 
less[B]: Noneconomic damage cap of $500,000 or less[B]: No; Tort 
reforms in place as of 1995[A]: Other tort reforms: Other tort reforms: 
X; Tort reforms in place as of 1995[A]: Limited tort reforms[C]: 
Limited tort reforms[C]: No; Average annual premium rate increase, 
2001-2002 (percentage change): Average annual premium rate increase, 
2001-2002 (percentage change): 10.

Sources: National Conference of State Legislatures (NCSL) and Medical 
Liability Monitor (MLM).

Notes: GAO analysis of state tort reforms obtained from the NCSL "State 
Medical Liability Laws Table" (Oct. 16, 2002) and independently 
confirmed in selected instances.

Premium increases are based on base rates reported by MLM for 
specialties of general surgery, internal medicine, and obstetrics/
gynecology (OB/GYN). Premiums are in 2002 dollars.

[A] States are categorized based on tort reforms enacted as of 1995 
because research indicates any impact reforms may have on premium rates 
or claims payments would follow the implementation of tort reforms by 
at least 1 year. Mississippi, Nevada, and West Virginia have recently 
enacted varying tort reforms.

[B] This category excludes states with caps of $250,000.

[C] States had no damage caps or collateral source reform.

[D] Problem status based on the American Medical Association (AMA) 
classification of "crisis" state as of April 2003.

[E] Florida enacted a noneconomic damage cap of $250,000 in 1988, but 
the cap was limited to cases involving arbitration; noneconomic damage 
limits may increase if the plaintiff or defendant refuses to arbitrate.

[F] Florida and Minnesota enacted mandatory collateral source offsets 
that directly reduced expected malpractice awards.

[G] West Virginia enacted a $1 million cap on noneconomic damages.

[End of table]

In each of the nine states we reviewed, we contacted or interviewed 
officials from associations representing physicians, hospitals, and 
nursing homes to more specifically identify the actions physicians have 
taken in response to malpractice pressures and the localized effects of 
any reported actions on access to services. (See app. I for a complete 
list of the provider organizations we contacted at the state and 
national levels.) Such actions were reported only in the five states 
with reported problems. In these five states we obtained and reviewed 
the evidence upon which the reports were based. Evidence of physician 
departures, retirements, practice closures, and reduced availability of 
certain hospital-based services consisted of survey results, 
information compiled and quantified by provider groups, and 
unquantified anecdotal reports collected by provider groups. Although 
we did not attempt to confirm each report cited by state provider 
groups, we judgmentally targeted follow-up contacts with local 
providers where the reports suggested potentially acute consumer access 
problems or where multiple reports were concentrated in a geographic 
area. With the local providers we contacted directly, including 
representatives of physician practices, clinics, and hospitals, we 
discussed the reports provided by the state provider groups and 
explored the resulting implications for consumers' access to health 
care. In total, we contacted 49 hospitals and 61 clinics and physician 
practices in the five states. From these contacts we identified 
examples of access problems that were related to providers' concerns 
about malpractice-related pressures as well as examples of provider 
actions that did not appear to affect consumer access or were not 
substantiated.

We separately examined evidence of specific high-risk services that 
providers reportedly reduced in response to concerns about malpractice 
pressures. Such evidence consisted of results from surveys conducted by 
national and state-level medical, hospital, and specialty associations 
that identified the high-risk procedures physicians reported reducing 
or eliminating in response to malpractice pressures. High-risk services 
commonly identified in these surveys included spinal surgeries, joint 
revisions and repairs, mammograms, physician services in nursing homes, 
emergency room services, and obstetrics. We analyzed Medicare 
utilization data to assess whether reported reductions in three of 
these high-risk services--spinal surgery, joint revisions and repairs, 
and mammograms---have had a measurable effect on consumers' access to 
these services.[Footnote 64] To calculate service utilization rates per 
thousand fee-for-service Medicare beneficiaries enrolled in part B, we 
used Medicare part B physician claims data from January 1997 through 
June 2002 and the Medicare denominator files from 1997 through 
2001.[Footnote 65] For 2002, we estimated each state's part B fee-for-
service beneficiary count by adjusting the 2001 count by the change in 
the 65 and older population between 2001 and 2002 and the change in 
Medicare beneficiaries enrolled in part B managed care plans between 
January 1 and July 1, 2002.[Footnote 66]

Defensive Medicine Practices:

To assess what is known about how rising premiums and fear of 
litigation cause health care providers to practice defensive medicine, 
we reviewed studies that examined the prevalence and costs of defensive 
medicine and the potential impact of tort reform laws on mitigating 
these costs that were published in 1994 or later, generally in peer-
reviewed journals, or were conducted by government research 
organizations. We identified these studies by searching databases 
including MEDLINE, Econlit, Expanded Academic ASAP, and ProQuest; and 
through contacts with experts and affected parties. Several studies 
published prior to 1994 were reviewed by the Office of Technology 
Assessment (OTA) in its comprehensive 1994 report on defensive 
medicine, which we included in our review. In addition, we also 
explored the issue with medical provider organizations and examined the 
results of several recent surveys, including those conducted by 
national health care provider organizations, in which providers were 
asked about their own defensive medicine practices.

Malpractice Premium Rate and Claims Payments Growth:

To assess the growth in medical malpractice premium rates and claims 
payments across states, we compared trends in states with tort reforms 
that include noneconomic damage caps (4 states with a $250,000 cap and 
8 states with a $500,000 or less cap[Footnote 67]) to the 11 states 
(including the District of Columbia) with limited reforms and the 
average for all states. We focused our analysis on those states with 
noneconomic damage caps as a key tort reform because such caps are 
included in proposed federal tort reform legislation and because 
published research generally reports that such caps have a greater 
impact on medical malpractice premium rates and claims payments than 
some other types of tort reform measures. We did not separately assess 
trends in the 28 states with various other tort reforms because of the 
wide range of often dissimilar and incomparable tort reforms that are 
included among these states. Because research suggests that any impact 
of tort reforms on premiums or claims can be expected to follow the 
implementation of the reforms by at least 1 year, we grouped states 
into their respective categories based on reforms that had been enacted 
no later than 1995 and reviewed premium rate and claims payment data 
for the period 1996 through 2002. We relied upon a summary of state 
tort reforms compiled by the National Conference of State Legislatures 
(NCSL) to place states within the reform categories and reviewed the 
information with respect to the 9 study states for accuracy in February 
2003. (See table 4.):

Table 4: State Tort Reform Categories, Based on Reforms in Place as of 
1995:

[See PDF for image]

Source: NCSL.

Notes: GAO analysis of summary data compiled by NCSL (Oct. 16, 2002). 
We independently reviewed selected sections for accuracy.

[A] In states with patient compensation funds (PCF), the fund cap, 
rather than the per provider cap, is considered under these criteria. 
PCFs are either voluntary or mandatory state-sponsored funds that 
provide insurance coverage for health care providers beyond that 
guaranteed by the provider's medical liability insurance policy.

[B] States had a noneconomic or total damage cap above $500,000, any 
punitive damage cap, or collateral source reform.

[C] States had no damage caps or collateral source reform.

[D] Caps may be increased or removed under special circumstances.

[E] Louisiana's PCF cap is subject to a total cap of $500,000 for all 
claims of malpractice. Amounts awarded for future medical expenses are 
paid from the state fund and not by individual providers, and those 
amounts are not subject to the $500,000 limit.

[F] Missouri's cap is indexed to inflation and was $500,000 in 1997, 
increasing to $547,000 by 2002.

[G] Florida enacted a noneconomic damage cap of $250,000 in 1988, but 
the cap was limited to cases involving arbitration; noneconomic damage 
limits may increase if the plaintiff or defendant refuses to arbitrate.

[H] Kansas enacted a noneconomic damage cap of $250,000 in 1988, but 
these damages are recoverable by each party from all defendants.

[I] A noneconomic damage cap is limited to wrongful death cases.

[J] Damage cap increased beyond $500,000 during 1995.

[End of table]

To assess the growth in medical malpractice premiums, we analyzed 
state-level malpractice premium rates for the specialties of general 
surgery, internal medicine, and obstetrics/gynecology (OB/GYN) 
reported by insurers to the Medical Liability Monitor (MLM) from 1996 
to 2002.[Footnote 68] Our analysis does not capture the experience of 
other physician specialties and other types of medical providers such 
as hospitals and nursing homes. MLM reports base premium rates that do 
not reflect discounts or rebates that may effectively reduce the actual 
premium rates charged. We generally excluded data from insurers that 
did not consistently report premium rates across most of the years 
studied. We also excluded surcharges for contributions to state patient 
compensation funds (PCF) because these were inconsistently reported 
across states and years.[Footnote 69] We adjusted rates for inflation 
using the urban consumer price index. We calculated a composite average 
premium across all three specialties, as well as specialty-specific 
average premiums, for each year. We then analyzed growth rates in these 
average premiums from 1996 through 2002 across all states.

To assess the growth in medical malpractice claims payments, we 
analyzed state level claims payment data from the National Practitioner 
Data Bank (NPDB) from 1996 to 2002, which had been adjusted to 2002 
dollars.[Footnote 70] We calculated average per capita claims payments 
and their growth rates for each state across this time frame. Assuming 
a 1-year lag to allow the reforms to affect these indicators, we 
calculated overall averages of these indicators from 1996 to 2002, and 
used these averages to compare average per capita payments and their 
rates of growth across the reform categories.

The NPDB claims data we analyzed contain notable limitations. First, 
they include malpractice claims against licensed physicians only, and 
not against institutional providers such as hospitals and nursing 
homes.[Footnote 71] Secondly, as we have previously reported, NPDB 
claims may be underreported. When physicians are not specifically named 
in a malpractice judgment or settlement, the related claims are not 
reported to the data bank, and certain self-insured and managed care 
plans may be underreported as well.[Footnote 72] The extent to which 
this underreporting occurs is not known. Finally, NPDB data do not 
capture legal and other administrative costs associated with 
malpractice claims.

We examined other sources of information on claims payments, and found 
none to be a comprehensive data source for each state that captures 
malpractice claims costs from all segments of the malpractice insurance 
market--commercial insurers, physician-mutual companies, and self-
insured and other groups. For example, data reported to the National 
Association of Insurance Commissioners (NAIC) have been used in other 
research; however, data are not reported consistently across states and 
exclude payments from certain insurers. According to NAIC officials, 
the laws that dictate reporting requirements differ by state, and not 
all insurers are required to report in every state. They also stated 
that exempted insurers can include those operating in a single state 
and certain physician mutual companies.[Footnote 73] In all states, 
self-insured groups, which represent a substantial proportion of the 
medical malpractice insurance market, are exempted from 
reporting.[Footnote 74] Similarly, the Insurance Services Office (ISO) 
is a private organization providing state-level price advisory 
information to state insurance regulators. However, ISO does not 
operate in all states, nor does it uniformly collect data on hospital 
claims, or claims from physician mutual companies, and represents only 
25 to 30 percent of the total medical malpractice market. Physician 
Insurers Association of America is an association of physician mutual 
companies; however, it does not share proprietary state-level claims 
data. Jury Verdict Research is a private research organization that 
collects data from several different sources, including attorneys and 
media reports, among others. Some have criticized the accuracy of this 
data set for several reasons, including a varied and unsystematic data 
collection process and because large verdict awards may be more likely 
to be included than smaller verdict awards.

[End of section]

Appendix III: Summary of Selected Research Designed to Measure Defensive 
Medicine Prevalence and Costs:

Table 5 summarizes the scope, methods, results, and limitations of 
studies that examined the prevalence and costs of defensive medicine 
practices or the potential impact of tort reform laws on mitigating 
defensive medicine costs. Studies were published in 1994 or later, 
generally in peer-reviewed journals, or were conducted by government 
research organizations.

Table 5: Summary of Selected Research Designed to Measure Defensive 
Medicine Prevalence and Costs:

Study: OTA, 1994[A]; Scope: Physicians from three national specialty 
societies (1993 data), physicians from New Jersey (1993 data), and 
cesarean deliveries in New York State (1984 data) and Washington State 
(1989 data); Method: Physician clinical scenario surveys, records 
reviews, and synthesis of prior research; Results: Among other 
findings, defensive medicine causes less than 8 percent of diagnostic 
procedures and varies significantly by clinical situation; 
Limitations: Physician clinical scenario surveys were designed to 
elicit defensive medicine practices among physicians; hence, they may 
overestimate the rate at which defensive medicine is actually 
practiced.

Study: Sloan and others, 1995[B] and 1997c; Scope: Births in Florida in 
1987; Method: Survey of mothers and records reviews; Results: An 
increased threat of malpractice litigation is not associated with 
improved birth outcomes, and malpractice pressures generally had no 
impact on delivery method (cesarean vs. vaginal); Limitations: Results 
cannot be generalized, as study only assessed practice patterns in one 
state in 1 year.

Study: Kessler and McClellan, 1996[D]; Scope: Medicare beneficiaries 
treated for a new heart attack or new ischemic heart disease (1984, 
1987, and 1990 data); Method: Records reviews; Results: Direct tort 
reforms enacted by states between 1985 and 1990 reduced hospital 
expenditures for Medicare patients with a new heart attack or new 
ischemic heart disease by 5 to 9 percent, respectively; indirect 
reforms had no effect. Among states adopting direct reforms prior to 
1985, no consistent effect was found; Limitations: Results cannot be 
generalized to all patients and procedures, and certain other factors 
that can influence practice patterns and health care expenditures (such 
as the prevalence of managed care in an area) were not controlled for.

Study: Dubay, Kaestner, and Waidmann, 1999[E]; Scope: Births in the 
United States from 1990 to 1992; Method: Records reviews; Results: A 
$10,000 reduction in malpractice premiums could result in a 1.4 to 2.4 
percent decline in the cesarean section rate for some mothers. 
Researchers concluded a total cap on damages would reduce the number of 
cesarean sections by 3 percent and total obstetrical charges by 0.27 
percent; Limitations: Results are limited to only certain 
socioeconomic groups of mothers.

Study: Kessler and McClellan, 2000[F]; Scope: Medicare beneficiaries 
treated for a new heart attack or new ischemic heart disease (1984-94 
data); Study attempted to control for the influence of managed care; 
Method: Records reviews; Results: When controlling for the influence 
of managed care, direct tort reforms reduced hospital expenditures for 
Medicare patients with a new heart attack or new ischemic heart disease 
by about 4 percent; Limitations: Results cannot be generalized to all 
patients and procedures, and certain other factors that can influence 
practice patterns and health care expenditures (such as the supply of 
cardiac specialists in an area) were not controlled for.

Study: Kessler and McClellan, 2002[G]; Scope: Medicare beneficiaries 
treated for a new heart attack or new ischemic heart disease (1984-94 
data); Study attempted to identify the mechanisms through which 
reforms affect the behavior of health care providers; Method: Records 
reviews; Results: Direct tort reforms reduced malpractice pressure and 
hospital expenditures for Medicare patients with a new heart attack or 
new ischemic heart disease; indirect reforms increased malpractice 
pressure in some cases; Limitations: Findings cannot be generalized to 
all patients and procedure, and certain other factors that can 
influence practice patterns and health care expenditures (such as the 
prevalence of managed care in an area) were not controlled for.

Study: CBO, 2003[H]; Scope: Medicare beneficiaries diagnosed with a 
broader set of ailments than considered in previous research (1989-99 
data); Method: Records reviews and expenditure analysis; Results: No 
effect of tort controls on medical expenditures or per capita health 
spending; Limitations: Results cannot be generalized to all patients 
and procedures.

Sources: As noted below.

Note: Researchers generally rely on two approaches to measure the 
extent of defensive medicine practices. They (1) use surveys to present 
a clinical scenario, ask physicians to choose a treatment and provide a 
rationale for their decision, and may also examine the variation in 
survey responses across groups facing different amounts of malpractice 
pressure, or (2) review clinical or other records to compare actual 
treatment approaches and health care expenditures across groups of 
physicians facing different amounts of malpractice pressure.

[A] U.S. Congress, OTA, Defensive Medicine and Medical Malpractice, 
OTA-H-602 (Washington, D.C.: U.S. Government Printing Office, 1994).

[B] Frank A. Sloan and others, "Effects of the Threat of Medical 
Malpractice Litigation and Other Factors on Birth Outcomes," Medical 
Care, vol. 33, no. 7 (1995): 700-14.

[C] Frank A. Sloan and others, "Tort Liability and Obstetricians' Care 
Levels," International Review of Law and Economics, vol. 17, no. 2 
(1997): 245-60.

[D] Daniel P. Kessler and Mark B. McClellan, "Do Doctors Practice 
Defensive Medicine?" Quarterly Journal of Economics, vol. 111, no. 2 
(1996): 353-90.

[E] Lisa Dubay, Robert Kaestner, and Timothy Waidmann, "The Impact of 
Malpractice Fears on Cesarean Section Rates," Journal of Health 
Economics, vol. 18, no. 4 (1999): 491-522.

[F] Daniel P. Kessler and Mark B. McClellan, "Medical Liability, 
Managed Care, and Defensive Medicine," working paper #7537, National 
Bureau of Economic Research (Cambridge, Mass.: 2000).

[G] Daniel P. Kessler and Mark B. McClellan, "How Liability Law Affects 
Medical Productivity," Journal of Health Economics, vol. 21, no. 6 
(2002): 931-55.

[H] U.S. Congress, CBO, Cost Estimate: H.R. 5 - Help Efficient, 
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2003 (March 
2003).

[End of table]

[End of section]

Appendix IV: GAO Contacts and Staff Acknowledgments:

GAO Contact:

Randy DiRosa, (312) 220-7671:

Acknowledgments:

In addition to the person named above, key contributors to this report 
were Gerardine Brennan, Iola D'Souza, Corey Houchins-Witt, and Margaret 
Smith.

[End of section]

Related GAO Products:

Medical Malpractice Insurance: Multiple Factors Have Contributed to 
Increased Premium Rates. GAO-03-702. Washington, D.C.: June 27, 2003.

National Practitioner Data Bank: Major Improvements Are Needed to 
Enhance Data Bank's Reliability. GAO-01-130. Washington, D.C.: November 
17, 2000.

Medical Malpractice: Effects of Varying Laws in the District of 
Columbia, Maryland, and Virginia. GAO/HEHS-00-5. Washington, D.C.: 
October 15, 1999.

Medical Liability: Impact on Hospital and Physician Costs Extends 
Beyond Insurance. GAO/AIMD-95-169. Washington, D.C.: September 29, 
1995.

Medical Malpractice: Medicare/Medicaid Beneficiaries Account for a 
Relatively Small Percentage of Malpractice Losses. GAO/HRD-93-126. 
Washington, D.C.: August 11, 1993.

Medical Malpractice: Experience with Efforts to Address Problems. GAO/
T-HRD-93-24. Washington, D.C.: May 20, 1993.

Medical Malpractice: A Continuing Problem with Far-Reaching 
Implications. GAO/T-HRD-90-24. Washington, D.C.: April 26, 1990.

FOOTNOTES

[1] Medical malpractice lawsuits are generally based on principles of 
tort law. A tort is a wrongful act or omission by an individual that 
causes harm to another individual. Typically, a legal claim of 
malpractice would be based on a claim that the negligence of a provider 
caused injury and the injured party would seek damages. To reduce 
malpractice claims payments and insurance premiums and for other 
reasons, some have advocated changes to tort laws, such as placing caps 
on the amount of damages or limits on the amount of attorney fees that 
may be paid under a malpractice lawsuit. These changes are collectively 
referred to as "tort reforms."

[2] U.S. General Accounting Office, Medical Malpractice Insurance: 
Multiple Factors Have Contributed to Increased Premium Rates, 
GAO-03-702 (Washington, D.C.: June 27, 2003).

[3] The five states with reported problems are Florida, Mississippi, 
Nevada, Pennsylvania, and West Virginia; the four states without 
reported problems are California, Colorado, Minnesota, and Montana.

[4] Part B of the Medicare program covers claims for services provided 
by physicians, while part A covers claims from hospitals and other 
institutions. 

[5] MLM is a private research organization that annually surveys 
professional liability insurance carriers in 50 states and the District 
of Columbia to obtain their base premium rates for the specialties of 
internal medicine, general surgery, and OB/GYN. Annual survey data were 
available through 2002. 

[6] NPDB, under the jurisdiction of the Secretary of Health and Human 
Services, is a nationwide source of information on physicians who have 
been named in a medical malpractice settlement or judgment. Insurers 
are required by law to report malpractice payments made on behalf of 
these physicians and are subject to civil penalties for noncompliance. 
42 U.S.C.  11131 (2000).

[7] The eight states with a $500,000 or less cap do not include the 
four states with a $250,000 cap.

[8] We define loss of access as the direct loss or newly limited 
availability of a health care provider or service resulting largely 
from actions taken by providers in response to malpractice concerns. We 
did not assess the impact on access that may result from the added 
costs malpractice pressures impose on the health care system (e.g., the 
combined cost of malpractice insurance premiums, litigation, and 
defensive medicine practices) and thus on the costs and affordability 
of health insurance because data to reliably measure malpractice-
related costs in total are not available. 

[9] Damage caps may apply to three types of damages awarded to 
plaintiffs in a medical malpractice suit: noneconomic damages, which 
compensate for harm that is not easily quantifiable (such as pain and 
suffering); economic damages, which compensate for lost wages and other 
financial harms; and punitive damages, which punish providers for 
especially egregious conduct.

[10] For more information on the factors that influence malpractice 
premium rates, see GAO-03-702.

[11] See Physician Insurers Association of America (PIAA), PIAA Claim 
Trend Analysis, 2001 Edition (Rockville, Md.: 2002). Averages are based 
on a compilation of medical malpractice claims data from more than 20 
PIAA member companies that insure about 20 to 25 percent of all 
physicians. Most claims are resolved out of court. Among the closed 
claims PIAA reviewed in 2001 that resulted in an award to plaintiffs, 
about 96 percent were closed through an out-of-court settlement and 
about 4 percent through a trial verdict. 

[12] Base premium rates exclude discounts, rebates, and surcharges that 
may affect the actual premium rate charged. 

[13] GAO-03-702.

[14] The states are California, Florida, Minnesota, Mississippi, 
Nevada, Pennsylvania, and Texas.

[15] State insurance regulators generally require insurers to reduce 
their requested premium rates in line with expected investment income. 
That is, the higher the expected income from investments, the more 
premium rates must be reduced.

[16] Reinsurance is insurance for insurance companies, which insurance 
companies routinely use as a way to spread the risk associated with 
their insurance policies.

[17] Claims-made policies cover claims reported during the year in 
which the policy is in effect. Occurrence-based policies cover claims 
arising out of events that occurred but may not have been reported 
during the year in which the policy was in effect. Most policies sold 
today are claims-made policies.

[18] States have also experimented with approaches to constrain 
malpractice-related costs in addition to tort reforms. For example, 
Virginia created a no-fault compensation program for birth-related 
neurological injuries, and Maine temporarily used standardized clinical 
practice guidelines to provide physicians with a defense against 
potential malpractice lawsuits.

[19] Physicians may also reduce or eliminate certain services they 
believe place them at risk of malpractice litigation. Such practices 
may also be referred to as defensive medicine.

[20] On March 13, 2003, the House of Representatives passed the Help 
Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2003 
(H.R. 5); on June 27, 2003, a similar version (S. 11) of this bill was 
introduced in the Senate.

[21] Provider groups in the four states without reported problems 
neither cited nor provided evidence of provider actions taken in 
response to malpractice pressures that could affect consumer access to 
care. 

[22] Some providers have also reported reductions in certain nonurgent 
elective services that may require surgical backup in the event of 
complications, such as cardiac surgery.

[23] Trauma centers are designated based on the level of service 
sophistication, with Level I trauma centers equipped to handle the most 
complex trauma cases.

[24] West Virginia's health care provider tax was imposed in 1993 as a 
2 percent tax on physicians' gross revenues. The tax is gradually being 
phased out and will be eliminated in 2010. The tax rate is currently 
1.4 percent. According to AMA, only one other state has a similar tax 
on physicians.

[25] Each of the five hospitals that closed its obstetrics unit told us 
that demand for obstetrical services in its community was low. One 
hospital reported that there was a greater need in the community for 
additional emergency room beds than obstetrics beds, and two hospitals 
reported that their obstetrics units were originally opened based on 
managed care contract requirements even though there was not a clear 
need for obstetrics services at these facilities.

[26] The Florida Board of Medicine reported that 3,239 new licenses 
were issued in 2000, 3,577 in 2001, and 3,858 in 2002. The number of 
physicians practicing in Florida per thousand in the population was 3.1 
in both 2001 and 2002. Estimates of physicians per capita are based on 
counts of physicians practicing in the state reported by the Federation 
of State Medical Boards of the United States, Inc. (FSMB), and include 
osteopathic physicians. 

[27] Between 1997 and 2002 the number of physicians in Mississippi 
increased slightly, from 1.9 to 2.0 per thousand in the population. 
Physician counts were reported by the Mississippi State Board of 
Medical Licensure and include osteopathic physicians and podiatrists.

[28] Physicians practicing in Pennsylvania increased slightly between 
1997 and 2001 from 2.6 to 2.8 per thousand in the population and have 
remained essentially unchanged between 2001 and 2002 at 2.8 per 
thousand in the population. Counts of physicians practicing in the 
state were reported by FSMB and include osteopathic physicians. 

[29] From 1997 through 2002, the number of physicians practicing in 
West Virginia increased from 2.0 to 2.2 per thousand in the population. 
Counts of physicians practicing in the state were reported by FSMB and 
include osteopathic physicians.

[30] A survey of orthopedic surgeons in Mississippi yielded a response 
rate of 10 percent and surveys of orthopedic surgeons in Florida and 
Pennsylvania and of neurologists nationally all yielded response rates 
of about 20 percent.

[31] Preliminary results as of January 23, 2003, of a joint AMA and 
American Academy of Neurology survey.

[32] AMA, National Physician Survey on Professional Medical Liability 
(Chicago, Ill.: April 2003). We attempted to obtain data from this 
survey specific to the nine states we reviewed. However, AMA did not 
release the data out of concern that response rates for these states 
were unacceptably low. 

[33] Joint revision and repairs reported by orthopedic surgeons as 
those reduced due to malpractice concerns include certain hip, knee, 
and shoulder procedures.

[34] We contacted mammography facilities reported to have had problems 
in Pennsylvania and Florida. Representatives from both Pennsylvania 
mammography facilities contacted told us that increased demand for 
radiology services was the primary cause for longer wait times. One 
facility in Florida indicated that long wait times were due to a 
shortage of radiology technicians rather than radiologists. A 
representative of another Florida facility told us that malpractice 
concerns were leading to wait times of 3 or more months and that demand 
for these services was also increasing. We contacted six mammography 
facilities near this Florida facility and found relatively short wait 
times. Wait times for screening mammograms ranged from 0 to 20 days at 
four locations and 20 to 30 days at two locations, while wait times for 
diagnostic mammograms among all six locations ranged from 30 to 40 
days, but in all cases could be scheduled sooner if a physician deemed 
it necessary. We recently reported on the nation's overall capacity to 
provide mammography services. See U.S. General Accounting Office, 
Mammography: Capacity Generally Exists to Deliver Services, GAO-02-532 
(Washington, D.C.: Apr. 19, 2002).

[35] Florida law imposes certain requirements on physicians who decide 
to go without coverage. For example, physicians with hospital staff 
privileges who decide not to carry commercial coverage must maintain 
assets or credit of at least $750,000 annually to cover potential 
malpractice claims. Under certain circumstances, physicians may waive 
this requirement but are required to inform all patients if they do.

[36] A March 2003 survey conducted by AHA reported that some hospitals 
are taking on more risk in response to malpractice pressures. This 
includes not purchasing coverage, allowing their physicians to practice 
without coverage, paying higher deductibles, reducing coverage levels, 
and increasingly becoming self-insured. In addition to actions taken by 
health care providers, some states have taken steps to make malpractice 
insurance more affordable or easier to obtain. 

[37] Because of the potential for increased health care costs, we 
highlight the practice of defensive medicine associated with the 
overutilization of certain diagnostic tests or procedures to reduce 
exposure to malpractice liability. Such practices are sometimes 
referred to as "positive defensive medicine." Physicians may also 
reduce or eliminate certain services they believe place them at risk of 
malpractice litigation. Such practices are sometimes referred to as 
"negative defensive medicine."

[38] AMA, National Physician Survey on Professional Medical Liability 
(Chicago, Ill.: April 2003). American Academy of Orthopaedic Surgeons, 
Medical Malpractice Insurance Concerns - Final Report (Rosemont, Ill.: 
April 2002).

[39] Harris Interactive, The Fear of Litigation Study - The Impact on 
Medicine, a special report prepared at the request of Common Good 
(Rochester, N.Y.: April 2002), http://ourcommongood.com/medicine/
item?item_id=3396 (downloaded June 4, 2003).

[40] Daniel P. Kessler and Mark B. McClellan, "Medical Liability, 
Managed Care, and Defensive Medicine," working paper #7537, National 
Bureau of Economic Research (Cambridge, Mass.: 2000).

[41] Researchers generally rely on two approaches to measure the extent 
of defensive medicine practices. They (1) use surveys to present a 
clinical scenario, ask physicians to choose a treatment and provide a 
rationale for their decision, and may also examine the variation in 
survey responses across groups facing different amounts of malpractice 
pressure, or (2) review clinical or other records to compare actual 
treatment approaches and health care expenditures across groups of 
physicians facing different amounts of malpractice pressure.

[42] U.S. Congress, Office of Technology Assessment, Defensive Medicine 
and Medical Malpractice, OTA-H-602 (Washington, D.C.: U.S. Government 
Printing Office, 1994). 

[43] Lisa Dubay, Robert Kaestner, and Timothy Waidmann, "The Impact of 
Malpractice Fears on Cesarean Section Rates," Journal of Health 
Economics, vol. 18, no. 4 (1999): 491-522.

[44] Researchers have found that physician practice patterns and health 
care spending can vary greatly across geographic regions for many 
reasons. See Jonathan Skinner and John E. Wennberg, "How Much Is 
Enough? Efficiency and Medicare Spending in the Last Six Months of 
Life," working paper #6513, National Bureau of Economic Research 
(Cambridge, Mass.: April 1998). 

[45] The researchers found that direct reforms (such as caps on damage 
awards, abolition of punitive damages, and collateral-source rule 
reforms) were associated with reduced medical expenditures, while 
indirect reforms (such as caps on contingency fees, mandatory payment 
of damages through periodic installments, joint and several liability 
reform, and patient compensation funds) were not. Daniel P. Kessler and 
Mark B. McClellan, "Do Doctors Practice Defensive Medicine?" Quarterly 
Journal of Economics, vol. 111, no. 2 (1996): 353-90.

[46] Kessler and McClellan, "Medical Liability, Managed Care, and 
Defensive Medicine." 

[47] U.S. Congress, Congressional Budget Office (CBO), Cost Estimate: 
H.R. 5 - Help Efficient, Accessible, Low-cost, Timely Healthcare 
(HEALTH) Act of 2003 (March 2003). CBO characterizes results relating 
to its analysis of defensive medicine practices as preliminary.: 

[48] HHS, Office of the Assistant Secretary for Planning and 
Evaluation, Confronting the New Health Care Crisis: Improving Health 
Care Quality and Lowering Costs By Fixing Our Medical Liability System 
(Washington, D.C.: July 24, 2002), http://aspe.hhs.gov/daltcp/reports/
litrefm.htm (downloaded June 9, 2003); and Addressing the New Health 
Care Crisis: Reforming the Medical Litigation System to Improve the 
Quality of Health Care (Washington, D.C.: Mar. 3, 2003), http://
aspe.hhs.gov/daltcp/reports/medliab.htm (downloaded June 9, 2003).

[49] Noneconomic damages compensate for harm that is not easily 
quantifiable, such as pain and suffering.

[50] We focused our analysis on those states with noneconomic damage 
caps as a key tort reform because such caps are included in proposed 
federal tort reform legislation and because published research 
generally finds these caps to have a greater impact on medical 
malpractice premium rates and claims payments than some other tort 
reform measures. See appendix II for details on our classification of 
states by tort reforms. 

[51] Direct reforms are limits on amounts that can be recovered in a 
malpractice action including: caps on noneconomic or total damages, 
abolition of punitive damages, collateral source rule reforms, and 
abolition of mandatory prejudgment interest.

[52] CBO, Cost Estimate: H.R. 5.

[53] 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. 670, no. 1 
(1997): 81-106. 

[54] Per capita claims payments are the total claims payments in each 
state divided by the state population.

[55] Average per capita claims payments among states with limited tort 
reforms were highest in the District of Columbia and Pennsylvania in 
each year from 1996 through 2002. For example, in 2002, average claims 
payments were $27 and $33 for the District of Columbia and 
Pennsylvania, respectively, compared to from $3 to $18 in the remaining 
states with limited tort reforms. 

[56] See U.S. General Accounting Office, National Practitioner Data 
Bank: Major Improvements Needed to Enhance Data Bank's Reliability, 
GAO-01-130 (Washington, D.C.: Nov. 17, 2000).

[57] For example, the National Association of Insurance Commissioners 
(NAIC) maintains data on claims costs reported by malpractice insurers; 
however, NAIC officials told us that reporting requirements are 
dictated by state law. As a result, certain types of insurers are 
exempted from reporting in certain states (such as insurers operating 
in a single state, certain physician mutual companies, or--in all 
states--self-insured groups), thus limiting the usefulness of the data 
for making state-level comparisons. 

[58] CBO, Cost Estimate: H.R. 5.

[59] See Daniel P. Kessler and Mark B. McClellan, "How Liability Law 
Affects Medical Productivity," Journal of Health Economics, vol. 21, 
no. 6 (2002): 931-55.

[60] Indirect reforms are changes in laws that do not directly specify 
limits on amounts that can be recovered in a malpractice action; 
rather, they may indirectly affect recoverable amounts, such as by 
limiting attorneys' contingency fees or allowing periodic rather than 
lump sum payments of awards.

[61] Kessler and McClellan, "The Effects of Malpractice Pressure and 
Liability Reforms on Physicians' Perceptions of Medical Care" and 
Stephen Foreman, Pennsylvania Medical Society Health Services Research 
Institute, [Premium] Deceit: A Critique of a Center For Justice and 
Democracy Study by J. Robert Hunter and Joanne Doroshow (Harrisburg, 
Pa.: Jan. 8, 2003).

[62] In 1988, California passed Proposition 103, which in part required 
greater state oversight and approval of premium rate increases. 

[63] For more information on the factors that influence malpractice 
premium rates, see GAO-03-702.

[64] Limitations to Medicare data precluded an assessment of trends for 
physician services provided in nursing homes, emergency room services, 
and obstetrics services. Utilization rates of services provided in 
nursing homes per Medicare beneficiary could not be completed because 
Medicare data do not identify the beneficiaries that reside in these 
facilities. Emergency room services could not be analyzed because it is 
not possible to accurately count emergency room services in the part B 
physician claims data. Obstetrics services could not be analyzed 
because Medicare beneficiaries are mostly elderly, so the counts of 
females of childbearing age are not representative of the general 
population.

[65] Medicare part B claims for these specific services were identified 
by the five-digit procedure codes specified in the Centers for Medicare 
& Medicaid Services' (CMS) Health Care Common Procedure Coding System 
(HCPCS).

[66] Population data were obtained from the U.S. Bureau of the Census. 
Medicare enrollment data were obtained from the Medicare Denominator 
File. The Medicare Denominator File contains data on all Medicare 
beneficiaries entitled to benefits in a given year and includes 
information on the programs in which they participate. The changes in 
Medicare enrollment in managed care programs were reported in CMS's 
MMCC Monthly Summary Report on Medicare Managed Care Plans. See HHS, 
CMS, Medicare Managed Care Contract (MMCC) Plans - Monthly Summary 
Report (Baltimore, Md.: Jan. 1, 2002 and July 1, 2002), http://
www.cms.hhs.gov/healthplans/statistics/mmcc/ (downloaded Apr. 16, 
2003).

[67] The eight states with a $500,000 or less cap do not include the 
four states with a $250,000 cap.

[68] MLM is a private research organization that annually surveys 
professional liability insurance carriers in 50 states to obtain their 
base premium rates for the specialties of internal medicine, general 
surgery, and OB/GYN.

[69] Where physicians participate in PCFs, they typically pay an annual 
surcharge for participation in the fund, an assessment for payments 
made out of the fund, or both. These surcharges can range from a small 
percentage of the base premium to nearly as much, and in some 
instances, more than the base premium. 

[70] NPDB, established by the Health Care Quality Improvement Act of 
1986, is maintained by the Secretary of Health and Human Services and 
is a nationwide source of information on physicians and other licensed 
health care practitioners who have been party to a medical malpractice 
settlement or judgment. Insurers are required by law to report payments 
made on behalf of these providers in settlement or satisfaction of a 
judgment in a malpractice action, and are subject to civil penalties 
for noncompliance. Pub. L. No. 99-660, tit. IV, 100 Stat. 3743, 3784 
(codified at 42 U.S.C.  11101-11152 (2000))

[71] NPDB reports payments for claims against all licensed 
practitioners, including, physicians, nurses, and dentists; however, we 
analyzed payments only for claims against physicians. The consulting 
firm of Tillinghast-Towers Perrin estimates that total malpractice 
claims costs (including payments and defense and administrative costs) 
in 2001 were approximately $21 billion. See Tillinghast-Towers Perrin, 
U.S. Tort Costs: 2002 Update - Trends and Findings on the Costs of the 
U.S. Tort System, http://www.tillinghast.com/tillinghast/ (downloaded 
June 9, 2003). Payments reported for physician claims in the NPDB 
database for the same year (excluding associated defense/administrative 
costs) represent about 20 percent of these total costs.

[72] See GAO-01-130. 

[73] We found that exempted companies are disproportionately 
represented in states with limited reforms. 

[74] NAIC claims data represented slightly over a third of the total 
malpractice claim costs reported by Tillinghast-Towers Perrin. See 
Tillinghast-Towers Perrin http://www.tillinghast.com/tillinghast/.

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