Report to Congressional Requesters

United States General Accounting Office 

GAO 

August 2003 MEDICAL 

MALPRACTICE 

Implications of Rising 

Premiums on Access 

to Health Care 

GAO-03-836 
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 specialties—general 

surgery, internal medicine, and obstetrics/gynecology—grew 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 AMA’s point of view, the report 

was revised to better clarify the methods and scope of work for this issue. 

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 malpracticerelated 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. 

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. 

Highlights of GAO-03-836, a report to 

congressional requesters 

August 2003 

MEDICAL MALPRACTICE 

Implications of Rising Premiums on 

Access to Health Care 
Page i GAO-03-836 Medical Malpractice and Access to Health Care 

Letter 1

Results in Brief 5

Background 8

Implications of Rising Malpractice Premiums on Access to Health 

Care 12

Physicians Reportedly Practice Defensive Medicine, but 

Prevalence and Costs of Such Practices Are Not Reliably 

Measured 26

States with Certain Noneconomic Damage Caps Had Lower Recent 

Growth in Malpractice Premium Rates and Claims Payments 30

External Comments and Our Evaluation 38

Appendix I National and State Provider Associations Contacted 42 

Appendix II Scope and Methodology 44 

Appendix III Summary of Selected Research Designed to 

Measure Defensive Medicine Prevalence and Costs 53 

Appendix IV GAO Contacts and Staff Acknowledgments 56 

GAO Contact 56

Acknowledgments 56

Related GAO Products 57 

Tables 

Table 1: Assertions of Numbers of Physicians Moving, Retiring, or 

Closing Practices in Response to Malpractice Pressures in 

Five States 17

Table 2: State Provider Associations GAO Contacted 42

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

Nine States 45

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

as of 1995 49

Contents 
Page ii GAO-03-836 Medical Malpractice and Access to Health Care 

Table 5: Summary of Selected Research Designed to Measure 

Defensive Medicine Prevalence and Costs 53

Figures 

Figure 1: Rates of Medicare-Covered Orthopedic Surgeries in 

Pennsylvania Have Increased 19

Figure 2: Rates of Medicare-Covered Spinal Surgeries in Five States 

with Reported Problems Have Recently Increased 22

Figure 3: Rates of Medicare-Covered Joint Revisions and Repairs in 

Five States with Reported Problems Have Not Recently 

Declined 23

Figure 4: Rates of Medicare-Covered Mammograms in Florida and 

Pennsylvania Remain above the National Average 24

Figure 5: Premium Rates for Three Physician Specialties Rose After 

2000, but to a Lesser Extent in States with Noneconomic 

Damage Caps 32

Figure 6: Recent Premium Growth Was Lower for Three Physician 

Specialties in States with Noneconomic Damage Caps 33
Page iii GAO-03-836 Medical Malpractice and Access to Health Care 

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 

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Page 1 GAO-03-836 Medical Malpractice and Access to Health Care 

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 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-03-836 Medical Malpractice and Access to Health Care 

costs associated with malpractice litigation, and Congress is considering 

similar federal legislation.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.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 

 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). 
Page 3 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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.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. 

 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. 
Page 4 GAO-03-836 Medical Malpractice and Access to Health Care 

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 2002.5

 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.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 cap7

) 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. 

 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. 
Page 5 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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. 

 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. 

Results in Brief 
Page 6 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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 

 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. 
Page 7 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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. 

 10For more information on the factors that influence malpractice premium rates, see 

GAO-03-702. 
Page 8 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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.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 

 11See 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. 

12Base premium rates exclude discounts, rebates, and surcharges that may affect the actual 

premium rate charged. 

Background 
Page 9 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

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.13

More specifically, we reported on (1) the extent of increases in medical 

malpractice insurance rates in seven states,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’ 

 13GAO-03-702. 

14The states are California, Florida, Minnesota, Mississippi, Nevada, Pennsylvania, and 

Texas. 

Rising Claims Costs 

Among Factors 

Contributing to 

Malpractice Insurance 

Premium Increases 
Page 10 GAO-03-836 Medical Malpractice and Access to Health Care 

investment portfolios.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.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.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-

 15State 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. 

16Reinsurance is insurance for insurance companies, which insurance companies routinely 

use as a way to spread the risk associated with their insurance policies. 

17Claims-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. 
Page 11 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

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.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.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; 

 18States 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. 

19Physicians 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. 

States Use Tort Reform to 

Help Contain Costs 

Associated with Medical 

Malpractice 
Page 12 GAO-03-836 Medical Malpractice and Access to Health Care 

• 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.20

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.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 

 20On 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. 

21Provider 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. 

Implications of Rising 

Malpractice 

Premiums on Access 

to Health Care 
Page 13 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

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.22 Although the hospital 

 22Some providers have also reported reductions in certain nonurgent elective services that 

may require surgical backup in the event of complications, such as cardiac surgery. 

Health Care Provider 

Actions Taken in Response 

to Malpractice Pressures 

Have Limited Access to 

Certain Services in Some 

Localities 
Page 14 GAO-03-836 Medical Malpractice and Access to Health Care 

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 longstanding 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 2002.23 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 

 23Trauma centers are designated based on the level of service sophistication, with Level I 

trauma centers equipped to handle the most complex trauma cases. 
Page 15 GAO-03-836 Medical Malpractice and Access to Health Care 

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 oncall 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 
Page 16 GAO-03-836 Medical Malpractice and Access to Health Care 

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.24

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.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 

 24West 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. 

25Each 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. 

Some Reported Provider 

Actions Were Not 

Substantiated or Did Not 

Widely Affect Access to 

Health Care 
Page 17 GAO-03-836 Medical Malpractice and Access to Health Care 

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 

 Neurosurgeons

Orthopedic 

surgeons

Other 

surgeons OB/GYNs 

Other 

physicians 

Florida a a a a a 

Mississippi 5 3 11 5 50 

Nevada 0 2 9 34 28 

Pennsylvania 12 30 30 24 63 

West Virginia a a a a 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. 

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 
Page 18 GAO-03-836 Medical Malpractice and Access to Health Care 

type; however, over the past 2 years the number of new medical licenses 

issued has increased and physicians per capita has remained unchanged.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 

1997.27

• 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.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.) 

 26The 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. 

27Between 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. 

28Physicians 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. 
Page 19 GAO-03-836 Medical Malpractice and Access to Health Care 

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

Increased 

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. 

• 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 2002.29

 29From 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. 

0

50

60

70

80

90

100

Jan.–June 1997

July–Dec. 1997

Jan.–June 1998

July–Dec. 1998

Jan.–June 1999

July–Dec. 1999

Jan.–June 2000

July–Dec. 2000

Jan.–June 2001

July–Dec. 2001

Jan.–June 2002

Pennsylvania

United States

Four states without reported problems

Services per 1,000 part B fee-for-service beneficiaries

Source: CMS.
Page 20 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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.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.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 

 30A 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. 

31Preliminary results as of January 23, 2003, of a joint AMA and American Academy of 

Neurology survey. 

32AMA, 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. 

Some Providers Report 

Reducing Certain Services, 

but Access to Care Not 

Widely Affected 
Page 21 GAO-03-836 Medical Malpractice and Access to Health Care 

the national average and has not recently declined.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.34

 33Joint revision and repairs reported by orthopedic surgeons as those reduced due to 

malpractice concerns include certain hip, knee, and shoulder procedures. 

34We 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). 
Page 22 GAO-03-836 Medical Malpractice and Access to Health Care 

Figure 2: Rates of Medicare-Covered Spinal Surgeries in Five States with Reported 

Problems Have Recently Increased 

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 spine surgeries performed by orthopedic surgeons. 

Source: CMS.

0

.5

1.0

1.5

2.0

2.5

3.0

3.5 Services per 1,000 part B fee-for-service beneficiaries

United States

Four states without reported problems

Five states with reported problems

Jan.–June 1997

July–Dec. 1997

Jan.–June 1998

July–Dec. 1998

Jan.–June 1999

July–Dec. 1999

Jan.–June 2000

July–Dec. 2000

Jan.–June 2001

July–Dec. 2001

Jan.–June 2002
Page 23 GAO-03-836 Medical Malpractice and Access to Health Care 

Figure 3: Rates of Medicare-Covered Joint Revisions and Repairs in Five States 

with Reported Problems Have Not Recently Declined 

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 selected services (hip, knee, and shoulder repairs/revisions that were 

identified as high risk) provided by orthopedic surgeons. 

Four states without reported problems

United States

Five states with reported problems

Source: CMS.

Services per 1,000 part B fee-for-service beneficiaries

0

1

2

3

4

5

6

7

8

Jan.–June 1997

July–Dec. 1997

Jan.–June 1998

July–Dec. 1998

Jan.–June 1999

July–Dec. 1999

Jan.–June 2000

July–Dec. 2000

Jan.–June 2001

July–Dec. 2001

Jan.–June 2002
Page 24 GAO-03-836 Medical Malpractice and Access to Health Care 

Figure 4: Rates of Medicare-Covered Mammograms in Florida and Pennsylvania 

Remain above the National Average 

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-forservice beneficiaries and include all mammograms performed by radiologists. 

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. 

0

100

Source: CMS.

120

140

160

180

200

220

240 Services per 1,000 female part B fee-for-service beneficiaries

Florida

Pennsylvania

United States

Four states without reported problems

Jan.–June 1997

July–Dec. 1997

Jan.–June 1998

July–Dec. 1998

Jan.–June 1999

July–Dec. 1999

Jan.–June 2000

July–Dec. 2000

Jan.–June 2001

July–Dec. 2001

Jan.–June 2002
Page 25 GAO-03-836 Medical Malpractice and Access to Health Care 

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.35 One hospital contacted in the state told us it has 

 35Florida 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. 

Health Care Providers 

Have Taken Actions to 

Avoid Access Problems 
Page 26 GAO-03-836 Medical Malpractice and Access to Health Care 

loosened this requirement in response to physicians’ concerns over 

increasing malpractice premiums.36

Several recently published surveys report that physicians practice 

defensive medicine in response to malpractice pressures.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 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.38 However, the 

 36A 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. 

37Because 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.” 

38AMA, 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). 

Physicians Reportedly 

Practice Defensive 

Medicine, but 

Prevalence and Costs 

of Such Practices Are 

Not Reliably 

Measured 

Physicians Report 

Practicing Defensive 

Medicine, but Surveys 

Must Be Interpreted with 

Caution 
Page 27 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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.40

 39Harris 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). 

40Daniel P. Kessler and Mark B. McClellan, “Medical Liability, Managed Care, and Defensive 

Medicine,” working paper #7537, National Bureau of Economic Research (Cambridge, 

Mass.: 2000). 
Page 28 GAO-03-836 Medical Malpractice and Access to Health Care 

Most research that has attempted to measure defensive practices has 

examined physician practices under specific clinical situations.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.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.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.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 

 41Researchers 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. 

42U.S. Congress, Office of Technology Assessment, Defensive Medicine and Medical 

Malpractice, OTA-H-602 (Washington, D.C.: U.S. Government Printing Office, 1994). 

43Lisa 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. 

44Researchers 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). 

Some Research Identifies 

Defensive Medicine in 

Certain Clinical Situations 
Page 29 GAO-03-836 Medical Malpractice and Access to Health Care 

expenditures.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.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.47 Appendix III summarizes the 

methods, findings, and limitations of published studies examining 

defensive medicine. 

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 

 45The 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. 

46Kessler and McClellan, “Medical Liability, Managed Care, and Defensive Medicine.” 

47U.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. 

Studies Cannot Be 

Generalized to Reliably 

Estimate Defensive 

Medicine Prevalence and 

Costs 
Page 30 GAO-03-836 Medical Malpractice and Access to Health Care 

tort reforms were enacted.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. 

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 midto late 1990s and then began to rise, but more slowly among states with 

certain noneconomic damage caps.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. 

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 

 48HHS, 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). 

49Noneconomic damages compensate for harm that is not easily quantifiable, such as pain 

and suffering. 

States with Certain 

Noneconomic 

Damage Caps Had 

Lower Recent Growth 

in Malpractice 

Premium Rates and 

Claims Payments 

Premium Growth Was 

Lower in States with 

Noneconomic Damage 

Caps Than in States with 

Limited Reforms 
Page 31 GAO-03-836 Medical Malpractice and Access to Health Care 

annually by no more than about 5 percentage points on average.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.) 

 50We 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. 
Page 32 GAO-03-836 Medical Malpractice and Access to Health Care 

Figure 5: Premium Rates for Three Physician Specialties Rose After 2000, but to a 

Lesser Extent in States with Noneconomic Damage Caps 

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. 

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.) 

Source: MLM.

-10

-5

0

5

10

15

20

25

30

35

1996 – 

1997

1997 – 

1998

1998 – 

1999

1999 – 

2000

2000 – 

2001

2001 – 

2002

Average percentage growth in premium rates

States with caps of $250,000 (4 states)

States with caps of $500,000 or less (8 states)a

States with limited reforms (11 states)

All states
Page 33 GAO-03-836 Medical Malpractice and Access to Health Care 

Figure 6: Recent Premium Growth Was Lower for Three Physician Specialties in 

States with Noneconomic Damage Caps 

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. 

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 

Source: MLM.

12

9

33

16

11 10

29

16

9 8

27

14

0

5

10

15

20

25

30

40

35

Average percentage growth in premium rates, 2001-2002

General surgery Internal medicine OB/GYN

States with caps of $250,000 (4 states)

States with caps of $500,000 or less (8 states)a

States with limited reforms (11 states)

All states
Page 34 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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 

2013.52 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.53

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.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.55 Absent 

 51Direct 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. 

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

53Daniel 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. 

54Per capita claims payments are the total claims payments in each state divided by the 

state population. 

Average Claims Payments 

and Growth Lower in 

States with Noneconomic 

Damage Caps Than in 

States with Limited 

Reforms 
Page 35 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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 

 55Average 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. 

56See 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). 
Page 36 GAO-03-836 Medical Malpractice and Access to Health Care 

completeness or comparability.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.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.59 In contrast, other researchers who have examined the effect 

of indirect tort reforms on malpractice costs have found mixed results.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.61 These 

studies have also relied on claims data that have limitations in terms of 

their completeness and comparability. 

 57For 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. 

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

59See Daniel P. Kessler and Mark B. McClellan, “How Liability Law Affects Medical 

Productivity,” Journal of Health Economics, vol. 21, no. 6 (2002): 931-55. 

60Indirect 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. 

61Kessler 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). 
Page 37 GAO-03-836 Medical Malpractice and Access to Health Care 

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.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.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. 

 62In 1988, California passed Proposition 103, which in part required greater state oversight 

and approval of premium rate increases. 

63For more information on the factors that influence malpractice premium rates, see 

GAO-03-702. 

Factors Other Than Caps 

on Noneconomic Damages 

Also Affect Premiums and 

Claims Payments Trends 
Page 38 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

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 fullblown 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 

External Comments 

and Our Evaluation 

Completeness of Evidence 

Examined 
Page 39 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

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 

Measures Used to Assess 

Access Problems 
Page 40 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

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. 

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 

Time Lags in Available 

Data 

The Cost and Impact of 

Defensive Medicine 
Page 41 GAO-03-836 Medical Malpractice and Access to Health Care 

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 
Appendix I: National and State Provider 

Associations Contacted 

Page 42 GAO-03-836 Medical Malpractice and Access to Health Care 

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 Provider association 

California California Association of Health Facilities 

 California Healthcare Association 

 California Medical Association 

Coloradoa Colorado Health and Hospital Association 

Florida Florida Health Care Association 

 Florida Hospital Association 

 Florida Medical Association 

Minnesota Minnesota Health and Housing Alliance 

 Minnesota Hospital Association 

 Minnesota Medical Association 

Mississippi Mississippi Health Care Association 

 Mississippi Hospital Association 

 Mississippi State Medical Association 

Montana Association of Montana Health Care Providers 

 Montana Medical Association 

Appendix I: National and State Provider 

Associations Contacted 
Appendix I: National and State Provider 

Associations Contacted 

Page 43 GAO-03-836 Medical Malpractice and Access to Health Care 

State Provider association 

Nevada Nevada Health Care Association 

 Nevada Hospital Association 

 Nevada State Medical Association 

Pennsylvania The Hospital & Healthsystem Association of Pennsylvania 

 Pennsylvania Health Care Association 

 Pennsylvania Medical Society 

West Virginia West Virginia Health Care Association 

 West Virginia Hospital 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. 
Appendix II: Scope and Methodology 

Page 44 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

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.) 

Appendix II: Scope and Methodology 

Consumers’ Access to 

Health Care 
Appendix II: Scope and Methodology 

Page 45 GAO-03-836 Medical Malpractice and Access to Health Care 

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

 Tort reforms in place as of 1995a  

Extent of 

malpractice 

problems State 

Noneconomic 

damage cap of 

$250,000 

Noneconomic 

damage cap of 

$500,000 or 

lessb

Other tort 

reforms 

Limited tort 

reformsc

Average annual 

premium rate 

increase,

2001–2002 

(percentage 

change)

Floridae XfStates with reported 23

problemsd

Mississippi X 45

 Nevada X 28

 Pennsylvania X 35

 West Virginia Xg 12

States without California X X 6

reported problems Colorado X X 8

 Minnesota Xf 5

 Montana X X 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. 
Appendix II: Scope and Methodology 

Page 46 GAO-03-836 Medical Malpractice and Access to Health Care 

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 
Appendix II: Scope and Methodology 

Page 47 GAO-03-836 Medical Malpractice and Access to Health Care 

these services.1 To calculate service utilization rates per thousand fee-forservice 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 2001.2 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, 2002.3

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, 

 1

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. 

2

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). 

3

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). 

Defensive Medicine 

Practices 
Appendix II: Scope and Methodology 

Page 48 GAO-03-836 Medical Malpractice and Access to Health Care 

in which providers were asked about their own defensive medicine 

practices. 

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 cap4

) 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.) 

 4

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

cap. 

Malpractice Premium Rate 

and Claims Payments 

Growth 
Appendix II: Scope and Methodology 

Page 49 GAO-03-836 Medical Malpractice and Access to Health Care 

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

Noneconomic damage cap 

of $250,000 

(4 states) 

Noneconomic damage cap 

of $500,000 or lessa 

(8 states) 

Other reformsa, b 

(28 states) 

Limited reformsc 

(11 states) 

California Hawaiid Alabama Arkansas 

Coloradod Louisianae Alaska District of Columbia 

Montana Massachusettsd Arizona Kentucky 

Utah Michigand Connecticut Mississippi 

 Missourif Delaware Nevada 

 North Dakota Floridag Ohio 

 South Dakota Georgia Oklahoma 

 Wisconsin Idaho Pennsylvania 

 Illinois South Carolina 

 Indiana Vermont 

 Iowa Wyoming 

 Kansash 

 Mainei 

 Marylandj 

 Minnesota 

 Nebraska 

 New Hampshirei 

 New Jersey 

 New Mexicoj 

 New York 

 North Carolina 

 Oregon 

 Rhode Island 

 Tennessee 

 Texas 

 Virginia 

 Washington 

 West Virginia 

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. 
Appendix II: Scope and Methodology 

Page 50 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

To assess the growth in medical malpractice premiums, we analyzed statelevel 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 2002.5

 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.6

 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. 

 5

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. 

6

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. 
Appendix II: Scope and Methodology 

Page 51 GAO-03-836 Medical Malpractice and Access to Health Care 

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.7 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.8

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.9

 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-

 7

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)) 

8

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. 

9

See GAO-01-130. 
Appendix II: Scope and Methodology 

Page 52 GAO-03-836 Medical Malpractice and Access to Health Care 

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.10 In all states, self-insured groups, which 

represent a substantial proportion of the medical malpractice insurance 

market, are exempted from reporting.11 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. 

 10We found that exempted companies are disproportionately represented in states with 

limited reforms. 

11NAIC 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/. 
Appendix III: Summary of Selected Research 

Designed to Measure Defensive Medicine 

Prevalence and Costs 

Page 53 GAO-03-836 Medical Malpractice and Access to Health Care 

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 Scope Method Results Limitations 

OTA, 1994a 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). 

Physician clinical 

scenario surveys, 

records reviews, and 

synthesis of prior 

research. 

Among other findings, defensive 

medicine causes less than 8 

percent of diagnostic procedures 

and varies significantly by clinical 

situation. 

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. 

Sloan and others, 

1995b

 and 1997c 

Births in Florida in 

1987. 

Survey of mothers 

and records reviews. 

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). 

Results cannot be generalized, 

as study only assessed practice 

patterns in one state in 1 year. 

Kessler and 

McClellan, 1996d

Medicare 

beneficiaries treated 

for a new heart attack 

or new ischemic 

heart disease (1984, 

1987, and 1990 

data). 

Records reviews. 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. 

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. 

Dubay, Kaestner, 

and Waidmann, 

1999e

Births in the United 

States from 1990 to 

1992. 

Records reviews. 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. 

Results are limited to only 

certain socioeconomic groups 

of mothers. 

Appendix III: Summary of Selected Research 

Designed to Measure Defensive Medicine 

Prevalence and Costs 
Appendix III: Summary of Selected Research 

Designed to Measure Defensive Medicine 

Prevalence and Costs 

Page 54 GAO-03-836 Medical Malpractice and Access to Health Care 

Study Scope Method Results Limitations 

Kessler and 

McClellan, 2000f

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. 

Records reviews. 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. 

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. 

Kessler and 

McClellan, 2002g

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. 

Records reviews. 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. 

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. 

CBO, 2003h Medicare 

beneficiaries 

diagnosed with a 

broader set of 

ailments than 

considered in 

previous research 

(1989-99 data). 

Records reviews and 

expenditure analysis. 

No effect of tort controls on 

medical expenditures or per 

capita health spending. 

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. 
Appendix III: Summary of Selected Research 

Designed to Measure Defensive Medicine 

Prevalence and Costs 

Page 55 GAO-03-836 Medical Malpractice and Access to Health Care 

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). 
Appendix IV: GAO Contacts and Staff 

Acknowledgments 

Page 56 GAO-03-836 Medical Malpractice and Access to Health Care 

Randy DiRosa, (312) 220-7671 

In addition to the person named above, key contributors to this report 

were Gerardine Brennan, Iola D’Souza, Corey Houchins-Witt, and Margaret 

Smith. 

Appendix IV: GAO Contacts and Staff 

Acknowledgments 

GAO Contact 

Acknowledgments 
Related GAO Products 

Page 57 GAO-03-836 Medical Malpractice and Access to Health Care 

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. 

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