Medical Malpractice: Implications of Rising Premiums on Access to Health Care
Published: 2003-08-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The recent rising cost of medical malpractice insurance premiums in many states has reportedly influenced some physicians to move or close practices, reduce high-risk services, or alter their practices to preclude potential lawsuits (known as defensive medicine practices). States have revised tort laws under which malpractice lawsuits are litigated to help constrain malpractice premium and claims costs. Some of these tort reform laws include caps on monetary penalties for noneconomic harm, such as for plaintiffs' pain and suffering. Congress is considering legislation similar to some states' tort reform laws. GAO examined how health care provider responses to rising malpractice premiums have affected access to health care, whether physicians practice defensive medicine, and how growth in malpractice premiums and claims payments compares across states with varying tort reform laws. Because national data on providers' responses to rising premiums are not reliable, GAO examined the experiences in five states with reported malpractice-related problems (Florida, Nevada, Pennsylvania, Mississippi, and West Virginia) and four states without reported problems (California, Colorado, Minnesota, and Montana) and analyzed growth in malpractice premiums and claims payments across all states and the District of Columbia.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: Medical malpractice insurance premium rates increased rapidly in some  states beginning in the late 1990s after several years of relative stability,  similar to previous cycles of rising premiums that occurred during the  1970s and 1980s. Between 2001 and 2002, premium rates for the specialties  of general surgery, internal medicine, and obstetrics/gynecology (OB/GYN)  increased by about 15 percent on average nationally, and over 100 percent  for certain of these specialists in some states. In response to these rising  premiums, representatives of health care providers—including physicians,  hospitals, and nursing homes—and the media have reported that  physicians have moved out of states experiencing the highest increases,  retired, or reduced or eliminated certain high-risk services. Policymakers  are concerned that, if these provider actions are occurring, they may limit  consumers’ access to health care. Additionally, fear of malpractice  litigation may encourage physicians to practice “defensive medicine,” for  example, ordering additional tests or procedures, thus increasing total  health care costs. In an effort to mitigate rising malpractice costs, states  have passed various tort reform laws, some of which include caps to  restrict the size of damage award payments and other measures to limit  costs associated with malpractice litigation, and Congress is considering  similar federal legislation.
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. Its findings are summarized on pages 9  through 11 of this report.
To evaluate how actions taken by health care providers in response to  malpractice premium increases have affected consumers’ access to health  care, we interviewed providers and their representatives, including the  American Medical Association (AMA), the American Health Care  Association, the American Hospital Association (AHA), and many of their  state-level counterparts. (See app. I for the complete list of national and  state associations we contacted during the course of our work.) In the  absence of reliable national sources of data concerning provider responses  to rising malpractice premiums, we focused our review on nine states  selected to encompass a range of malpractice premium pricing and tort  reform environments. Five of these states were among those cited by AMA  and other national health care provider organizations as malpractice  “crisis” or “problem” states based on such factors as higher than average  increases in malpractice insurance premium rates, physicians’ reported  difficulties obtaining malpractice insurance coverage, and reports of  actions taken by providers in response to the malpractice-related  pressures of rising premiums and litigation. The remaining four states  were not cited by provider groups as experiencing malpractice-related  problems. 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. Because of limitations in the Medicare data that precluded its  use in analyzing utilization of certain other physician services such as  hospital emergency and obstetrical care, we relied exclusively on the  reports of access problems provided by state provider associations and  our follow-up with local providers to assess access to these services.
To determine what is known about the extent of defensive medicine  practices, we reviewed available empirical studies, including those  examining the costs of defensive medicine and the potential impact of tort  reform laws on mitigating these costs. We also explored the issue with  medical provider organizations and examined the results of recent surveys  in which physicians were asked about their own defensive medicine  practices.
To assess premium growth, we analyzed malpractice premium rates  reported by insurers to the Medical Liability Monitor (MLM) for the  specialties of general surgery, internal medicine, and OB/GYN—the only  three specialties for which these data are reported—across all states and  the District of Columbia from 1996 through 2002. 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. We compared trends in 12 states with tort  reforms that include caps on noneconomic damages, such as for plaintiffs’  pain and suffering (4 states with a $250,000 cap and 8 states with a  $500,000 or less cap) 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.
subsections: section_title: Background
paragraphs: 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. 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. In contrast, a large insurer in Florida charged base premium  rates in Dade County of $56,153 for internal medicine, $174,268 for general  surgery, and $201,376 for OB/GYN, and $34,556, $107,242, and $123,924,  respectively, for these same specialties in Palm Beach County. In addition  to the wide range in premium rates charged, the extent to which premiums  increase over time also varies by specialty and geographic area. Beginning  in the late 1990s, malpractice premiums began to increase at a rapid rate  for most, but not all, physicians in some states. For example, between 1999  and 2002, the Minnesota insurer increased its base premium rates by about  2 percent for each of the three specialties, in contrast to the Florida  insurer that increased its base premium rates by about 98, 75, and 43  percent, respectively, for the three specialties in Dade County.
subsections: section_title: Rising Claims Costs Among Factors Contributing to Malpractice Insurance Premium Increases
paragraphs: 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.  More specifically, we reported on (1) the extent of increases in medical  malpractice insurance rates in seven states, (2) factors that have  contributed to the increases, and (3) changes in the medical malpractice  insurance market that may make the current period of rising premium  rates different from earlier periods of rate hikes. Key findings from that  report include the following.
Among the seven states we analyzed, the extent of medical malpractice  premium increases varied greatly not only from state to state but across  medical specialties. For example, among the largest writers of medical  malpractice insurance in the seven states, increases in base premium rates  for general surgeons from 1999 to 2002 ranged from 2 percent in  Minnesota to 130 percent in and around Harrisburg, Pennsylvania. Across  specialties, one carrier raised premiums for the area in and around El  Paso, Texas, during this period by 95 percent for general surgery, 108  percent for internal medicine, and 60 percent for OB/GYN.
Multiple factors have contributed to the recent increases in medical  malpractice premium rates. First, since 1998, the greatest contributor to  increased premium rates in the seven states we analyzed appeared to be  increased losses for insurers on paid medical malpractice claims.  However, a lack of comprehensive data at the national and state levels on  insurers’ medical malpractice claims and the associated losses prevented  us from fully analyzing the composition and causes of those losses.  Second, from 1998 through 2001, medical malpractice insurers  experienced decreases in their investment income as interest rates fell on  the bonds that generally make up around 80 percent of these insurers’  investment portfolios. 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.
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. Also in the 1970s, physicians, facing increasing  premium rates and the departure of some insurers, began to form mutual  nonprofit insurance companies. Such companies, which may have some  cost and other advantages over commercial insurers, now make up a  significant portion of the medical malpractice insurance market. More  recently, an increasing number of large hospitals and groups of hospitals  or physicians have left the traditional commercial insurance market and  sought alternative arrangements, for example, by self-insuring. While such  arrangements can save money on administrative costs, hospitals and  physicians insured through these arrangements assume greater financial  responsibility for malpractice claims than they would under traditional  insurance arrangements and thus may face a greater risk of insolvency.  Finally, since the periods of increasing premium rates during the mid- 1970s and mid-1980s, all states have passed at least some laws designed to  reduce medical malpractice premium rates. Some of these laws are  designed to decrease insurers’ losses on medical malpractice claims, while  others are designed to more tightly control the premium rates insurers can  charge. These market changes, in combination, make it difficult to predict  how medical malpractice premiums might behave in the future.
section_title: States Use Tort Reform to Help Contain Costs Associated with Medical Malpractice
paragraphs: 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. 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. 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    placing limits on fees charged by plaintiffs’ lawyers;  imposing stricter statutes of limitations that shorten the time injured  parties have to file a claim in court;    establishing pretrial screening panels to evaluate the merits of claims  before proceeding to trial; and    providing for greater use of alternative dispute resolution systems, such as  arbitration panels.
Among the tort reform measures enacted by states, caps on noneconomic  damage awards that include pain and suffering have been the focus of  particular interest. Cap proponents believe that such limits can result in  several benefits that help reduce malpractice insurance premiums, such as  helping to prevent excessive awards and overcompensation and ensuring  more consistency among jury verdicts. In contrast, cap opponents believe  that factors other than award amounts affect premiums charged by  malpractice insurers and that caps can result in undercompensation for  severely injured persons.
Congress is currently considering federal tort reform legislation that  includes several elements adopted by states to varying degrees, including  placing caps on noneconomic and punitive damages, allowing evidence at  the trial of a plaintiff’s recovery from collateral sources, abolishing joint  and several liability, and placing a limit on contingency fees, among  others.
section_title: Implications of Rising Malpractice Premiums on Access to Health Care
paragraphs: 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. We  confirmed instances where physician actions in response to malpractice  pressures have resulted in decreased access to services affecting  emergency surgery and newborn deliveries in scattered, often rural areas  of the five states. However, we also determined that many of the reported  physician actions and hospital-based service reductions were not  substantiated or did not widely affect access to health care. For example,  our analysis of Medicare utilization data suggests that reported reductions  in certain high-risk services, such as some orthopedic surgeries and  mammograms, have not widely affected consumer access to these  services. To help avoid consumer access problems, some hospitals we  contacted have taken certain steps, such as assuming the costs of  physicians’ liability insurance, to enable physicians to continue practicing.
subsections: section_title: Health Care Provider Actions Taken in Response to Malpractice Pressures Have Limited Access to Certain Services in Some Localities
paragraphs: 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. Although the hospital  officials we interviewed expected that some of the physicians would  eventually return to work, they believe timing may depend on passage of  malpractice reform legislation during a special legislative session expected  to take place this summer.
Mississippi: Reductions in ER on-call surgical coverage and newborn  delivery services have created access problems in certain areas of  Mississippi. We confirmed that some surgeons along the Gulf Coast who  formerly provided on-call services at multiple hospitals are restricting  their coverage to a single ER and others are eliminating coverage entirely  in an effort to minimize their malpractice premiums and exposure to  litigation. Officials of two of five hospitals we spoke with in the three Gulf  Coast counties told us they have either completely lost or experienced  reduced ER on-call surgical coverage for certain services. These  reductions in coverage may require that patients be transferred greater  distances for services. Some family practitioners and OB/GYNs have  stopped providing newborn delivery services, creating access problems in  certain rural communities. An official from one hospital in a largely rural  county in central Mississippi told us that it closed its obstetrics unit after  five family practitioners who attended deliveries stopped providing  newborn delivery services in order to avoid a more than 65 percent  increase in their annual premium rates. Pregnant women in the area now  must travel about 65 miles to the nearest obstetrics ward to deliver. Loss  of obstetrics providers in other largely rural areas may require pregnant  women in these areas to travel farther for deliveries. A provider  association official told us that malpractice pressures have worsened long- standing difficulties associated with recruiting physicians to the state, and  providers also said that low Medicaid reimbursement rates and insufficient  reimbursement for trauma services also influence physician practice  decisions.
Nevada: Reductions in ER on-call surgical coverage have created access  problems in Clark County. To draw attention to their concerns about  rising medical malpractice premiums, over 60 orthopedic surgeons in the  county withdrew their contracts with the University of Nevada Medical  Center, causing the state’s only Level I trauma center to close for 11 days  in July 2002. The center reopened after a special arrangement was made  for surgeons to temporarily obtain malpractice coverage through the  Medical Center and the governor announced his support for state tort  reform, prompting the return of approximately 15 of the surgeons,  according to medical center staff. Another hospital in the county has  closed its orthopedics ward and no longer provides orthopedic surgical  coverage in its ER as orthopedic surgeons have sought to reduce their  malpractice exposure by decreasing the number of hospitals in which they  provide ER coverage, according to a hospital official. Clark County has  had long-standing problems with ER staffing due in part to its rapidly  growing population, according to providers.
Pennsylvania: Some areas in Pennsylvania have experienced reductions  in access to emergency surgical services and newborn delivery services.  For example, one rural hospital recently lost three of its five orthopedic  surgeons. As a result, orthopedic on-call coverage in its ER has declined  from full-time to only one-third of each month. At the same hospital,  providers reported that four of the nine OB/GYNs who provide obstetrical  care in two counties stopped providing newborn delivery services because  their malpractice premiums became unaffordable and another left the  state to avoid high premiums. Some pregnant women now travel an  additional 35 to 50 miles to deliver. According to a hospital official, the  remaining four OB/GYNs were each in their sixties and near retirement.  This hospital reported that the loss of the physicians was largely due to the  rising cost of malpractice insurance, but also identified the hospital’s rural  location, and the area’s large Medicaid population and low Medicaid  reimbursement rates as factors contributing to the physicians’ decisions to  leave. Trauma services in Pennsylvania have also been affected in some  localities. For example, a suburban Philadelphia trauma center closed for  13 days beginning in December 2002 because its orthopedic surgeons and  neurosurgeons reported they could not afford to renew their malpractice  insurance. The situation was resolved when a new insurance company  offered more affordable coverage to the surgeons and the governor  introduced a plan to reduce physician payments to the state medical  liability fund, according to a hospital official.
West Virginia: Access problems due to malpractice concerns in West  Virginia involved ER specialty surgical services. One of the state’s major  medical centers lost its Level I trauma designation for approximately 1  month in the early fall of 2002 due to reductions in the number of  orthopedic surgeons providing on-call coverage. During this time, patients  who previously would have been treated at this facility had to be  transferred to other facilities at least 50 miles away. The hospital’s Level I  designation was restored when additional physicians agreed to provide on- call coverage after the state extended state-sponsored liability insurance  coverage to physicians who provide a significant percentage of their  services in a trauma setting. The state’s northern panhandle lost all  neurosurgical services for about 2 years when three neurosurgeons who  served the area either left or stopped providing these services in response  to malpractice pressures, requiring that all patients needing neurosurgical  care be transferred 60 miles or more, limiting patients’ access to urgent  neurosurgical care. Full-time neurosurgical coverage was restored to the  area in early 2003 through an agreement with a group of neurosurgeons at  one of the state’s major academic medical centers. A hospital official from  this area reported that efforts to recruit a permanent full-time  neurosurgeon have been unsuccessful. Provider groups told us that  malpractice concerns have made efforts to recruit and retain physicians  more difficult; however, they also identified the rural location, low  Medicaid reimbursement rates, and the state’s provider tax on physicians  as factors that have made it difficult to attract and retain physicians.
section_title: Some Reported Provider Actions Were Not Substantiated or Did Not Widely Affect Access to Health Care
paragraphs: 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. In West Virginia, although access problems reportedly  developed because two hospital obstetrics units closed due to malpractice  pressures, officials at both of these hospitals told us that a variety of  factors, including low service volume and physician departures unrelated  to malpractice, contributed to the decisions to close these units. One of  the hospitals has recently reopened its obstetrics unit.
Provider groups also asserted that some physicians in each of the five  states are moving, retiring, or closing practices in response to malpractice  pressures. In the absence of national data reporting physician movement  among states related to malpractice concerns, we relied on state-level  assertions of departures that were based on a variety of sources, including  survey results, information compiled and quantified by provider groups,  and unquantified anecdotal reports. (See table 1.)
Although some reports have received extensive media coverage, in each of  the five states we found that actual numbers of physician departures were  sometimes inaccurate or involved relatively few physicians.
Reports of physician departures in Florida were anecdotal, not extensive,  and in some cases we determined them to be inaccurate. For example,  state medical society officials told us that Collier and Lee counties lost all  of their neurosurgeons due to malpractice concerns; however, we found at  least five neurosurgeons currently practicing in each county as of April  2003. Provider groups also reported that malpractice pressures have  recently made it difficult for Florida to recruit or retain physicians of any  type; however, over the past 2 years the number of new medical licenses  issued has increased and physicians per capita has remained unchanged.  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.  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. 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.)
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.
section_title: Some Providers Report Reducing Certain Services, but Access to Care Not Widely Affected
paragraphs: 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. 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. 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.
Our analysis of utilization rates among Medicare beneficiaries for three of  the specific services frequently cited as being reduced—spinal surgery,  joint revisions and repairs, and mammography—did not identify recent  reductions. For example, utilization of spinal surgeries among Medicare  beneficiaries in the five states generally increased from July 2000 through  June 2002, and is currently higher than the national average. (See fig. 2.)  Utilization of joint revision and repair services among Medicare  beneficiaries in the five states is slightly below, but has generally tracked  the national average and has not recently declined. (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.
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.
section_title: Health Care Providers Have Taken Actions to Avoid Access Problems
paragraphs: 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. One hospital contacted in the state told us it has  loosened this requirement in response to physicians’ concerns over  increasing malpractice premiums.
section_title: Physicians Reportedly Practice Defensive Medicine, but Prevalence and Costs of Such Practices Are Not Reliably Measured
paragraphs: Several recently published surveys report that physicians practice  defensive medicine in response to malpractice pressures. 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.
subsections: section_title: Physicians Report Practicing Defensive Medicine, but Surveys Must Be Interpreted with Caution
paragraphs: 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. However, the  response rates for the AMA and AAOS surveys were about 10 and 15  percent, respectively, raising questions about how representative these  responses were of all physicians nationwide. Another 2002 survey of 300  physicians conducted by a polling firm found that, due to concerns about  medical malpractice liability, 79 percent of respondents reported ordering  more tests, 74 percent reported referring patients to specialists more  often, and 41 percent reported prescribing more medications than they  otherwise would based only on medical necessity. 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.
section_title: Some Research Identifies Defensive Medicine in Certain Clinical Situations
paragraphs: Most research that has attempted to measure defensive practices has  examined physician practices under specific clinical situations. 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. 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.
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. For example, a 1996 study  using records review found that for a population of elderly Medicare  patients treated for acute myocardial infarction or ischemic heart diseases,  certain tort reforms led to reductions of 5 to 9 percent in hospital  expenditures. 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. 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. Appendix III summarizes the  methods, findings, and limitations of published studies examining  defensive medicine.
section_title: Studies Cannot Be Generalized to Reliably Estimate Defensive Medicine Prevalence and Costs
paragraphs: Although available research suggests that defensive medicine may be  practiced in specific clinical situations, the findings are limited and cannot  be generalized to estimate the prevalence and costs of defensive medicine  nationwide. Because the studies focused on specific clinical  circumstances and populations, even slight changes in these scenarios  could yield significant changes in the degree of defensive medicine  practices identified. Consequently, reports that use the results of these  studies to estimate defensive medicine practices and costs nationally are  not reliable. For example, recent reports by the U.S. Department of Health  and Human Services (HHS) applied the 5 to 9 percent hospital cost savings  estimate for Medicare heart patients to total national health care spending  to estimate the total defensive medicine savings that could result if federal  tort reforms were enacted. 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.
section_title: States with Certain Noneconomic Damage Caps Had Lower Recent Growth in Malpractice Premium Rates and Claims Payments
paragraphs: Premium rates reported for the physician specialties of general surgery,  internal medicine, and OB/GYN—the only specialties for which data were  available—were relatively stable on average in most states from the mid-  to late 1990s and then began to rise, but more slowly among states with  certain noneconomic damage caps. 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.
subsections: section_title: Premium Growth Was Lower in States with Noneconomic Damage Caps Than in States with Limited Reforms
paragraphs: The average medical malpractice premium rates across the three  specialties reported by MLM (general surgery, internal medicine, and  OB/GYN) remained relatively stable during the mid- to late-1990s. From  1996 to 2000, average premium rates for all states changed little, as did  average premium rates for states with certain caps on noneconomic  damages and states with limited reforms, increasing or decreasing  annually by no more than about 5 percentage points on average. 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.)
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.)
In addition to including rates for only three specialties, premium rates  reported by MLM are subject to other limitations. First, because MLM  relies on a voluntary survey, its data do not include all insurers that  provide coverage in each state. Certain companies that may have a large  market share in a particular state may not be included. MLM estimates that  its 2002 survey may exclude about one-third of the total malpractice  insurance market nationwide. Second, insurers that do report rates have  not consistently done so across all the years, or have not consistently  reported premiums in different geographic areas within each state. We  generally excluded data from insurers that did not consistently report  premium rates across most of the years studied. Third, premium rates do  not reflect discounts, premium offsets, or rebates that may effectively  reduce the actual premium rate, or surcharges that are assessed in certain  states for physician participation in mandatory state-funded insurance  programs. These surcharges can range from a small amount to more than  the base premium rate.
Other studies have found a relationship between direct tort reforms that  include noneconomic damage caps and lower rates of growth in  premiums. 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. 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.
section_title: Average Claims Payments and Growth Lower in States with Noneconomic Damage Caps Than in States with Limited Reforms
paragraphs: 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. 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. Absent  the claims experience of these two states, the average claims payment for  states with limited reforms from 1996 through 2002 would decrease to $11,  only slightly higher than the $10 in states with these damage caps.
Average growth in per capita claims payments for all physicians was also  lower among the states with caps on noneconomic damages than among  the states with limited reforms. From 1996 through 2002 average per capita  claims payments grew by 5 and 6 percent in the states with noneconomic  damage caps of $250,000 and $500,000 or less, respectively, compared to  10 percent in the states with limited reforms. However, the growth in these  payments also varied widely among states in any given year and within  individual states from year to year. For example, from 2001 to 2002, the  average growth in claims payments on an individual state basis ranged  from a 68 percent decrease in the District of Columbia to a 70 percent  increase in Wyoming. Within the same state, growth rates fluctuated  widely from year to year. For example, Mississippi experienced an 18  percent decrease in claims payments from 1999 to 2000, followed by a 61  percent increase in 2001, and a 5 percent decrease in 2002.
The claims payment data reported to NPDB that we analyzed contain  certain limitations. The data include malpractice claims against licensed  physicians, and not against other institutional providers such as hospitals  and nursing homes, thus limiting the overall completeness of the data  across all providers. In addition, as we have previously reported, certain  claims payments may be underreported to NPDB. When physicians are not  specifically named in a malpractice settlement, the related claims  payments may not be reported. Nevertheless, because insurers must  report payment of claims against physicians subject to federal law and not  varying state laws, NPDB data are useful in comparing trends across  states. Other sources of claims payment data are subject to limitations of  completeness or comparability. 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. 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. In contrast, other researchers who have examined the effect  of indirect tort reforms on malpractice costs have found mixed results.  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. These  studies have also relied on claims data that have limitations in terms of  their completeness and comparability.
section_title: Factors Other Than Caps on Noneconomic Damages Also Affect Premiums and Claims Payments Trends
paragraphs: 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. 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. 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.
section_title: External Comments and Our Evaluation
paragraphs: 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.
subsections: section_title: Completeness of Evidence Examined
paragraphs: AMA questioned our finding that access problems were not widespread  based on our work in 5 states, whereas it has identified 18 states “in a full- blown liability crisis.” It further cited results from its own recent physician  survey on professional liability as evidence that medical liability concerns  are causing physicians to limit their practices. The report clearly states the  scope of our work and does not attempt to generalize our findings beyond  the 5 states with reported problems that we reviewed. However, these 5  states were among the most visible and often-cited examples of “crisis”  states by AMA and other provider groups. We believe that our finding that  malpractice-related concerns contributed to localized but not widespread  access problems in these states provides relevant and important insight  into the overall problem. With respect to AMA’s reference to evidence  available from its own survey, our report notes that the low response rate  of 10 percent to its survey precludes the ability to reliably generalize the  survey results to all physicians.
AMA suggested that we withhold release of the report until we contacted  state and national medical and specialty associations to obtain more  complete and accurate information about access to care problems and it  provided contacts for associations in each of the five states with reported  problems and for four national specialty associations. We made these  contacts throughout the course of our work, and the information these  associations provided formed the basis for many of our findings. As the  draft report noted, we contacted state medical, hospital, and nursing home  association representatives in each of the five states with reported  problems. We also contacted nine national medical and specialty  associations, including three of the four AMA cited, which were specified  in the draft report. In response to AMA’s comments, we added an  appendix to specify the names of each national and state provider  association we contacted during the course of our work.
AMA commented that we failed to account for the two clinical areas of  patient care in which impairment of access has been the most egregious:  obstetrical and ER services. It attributed its concern to our  acknowledgment in the report that we were unable to use Medicare claims  data to investigate reported concerns about these services. Because of the  recognized limitations of Medicare claims data for these and other  services, we used other methods to explore whether malpractice-related  pressures had affected access to ER on-call surgical services and newborn  deliveries and indeed found—and reported—evidence of access problems  for these services in localized areas. In response to AMA and technical  comments from the other reviewers, we clarified the report’s discussion of  our methodology for this issue.
section_title: Measures Used to Assess Access Problems
paragraphs: AMA commented that using aggregated data on physician supply to draw  conclusions about access to care is problematic. It said that physicians  tend to hold multiple state licenses and typically retain their licenses when  they relocate their practices, thus potentially obscuring the supply of  practicing physicians, and overall counts of physicians can obscure the  impact of changes for different specialties and different jurisdictions. We  agree that measuring changes in physician supply—especially changes due  to malpractice-related issues—and the related effects on access to care is  problematic. Sharing AMA’s concerns, during the course of our work we  obtained available data reported by state medical licensing agencies for  newly licensed physicians and for physicians practicing in the state  whenever possible rather than for all licensed physicians and contrasted  those data with reports of departing physicians. As noted in the draft  report, although we reported physician supply and practice changes at the  state level, the number of recent departures attributed specifically to  malpractice concerns was relatively small and usually not concentrated in  particular locales. Also as noted in the draft report, we further explored  reports of specialty-specific problems, such as orthopedic surgeons in  Pennsylvania and OB/GYNs in Nevada. For example, we analyzed rates of  all procedures performed by orthopedic surgeons in Pennsylvania and  found them to be growing, and called a random sample of OB/GYN  practices in Clark County, Nevada, and on that basis determined that  obstetrical care was readily available. Moreover, our Medicare claims  analysis of certain high-risk services was specialty-specific. For example,  to assess assertions by orthopedic surgeons that they have reduced the  provision of spinal surgeries and joint revisions and repairs, our analysis  was limited to only those services performed by orthopedic surgeons.
section_title: Time Lags in Available Data
paragraphs: 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.
section_title: The Cost and Impact of Defensive Medicine
paragraphs: AMA commented that while specific estimates of defensive medicine costs  have not been conclusive, the vast majority of peer-reviewed research  indicates that those costs are enormous, in the tens of billions of dollars  per year. To support this point, AMA cited three recent government  studies. As our report notes, the peer-reviewed literature attempts to  quantify the extent and sometimes the cost of defensive medicine under  narrowly defined clinical circumstances that cannot be generalized more  broadly. Two of the three government studies that AMA cited are  examples of what we believe to be overgeneralizations of prior study  results. We cite one of these by way of example in our report. The third  government study AMA cited does not address the cost of defensive  medicine but instead explicitly notes the difficulty of estimating such costs  and the speculative nature of existing estimates.
AMA also commented that our draft report ignored the impact of defensive  medicine costs in terms of patient access, expressing the view that these  costs are ultimately reflected in rising health insurance premiums that  contribute substantially to the number of uninsured. Our draft report  noted that, because of the absence of data to reliably measure overall  malpractice-related costs—such as the combined cost of malpractice  insurance premiums, litigation, and defensive medicine practices—we did  not assess the indirect impact on access to care that may result from any  added costs that malpractice pressures impose on the health care system.  In response to AMA’s comment, we moved our discussion of this point to  the report’s Results in Brief.
As agreed with your offices, unless you publicly announce this report’s  contents earlier, we plan no further distribution until 30 days after its issue  date. At that time, we will send copies to other interested congressional  committees and Members of Congress. We will also make copies available  to others on request. In addition, this report is available at no charge at the  GAO Web site at http://www.gao.gov.
Please call me at (202) 512-7118 or Randy DiRosa at (312) 220-7671 if you  have any questions. Other major contributors are listed in appendix IV.
section_title: Appendix I: National and State Provider Associations Contacted
paragraphs: 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.
section_title: Appendix II: Scope and Methodology
paragraphs: 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.
subsections: section_title: Consumers’ Access to Health Care
paragraphs: 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.)
In each of the nine states we reviewed, we contacted or interviewed  officials from associations representing physicians, hospitals, and nursing  homes to more specifically identify the actions physicians have taken in  response to malpractice pressures and the localized effects of any  reported actions on access to services. (See app. I for a complete list of the  provider organizations we contacted at the state and national levels.) Such  actions were reported only in the five states with reported problems. In  these five states we obtained and reviewed the evidence upon which the  reports were based. Evidence of physician departures, retirements,  practice closures, and reduced availability of certain hospital-based  services consisted of survey results, information compiled and quantified  by provider groups, and unquantified anecdotal reports collected by  provider groups. Although we did not attempt to confirm each report cited  by state provider groups, we judgmentally targeted follow-up contacts  with local providers where the reports suggested potentially acute  consumer access problems or where multiple reports were concentrated  in a geographic area. With the local providers we contacted directly,  including representatives of physician practices, clinics, and hospitals, we  discussed the reports provided by the state provider groups and explored  the resulting implications for consumers’ access to health care. In total, we  contacted 49 hospitals and 61 clinics and physician practices in the five  states. From these contacts we identified examples of access problems  that were related to providers’ concerns about malpractice-related  pressures as well as examples of provider actions that did not appear to  affect consumer access or were not substantiated.
We separately examined evidence of specific high-risk services that  providers reportedly reduced in response to concerns about malpractice  pressures. Such evidence consisted of results from surveys conducted by  national and state-level medical, hospital, and specialty associations that  identified the high-risk procedures physicians reported reducing or  eliminating in response to malpractice pressures. High-risk services  commonly identified in these surveys included spinal surgeries, joint  revisions and repairs, mammograms, physician services in nursing homes,  emergency room services, and obstetrics. We analyzed Medicare  utilization data to assess whether reported reductions in three of these  high-risk services—spinal surgery, joint revisions and repairs, and  mammograms—-have had a measurable effect on consumers’ access to  these services. To calculate service utilization rates per thousand fee-for- service Medicare beneficiaries enrolled in part B, we used Medicare part B  physician claims data from January 1997 through June 2002 and the  Medicare denominator files from 1997 through 2001. 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.
section_title: Defensive Medicine Practices
paragraphs: To assess what is known about how rising premiums and fear of litigation  cause health care providers to practice defensive medicine, we reviewed  studies that examined the prevalence and costs of defensive medicine and  the potential impact of tort reform laws on mitigating these costs that  were published in 1994 or later, generally in peer-reviewed journals, or  were conducted by government research organizations. We identified  these studies by searching databases including MEDLINE, Econlit,  Expanded Academic ASAP, and ProQuest; and through contacts with  experts and affected parties. Several studies published prior to 1994 were  reviewed by the Office of Technology Assessment (OTA) in its  comprehensive 1994 report on defensive medicine, which we included in  our review. In addition, we also explored the issue with medical provider  organizations and examined the results of several recent surveys,  including those conducted by national health care provider organizations,  in which providers were asked about their own defensive medicine  practices.
section_title: Malpractice Premium Rate and Claims Payments Growth
paragraphs: To assess the growth in medical malpractice premium rates and claims  payments across states, we compared trends in states with tort reforms  that include noneconomic damage caps (4 states with a $250,000 cap and 8  states with a $500,000 or less cap) 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.)
To assess the growth in medical malpractice premiums, we analyzed state- level malpractice premium rates for the specialties of general surgery,  internal medicine, and obstetrics/gynecology (OB/GYN) reported by  insurers to the Medical Liability Monitor (MLM) from 1996 to 2002. 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. We  adjusted rates for inflation using the urban consumer price index. We  calculated a composite average premium across all three specialties, as  well as specialty-specific average premiums, for each year. We then  analyzed growth rates in these average premiums from 1996 through 2002  across all states.
To assess the growth in medical malpractice claims payments, we  analyzed state level claims payment data from the National Practitioner  Data Bank (NPDB) from 1996 to 2002, which had been adjusted to 2002  dollars. 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.  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. The extent to which this underreporting occurs is  not known. Finally, NPDB data do not capture legal and other  administrative costs associated with malpractice claims.
We examined other sources of information on claims payments, and found  none to be a comprehensive data source for each state that captures  malpractice claims costs from all segments of the malpractice insurance  market—commercial insurers, physician-mutual companies, and self- insured and other groups. For example, data reported to the National  Association of Insurance Commissioners (NAIC) have been used in other  research; however, data are not reported consistently across states and  exclude payments from certain insurers. According to NAIC officials, the  laws that dictate reporting requirements differ by state, and not all  insurers are required to report in every state. They also stated that  exempted insurers can include those operating in a single state and certain  physician mutual companies. In all states, self-insured groups, which  represent a substantial proportion of the medical malpractice insurance  market, are exempted from reporting. 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.
section_title: Appendix III: Summary of Selected Research Designed to Measure Defensive Medicine Prevalence and Costs
paragraphs: 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.
section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the person named above, key contributors to this report  were Gerardine Brennan, Iola D’Souza, Corey Houchins-Witt, and Margaret  Smith.
section_title: Related GAO Products
paragraphs: 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.