Study Says Damage Caps Reduce Malpractice Cost

NU Online News Service, April 8, 4:22 p.m.EDT?Large states with caps on non-economic damages havebelow-average medical malpractice loss costs for physicians, whilethose without caps have the highest medical malpractice costs,according to a consulting firm's study.

Milliman USA in New York, said today that its analysis ofmedical malpractice claims in the 15 largest states from late 1990to early 2001 shows wide differences in medical malpractice losscosts by state for physicians, which correlate with whether or notthe state has enacted caps on non-economic damages.

Richard S. Biondi, principal and consulting actuary at MillimanUSA, said, "The data indicate that caps on non-economic damagesreduce the cost of insuring medical malpractice for physicians inthe states in our study that have instituted this element of tortreform."

Mr. Biondi, the author of the Milliman study, said it "impliesthat caps on non-economic damages would significantly reduce totallosses for both physicians and hospitals."

According to Milliman, the data is consistent with resultsothers have observed in California, which has capped non-economicdamages at $250,000 since 1975.

The California medical malpractice losses per physician areabout half (52 percent) of the countrywide average, according tothe study.

Other large states listed in the study that have instituted capsand have lower medical malpractice losses per physician areColorado (69 percent of the countrywide average), Indiana (86percent) and Maryland (64 percent).

The study noted that large states without caps have higher thanaverage medical malpractice losses per physician. They include:Florida (136 percent of countrywide average), Illinois (144percent), New Jersey (131 percent), New York (156 percent),Pennsylvania (171 percent), and Washington, D.C. (144 percent).

Milliman noted that in a separate 1997 analysis performed by Mr.Biondi, using data for New York, which does not have caps, savingswere estimated on physicians' medical malpractice losses if capswere instituted. It was projected that caps of $250,000, $500,000,$750,000, and $1,000,000 would result in a reduction in losses of29 percent, 20 percent, 14 percent and 11 percent respectively onpolicies providing $1 million to $3 million coverage forphysicians.

"There are other differences between these states besides thefact that they either have or don't have caps, and there are alsodifferences in the size and application of the caps in the statesthat have them," said Mr. Biondi. "However, the pattern in thisparticular study is still very clear in showing that caps onnon-economic damages are highly correlated to medical malpracticecosts."

Milliman said the data in the USA study included physicians'statistics by state from the National Practitioners' Data Base(NPDB) Public Use Data File, which contains selected variables frommedical malpractice payment reports on physicians, dentists andother licensed healthcare professionals.