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 have below-average medical malpractice loss costs for physicians, while those 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 of medical malpractice claims in the 15 largest states from late 1990 to early 2001 shows wide differences in medical malpractice loss costs by state for physicians, which correlate with whether or not the state has enacted caps on non-economic damages.

Richard S. Biondi, principal and consulting actuary at Milliman USA, said, "The data indicate that caps on non-economic damages reduce the cost of insuring medical malpractice for physicians in the states in our study that have instituted this element of tort reform."

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

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

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

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

The study noted that large states without caps have higher than average medical malpractice losses per physician. They include: Florida (136 percent of countrywide average), Illinois (144 percent), 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, savings were estimated on physicians' medical malpractice losses if caps were instituted. It was projected that caps of $250,000, $500,000, $750,000, and $1,000,000 would result in a reduction in losses of 29 percent, 20 percent, 14 percent and 11 percent respectively on policies providing $1 million to $3 million coverage for physicians.

"There are other differences between these states besides the fact that they either have or don't have caps, and there are also differences in the size and application of the caps in the states that have them," said Mr. Biondi. "However, the pattern in this particular study is still very clear in showing that caps on non-economic damages are highly correlated to medical malpractice costs."

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 from medical malpractice payment reports on physicians, dentists and other licensed healthcare professionals.

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Study Says Damage Caps Reduce Malpractice Cost

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