WASHINGTON–Insurers and physicians don't generate excess profits when states impose caps on medical malpractice awards, according to a new study.
And another study on the issue says the nation is undergoing its third med-mal "crisis" since the 1970s, this time the result of premiums that have "been rising substantially" since 2001.
The reports were unveiled today at a seminar sponsored by the American Enterprise Institute to discuss medical malpractice insurance studies.
The first study, co-authored by H. E. Frech III, a professor of economics at the University of California, was "An Economic Assessment of Damage Caps in Medical Malpractice Litigation Imposed by State Laws and the Implications for Federal Policy and Law."
The study said that a federal cap on med-mal damage awards would lead to a decrease in the cost of health care insurance–prompting more consumers to buy insurance.
At the same event, Meredith Kilgore, an associate professor at the University of Alabama, Birmingham, said that a study he co-authored with Michael Morrisey and Leonard Nelson shows that lowering damage caps by $100,000 by states resulted in insurers reducing premiums by 4 percent.
Mr. Kilgore said his work also found that the legal tool besides caps that helped control med-mal premiums are strict laws that limit the absolute amount of time a victim or relative of a victim has to file a claim, regardless of when the claim was discovered.
Both studies seem to indicate that federal limits on damages would have a strong positive effect on keeping med-mal premiums under control.
Regarding caps, Mr. Frech said he studied the issue in detail using California data because opponents of caps argue that the reduction in loss payments resulting from caps do not produce savings for consumers. But, he said, "we can find no reliable evidence to support this argument."
He said medical liability insurance companies "are not exempt" from the competitive forces that keep prices and profits in check elsewhere in the economy. "To the contrary," he said, "the evidence indicates that competition within the insurance industry is vigorous."
Indeed, a federal cap, he said, would lead to a decrease in the number of people who elect not to buy health insurance.
Citing a federal study, he said that a decrease in premium costs increases the likelihood that a firm will offer health insurance.
And, a federal cap leading to a decrease in premiums will lead more low-income workers to buy health insurance coverage. "A growing body of research tests the sensitivity of employee behavior to health insurance costs," he said.
He said the research can be interpreted to mean that a 10 percent decrease in the price of health insurance will lead to a 1-to-4 percent increase in the number of people who choose to buy health insurance. "These numbers can be substantial when measured against the total population of the U.S., or more specifically, in states that currently don't have damage caps," Mr. Frech said.
He added that a federal cap will allow physicians to establish practices in states where liability costs are currently too severe.
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