Rising Medical Malpractice Premiums: Impact on Patients and Physicians

Introduction and Problem Statement

Medical malpractice premiums have increased exponentially during the last decade, resulting in a decreased pool of qualified physicians available to consumers seeking quality care. As a consequence, consumers are left with fewer and fewer options when seeking out quality medical care. In some circumstances, consumers are left with no convenient or available options at all. In addition, physicians are faced with the ever-looming prospect of discontinuing many services formerly offered to patients. Physicians are dropping many practices as a result of an inability to cover the premiums associated with insuring such services. Many physicians have been forced out of practice entirely as a result of rising medical malpractice premiums, and patients have found themselves confronted with the crisis of locating qualified professionals in an ever-shrinking market. A majority of smaller physician practices find themselves at a crossroads — desiring to provide patients with the utmost quality care, but unable to do so because of exorbitant premiums.

Health care costs and insurance premiums are both a social and economic problem (Gilfillan, 1993). Rising insurance premium costs affect consumers and physicians equally. Physicians are plagued by rapidly rising premiums, causing them to reduce either the quality or volume of care offered to patients. Patients are forced to select from a narrowing pool of physicians due to changes resulting from physicians dropping out of critical care practice. Yet premiums continue to rise, and adequate solutions have yet to be developed and implemented across the board.

Due to many factors, health insurance premiums and medical malpractice insurance premiums have risen to remarkable rates in recent years (Gilfillan, 1993). Part of the rapid increase has been attributed to the decline in the economy. Additionally, rapidly rising premiums have been associated with increased jury awards in cases of medical malpractice. Regardless of the causes, physicians are calling out for reform, as are patients seeking quality care under increasingly limited circumstances.

Medical malpractice awards were originally intended to punish violations of trust (Bloche, 2002). Originally, a majority of medical malpractice claims arose from serious medical deficiencies. In recent years, however, juries seem to have imposed idealized expectations upon doctors and health plans (Bloche, 2002). An increasing number of medical malpractice claims have resulted — some legitimate, others considered extraneous in nature. Regardless of the legitimacy of such claims, a crisis is emerging that must be addressed from numerous perspectives.

Some opponents of increasing claims have suggested that the current medical malpractice liability system in fact encourages a potentially "increasing risk of error and patient injury" by causing doctors to focus on protective measures rather than quality medicine (Liang, 2001). Indeed, a number of physicians have indicated a reduction of services as a result of increased premiums. Many physicians, rather than focusing on quality care, have adjusted their outlook to reflect preventive and defensive practice. It appears that a majority of physicians are implementing practices more akin to protecting themselves than to ensuring the safety and well-being of patients.

For a plaintiff to prevail in a medical negligence lawsuit, they must first prove that they sustained damages caused by the "failure of the physician to take due care, defined as customary practice of physicians in good standing with the profession" (Danzon, 1991). Experience shows, however, that medical malpractice claims arise for many reasons above and beyond those that might be defined by true liability.

The purpose of this study is to examine how rising medical malpractice premiums are affecting physicians and patients. Additionally, this study aspires to examine what solutions may be possible to prevent continuance of the crisis facing practicing physicians. To that end, the following hypotheses have been developed:

Null Hypothesis: Rising medical malpractice insurance premiums directly impact a physician's ability to practice quality medicine and patients' subsequent access to quality care in a negative manner.

Alternative Hypothesis: Rising medical malpractice insurance premiums do not directly affect a physician's ability to practice and patients' subsequent access to quality care in a negative manner.

This research study will document the impact of rising premiums on physicians' ability to provide care and patients' subsequent access to quality health care programs.

Significance of Study

The significance of this study is based on the researcher's commitment to quality care — particularly for consumers within the United States who are in desperate need of continuing quality care. The author believes that the abundance of unnecessary claims has resulted in a deficiency of qualified physicians, as more and more find themselves unequipped to deal with the rising expense of providing care.

As a current and future patient, the author has a special interest in ensuring the best outcome for both physicians and patients, and is thus obligated to explore this crisis in greater detail in the hope of developing alternative solutions. This research will allow the investigator to examine the decline in availability of qualified professionals — perhaps resulting from increasing medical malpractice insurance premiums — and to expose the potential crisis related to unsubstantiated medical malpractice claims facing American citizens.

Definitions

AMA: American Medical Association

Medical Malpractice: Generally defined as the "failure to take due care, defined as efficient care" when providing medical services (Danzon, 1991).

Tort Law: Common law in which the law provides a remedy for injustices delivered to a person or persons.

Likert Scale: A tool utilized to measure survey responses, typically using a scale with a ranking system of 1–5, whereby survey participants rank responses according to their level of acceptance or agreement with statements.

Review of the Literature

The purpose of this study is to examine the effects and consequences of rising medical malpractice premiums on patients and healthcare providers. A trend has surfaced in recent years indicating that medical malpractice premiums are rising. Supplemental to this, medical malpractice claims also appear to be on the rise — due perhaps to an increased incidence of awards to parties suing physicians for claims of medical malpractice. The aim of this study is not to deny patients the right to pursue legitimate compensation for medical negligence claims; rather, it is intended that this study will uncover the mechanisms which have led to rapidly rising and uncontrollable premiums. This study also intends to examine the impact of such premium increases and assess how these changes have affected both patients and physicians, as well as to identify and assess potential solutions for the healthcare crisis that has resulted.

According to Fielding and Waitzkin (1999), the problem of medical malpractice claims "is like an iceberg; the bulk is hidden beneath the surface, and the visible portion is the few sensational cases covered in the media."

Indeed, the media tends to focus on the few extreme cases of medical malpractice that have occurred in order to sensationalize victims of negligence. Unfortunately, such practices do not assist the plight of physicians attempting to protest against the recent surge of exorbitant medical insurance premiums. In fact, such sensationalism only serves to fuel the fire.

The practice of medicine in contemporary society has increasingly become more technology-based. Physicians are utilizing ever more sophisticated procedures that often add new risks, consequently setting the stage for an increased rate of claims (Fielding & Waitzkin, 1999). As a result of increasingly new technology, physicians take on more risks when treating patients. At the same time, new technologies present patients with better outlooks and the potential for greater healing. However, new technology is not without risk.

Medical malpractice claims are rising exponentially in contemporary society. A great majority of these cases are civil rather than criminal complaints (Fielding & Waitzkin, 1999). Regardless, the impacts of such claims are devastating, not only to physicians but also to patients.

A majority of the research conducted on medical malpractice claims up to this point has focused exclusively on statistical data, including insurance claims and surveys of patients regarding claimants (Fielding & Waitzkin, 1999). This data suggests that the incidence of medical malpractice claims is rising rather than declining.

Historical Context of Medical Malpractice Claims

The idea of medical negligence and malpractice is longstanding. Historically, records of malpractice insurance claims date back to the first quarter of the nineteenth century (Fielding & Waitzkin, 1999; Mills, 1956). Kenneth Allen De Ville reports that medical malpractice claims started to become more common during the Jacksonian period and have risen continuously ever since (Patel & Rushefsky, 1995). During the period between 1835 and 1865, a medical malpractice "crisis" was identified that paralleled the crisis occurring today within the medical field (Fielding & Waitzkin, 1999). Data from research conducted at that time indicates that the number of malpractice cases rose at a rate faster than population growth (see Table 1.1).

Among the reasons cited for such increases during this period is the idea that medicine was becoming more "heroic," where decisive medical intervention was becoming more the norm rather than the exception (Fielding & Waitzkin, 1999). Physicians began utilizing new treatments such as bloodletting and induced vomiting, which at the very least left "much to be desired in the eyes of the public" (Fielding & Waitzkin, 1999).

Progress often comes with pain. The development of the forceps, for example, was accompanied by "numerous accounts of fetuses being dismembered during delivery in order to save the mother's life" (Fielding & Waitzkin, 1999). Unrelated to such horror stories, medical advances have also been cited as raising patients' expectations of projected outcomes, and once those outcomes are not fully realized, a greater number of malpractice claims subsequently results (Fielding & Waitzkin, 1999). This rationale is far more likely applicable to the modern-day insurance premium crisis.

Medical malpractice cases arise for a number of reasons. Medical treatment rendered by a physician that is inadequate, incorrect, or even excessive may result in an adverse outcome and a subsequent claim. Fielding and Waitzkin (1999) note that from a structural perspective, the American health care system at present makes physicians easy targets for claims because "the complexity of this system increases the chances that something will go wrong despite the efforts of even the best trained practitioners." Medicine in contemporary times has also become a capitalized, profit-driven industry where physicians and patients alike are often left feeling "isolated and dehumanized" (Mills, 1956; Fielding & Waitzkin, 1999).

Physicians often describe medicine as "fraught with frustration" (Fielding & Waitzkin, 1999). Many are faced with increasing demands and workload pressures, as well as insurance provider limitations that dictate the amount of time allocated for each patient — often preventing a physician from spending what they feel is an adequate amount of time with patients. The ever-increasing threat of malpractice claims has also affected physicians in such a way that they now view patients as potential threats (Fielding & Waitzkin, 1999). Distrust has subsequently evolved and encouraged physicians to practice more "defensive medicine" (Fielding & Waitzkin, 1999).

Causes of Rising Premiums and Their Consequences

According to a report in State Legislatures (2002), more than 60 specialists at a university hospital in Las Vegas "walked off their jobs" because of the rising cost of medical malpractice insurance (Boulard, 2002). The mass exodus resulted in the closing of a 24-hour trauma center (Boulard, 2002).

In Nevada, lawmakers responded to the crisis by passing a bill that set a cap on medical malpractice claims at $350,000 (Boulard, 2002). Two exceptions to this cap exist, however, in situations where "gross malpractice" or "clear and convincing evidence" suggests intentional malpractice. The recent crisis in medical insurance accelerated from approximately the year 2000, when premiums began rising rapidly. In December of 2001, St. Paul Companies announced that they would no longer offer medical malpractice coverage, in part because of losses cited "in the hundreds of millions" (Boulard, 2002). St. Paul had covered more than 42,000 physicians and more than 73,000 other types of health care workers (Boulard, 2002) — figures representing more than 40% of covered physicians in some states.

In Fort Lauderdale, obstetricians now pay in excess of $200,000 per year for medical malpractice insurance (Boulard, 2002). Rising insurance premiums have resulted in national cutbacks of services. In Hopwood, Pennsylvania, for example, three local obstetricians who together delivered up to 450 babies per year stopped practicing because their insurance premiums increased by more than 260% (Boulard, 2002). Part of the problem lies in juries that are continually awarding plaintiffs larger and larger sums. According to Boulard, jury awards "contributed to a 33% jump in claims paid by insurers between 2000 and 2001" (Boulard, 2002). The size of awards has been growing by approximately 7% over the last ten years, an increase "that is about 3% more than the rate of inflation" (Boulard, 2002).

Research suggests that three primary factors are contributing to the increasing rise in insurance premiums: (1) insurers in the past kept premiums artificially low in order to gain market share, and this practice has changed; (2) jury awards are continuing to rise in cases of medical negligence; and (3) major insurance carriers such as St. Paul are leaving the market or no longer offering physicians medical negligence coverage because of the frequency and magnitude of claims (Cornell, 2002).

A strong economy and stock market typically enable medical insurers to better mitigate the costs of insurance premiums. In a well-supported economy, medical malpractice premiums can sometimes be kept below market value because profits "from investment income help offset low premiums and underwriting costs" (Cornell, 2002). This evidence suggests that the rapid rise in medical insurance premiums over the last several years may be partly attributed to the weakened state of the U.S. economy. The poor economy alone, however, cannot be blamed entirely for the rise in premiums. Some reports indicate that jury awards jumped as much as 43% in a single year.

The cost of malpractice insurance has "skyrocketed" over the last 20 years, with physicians spending upwards of $5 billion annually in premiums and hospitals spending approximately half as much (Frankel, 1994). Defensive medicine techniques — implemented to "minimize the potential for future litigation" — cost patients and consumers an additional $15 billion each year (Frankel, 1994). Despite tremendous jury awards in recent years, many critics state that the current system of tort liability "does a terrible job of compensating victims of negligent injuries" (Frankel, 1994).

Some cases do seem extreme in nature. For example, in 1986 a Philadelphia jury "awarded $1 million to a spiritual advisor who claimed to have lost her psychic powers as a result of a negligently delivered CAT scan" (Miller, 1997). Still, evidence suggests that not all awards are excessive — some are in fact the complete opposite (Miller, 1997). Clearly some clarification of the issues is required to ensure accurate assessment.

The tort system currently in place is tasked with the responsibility of providing an optimal level of "injury deterrence," as well as punishing wrongdoers and compensating victims (Hsieh & Sloan, 1990; Broder, 1986; Trebilcock, 1989). Some legal systems are limiting the amount paid out in damages relative to other standards, such as those imposed by Medicare. The Pennsylvania Supreme Court, in the case of Moorehead v. Crozer, held that "compensatory damages for medical malpractice are limited to the actual amount paid out by Medicare and private insurance for medical services, rather than the fair and reasonable value of the services" (Welti, 2001).

Health care markets within the United States face an increasingly "turbulent and more fiercely competitive future" (Colon & Gupta, 1999). Executives and physicians must challenge standards established by conventional wisdom in order to develop solutions to the ever-threatening medical malpractice crisis (Colon & Gupta, 1999).

Research suggests that there is a great deal of dissatisfaction among consumers and physicians with the current tort liability system (Hsieh & Sloan, 1995; Schuck, 1991; Litan & Winston, 1988). One might adequately conclude that reform lies in the ability of consumers and physicians to reach agreement and compromise related to medical insurance resolution. Physicians need to be instilled with some sense of confidence that they can attempt to practice the newest procedures and ensure the best outcomes for patients without fear of retribution. Patients, on the other hand, still need assurance that physicians have their best interests in mind — not those of profit-seeking ventures. Without some manner of reform, the outlook for the future of medical practice seems grim at best.

Proposed Solutions and Reform Options

Increasingly, doctors are "giving up on high-risk practices completely" while patients are facing a crisis of having few to no options (Ramstack, 2003). According to Donald Palmisano, president of the AMA, "You have a situation where the viability of a physician's practice is in great jeopardy" (Ramstack, 2003).

Some solutions that have been presented include the notion of insurance "caps." Lawyers argue, however, that such caps "penalize patients most severely injured from medical malpractice" (Boulard, 2002). The bigger issue is perhaps addressing the root problem of rising premiums. Caps can help stabilize the market, but research suggests that caps rarely "have the immediate effect of reducing premiums" (Boulard, 2002). West Virginia took an alternative approach, passing HB 601 in 2001, which established a limited state-run insurance plan designed to provide reasonable insurance for physicians who are unable to obtain traditional coverage (Boulard, 2002).

Certain specialties are more at risk than others, including obstetrical care providers and the field of neurosurgery (Cornell, 2002). States currently have several options available that are not adequately being utilized to reduce the medical malpractice problem. These include insurance market interventions — or "stopgap solutions" — that specifically target the problem of a lack of affordable or available insurance for practicing physicians (Cornell, 2002). One method involves providing subsidies to providers or creating state-run insurance programs such as those in operation in West Virginia. These measures, however, are generally considered more "short-term" in nature.

Another proposed intervention is tort reform, which generally targets the manner in which medical malpractice claims are processed through the court system (Cornell, 2002). Tort reforms "are aimed at reducing either the size of awards or the number of suits that make it to the court" (Cornell, 2002). This type of reform is perhaps the most controversial, as lawmakers and patients are concerned that such reforms might adversely impact patients who are victims of severe medical malpractice situations. Another proposed intervention is alternative dispute resolution programs, which attempt to reconcile medical malpractice claims outside of the court system (Cornell, 2002).

Patient safety efforts have also been proposed, focusing on prevention and patient well-being as an approach to "resolving the issues that contribute to medical errors" (Cornell, 2002).

For adequate reform to be enacted, states must first analyze the market forces operating within their jurisdictions and ascertain the depth of the medical claims crisis within their judicial systems. Even in 2002, many insurance companies in various states were quoting rates double and triple what doctors had paid previously (Cornell, 2002). Insurance rates apply not only to doctors but also to hospital emergency rooms, trauma centers, birthing centers, and nursing homes (Cornell, 2002). Americans face a crisis if these facilities continue to shut their doors in response to the lack of available and affordable medical malpractice insurance.

State-run stopgap medical malpractice liability coverage may help alleviate some of the problem. In this type of arrangement, a state establishes its own insurance fund from which doctors can purchase insurance, but only if no other insurance carrier is available on the market (Cornell, 2002). This type of coverage is traditionally administered via a third-party administrator (Cornell, 2002).

State patient compensation programs might also offer some relief by spreading the cost of high awards "more broadly" (Cornell, 2002). Under such a program, a state would create a fund to pay part of an award or settlement against a health care provider if the award exceeds a designated amount (Cornell, 2002). Funds for this type of account would be provided via an annual surcharge assessed against participating health care providers (Cornell, 2002). Currently, seven states have similar programs implemented: Indiana, Louisiana, Nebraska, New Mexico, North Dakota, South Carolina, and Virginia (Cornell, 2002). All of these programs are voluntary, however, not mandatory.

Another alternative solution involves state subsidies to providers, whereby a state establishes a mechanism that "subsidizes all or a portion of the provider's insurance premium" (Cornell, 2002). Subsidies are generally easy to implement and can be made available to all providers. This type of program was available in several states during the late 1980s but was subsequently abandoned "as the liability crisis abated" (Cornell, 2002).

Regarding caps, there are a couple of different approaches. Generally, medical malpractice damages are awarded in the following areas: economic and non-economic damages. Economic damages are "for actual monetary losses due to negligence including medical expenses, lost wages and rehabilitation costs," whereas non-economic damages are typically awarded for "pain and suffering, disfigurement, and loss of companionship" (Cornell, 2002).

Alternative dispute resolution measures seem to be a desirable alternative to traditional in-court claims. Alternative dispute resolution programs are designed to provide "fairer, faster and less expensive routes to a resolution" for all parties involved (Cornell, 2002). Under this type of practice, states would establish a system that provides compensation for injury resulting from medical negligence over the course of the injured person's lifetime (Cornell, 2002). Claims would be filed with "an expert panel of impartial physicians" assigned the responsibility of reviewing claims to determine whether injury is justified. Compensation would be limited to economic losses only and would not include pain and suffering (Cornell, 2002). This type of system can also target specific types of injury, including "birth-related injuries" (Cornell, 2002).