Medical Malpractice: An Overview
CRS Report for Congress
Medical Malpractice: An Overview
Updated May 5, 2006
Analyst in Social Legislation
Domestic Social Policy Division
Analyst in Economics
Government and Finance Division
Congressional Research Service ˜ The Library of Congress
Medical Malpractice: An Overview
The rising cost of medical malpractice insurance is of concern to Congress
largely because of its potential impact on the availability of health care providers and
services. As malpractice insurance becomes increasingly expensive, some physicians
claim that premium increases have forced them to limit the services they provide,
move their practice locations, or leave medicine altogether. This is especially the
case for certain specialists who have experienced the largest premium increases.
Some providers have gone on strike to publicize their plight. They cite excessive
malpractice lawsuits and unreasonably large jury awards as the causes of the
malpractice insurance “crisis.”
Some lawyer and consumer groups counter that the insurance industry is to
blame for the rapid rise in malpractice insurance premiums. These groups contend
that bad investment choices, in addition to the underwriting cycle, have led to
dwindling profits for insurers, who then try to recoup their losses through expensive
insurance products. Abetting this, in their eyes, is an exemption from the normal
federal antitrust law for insurers.
Congressional debate on these issues generally has conformed to the contrasting
perspectives mentioned above. During the first session of the 109th Congress, some
Members, notably both House and Senate majority leadership, attributed the rise in
malpractice insurance premiums to “frivolous” lawsuits and large jury awards. Other
lawmakers respond that spikes in malpractice insurance premiums are the result of
the insurance underwriting cycle and sagging insurer investments. In addition, there
is a third perspective, which has not generated the same level of attention or
controversy, that sees the overall medical error rate as the root of the problem.
Given the malpractice insurance debates from previous sessions, proposals for
legal changes (H.R. 5, which has passed the House, and S. 22 and S. 23, which are
currently being debated in the Senate) most likely will be high on the legislative
agenda. These bills are designed to decrease the overall number of malpractice
lawsuits and the payment amounts awarded in successful claims. Examples of
specific reforms include establishing a federal statute of limitations, restricting
attorneys’ fees, and placing caps on the amount juries may award in damages.
Proposals addressing the insurance side (S. 1525, H.R. 3359) include a range of
strategies to constrain the cost of malpractice insurance, such as greater oversight of
the insurance industry and stabilizing the reinsurer market in order to limit the
liability that primary insurers face in the event of extraordinary loss. Some Members
also have expressed interest in alternatives to tort and insurance reforms. Among the
proposals introduced during the 109th Congress are efforts to disclose medical error
data (S. 554, now P.L. 109-41), establish administrative proceedings (S. 1337), and
award tax credits to physicians to help cover premium costs (H.R. 2291).
This report will be updated in the event of major legislative activity.
In troduction ......................................................1
Background on Medical Malpractice Insurance...........................2
Prevalence of Medical Malpractice Insurance........................3
Sources of Medical Malpractice Insurance..........................3
Malpractice Liability and Resolution of Claims......................4
The Underwriting Cycle — “Hard” and “Soft” Insurance Markets........4
Medical Malpractice Insurance Market Structure.....................5
Impact on Consumers and Providers...................................7
Consumer Access to Services and Providers.........................7
Causes of the Problem.............................................11
Tort System: “Frivolous” Lawsuits and High Damage Awards.........11
Insurance System: Regulation and Antitrust Exemption..............12
Health Care System: Medical Errors..............................14
Legislative Proposals in the 109th Congress.............................16
Patient Safety and Medical Error Reporting........................17
Administrative Approach and Research...........................18
Medical Malpractice: An Overview
Medical malpractice insurance has become increasingly expensive during the
past several years. Some physicians claim that premium increases for malpractice
insurance have forced them to limit the services they provide, move their practice
locations, or leave medicine altogether. This is especially the case for certain
specialists, such as obstetricians, who have experienced the largest premium
increases. Some providers have gone on strike to publicize their plight. They cite
excessive malpractice lawsuits and unreasonably large jury awards as the causes of
a malpractice insurance “crisis.” Many physicians support tort reform legislation that
would, among other things, limit the amount juries could award to plaintiffs in
Certain trial lawyer and consumer groups counter that the insurance industry is
to blame for the rapid rise in malpractice insurance premiums. These groups contend
that bad investment choices, in addition to the relatively normal underwriting cycle
of higher and lower insurance rates, have led to dwindling profits for insurers, who
then try to recoup their losses through expensive insurance products. Abetting this,
in their eyes, is an exemption from the normal federal antitrust law for insurers.
Lawyers and consumer groups generally support efforts to reform the insurance
industry to address difficulties from rising premiums.
Congressional debate on these issues generally has conformed to the contrasting
perspectives mentioned above. Some members, notably both House and Senate
leadership, attributed the rise in malpractice insurance premiums to “frivolous”
lawsuits and large jury awards. Moreover, they argued that such lawsuits and awards
make physicians fearful, leading to the practice of “defensive medicine” and adding1
to overall health care costs. Other lawmakers responded that spikes in malpractice
insurance premiums are the result of the insurance underwriting cycle and sagging
insurer investments. They also point out that capping malpractice awards unfairly
penalizes individuals who have been injured due to medical malpractice
In the 108th Congress, the House passed the Help Efficient, Accessible,
Low-cost, Timely Healthcare (HEALTH) Act of 2003 (H.R. 5), whose centerpiece
was limitations on tort claims for medical malpractice, on March 13, 2003. The
Senate began consideration of S. 11, a bill substantially similar to H.R. 5, on July 7,
2003. After two days of debate, a cloture motion failed, and the Senate turned to
other business with no vote on the underlying bill. A narrower bill, S. 2061, to
1 See “Economic Report of the President,” Council of Economic Advisers, Feb. 2006, p. 95,
Box 4-2: Medical Liability Costs, at [http://www.whitehouse.gov/cea/erp06.pdf].
reduce “the excessive burden the liability system places on the delivery of obstetrical
and gynecological services,” was debated on the Senate floor February 23 and 24,
2004. A cloture motion then failed; no vote was taken on the underlying bill. A
second narrow bill, S. 2207, which included emergency room services as well as
obstetrics and gynecology, was brought to the Senate floor in early April. The cloture
motion on S. 2207 failed on April 7, 2004. Following the absence of progress in the
Senate, on May 12, 2004, the House again passed a comprehensive medical
malpractice liability bill, H.R. 4279, which was substantially similar to H.R. 5. No
further Senate floor action was taken during the 108th Congress.
In the 109th Congress,2 the House again passed, on July 28, 2005, a bill
numbered H.R. 5, entitled the Help Efficient, Accessible, Low-cost, Timely
Healthcare (HEALTH) Act of 2005, which was substantially similar to H.R. 5 from
the 108th Congress. The Senate began debate on May 4, 2006 on S. 22, which was
similar to H.R. 5, but notably had much higher limits on non-economic tort damages
($250,000 for H.R. 5 vs. $750,000 for S. 22). Also on the calendar in early May
In addition to bills focusing on liability for medical malpractice, in July 2005
the 109th Congress also passed, and the President signed, S. 544, the Patient Safety
and Quality Improvement Act of 2005 (P.L. 109-41). This bill encourages the
reporting of medical errors data, which may ultimately reduce such errors and the
medical malpractice claims that follow medical errors.
Some members also have expressed interest in other alternatives to address the
medical malpractice problem.. In addition to the reporting of non-identifiable data
(as enacted under P.L. 109-41), some have also suggested disseminating provider-
specific malpractice information included in the National Practitioner Data Bank
(currently not open to the public). Another idea is to promote alternative
administrative approaches, such as mediation and arbitration, which have proven
effective in isolated clinical settings and may provide a model for broader
implementation. A different strategy that addresses the cost of malpractice
premiums, but not the underlying causes, is to provide tax credits to physicians to
help cover premium costs.
Background on Medical Malpractice Insurance3
The recent difficulties in the market for medical malpractice insurance constitute
the third such “crisis” that has been proclaimed over the past three decades. Both the
mid-1970s and mid-1980s saw similar situations where rising prices and decreased
availability of insurance caused difficulties for physicians and other healthcare
providers. These past events led to both public policy and market reactions to
2 Summaries of all bills from the 109th Congress follow at the end of this report.
3 For a more in-depth discussion of the economics of malpractice insurance see CRS Report
RL31886, Medical Malpractice Insurance: An Economic Introduction and Review of
Historical Experience, by Baird Webel.
address the problems, and the crisis eventually abated. Judgments as to what
“solved” the problems and what might be applied to today’s difficulties can,
however, be difficult to make. Since the crisis is typically seen as one of medical
malpractice insurance, it may be best to begin by examining the particular nature of
this market and how medical malpractice insurance works.
Prevalence of Medical Malpractice Insurance
Most physicians are covered by medical malpractice insurance. Many states
require physicians to have malpractice insurance in order to practice in that state.
Also, some states allow only those physicians with malpractice insurance to have
access to state excess liability funds or other protections. Hospitals purchase their
own malpractice insurance and typically require physicians to be insured in order to
have admitting privileges. In the case of physicians who are employees of a hospital,
the hospital generally buys insurance that covers both itself and its staff.
However, some physicians believe that the cost of malpractice insurance is too
high and have decided to practice without it (“go bare”). In addition, some hospitals
choose to self-insure by setting funds aside to cover future claims, instead of buying
an insurance policy. According to the American Hospital Association, 40% of its
member hospitals are now self-insured.4
Sources of Medical Malpractice Insurance
Providers can get malpractice insurance through different types of organizations.
Historically, such insurance was the domain of large, commercial carriers that offered
several lines of insurance. Currently, most malpractice insurance companies are
provider-owned insurance companies. For physicians who cannot find coverage,
some states have established joint underwriting associations to act as insurers of last
resort. In addition, some states have established excess liability or patient
compensation funds which cover claim costs above a prescribed amount. (The
evolution of the malpractice insurance industry is described in greater detail under
the “Market Structure” section below.)
Regulation of malpractice insurance is the responsibility of the states. In
general, states require that insurance rates be (1) adequate, (2) not excessive, and (3)
not unfairly discriminatory. However, the practical implementation of these tests
varies by state.
States use six types of rating laws with respect to malpractice insurance: prior
approval, modified prior approval, flex rating, file and use, use and file, and no
4 Reported in U.S. General Accounting Office, Medical Malpractice Insurance: Multiple
Factors Have Contributed to Increased Premium Rates, GAO-03-702, June 2003.
(Hereafter cited as GAO, Medical Malpractice and Premium Rates.)
file/record maintenance.5 Most states apply either prior approval, or file and use
requirements to malpractice insurers. But even among states using the same type of
insurance rating law, there are variations. For example, Oregon initiates “prior
review” procedures for rate increases greater than 15%, whereas Alabama requires
prior approval for any proposed rate increase starting at 10%.6
Malpractice Liability and Resolution of Claims
Medical malpractice liability arises when a health care professional engages in
negligence or commits an intentional tort. Negligence has been described as conduct
falling below standards set by law for the protection of others. In most instances it
arises from a failure to exercise due care, but a defendant may have carefully
considered the possible consequences of his or her conduct and still be found to have
imposed an unreasonable risk on others.7
Although tort law allows plaintiffs to sue defendants to recover damages, most
malpractice claims do not reach this point. The vast majority of claims are settled
before cases even reach the courts. Of those cases where juries reach a verdict, most
are found in favor of the defendant. Thus, only a small proportion of plaintiffs
actually receive jury-awarded damages in malpractice cases. Moreover, successful
plaintiffs who receive a judgment from a court wait an average of four to five years
from when the negligence occurred to receive payment, “with many claims taking
The Underwriting Cycle — “Hard”
and “Soft” Insurance Markets
Insurance can be seen as the transfer of an uncertain future risk for a current
finite payment, an insurance premium. The most critical aspect of the transaction is
the size of this premium. An insurer must estimate the amount and probability of
future losses and charge a sufficient premium to cover these losses. Since the losses
are in the future, while the premium is paid today, the insurer invests that premium
5 For descriptions of these rating laws, see Insurance Information Institute, “Rates and
Regulation,” Mar. 2006, at [http://www.iii.org/media/hottopics/insurance/ratereg].th
(Hereafter cited as III, “Rates and Regulation.”) Note: a 7 rating law type, State-
Prescribed, does not apply to malpractice insurance.
6 For a state-by-state table of rating rules, see III, “Rates and Regulation.”
7 For additional discussion about the legal aspects of medical malpractice, see CRS Report
RL31692, Medical Malpractice Liability Reform: Legal Issues and Fifty-State Survey of
Caps on Punitive Damages and Noneconomic Damages, by Henry Cohen. (Hereafter cited
as CRS Report RL31692.)
8 Eric Nordman, Davin Cermak, and Kenneth McDaniel, Medical Malpractice Insurance
Report: A Study of Market Conditions and Potential Solutions to the Recent Crisis, White
Paper presented to the National Association of Insurance Commissioners, Sept. 12, 2004,
p. 10. (Hereafter cited as McDaniel, et al., NAIC Medical Malpractice White Paper.)
until the losses occur.9 To do otherwise would require that the purchaser pay a higher
current price for the insurance coverage. Although the insurance purchaser generally
benefits from the lower price due to the investment of the premium, this investment
also introduces another uncertainty into the equation, namely future investment
returns. If investment returns change unexpectedly, then the premiums paid will also
have to change, which can mean substantial increases or decreases in premiums even
if there have been few or no claims made by the insured.
Property/casualty insurance, of which medical malpractice is a part, is known
for its cyclical nature. So-called “soft” markets, periods where prices are generally
low and insurance is readily available, alternate with “hard” markets, periods where
prices are generally high and consumers may have difficulty finding insurance. Some
trace these market cycles to changes in the investment climate, although it is probably
more accurate to trace them to unexpected events on either side of the insurance
equation. A hard market could come about because returns unexpectedly fall, or it
could happen because unexpectedly large losses were experienced. Since 2001, both
events have occurred, with the fall of the stock market and interest rates as well as
the September 11, 2001, terrorist attacks.
Medical Malpractice Insurance Market Structure
The general market for property/casualty insurance is huge and varied. Literally
thousands of companies operate in the United States, ranging from obscure small
insurers that might focus on a particular area or type of insurance to large companies
that are recognized names across the country. Thirty years ago, medical malpractice
insurance was generally the province of large, diversified insurers; only 8% of the
market was served by provider-owned insurers. Largely in response to the
difficulties experienced in the marketplace in the mid-1970s and mid-1980s, the large
diversified companies exited the market and were largely replaced by small
companies. Many of these were mutual insurers, owned by the healthcare providers
who were also the ones insured, and most focused on a particular geographical state
or region, or on a particular medical speciality. Within the target geographic area or
speciality, such small companies may have a very large share of the market. By
1992, provider-owned insurers had grown to 62% of the market.10 This market share
has dropped somewhat since 1992, but such insurers have remained a large part of
the market, particularly in hard markets as was seen after 2001.
The market evolution from large, diversified insurers to small, focused entities
has a number of possible outcomes. One of these is a greater reliance on reinsurance.
A small insurer pools risk away from an individual healthcare provider, but it does
not spread this risk as widely as a larger insurer. To further spread risk, many insurers
rely on purchasing reinsurance from other insurance companies. Using the
reinsurance market effectively allows risk to be spread across a large amount of
9 Insurer investment practices are regulated by the states, with the large majority of such
investment going into relatively stable investments.
10 Conning and Company, Medical Malpractice Insurance: A Prescription for Chaos, 2001,
international capital. However, it also makes an insurer vulnerable to the vagaries
of international capital markets.
Another result of the recent market evolution has been a high concentration of
market share by particular insurers. This seems initially counterintuitive: one might
expect a greater number of small companies to result in less market concentration.
The key, however, is the geographic concentration of the companies. For example,
in 2003, PIC of Wisconsin may have held a 0.7% market share nationwide, but in the
state of Wisconsin, its market share was nearly 40%. The Copic Group had a 0.7%
nationwide market share, but in Colorado, its share was 52%. Even the big insurers
are not evenly distributed across the country. MLMIC Group was the largest insurer
with 9.4% market share across the country, but its share in New York was 51.4%, in
New Jersey, 45.9%, and Wyoming, 44.3%. The only other state where it was one of
the two largest insurers was Massachusetts, where it had only 10% of the state’s
A recurring theme in past examinations of medical malpractice insurance is the
lack of solid data with which to make judgments.12 This uncertainty extends even as
far as a seemingly simple question such as, “How much have medical malpractice
premiums increased?” The insurance rating firm A.M. Best reports that total medical
malpractice premiums increased 15.6 % in 2001,13 22.5% in 2002,14 13.5% in 2003,15
and 5.5% in 2004,16 with no data yet on 2005. The 2002 National Association of
Insurance Commissioners’ white paper, working from slightly different data, found
a 28% rise in 2002, the most recent year listed, and a 13.2% rise in 2001. Regardless
of data differences, it is clear that aggregate premiums rose substantially from 2001
The experience of individual healthcare providers, however, has been much
more variable than the aggregate numbers indicate. Different specialities and
different areas have experienced dramatically different rates for malpractice
insurance, and this impact on individual physicians and particular areas is usually
what drives public concern. It offers little solace to a small town losing a physician
to note that the average rise in premiums may not have been that bad.
11 “Medical Malpractice, Top Writers by State — 2003,” AM Best, Nov. 15, 2004, p. 1; and
“Medical Malpractice, Top Writers — 2003,” AM Best, Nov. 15, 2004, p. 1-2.
12 For example, see McDaniel, et al., NAIC Medical Malpractice White Paper, and U.S.
General Accounting Office, Medical Malpractice: Implications of Rising Premiums on
Access to Health Care, GAO-03-836, Aug. 2003. (Hereafter cited as GAO, Medical
Malpractice and Access.)
13 “Medical Malpractice, Top Writers — 2001,” AM Best, Aug. 5, 2002, p. 1.
14 “Medical Malpractice, Top Writers — 2002,” AM Best, Nov. 17, 2003, p. 1.
15 “Medical Malpractice, Top Writers — 2003,” AM Best, Nov. 15, 2004, p. 1.
16 “Medical Malpractice, Top Writers — 2004,” AM Best, Aug. 22, 2005, p. 1.
The most often cited source for specific area and speciality data on medical
malpractice premium rates is the Medical Liability Monitor (MLM), which has
published a yearly survey of medical malpractice insurance companies for the past
14 years. The MLM survey tracks three specialities: internal medicine, general
surgery, and OB/Gyn. It reports premiums for each speciality by company within
each state. By their own estimate, the MLM survey captures 65-75% of the market.
The surveys of the past few years certainly seem to track the aggregate numbers
indicating that rates have gone up significantly since 2000.17 For example, from 1999
to 2004, an OB/Gyn in Philadelphia might have seen rates go from $32,236 to
$161,211 and a general surgeon in Florida, from $99,652 to $277,241. In 2004
alone, an OB/Gyn in Maryland might have seen an increase of 132.8% from $44,063
to $102,587. There are, however, experiences on the other end of the scale as well.
Rates reported by one company for an internist in northern California actually
dropped from $7,526 in 1999 to $6,869 in 2004,18 and an internist in Nebraska might
pay only $3,212 in 2004, unchanged from 2003.
Impact on Consumers and Providers
Concern about rising premiums for medical malpractice insurance extends
beyond the affordability of coverage to include the potential impact on access to
health services, quality of care provided, and health spending overall. As mentioned
previously, some physicians claim that rising malpractice insurance rates force them
to reduce, relocate, or end their medical practices, affecting consumer access to
health care. Some also argue that the fear of liability (and the potential cost and
professional harm a malpractice lawsuit could entail) leads physicians to practice
defensive medicine. That is, “physicians’ ordering of tests and procedures, or
avoidance of high-risk patients or procedures, primarily (but not necessarily solely)
to reduce their exposure to malpractice risk.”19 Detractors of the limited consumer
access and defensive medicine arguments contend that other factors, such as the type
and cost of insurance coverage that a patient might have, exert more influence over
health care access or spending than does the malpractice system. Research on these
issues has led to mixed or incomplete findings with ambiguous policy implications.
Consumer Access to Services and Providers
Over the past several years, stories of physicians going on strike or moving their
business in response to growing malpractice insurance premiums have populated
17 Various MLM headlines: “1999 Survey Finds No Widespread Rush by Medical
Malpractice Writers to Raise Rates,” vol. 24, no. 9, Sept. 1999; “2002 rate survey finds
malpractice premiums are soaring....” vol. 27, no. 10, Oct. 2002; “2004 rate survey indicates
rate increases may be leveling, but triple-digit hikes not over,” vol. 29, no. 10, Oct. 2004.
18 Rates for Norcal Mutual in San Mateo, Santa Clara, Santa Cruz, Fresno, and Monterey
Counties in 2004, and Northern California as a whole in 1999.
19 U.S. Office of Technology Assessment, Impact of Legal Reforms on Medical Malpractice
Costs, OTA-BP-H-1 19, Oct. 1993, p. 6.
mainstream media.20 Doctors and their supporters cite multiple examples of
providers curtailing high-risk services or shutting down practices altogether, because
malpractice insurance has gotten too expensive. They claim that “large jury awards
and the burgeoning costs of defending against lawsuits” are the causes for
“skyrocketing” liability premiums, and they see tort reform — especially limiting
damages awarded in malpractice lawsuits — as the solution.21
Researchers have tested this theory by monitoring physician actions (e.g.,
moving medical practices) either in direct response to premium growth or in response
to state tort reforms, such as caps on award damages. Overall, studies have found
evidence of fewer physician services in response to rising premiums and increased
physician supply in states that have passed tort reforms. However, access problems
were not experienced uniformly, so the overall impact on consumer access to health
care is unclear.
For example, the then-General Accounting Office (GAO) examined the
implications of premium growth on availability of physician services. GAO
interviewed physicians and physician associations in nine states that included a
“range of malpractice premium pricing and tort reform environments.”22 They found
instances of health care access problems such as gaps in speciality surgical care and
lack of obstetric services. However, these problems were not found in every area
studied, sometimes involved relatively few physicians, and oftentimes occurred in
rural areas where “providers identified long-standing factors in addition to
malpractice pressures that affected the availability of services.”23
With respect to the impact of tort reforms on physician supply, a number of
studies have found a positive relationship. For example, a study published in the
Journal of the American Medical Association (JAMA) found that state adoption of
“direct” tort reforms24 led to more growth in the physician supply. From 1985-2001,
the physician supply grew 2.4% more in direct-reform states than in non-reform
states. The researchers found a similar impact for certain physician specialities
associated with high premiums for malpractice insurance. For example, the supply
of obstetricians and gynecologists in solo practice grew 2.3% more in direct-reform
states than in non-reform states. For emergency physicians, the difference was
20 Selected examples include David Eisenberg and Maggie Sieger, “The Doctor Won’t See
You Now,” Time, June 9, 2003; Rita Rubin, “Doctors Act Against Malpractice Premiums,”
USA Today, Jan. 19, 2004; and Marketplace Public Radio, “Medical Malpractice,” Aug. 19,
21 “Medical Malpractice,” CQ Researcher, Feb. 14, 2003, vol. 13, no. 6, p. 135.
22 GAO, Medical Malpractice and Access, pp. 2-3. GAO is now the Government
23 GAO, Medical Malpractice and Access, p. 13.
24 “Direct” reforms include caps on damage awards, abolition of punitive damages, no
mandatory prejudgement interest, and reform of the collateral source rule. For a discussion
about these and other malpractice tort reforms, see CRS Report RL31692.
11.5%.25 Such findings comport with studies published in Health Affairs and by the
American Enterprise Institute (AEI) that also found a positive correlation between
malpractice tort reforms and physician supply.26
However, a slight increase in physician supply does not necessarily translate to
more consumer access and better health outcomes, nor may the increase be attributed
solely to tort reform. For instance, the JAMA study looked only at the change in
physician supply, but did not measure total number of hours worked. Moreover, the
researchers concede that the increase in physician supply in reform states may be a
“consequence of those states having more room for growth,”27 and admit that their
evaluation did not assess the impact of malpractice on cost, access, or quality.
Studies that have looked at the impact of tort reform on quality of care have reached
mixed findings. One study analyzed the impact of tort reforms on hospital
expenditures for Medicare patients with heart conditions. The researchers found that
hospital spending decreased, with no significant impact on health outcomes.
However, the authors of the aforementioned AEI study found that the reforms
“lower[ed] the standard of care provided” and had an adverse impact on infant
mortality under certain circumstances.28
Statements linking malpractice concern with reduced physician services are
reflected in the discussions regarding the role of malpractice in encouraging the
practice of defensive medicine. The premise underpinning defensive medicine is that
the fear of liability and the potential negative outcomes associated with malpractice
claims lead physicians to administer additional health care treatments or avoid high-
risk services primarily to reduce their liability risk. The implication is that defensive
medicine results in either an increase in overall spending for health care that may not
be medically necessary, or a decrease in access to certain services or for certain
patients. Multiple studies have found evidence of defensive medicine, but the policy
implications remain ambiguous.
One study compared the rate of Caesarean sections at hospitals that experienced
high malpractice claims and had high malpractice insurance premiums with the C-
section rate at hospitals with low claims frequency and premiums. The researchers
found that hospitals with high claims and premiums had a higher C-section rate, even
25 Daniel Kessler, William Sage, and David Becker, “Impact of Malpractice Reforms on the
Supply of Physician Services,” Journal of the American Medical Association, June 1, 2005,
vol. 293, no. 21. (Hereafter cited as Kessler, et al., Journal of the AMA.)
26 See William Encinosa and Fred Hellinger, “Have State Caps on Malpractice Awards
Increased The Supply of Physicians?” Health Affairs, May 31, 2005; and Jonathan Klick and
Thomas Stratmann, Does Medical Malpractice Reform Help States Retain Physicians and
Does It Matter? American Enterprise Institute, Sept. 11, 2003. (Hereafter cited as Klick and
Stratmann, Does Medical Malpractice Reform Help States Retain Physicians.)
27 Kessler, et al., Journal of the AMA, p. 2624.
28 Klick and Stratmann, Does Medical Malpractice Reform Help States Retain Physicians,
when controlling for patient, physician, and hospital characteristics.29 However, it
is doubtful that such results are generalizable to all physician specialties. Due to the
heightened risk associated with obstetrics, this specialty generally experiences
greater-than-average malpractice claims and greater premium increases for
malpractice insurance. It stands to reason that such an environment would make
obstetricians more sensitive to changes in the malpractice environment, compared
with physicians in non-high-risk fields.
The aforementioned study of Medicare hospital spending is another example
cited as providing evidence of defensive physician behavior. The study analyzed the
impact of tort reforms adopted between 1984 and 1990. As previously mentioned,
the researchers found that spending decreased — between 5% and 9% within five
years after reform implementation — with no significant impact on mortality or
severe complications. The authors attributed the decrease in spending to behavior
change prompted by tort reforms that directly limited physician liability.30 Like the
previous study, the question of generalizability is relevant. Given the narrow
population studied, these results could not be generalized to all health care
consumers. Moreover, CBO later applied the same methodology used in the
Medicare study to a broader set of medical conditions and found no evidence of
reduced medical spending attributable to malpractice tort reforms.31
Multiple physician surveys have found that doctors practice defensive medicine
regarding referrals, treatments, patient mix, and business practices.32 For instance,
nine out of 10 of respondents to a survey conducted in Pennsylvania reported that
they practiced defensive medicine at least some of the time. Five out of 10
respondents said that they often provided unnecessary referrals, and four out of 10
reported that they avoided treating high-risk patients. However, self-reports about
physician behavior should be treated cautiously. Many physician surveys have low
response rates. Generally, physicians who are more likely to respond to a survey
focusing on malpractice concerns will be doctors who are more sensitive to the issue
due to personal or professional concerns. The Pennsylvania insurance study
specifically surveyed only physicians in six high-risk specialty fields.33 The
researchers note that the state had been “hit particularly hard by the latest malpractice
29 A. Russell Localio, et al., “Relationship Between Malpractice Claims and Cesarean
Delivery,” Journal of the American Medical Association, Jan. 20, 1993, vol. 269, no. 3.
30 Daniel Kessler and Mark McClellan, Do Doctors Practice Defensive Medicine?, NBER
Working Paper 5466, Feb. 1996.
31 U.S. Congressional Budget Office, Limiting Tort Liability for Medical Malpractice, Jan.
32 For example, see David Studdert, “Defensive Medicine Among High-Risk Specialist
Physicians in a Volatile Malpractice Environment,” Journal of the American Medical
Association, June 1, 2005, vol. 293, no. 21. (Hereafter cited as Studdert, Defensive
Medicine); Stephen Zuckerman, “Medical Malpractice: Claims, Legal Costs, and the
Practice of Defensive Medicine,” Health Affairs, fall, 1984 (Hereafter cited as Zuckerman,
Medical Malpractice.); and GAO, Medical Malpractice and Access.
33 The specialities are emergency medicine, general surgery, orthopedic surgery,
neurosurgery, obstetrics/gynecology, and radiology.
‘crisis.’”34 Factors such as these can bias the survey response and cast doubt on
generalizability to all physician specialties in all malpractice environments.
Taken together, studies quantifying the extent to which defensive medicine is
practiced have shown that it exists to some degree. But even physician and other
provider groups concede that “it is difficult to measure.”35 Like the experience with
rapidly rising premiums, the extent to which defensive medicine is practiced also
seems to vary based on physician specialty and practice location. Moreover,
defensive medicine can have both negative and positive aspects for consumers. For
example, liability concerns may discourage physicians from treating certain medical
cases, but such concerns may also encourage physicians to spend more time with
Causes of the Problem
Although the extent of the impact of higher medical malpractice insurance
premiums may be unclear, both state legislatures and Congress have considered
various proposals to address the discontent caused by higher premiums. The wide
variety of cures for the problems in medical malpractice insurance are largely a result
of three differing diagnoses of the underlying cause of these problems: the tort
system, the insurance system, or the healthcare system.
Tort System: “Frivolous” Lawsuits
and High Damage Awards
The focus in Congress, particularly of the bills that have seen floor action in the
past several years, has been on the tort system as the root of the problem in medical
malpractice insurance. Many argue that the incentives under the current tort system
have led to increases in both the frequency of malpractice claims and severity (size)
of awards. In theory, the tort system can work very efficiently to both deter
wrongdoing and compensate those who are injured by this wrongdoing. In the current
system, many argue, this model has become a caricature of itself: a sort of lottery
situation where frivolous lawsuits clog the courts, the plaintiffs hoping to either settle
before trial or find a jury to award high damages out of sympathy to the injured
patient. With insurance claims from settlements and awards skyrocketing, the
insurance premiums increase as a matter of course.
The Joint Economic Committee (JEC) issued a study in 200337 that strongly
supported this argument for the tort system as the root of the problem. Citing a wider
variety of influences than the JEC, GAO also found in 2003 that “Increased Losses
34 Studdert, Defensive Medicine, p. 2610.
35 GAO, Medical Malpractice and Access, p. 27.
36 For more information about the range of defensive practices, see Zuckerman, Medical
Malpractice, Exhibit 3.
37 U.S. Congress, Joint Economic Committee, Liability for Medical Malpractice: Issues and
Evidence, May 2003.
on Claims Are the Primary Contributor to Higher Medical Malpractice Premium
Rates.”38 The Congressional Budget Office (CBO) cites increased payments of
claims as a major factor in driving medical malpractice insurance costs, though they
cite other market forces as well.39 CBO’s cost estimates for bills that would institute
limits on the tort system for medical malpractice have predicted significant savings
in insurance costs. The latest of these was for H.R. 5 in the 108th Congress. CBO
concluded that this bill’s limits on tort damages and lawyers’ fees would reduce
medical malpractice premiums by 25%-30%.40
These conclusions have been disputed by many, and definite conclusions are
difficult to draw because of a lack of underlying data.41 For example, many of the
arguments on increased medical malpractice claims draw their information for the
size of damage awards from Jury Verdicts Research. These numbers, however, have
been criticized as incomplete and “skewed significantly upward”42 as compared to
statistics from the National Practitioners Data Bank (NPDB). The NPDB, however,
has been strongly criticized as a data source as well.43 Another study casting doubt
on increasing claims as an explanation for high premiums came from a review of the
closed claims information in the state of Texas. This study found that from 1988-
2002, the number of large paid claims was roughly constant, the number of small
claims declined, and the real total cost per large paid claim rose by only 0.8%-1.2%
per year.44 These conclusions, however, have been disputed as well.45
Insurance System: Regulation and Antitrust Exemption
Another cause for the large increases in medical malpractice premiums that is
frequently cited is the working of the insurance industry itself and the regulation, or
lack thereof, of the industry. As was noted above, pricing for insurance seems to go
38 GAO, Medical Malpractice and Premium Rates, p. 15.
39 U.S. Congressional Budget Office, Limiting Tort Liability for Medical Malpractice, Jan.
40 U.S. Congressional Budget Office, Cost Estimate: H.R. 5 Help Efficient, Accessible,
Low-cost, Timely Healthcare (HEALTH) Act of 2003 as ordered reported by the House
Committee on the Judiciary on March 5, 2003, Mar. 10, 2003, p. 4.
41 Both GAO and the NAIC cited limitations on currently available data as a significant
problem in researching the issue.
42 “Medical Malpractice Award Trends: Believe Government Sources, Not Doctors,” on the
Public Citizen website at [http://www.citizen.org/congress/civjus/medmal/
43 For more information about the NPDB, see U.S. General Accounting Office, National
Practitioner Data Bank: Major Improvements Needed to Enhance Data Bank’s Reliability,
GAO-01-130, Nov. 2000.
44 Bernard S. Black, et al., Stability, Not Crisis: Medical Malpractice Claim Outcomes in
Texas, 1988-2002, University of Texas Law & Economics Research Paper No. 30, p. 1.
Available at [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=678601].
45 See [http://www.aei.org/events/filter.all,eventID.1037/summary.asp] for a discussion of
in cycles of hard and soft markets that are at least somewhat based on investment
returns earned by insurers. Some see the large price increases in medical malpractice
insurance as an attempt by insurers to make up for stock market losses due to overly
risky investment decisions. Others attribute the problem of increasing premiums to
the limited exemption from the federal antitrust laws for the “business of insurance”
that was granted by the McCarran-Ferguson Act of 1945.46 This exemption, it is
argued, allows insurers to engage in certain anti-competitive behavior that pushes
insurance prices higher than those that would prevail under a free market.47
As a matter of economics, investment returns will play a role in pricing for
insurance because of the difference in time between when premiums are paid by the
insured and when claims are paid by the insurer. Whether the investments currently
undertaken by insurers are “too risky,” however, is inherently a value judgment that
likely cannot be proven. The individual states do currently have regulations outlining
what investments may be undertaken, and historically, approximately 75% of general
property/casualty investments have been in bonds or cash equivalents, which tend to
be more stable than stocks.48 For medical malpractice insurers, the ratio is even
higher: approximately 86% is in bonds or cash equivalents.49 States also regulate to
various degrees the rates that companies can charge and usually require that rates be
set on a prospective basis (current rates should cover the expected future claims), not
a retrospective basis (current rates covering past claims). Whether or not the state
regulation is adequate, however, has been questioned in the past, and stronger
regulation has been cited as a way to address higher insurance prices.50
Consideration of the effect of the limited antitrust exemption is complicated by
the intricacies of both the law itself and judicial interpretations of it, and by the way
in which insurance companies set rates. The legal question concerns the precise
actions that courts have found permissible under current law, as well as interpretation
of any amendment that might be passed by Congress in the future. Courts have found
under McCarran-Ferguson’s exemption from the antitrust laws for “the business of
insurance” that information sharing and joint rate making are permissible. The
definition of “the business of insurance,” however, has been narrowed over the
years.51 It is not implausible, for example, that some cases of insurer rate setting
46 15 U.S.C. 1011-1014, P.L. 79-15.
47 See, for example, the Statement of Robert Hunter, in U.S. Congress, Senate Committee
on Government Affairs, Oversight Hearing on Insurance Brokerage Practices, Including
Potential Conflicts of Interest and the Adequacy of the Current Regulatory Framework,thnd
48 Insurance Information Institute, Insurance Fact Book 2005 (New York), p. 25.
49 NAIC, Medical Malpractice White Paper, p. 1.
50 See, for example, the Testimony of Jay Angoff in U.S. Congress, Joint Hearing of the
Senate Committee on the Judiciary and the Senate Committee on Health, Education, Laborthst
and Pensions, Patient Access Crisis: The Role of Medical Litigation, 108 Cong. 1 sess.,
Feb. 11, 2003. Available at [http://judiciary.senate.gov/hearing.cfm?id=600].
51 For a discussion of court interpretations of the McCarran-Ferguson Act, see CRS Report
might be found by future courts to fall outside of the current antitrust exemption as
impermissible price fixing; nor is it implausible that, even in the event of a complete
repeal of the McCarran-Ferguson exemption, some collective action and data sharing
might be found to be permissible under the antitrust laws — although anything
determined to be price fixing would not qualify for such treatment.52 Some collective
action, even including joint rate making, might also be judged permissible if states
authorize such action. Proponents of even a limited antitrust exemption argue that
any repeal of the current exemption, even if collective action might eventually be
judged permissible, would result in costly litigation and raise, rather than lower or
stabilize, insurance prices.
However, given that the limited antitrust exemption is ultimately defined by the
courts, the effect of such an exemption on the economics of insurer rate setting is
uncertain and possibly unknowable given the current state of economic research. It
is clear from economic theory that the more information available to an insurer, the
more accurate and efficient the resulting insurance rates will be. While some
information sharing certainly lowers rates overall, as more collective action occurs
between insurers, it seems more likely that anti-competitive collusive action would
occur. The policy judgment that must be made is where exactly to draw the line
between collective action that enhances efficiency and drives down prices versus
collective action that becomes anti-competitive and drives up prices.
Health Care System: Medical Errors
Among the cacophony of voices attributing the growth of medical liability
premiums to high jury awards or poor investment choices by insurers, is a third
group, which points to medical errors as a source of the problem and patient safety
as a solution.53 Supporters of this view argue that efforts to reduce medical errors
will decrease the possibility of medical injury and subsequent malpractice lawsuits.
Since death is the most frequently cited injury in lawsuits that are found in favor of
the plaintiffs (23% of all such cases),54 they reason that patient safety efforts will
RS22118, Courts Narrow McCarran-Ferguson Antitrust Exemption for “Business of
Insurance,” by Janice Rubin.
52 Under the Rule of Reason doctrine in antitrust law, courts balance the anticompetitiveness
of some actions against any procompetitive effects that might be produced by those actions.
Per se violations (those that are automatically unlawful, and may never be justified),
however, are not eligible for Rule of Reason analysis.
53 Patient safety refers to the panoply of rules, practices, and systems related to the
prevention of patient injury, also known as “adverse events.” Intrinsic to patient safety
efforts are strategies to prevent medical errors (i.e., the use of an incorrect medical treatment
or the failure of a specific treatment to achieve the intended result). For more information
about these issues, see CRS Report RL32092, Medical Malpractice: The Role of Patient
Safety Initiatives, by Bernadette Fernandez.
54 The remaining 77% is composed of many other medical cases, such as injuries to the
brain, genitals, spinal nerves, and other body parts, plus conditions such as cancer, paralysis,
and emotional distress, among others. Brooke Doran, ed., Medical Malpractice: Verdicts,
prevent some of these deaths, as well as other medical injuries, which should lead to
reductions in malpractice claims and costly jury verdicts.
Anesthesiologists make up one physician group that is routinely cited as a model
for patient safety and malpractice reform efforts. As a medical specialty,
“anesthesiology is an example of a local, but complex, high-risk, dynamic patient
care system in which there has been notably reduced error.”55 Through a combination
of technological advancements, committed leadership, research focused on patient
safety, and informed decision making, anesthesiologists have produced a dramatic
reduction in anesthesia-related deaths. As a result, the proportion of total medical
liability suits filed against anesthesiologists has dropped, and the median payment
made in malpractice cases against anesthesiologists has been cut in half over the
course of 20 years. Moreover, the premiums anesthesiologists pay for malpractice
insurance are lower today than the rates they paid 20 years ago.56
The link between medical errors and malpractice liability is not universally
accepted. Multiple studies have found that the majority of malpractice claims filed
do not involve negligent medical care.57 In other words, the majority of patients who
file malpractice claims have suffered medical injuries, but not of the type that would
be “legally compensable” on the grounds of provider negligence.58 At the same time,
only a small proportion of patients whose injuries are caused by negligence actually
end up filing a malpractice claim. In one study, only 3% of patients who experienced
a negligent injury sued for malpractice.59 Although these studies speak more to the
misalignment of incentives under the current tort system than the relationship
between medical negligence and provider liability, the findings are cited in arguments
that the relationship between negligence and malpractice claims is a tenuous one.
Given that medical error can lead to injury and that injury (whether or not
resulting from negligence) is the medical basis on which a malpractice claim is made,
analyzing the relationship between medical errors and malpractice claims may prove
insightful in developing strategies to reduce both. Congress has already set the
Settlements and Statistical Analysis, Updated Edition, (Horsham, PA: Jury Verdict
55 U.S. Institute of Medicine, To Err is Human: Building a Safer Health System, 1999,
p. 164, [http://www.nap.edu/books/0309068371/html/].
56 Joseph Hallinan, “Heal Thyself: Once Seen as Risky, One Group of Doctors Changes Its
Ways,” Wall Street Journal, June 21, 2005, p. 1.
57 For example, see David Studdert, et al., “Negligent Care and Malpractice Claiming
Behavior in Utah and Colorado,” Medical Care, Mar. 2000. (Hereafter cited as Studdert,
Negligent Care); Paul Weiler, et al., A Measure of Malpractice, 1993; and Troy Brennan,
et al., “Incidence of Adverse Events and Negligence in Hospitalized Patients: Results of the
Harvard Medical Practice Study I,” New England Journal of Medicine, vol. 324, issue 6,
Feb. 7, 1991.
58 Gerald Hickson, et al., “Development of an Early Identification and Response Model of
Malpractice Prevention,” Law and Contemporary Problems, winter, 1997, p. 9.
59 Studdert, Negligent Care.
foundation for such work with the passage of the Patient Safety and Quality
Improvement Act of 2005 (P.L. 109-41). Once implemented, this law will establish
legal protections for medical errors information and develop procedures to encourage
the voluntary reporting and analysis of such data. The expectation is that analysis of
the data will lead to recommendations for the prevention of medical errors and, as a
consequence, enhancement of patient safety.
Legislative Proposals in the 109th Congress
Given the complexity of the malpractice insurance debate, it is no wonder that
legislative proposals vary in terms of the approaches they employ to address these
issues. Proposals may focus on the problem itself, or attempt to mitigate its adverse
effects. In addition, legislative approaches will reflect logistical and political
Legislative proposals differ on the problem each proposal is attempting to
address and the presumed cause of the problem. Is the problem rapid growth in
malpractice insurance costs caused by unreasonable jury awards? Or is it insurance
companies’ attempts to counter dwindling investment returns by raising premiums?
Or a health system that does not do enough to prevent medical errors? And how are
these issues related to the twin goals of the liability tort system: fair and timely
compensation to those injured, and deterrence of negligent medical care?
What then are the objectives of these legislative proposals? Is it to reduce the
growth of malpractice insurance premiums (e.g., through damage caps or insurance
market reforms), or make insurance more affordable (e.g., through a tax credit to
physicians)? Or is it broader — aligning medical, health insurance, and tort
incentives to equitably treat patients and providers? These proposals also raise
questions about the appropriate role for government, as well as the appropriate level
(state vs. federal) for any intervention.
Given the diversity of issues discussed above, bills introduced in the 109th
Congress employ a variety of strategies in addressing those issues. The bills include
provisions that target the legal system (e.g., tort reforms), the insurance industry (e.g.,
prohibition of anti-competitive behavior), and the health care system (e.g., medical
error reporting). Many bills also include provisions that use both public- and private-
based solutions (e.g., grants to states to develop administrative procedures for
resolving malpractice claims). The next section of this report summarizes current
proposals, using different legislative approaches: tort reform, patient safety and
medical error reporting, administrative approach and research, tax credit, antitrust
prohibition, and comprehensive reform.
H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare Act of
2005, would preempt state tort law regarding certain aspects of medical malpractice
liability and liability for medical products. It would not preempt state laws that
provide greater substantive or procedural protections to health care providers and
organizations, except that its caps on damages would not apply in states with their
own caps, whether higher or lower. The act would establish a federal statute of
limitations concerning malpractice lawsuits, limit noneconomic damages to
$250,000, make each party liable for damages in proportion to its responsibility for
the patient’s harm, allow the court to restrict attorneys’ fees to a percentage based on
the amount awarded to the claimant, allow any party to introduce evidence of
collateral source benefits, limit punitive damages to the greater of $250,000 or twice
the amount of economic damages, and provide for periodic payments for damages
S. 354, the Help Efficient, Accessible, Low-cost, Timely Healthcare Act of
nontrivial differences. H.R. 5 was passed by the House on July 28, 2005. It was
referred to the Senate Judiciary Committee on July 29. S. 354 was referred to the
Health, Education, Labor, and Pensions Committee on February 10, 2005.
S. 22, the Medical Care Access Protection Act of 2006, would preempt state
tort law regarding certain aspects of medical malpractice liability. It is similar to S.
354, except for several differences in scope and content. For example, S. 22 would
apply only to medical malpractice lawsuits, whereas S. 354 would apply to both
malpractice and medical products liability lawsuits. Under S. 22, the maximum
amount of noneconomic damages that may be recovered from a health care provider
found negligent is $250,000. However, in cases where a health care institution is
named as a co-defendant, a successful plaintiff may recover up to an additional
$250,000 from the entity. If more than one health care institution is named in the
final judgment, the plaintiff may recover up to $250,000 from each entity, provided
that the total amount recovered from all such institutions does not exceed a total
amount of $500,000. This act differs from S. 354 in that the latter would establish
a maximum total cap for noneconomic damages at $250,000. Finally, the caps on
noneconomic damages and punitive damages in S. 22 would apply only in cases
where the state has not established such caps. This provision differs from S. 354, and
instead follows the approach under H.R. 5.61
S. 23, the Healthy Mothers and Healthy Babies Access to Care Act, is
identical to S. 22, except that the tort reform provisions apply only to lawsuits
involving the provision of obstetrical or gynecological care.
Patient Safety and Medical Error Reporting
S. 544, the Patient Safety and Quality Improvement Act of 2005, would
amend the Public Health Service Act to establish legal protections for medical errors
information and develop procedures to encourage the voluntary reporting and
analysis of such data. The act would protect medical error data from being used in
administrative, civil, or criminal proceedings, or from being disclosed under Freedom
of Information Act requests, with certain exceptions, such as for public health or law
60 The differences are discussed in the CRS Report RS22075, Medical Malpractice Liability
Reform: S. 354, 109th Congress, by Henry Cohen.
61 For additional information about S. 22 and S. 23, see CRS Report RL33406, Medical
Malpractice Bills: S. 22 and S. 23, 109th Congress, by Henry Cohen.
enforcement purposes. Certified patient safety organizations (PSOs) would collect
the data, analyze it, and disseminate patient safety recommendations based on those
analyses. The act would also require the Secretary of Health and Human Services to
submit a report to Congress regarding approaches to reducing medical errors and
improving patient safety. S. 544 became Public Law 109-41 (P.L. 109-41) on July
Administrative Approach and Research
S. 1337, the Fair and Reliable Medical Justice Act, would amend the Public
Health Service Act to authorize the Secretary of Health and Human Services to award
grants to states to develop, implement, and evaluate alternatives to tort litigation for
the purpose of resolving medical malpractice claims. The Secretary may award up
to 10 grants, with each grant not exceeding five years in duration. Each state desiring
a grant must develop an alternative approach to resolve malpractice claims and allow
for the collection and analysis of patient safety data. Each state must demonstrate
how the alternative approach encourages prompt and fair resolution of malpractice
claims, promotes disclosure of medical errors, increases patient safety, and preserves
access to medical malpractice insurance. The alternatives developed may be based
on three models described in the bill: “early disclosure and compensation model,”
“administrative determination of compensation model,” or “special health care court
model.” The bill was referred to the Senate Health, Education, Labor, and Pensions
Committee on June 29, 2005.
H.R. 2399, the Improved Medical Malpractice Information Reporting and
Competition Act of 2005, would establish the Office of Health Care Competition
Policy within the Department of Health and Human Services (HHS) for the purpose
of conducting the Secretary’s activities related to the National Practitioner Data
Bank. The Director is appointed by the HHS Secretary. The bill requires additional
information to be submitted to the existing database. Any entity that “underwrites
a policy of insurance for medical malpractice actions or claims” must submit
information related to the insurer’s premiums, income, claims, reserves, expenses,
underwriting gains/losses, operational gains/losses, and any other topic the Secretary
deems necessary for “appropriate interpretation.” The Secretary will make certain
database information available online to the public for free, provided that the
information does not include “individually identifiable information.” The bill was
referred to the House Energy and Commerce Committee, Health Subcommittee, on
June 3, 2005.
H.R. 2400, the Emergency Malpractice Liability Insurance Commission,
would authorize the establishment of the Emergency Malpractice Liability Insurance
Commission to examine the causes of medical malpractice insurance costs and
propose a strategy to counteract the “crisis” in liability insurance. The bill contains
provisions related to the composition and qualification of individual commission
members, as well as the duties and powers of the commission as a whole. The
commission is required to submit a final report to the President and Congress
containing findings related to a list of issues specified in the bill, a plan to combat the
impact of growing malpractice insurance premiums, and recommendations for
appropriate legislative and administrative action. The bill was referred to the House
Energy and Commerce Committee, Health Subcommittee on June 3, 2005.
H.R. 2291, the Medical Malpractice Relief Act of 2005, would amend the
Internal Revenue Code to provide tax credits to physicians, hospitals, clinics, and
long-term care providers. For each taxable year, an eligible health care provider may
receive a certain percentage of the provider’s “qualified medical malpractice
insurance expenditures” in the form of a business tax credit. These provisions limit
qualified expenditures to twice the average of costs for qualified malpractice
insurance for “similarly situated eligible persons.” The taxpayer may elect not to
claim the credit. The bill also authorizes the HHS Secretary to award grants to
eligible health care providers and facilities for the purpose of assisting credit-eligible
providers in “defraying qualified medical malpractice insurance expenditures.” The
bill was referred to the House Ways and Means Committee on May 11, 2005, and the
House Energy and Commerce Committee, Health Subcommittee on May 23, 2005.
S. 1525, the Medical Malpractice Insurance Antitrust Act of 2005, prohibits
anti-competitive behavior in the medical malpractice insurance market. It declares
that nothing in the McCarran-Ferguson Act should be construed to allow commercial
insurers to engage in price fixing (competitors collectively setting prices), bid rigging
(competitors deciding who will submit the winning bid on a contract), or market
allocation (competitors allocating market areas among themselves). The bill was
referred to the Judiciary Committee on July 28, 2005.
H.R. 3359, the Medical Malpractice and Insurance Reform Act of 2005,
includes provisions on medical liability tort reform, mandatory mediation,
malpractice insurance reform, physician supply, a medical malpractice advisory
commission, and a federal agency on medical malpractice insurance information.
The provisions regarding tort reform include imposing a three-year statute of
limitations for malpractice lawsuits, requiring an affidavit to affirm the merits of any
malpractice action, enforcing sanctions against “frivolous actions and pleadings,” and
allocating half of any punitive damages awarded towards activities to enhance patient
The bill mandates mediation prior to any malpractice action going to trial and
requires states to make it available. The Attorney General and HHS Secretary would
develop regulations relating to the timely and reasonable implementation of these
The insurance reform provisions include several requirements related to the
pricing of medical liability insurance products. The bill requires each malpractice
insurer to estimate savings resulting from the tort reform and mediation provisions,
and implement a plan to dedicate at least half of those savings to the reduction of
malpractice insurance premiums. Another insurance reform provision prohibits
commercial insurers from engaging in “any form of price fixing, bid rigging, or
market allocation” for the purpose of providing medical liability insurance. The bill
also requires that states have policies in effect that allow any health care provider to
challenge a proposed rate increase and require a malpractice insurer to submit, at a
minimum, a description of and justification for a rate increase before such an increase
can take effect. Finally, the insurance provisions require the HHS Secretary to
establish an interactive website for the purpose of obtaining medical liability
insurance quotes from each licensed carrier.
The physician supply provisions involve amending the Public Health Service
Act to authorize the HHS Secretary to award grants to health care practitioners who
agree to practice in areas experiencing health provider shortages. Such shortages
must be determined, by the HHS Secretary, to result from providers’ decisions to
reduce or relocate their medical practices in response to rising malpractice insurance
costs. The bill also authorizes appropriations to assign Public Health Service Corps
providers to trauma centers in health provider shortage areas.
The section on the advisory commission authorizes the establishment of the
Independent Advisory Commission on Medical Malpractice Insurance for the
purpose of evaluating the causes of the recent increases in medical liability insurance
costs and developing strategies to reduce premiums and avoid similar rate increases
in the future. The provisions describe the membership, powers, and duties of the
Commission, including submitting reports to Congress on the Commission’s
findings, conclusions, and proposals to address rate increases.
The section on the federal malpractice insurance agency establishes the Medical
Malpractice Insurance Information Administration with the Department of Health
and Human Services. The Administrator, appointed by the HHS Secretary, identifies
the data elements necessary to “properly evaluate the medical malpractice insurance
market.” Required data elements include information related to the frequency and
severity of malpractice claims paid, losses associated with malpractice claims under
settlements and trial verdicts, and the proportion of losses associated with economic
and noneconomic damages.
The bill was referred to the House Judiciary Committee on July 20, 2005, and
the House Energy and Commerce Committee, Health Subcommittee, on July 29,
H.R. 3378, the Comprehensive Medical Malpractice Reform Act of 2005,
includes provisions on medical liability reform, malpractice mediation programs,
voluntary reporting of medical errors, and malpractice insurance reform.
The liability reform section includes provisions that directly involve tort actions,
as well as relate to general liability issues. The tort reform provisions include a
$250,000 cap on awards for noneconomic damages, a process for certifying the merit
of malpractice actions, and sanctions against meritless actions. The general liability
provisions concern voluntary performance standards applicable to state medical
boards and establishment of an “interstate patient reporting and physician tracking
The mediation section authorizes the Attorney General to provide grants to
states and health care organizations for the development and implementation of
mediation programs. Such programs would be based on the “Rush model” — a
malpractice mediation program in place at Rush University Medical Center in
The reporting section includes provisions on the voluntary reporting of medical
error information for the purpose of collecting and analyzing such information to
promote patient safety efforts. To encourage reporting of medical errors, the bill
establishes certain legal and administrative protections. The reported information
would not be subject to a “civil or administrative subpoena or order,” “discovery in
connection with a civil or administrative proceeding,” or disclosure under the
Freedom of Information Act. It also cannot be used in an “adverse employment
action” against an individual who reported the information in good faith. The HHS
Secretary would provide for the development and operation of a database for the
purpose of collecting voluntarily reported medical error information and prepare a
report to Congress on strategies to reduce medical errors and enhance patient safety.
The insurance reform section includes provisions related to proposed rate
increases and premium reductions. The bill requires states to have in effect laws or
regulations regarding the process for increasing malpractice insurance rates and
specifies certain elements of that process. The bill also requires each malpractice
insurer to estimate savings resulting from the liability reform provisions and
implement a plan to dedicate at least half of those savings to the reduction of
malpractice insurance premiums.
The bill was referred to the House Judiciary Committee on July 21, 2005, and
the House Energy and Commerce Committee, Health Subcommittee on August 8.