Malpractice caps can bring more doctors to an area
While it may not be the primary reason for wanting to enact caps on malpractice awards, one of the tangential benefits of caps may be an increase in the supply of doctors, especially in rural areas.
A study in the May 31 issue of Health Affairs looked at the 27 states that have laws capping payments for noneconomic damages in malpractice cases and whether those laws have increased the supply of doctors.
Using countywide data within the states, researchers from the federal Agency for Healthcare Research and Quality (AHRQ) found that counties in states with a cap had 2.2% more doctors per capita because of the cap, and rural counties in states with a cap had 3.2% more doctors per capita.
Lead author William Encinosa, a senior economist in AHRQ’s Center for Delivery, Organization, and Markets, says there has been much evidence that a state’s legal environment influences the frequency and size of malpractice awards there, and that it would be reasonable to expect that the supply of doctors per capita and access to care would be greater in states that limit payments in medical malpractice cases.
However, a recent Government Accountability Office (GAO) report did not find such an association. Mr. Encinosa tells State Health Watch the GAO report relied heavily on data from a relatively small number of interviews with providers in five states and on Medicare utilization data for only three procedures in those five states. "GAO didn’t look at the actual supply of doctors," he continues. "They had a very limited view."
The AHRQ study extended findings of an earlier study examining how state laws that limit damages payments in malpractice cases affect the geographic distribution of doctors. That 2003 study used county-specific data from 1996 and 2000 to explain the geographic distribution of physicians across counties and found that counties in states with caps on damage awards had more physicians per person than counties in states without caps. Because that finding was only a picture of physician supply after caps had been in place for a while, Mr. Encinosa and his colleague, Fred Hellinger, also a senior economist at AHRQ, expanded the county analyses and years to include data from years both before and after most states had adopted caps (1985-2000).
According to the study, proponents of malpractice caps maintain that high malpractice award rates are driving physicians out of business or to states where such awards are capped. They also say that excessive jury awards for pain and suffering, and for punitive damages vary widely because there is no accepted process by which juries assign dollar values to these concepts.
Opponents of tort reform legislation to cap damage awards say that poor quality of care and poor investments by insurance companies are to blame for the recent spike in malpractice insurance premiums. They say caps hurt the patients who suffer the most harm and need help the most. Opponents also claim that medical malpractice claim payments are not the underlying cause of rapidly rising malpractice premiums.
Efforts to adopt a federal cap on malpractice awards are largely a response to recent increases in malpractice premiums, Mr. Encinosa points out.
Numerous studies based on data from the 1970s and 1980s have shown that caps result in lower malpractice insurance premiums. And a recent study found that malpractice premiums in states with caps on malpractice awards are 17% lower on average than in states without caps, he adds.
Data on the supply of physicians in counties in all states from 1970 to 2000 were taken from the Area Resource File maintained by the federal Health Resources and Services Administration from data in the American Medical Associa-tion’s Physician Masterfile, distribution of physicians data, and the Physician Specialty Microdata File.
Physician supply increases
"We found that there was an 83% increase in the median number of physicians per 100,000 residents from 1970 to 2000 in the states that never had a cap on malpractice awards before 2000," the researchers wrote. "For the states that enacted caps in the 1970s, physician supply grew 86%, compared with 102% in states that passed caps between 1985 and 1987. Thus, the caps responding to the malpractice crisis of the 1980s appear to have had a much greater effect on physician supply than the caps set in place during the 1970s malpractice crisis."
According to the report, a similar effect occurred with the supply of surgical specialists and OB/GYNs from 1975 to 2000. The median number of surgical specialists per 100,000 residents rose 45% under the 1980 caps, compared with 16% under the 1970 caps, and 29% in states without caps. The median number of OB/GYNs per 100,000 females ages 15 to 44 grew 40% under the 1980 caps, compared with 28% under the 1970 caps and 8% for states without caps. Thus, caps in both eras had a strong impact on the supply of OB/GYNs.
"In this study we found that state caps on noneconomic damages awards in malpractice suits between 1985 and 2000 increased the supply of physicians," Mr. Encinosa and Mr. Hellinger wrote.
"Moreover, the caps had a larger impact on physician supply in rural counties, and caps limiting malpractice awards to $250,000 had a much larger effect on surgeons and OB/GYNs in rural areas than caps with limits above $250,000.
"Twenty-seven states have caps on malpractice awards, but only five have caps with a $250,000 limit on awards, and 40% of the U.S. population living in a state with a cap has one with a limit above $400,000. Thus, a federal cap set at $250,000 for noneconomic damages could have a beneficial impact on the supply of surgeons and OB/GYNs in rural areas," they add.
The two researchers said they also found that other state malpractice laws did not affect physician supply. In particular, they said, they found that these laws had no effect: collateral source rule reform, pre-judgment interest reform, joint and several liability reform, and caps on punitive damages.
Although such laws may be related to physicians’ decisions whether to practice in a given geographic area, they are not nearly as conspicuous as laws that cap payments, the researchers said. Moreover, three previous studies found laws that indirectly affect the level of malpractice damage awards, such as laws permitting periodic payments or that abolish the common rule of joint and several liability, have less impact on the costs of defensive medicine and liability premiums than laws that directly limit malpractice awards.
Although the increased supply of doctors attributable to malpractice caps is likely to increase availability of care for most residents, the researchers said it is not clear what effect this has on the cost of care. Thus, they said, the impact of caps on noneconomic damages on health care costs should be the focus of future research.
Mr. Encinosa tells State Health Watch that without a malpractice crisis it is hard to attract physicians to rural areas, especially specialists. One reason, he says, is that physicians normally need a very big practice to cover their liability insurance costs.
He says the Centers for Medicare & Medicaid Services administrator Mark McClellan has quoted from his AHRQ study in testimony before Congress urging passage of malpractice caps. And one state has contacted AHRQ about conducting a specific study in that state to look at the effect of a $350,000 cap.
[To see a copy of the study, go to http://content.healthaffairs.org/cgi/ content/abstract/hlthaff.w5.250v1. Contact Mr. Encinosa at (301) 427-1437.]
While it may not be the primary reason for wanting to enact caps on malpractice awards, one of the tangential benefits of caps may be an increase in the supply of doctors, especially in rural areas.
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