Medical Malpractice Reform- Health Cost Containment


Updated November 2014

The following NCSL Issue brief has been distributed to legislators and legislative staff across the country and is available here.

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Cost Containment Strategy and Logic

There is general agreement that the medical malpractice system is costly and inefficient. National estimates of medical liability system costs—including settlements, legal and administrative costs and defensive medicine—range from $55.6 billion annually (2.4 percent of total health spending) to $200 billion annually (10 percent of health care spending). Evidence indicates the system does not compensate all patients equitably, rapidly or efficiently; delivers compensation to a small share of injured people; does not appear to reduce medical errors; may hamper efforts to improve patient safety; and, in some cases, leads to unnecessary tests and procedures.

Although medical malpractice premium rates nationwide began moderating in 2005 and fell an average of 4 percent in 2008 and 10 percent in 2009, this occurred after an extended period of sharply rising rates. Rates vary widely from state to state and by specialty; obstetricians and neurosurgeons pay among the highest rates—as much as $200,000 per year or more.

Medical malpractice reform proponents argue that tort reforms—such as limiting malpractice awards, tightening statutes of limitations for filing claims and screening cases before they go to trial—not only reduce overall medical care spending but also increase access to care. Opponents dispute these claims, arguing that “a nationwide crackdown on malpractice, not a campaign to roll back the rights of patients who are injured” is needed instead.

Summary of Health Cost Containment and Efficiency Strategies - Brief #16- Medical Malpractice Reform
State Examples  Strategy Description Target of Cost Containment Evidence of Effect on Costs
Alabama, Alaska, Arizona, Arkansas, California, Colorado,Delaware Georgia, Illinois, Indiana, Minnesota, Missouri, Montana, Nebraska, Nevada New Hampshire, Oregon, Pennsylvania, South Dakota, Utah and Wyoming Medical malpractice reform, also known as tort reform, includes strategies to limit medical malpractice costs, deter medical errors and ensure that patients who are injured by medical negligence are fairly compensated. Tort reform has the potential to reduce health care expenditures by reducing the number of malpractice claims, the average size of malpractice awards and tort liability system administrative costs. It also may lead to fewer instances of defensive medicine where physicians order tests and procedures not primarily to ensure the health of the patient but as a safeguard against possible medical malpractice liability. Major medical malpractice reform targets include damage awards, legal and administrative expenses and defensive medicine. Plaintiffs’ attorney contingency fees average 35 percent of damage awards. According to the Physicians Insurance Association of America, the median claim payment in 2008 was $200,000, and the average was $350,000. Some tort reforms have been shown to reduce medical malpractice premiums and may reduce overall health care expenditures. A study published in 2010 found that the 15 states with the lowest levels of malpractice payments and claims between 1999 and 2003 had low damage caps, restrictive statutes of limitation and stringent expert witness requirements.

Additional Resources

  • Florida court nixes cap in fatal malpractice suits - Caps placed on how much money people can receive in cases where a doctor’s mistakes led to a patient’s death were declared unconstitutional by the Florida Supreme Court on Thursday. NCSL data cited. Associated Press, March 13, 2014.

  • NCSL Overview and Portal: Medical Malpractice - lists and links to state legislative actions - link confirmed Nov. 2015

  • Massachusetts:  A health care law, S.2400 signed August 6, 2012, overhauls the state's approach to medical malpractice cases. Massachusetts doctors who make medical errors while treating patients are now required to disclose their mistakes and are allowed to apologize without facing lawsuits.   Physicians and attorneys have both expressed support for the changes, saying they will help reduce unnecessary lawsuits and improve patient safety.  The changes, which were included in high-profile legislation recently signed by Gov. Deval Patrick to reduce health care costs, include establishing a 182-day "cooling-off" period as both sides try to reach a settlement, requiring the plaintiff and defendant to exchange information and allowing health care providers to acknowledge making a mistake without it being used as an admission of liability.  Additionally, it will increase the maximum amount of compensation for patients who are legitimately injured by a non-profit hospital, and not a doctor or nurse, from $20,000 to $100,000.
  • New Study Calls for Comprehensive Tort Reform, 9/7/11 - Massachusetts has seen a rise in the number and average cost of malpractice payouts; and an increase in insurance premiums, up by 63% in 2009 since 2001. Medical malpractice is a branch of tort law meant to compensate patients for injuries resulting when physicians deviate from general standards of care. With the Massachusetts tort system becoming too expensive for health care providers and patients, and a legislative effort likely this fall to control state health care costs, a new Pioneer Institute report, Innovative Medical Liability Reform: Traditional and Non-Traditional Methods, provides options for comprehensive medical malpractice reform. Innovative Medical Liability Reform is authored by John Biebelhausen, MD/MBA, resident physician, University of Colorado, and Amy Lischko, Pioneer Senior Fellow and Associate Professor, Tufts University School of Medicine. In the report, they describe the pros and cons of a variety of options available to policymakers who are serious about facing this challenge.
“The current tort system is not only putting at risk our ability to retain medical talent, but also cost containment across the health system—a major goal of the 2006 health reform,” says Jim Stergios, Pioneer’s executive director. “Any reform this fall aimed at furthering cost containment cannot exclude meaningful tort reform.”

Nationally it is estimated that only 2% of malpractice victims file suit, 37% of cases involve no error, and victims receive less than half of every dollar recovered through settlements or a jury verdict. In 2010, Massachusetts ranked 7th highest in the nation for medical malpractice claim payments, averaging over $484,000. Full text.

About this NCSL project

NCSL’s Health Cost Containment and Efficiency Series describes more than 20 alternative policy approaches, with an emphasis on documented and fiscally calculated results. The project is housed at the NCSL Health Program in Denver, Colorado. It is led by Richard Cauchi (Program Director).  Between 2009 and 2012 it included Martha King (Group Director) with Barbara Yondorf as lead researcher. 

NCSL gratefully acknowledges the financial support for this publication series, 2009-2011, from The Colorado Health Foundation and Rose Community Foundation of Denver, Colorado.

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