Study Says Tort Reform Could Cut Medical Liability Costs In Bay State

WALTHAM, Mass. — A new actuarial study released recently says that total savings of approximately 25{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 30{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} on medical liability costs could be achieved if proposed changes in medical liability laws now before the state legislature are approved.
Milliman USA, a global consulting and actuarial firm that specializes in insurance, health care, and employee benefits, performed the analysis at the request of the Massachusetts Medical Society (MMS). The purpose of the study was to estimate what potential savings in liability costs could be realized if the MMS’s legislative medical liability reform package is enacted. The bill, with seven provisions, was filed last December. A public hearing on the bill took place Oct. 9.

“This analysis offers compelling information that liability reform would have substantial benefits for our health care system and our physicians,” said Thomas
E. Sullivan, M.D., president of the Mass-achusetts Medical Society. “Physicians in Massachusetts are crumbling under the weight of soaring insurance premiums, and it’s affecting patient care. Relief is needed sooner rather than later.”

Liability premiums for many Mass-achusetts physicians rose an average of 20{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} on July 1, following three years of 9, 14, and 12.5{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} hikes. Higher-risk specialties, such as obstetrics and neurosurgery, are seeing even larger jumps, with some rates doubling. The relentless rise is forcing some doctors to leave Massachusetts, retire early, curtail services, or change careers.

Sullivan, a Danvers-based cardiologist in private practice, said that the working environment for physicians in the state continues to deteriorate and that liability costs and concerns have become a driving force behind the erosion. He cited the findings of the Medical Society’s recently-released Physician Workforce Study and its MMS Physician Practice Environment Index as evidence of this situation.

The 2003 Workforce Study found critical shortages in at least eight specialties along with growing difficulty in recruitment and retention of physicians. The Index, a statistical measure of factors affecting the environment in which physicians provide care, plunged 3.9{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} in 2002 — the second largest drop since 1993 and its ninth straight decline.

“Both studies clearly show the need for liability reform,” said Sullivan, “The cost of liability insurance has now become the main driver of the Index, and liability concerns are forcing physicians to contemplate career changes as never before. Further, the fear of being sued is real and pervasive and leads to expensive ‘defensive medicine,’ putting added burdens on our health care system. Tort reform can be a huge shot in the arm, not only for physicians, but also for their patients and the health care system overall. It’s vital medicine for a serious condition, and as an added incentive, it will not cost the state or the taxpayers any money in this era of strained budgets.”

Sullivan also called attention to a September UMassBoston/McCormack School poll of Massachusetts voters that found a substantial percentage of Massachusetts adults — 83{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} — believe the issue of medical malpractice insurance in health care today is either a “major problem” or “crisis” and that 74{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} favor limits on the amount patients can be awarded for pain and suffering, or non-economic damages in lawsuits. The UMass poll is consistent with the findings of several other local and national polls on the issue.

“The bad news is we have huge problem with the current liability system,” said Sullivan. “The good news is that the public recognizes it.”

The Milliman study examined the likely savings that would occur if the following five of the seven changes in the proposed legislation take place:

Reduction of the pre-judgment interest rate from its current 12{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to market rates. Now, plaintiffs receive a 12{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} annual rate on the dollar amount of any judgment, going back to the date of the filing of the claim.
Payment of judgments over $50,000 to be made over time rather than one lump sum.
Consideration of “future collateral sources” such as health insurance in reducing judgments by those amounts so as not to collect twice for damages.
Elimination of “joint and several liability.” All defendants are now equally responsible to satisfy a judgment, no matter who is principally responsible. The change would mean that each of the defendants would not pay any more than their individual share of responsibility.
Imposition of a firm cap of $500,000 on non-economic damages, including those referred to as ‘pain and suffering.’ The state now has a cap of $500,000, but a waiver provision exists, allowing judges and juries to bypass the cap, leading to large awards. The proposed legislation provides for a firm cap, which cannot be waived. Medical expenses and other economic costs, such as lost wages, would not be capped and would still be covered in full as they are now.
Two provisions of the legislative package — one requiring experts to be certified in the same specialty as the defendant physician, and the patient safety section requiring insurers to report aggregate data — were not evaluated in the study as their impact on costs cannot reasonably be quantified.

Milliman USA’s actuary, William Murphy, who conducted the study, said, “the relationship between estimates of medical professional liability costs and insurance prices is complex. It is reasonable to expect, however, that if the projected savings are realized, future malpractice insurance premiums should ultimately be commensurately lower than they otherwise would have been.”

The 25{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 30{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} total savings reflects the aggregate effect of all reforms combined.

Murphy also estimated savings for all five proposed changes as if they were enacted independently of one another. He found each would result in reduced costs: pre-judgment interest by 8.2{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}; periodic payments, by 4.6{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}; future collateral sources, by 4.6{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}; elimination of joint and several liability, by 3.3{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}; and imposition of a firm cap of $500,000 for pain and suffering, by 12.7{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}.

The combined effect of all the changes taken together, however, is expected to be less than the simple addition of the individual benefits because the benefits are not additive, Murphy said. “Each time you put into effect a reform that reduces costs,” said Murphy, “that means additional reforms or savings apply to a smaller base. Hence you get less savings as additional reforms are put into place.”