The Medical Liability Climate: The Calm Between Storms Is the Time For Reforms

By: Michelle Mello, JD, PhD
Stanford Law School and Stanford University School of Medicine

On November 4, Californians will vote on Proposition 46, a ballot initiative to adjust the $250,000 state’s noneconomic damages cap in medical malpractice cases for inflation, raising it to $1.1 million virtually overnight.  It’s a long overdue move – California has one of the most stringent damages caps in the country, and the cap really affects access to the legal system.  Now is the perfect time to do it, because after years of turbulence, the medical liability environment has calmed.

In an analysis published October 30 in the Journal of the American Medical Association (JAMA), David Studdert, Allen Kachalia and I report that data from the National Practitioner Data Bank show that the frequency and average cost of paid malpractice claims have been declining.  The rate of paid claims against physicians decreased from 18.6 to 9.9 paid claims per 1,000 physicians between 2002 and 2013, with an estimated annual average decrease of 6.3% for MDs and a 5.3% decrease for DOs. Among claims that resulted in some payment, the median amount paid increased from $133,799 in 1994 to $218,400 in 2007, an average annual increase of 5%. Since 2007 the median payment has declined, reaching $195,000 in 2013, an average annual decrease of 1.1%.

Trends in insurance premiums vary more according to which market you’re looking at, according to data from the Medical Liability Monitor’s Annual Rate Survey, but also look pretty favorable overall. None of the locations we examined showed large increases over the last 10 years, and most showed flat or declining premiums. 

This period of relative stability in the liability environment is the ideal time to be thinking about reforms to the medical liability system. The system remains rife with dysfunction, including barriers to bringing suit, imprecision in which claims attract payment, and exorbitant overhead costs and delays.  As we write in JAMA, “Usually, attention is only focused on reform during ‘malpractice crises,’ but highly charged political environments are not conducive to cool-headed policy decisions.”

So now that we’ve got a window of opportunity, what should we do?  Proposition 46 notwithstanding, tinkering around with traditional liability reforms isn’t likely to do much to fix the system’s underlying problems.  Much more intriguing are several more novel approaches, which we think are “politically and ethically appealing because they stand to benefit not just physicians and insurers but also patients.”

Among the most promising innovations are communication-and-resolution programs, in which health care practitioners and institutions openly discuss adverse outcomes with patients and proactively seek resolution, which may include offering compensation before the patient files a claim. Early programs pioneered by the Lexington (Ky.) Veterans Affairs hospital and the University of Michigan Health System have reported substantially lower malpractice claims and costs.  The question now being addressed in ongoing research is whether these successes can be replicated by other kinds of hospital systems.  In the JAMA paper, we review some of the challenges.  Other reform approaches worth further testing include judge-directed negotiation programs and administrative compensation.

Looking ahead, there are several forces that are likely to shape the medical liability policy scene during the next decade. Among these, we write in JAMA, are government initiatives to support nationwide dissemination of the communication-and-resolution approach and growing interest in leveraging the national movement toward consolidation in health care to improve resolution of medical injuries. As more physicians are employed by hospitals and health systems, those organizations could play a more prominent role in the liability system.

Also on the foreseeable horizon is another malpractice insurance crisis.  These crises have recurred in regular cycles since the expansion of malpractice litigation in the 1960s, and we’re about due for another.  As we conclude in the article, “Action now to reduce the amplitude of the next medical liability cycle is both prudent and feasible. Further testing of nontraditional reforms, followed by wider implementation of those that work, holds the most promise. Prospects for permanent improvement in the medical liability climate depend on it.”

The Petrie-Flom Center Staff

The Petrie-Flom Center staff often posts updates, announcements, and guests posts on behalf of others.

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