What are the impacts of medical malpractice award caps?

The two key functions of the medical malpractice system are to compensate patients who are the victims of negligent care, and to incentivize health care professionals to provide safe and efficient medical care.

In the early 2000s there was a perceived malpractice liability insurance crisis, with premiums for physicians rising 15% in just two years. President George W. Bush asked Congress for a national cap on non-economic damages; the House passed the cap, and then the Senate blocked it. The US Supreme Court hasn’t ruled specifically on medical malpractice caps, but it has ruled on tort reform which encompasses medical malpractice. Punitive damages cannot exceed damages awarded to plaintiff for the injury by more than a nine-to-one ratio.

The majority of US states have now passed laws limiting damages in medical malpractice economic lawsuits. You can review a comprehensive list of those states and the caps they have set here, and review a list of states that ban the use of caps here.

An important and debatable question was posed recently by Renal & Urology News editor Jody Charnow, “Have malpractice award caps made any difference in medical practice?” Although he’s asked the question to practitioners in his specific field, the implications are much broader. In today’s post we explore a few possible answers to this question.

At the heart of the controversy about economic damages caps are three issues: if the cap will reduce malpractice premiums; the potential impact on medical errors; and if injured patients can be fairly compensated with the damages caps in place.

Leonard Nelson, III, Michael Morrisey and Meredith Kilgore co-authored ‘Damages Caps in Medical Malpractice Cases‘ which examines empirical literature of the effects of medical malpractice damages caps. Their analysis points to a rise in defensive medicine in response to the medical malpractice lawsuits, and an impact on location choices made by physicians.

The literature review found no evidence of damages caps resulting in lower health insurance premiums, but did find studies linking areas with higher damage caps to having more physicians available to residents. Anecdotal evidence highlights areas like Beaumont, Texas, where liability insurance rates dropped by half and resulted in physician growth exceeding population growth every year since 2007.