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An Analysis of the Impacts of the Medical Malpractice System

by Eric Montague, Policy Analyst
2003-07

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The cost of health care is rising across the nation.  Washington is one state where it is rising the fastest.  A major component of growing costs is Washington’s tort system, which allows juries to award unlimited non-economic damages to patients injured by the negligence of a doctor.  The growing prospect of multi-million dollar payouts has spawned tremendous growth in the size of claims against our state’s doctors, forcing them to spend millions of dollars each year to defend against costly and often frivolous lawsuits.

A recent report by the American Medical Association places Washington on a list of twelve states facing a medical malpractice crisis that threatens the viability of the medical community and the health of patients.  Unlike many states, Washington does not have a limit on the non-economic damages that can be awarded to an injured patient in cases of physician negligence.

Newspapers around the state are filled with stories of successful, dedicated physicians hanging up the stethoscope because they can no longer afford to pay their malpractice insurance.  These physicians and medical professionals are not the low quality, fly-by-night practitioners malpractice attorneys claim they are targeting, but upstanding, respected professionals with spotless records and devoted patients.

Affected doctors include Bob Pringle from Mt. Vernon.  Dr. Pringle has delivered more than 4,000 babies over the past 20 years at his small, three-doctor practice.  His malpractice insurance costs rose from $51,000 to $81,000 in one year, and forced him into early retirement.  In Vancouver, Ear, Nose and Throat Doctor Donald Newell saw his malpractice insurance rates jump almost 25 percent, even without a single claim against his entire group practice.

As a direct result of continually rising costs, doctors are retiring and leaving the state in record numbers.  Between 1998 and 2002 more than 500 doctors left the state according to the Washington State Medical Association, an increase of 31 percent from previous years.  Between 1996 and 2001 the number of doctor retirements increased 50 percent over previous years and the average age of retirement dropped from 63 to 58.

In addition to doctors leaving their practices, two major insurers recently ended their physician insurance businesses in the state.  CNA left more than 1,100 doctors searching for new insurance in 1997, and in late 2001 Washington Casualty Company, the state’s second largest physician insurance company, eliminated coverage for more than 1,300 physicians and doctors.

At the same time, the annual premium required by the few companies that continue to offer coverage is skyrocketing.  Over the last five years, the average insurance cost for a family physician increased 29 percent to almost $10,000.  Orthopedic surgeons have seen a similar 30 percent increase to $39,000 a year, and obstetricians have been forced to absorb a staggering 39 percent average increase, from $37,000 in 1998 to almost $52,000 today.

Medical malpractice lawsuits are civil cases that seek two types of damages: economic damages for lost wages and medical bills, and non-economic damages for pain and suffering, mental anguish and emotional distress.  Most efforts to reform the malpractice system place an emphasis on limiting non-economic damages, which are typically the most costly and the least objectively measured, while allowing full restitution for all identifiable economic damages.

Opponents of malpractice reform claim that a cap on non-economic damages would fail to prevent doctors from making life-threatening errors in their practice.  This argument is misleading.  Malpractice reform that limits non-economic damages would do nothing to restrict the ability of injured patients to seek justice in a court of law.  Economic damages, including loss of past and future earnings and the full cost of medical care, would be unaffected.  What malpractice reform will prevent is what some call the “Jackpot Justice” mentality brought on by too many frivolous lawsuits and baseless claims.

Seventeen other states have adopted some form of limitation on non-economic damages, many with broad bi-partisan support.  Two states in particular offer useful examples of successful reform.  In 1975 the California legislature approved the Medical Injury Compensation Reform Act, or MICRA.  The reform, which limits the size of non-economic damage awards and controls the fees collected by plaintiff’s attorneys, has restored balance to the malpractice system, reducing costs for both patients and doctors, while maintaining the necessary protections against doctor negligence and patient harm.

Under MICRA, malpractice claims in California are settled in one-third less time than the national average of more than five years and malpractice insurance rates have dropped by 40 percent since MICRA’s inception.  The result is a system that better serves the needs of patients by reducing the cost of litigation and speeding compensation payments.

Reforms in Colorado have enjoyed similar success.  Since adopting a MICRA-like system in 1988, average premiums have gone from increases between 20 and 70 percent a year, to average increases between one and nine percent today.  Malpractice insurance costs for many medical professionals have actually dropped since the mid-1980’s, reflecting the success of placing reasonable limits on the non-economic damages juries can award defendants.

Nationally, about one out of every six practicing doctors face a malpractice claim every year.  In some high-risk fields, like orthopedics, obstetrics, and trauma surgery, every doctor faces, on average, one claim every two and a half years.  The cost of defending against these lawsuits averages more than $20,000 per defendant.  Fully 70 percent of all malpractice claims are thrown out before ever reaching the courtroom.  For those that do go to court, a trial that results in the doctor’s vindication costs an average of $85,000.

A growing precedent of unreasonably large malpractice awards is threatening the ability of even the largest insurance companies to adequately distribute cost.  In the words of one health care expert, “Insurance is not magic.  If society expects insurers to pay unlimited awards, it should expect unlimited premiums.  As premiums increase, so must the cost of health care.”

Washington needs reforms similar to those that are successfully reducing costs while protecting patients in other states.  By allowing unlimited economic damage recovery, applying reasonable limits to non-economic damages,* encouraging the use of mediation and alternative dispute resolution and applying a dynamic cap on plaintiff attorney fees, lawmakers can help reduce the cost of health care to Washington residents.  In doing so, they will increase access for those who need it most and assure that our state’s top doctors are able to continue practicing medicine.

Appendix

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