Neurosurgeons are well aware of the significant financial impact that skyrocketing medical liability insurance premiums can have on their practices, and organized neurosurgery has been at the forefront of efforts to institute medical tort reform at both the federal and state levels. Yet a long-standing debate continues on the real impact of tort reform on malpractice insurance premiums. Some argue that there is no correlation between the capping of noneconomic damage awards and the annual insurance premiums and argue further that the premiums set by the insurance industry have nothing to do with jury verdicts and awards.
However, medical tort reform enacted in Texas on Sept. 12, 2003, refutes that idea and supports the position that appropriate reforms will reduce medical malpractice premiums and increase patients’ access to care. In fact, Texas House Bill 4 and its constitutional amendment, Proposition 12, have served to reduce high rates of medical malpractice insurance by granting the Texas Legislature the authority to limit noneconomic medical civil liability damages to no more than “250,000 in medical malpractice lawsuits. The cap was established at “250,000 for all doctors (no matter how many are named in a lawsuit) and “250,000 per healthcare institution (up to two institutions). All actual medical expenses, lost past and future income and other expenses that can be translated into an actual dollar amount (such as maid service, transportation) are still recoverable.
The reforms, which were intended to help reduce frivolous medical malpractice lawsuits and to decrease escalating medical liability insurance rates, began to pay dividends soon after enactment. As early as Jan. 1, 2004, Texas Medical Liability Trust, the largest medical malpractice insurer in Texas, reduced its rates by 12 percent across the board. This was followed nine months later by another 5 percent rate reduction. Between February 2005 and March 2006, additional rate decreases were announced by numerous other Texas professional liability insurance underwriters, including American Physicians Insurance Company (9 percent-14 percent), The Joint Underwriting Association (10 percent), Medical Protective (2 percent), Texas Medical Liability (an additional 5 percent) and The Doctors Company (18 percent).
In 2005, Bernard Black and colleagues reported that the total number of medical malpractice claims for 2002 was 6,929 compared with a high of 8,943 claims filed the preceding year. In 2003, the year in which tort reform passed, there was a transition drop in claims to 5,967 as reported to the Texas Department of Insurance by the four largest medical malpractice insuring companies in Texas; figures from these companies represent claims for approximately 60 percent of Texas physicians, according to Kenneth McDaniel of the Texas Department of Insurance Professional Liability Commercial Property/Casualty Division. Additional decreases in claim rates also are being observed using the same TDI data set, indicating a reduction in medical malpractice claims in 2004 to 2,359 and in 2005 to 2,259. The overall number of claims in 2005 was roughly just one third of the number reported in 2002, the year immediately prior to reform enactment.
This dramatic difference is echoed by Texas Department of Insurance data which shows that medical malpractice lawsuit filings decreased by half by 2006. Additionally, the agency reported its action to deny rate increases that did not take into account the reduced exposure to frivolous claims. The agency further reported that within months of reform passage, it had been contacted by more than two dozen companies for information on entering the malpractice insurance market, and an insurer who had announced plans to pull out of the Texas market began expanding and writing new business.
The reforms have wrought additional beneficial changes in Texas healthcare, among them:
- From May 2003 through July 2005 there was an increase of approximately 3,000 new doctors establishing practices in Texas, many of whom serve in high-risk specialty medicine. (Texas Medical Association, March 23, 2006).
- Some Texas communities (Corpus Christi, Beaumont, the Rio Grande Valley, Webb County) are experiencing surges in physician recruitment (American Medical Association, May 9, 2005).
- Texas physicians are now able to shop for medical malpractice insurance since the number of new and start-up medical malpractice insurers increased from four pre-reform to roughly 20 new entities. (Beaumont Enterprise, Feb. 22, 2005).
Texas teaches that appropriate medical tort reform does indeed work. It lowers medical malpractice premiums and increases the number of available doctors, thus increasing patients’ access to care. An important caveat, however, is that Texas voters passed a constitutional amendment that makes it highly unlikely for the state’s high court to overturn the cap. The question now is whether other states will learn Texas’ very valuable lesson.
David F. Jimenez, MD, FACS, is professor and chair of the Department of Neurosurgery at the University of Texas Health Science Center, San Antonio.