Making the case for caps in tort reform

A recently released, updated literature review by the AMA examines the effect of a fundamental tort reform -- caps on awards, typically for noneconomic damages -- on the practice of medicine.

A common-sense prediction would be that easing the burden of an unfair, expensive and demoralizing tort system would lead to more doctors, less defensive medicine and lower costs. The AMA report adds to the body of scholarly research confirming those results.

Included in this new batch of credible and compelling figures are fresh approaches to measuring the effects of caps. All told, this updated version of the review -- "The Impact of Liability Pressure and Caps on Damages on the Healthcare Market: An Update of Recent Literature" -- adds nine studies released in the past two years to a roughly equal number of papers examined earlier.

All of the studies were done independent of the AMA. Much of the research was peer reviewed and published in leading journals. It is important to note that the report only looks at research that controlled for the effects of variables outside of tort reform.

The 10-page study presents conclusions on critical and intertwined areas that can significantly influence cost and accessibility of care. Among highlights:

• In states with noneconomic damage caps, one study found liability premium rates were reduced an average of 17.3% for internists, 20.7% for general surgeons and 25.5% for ob-gyns. Altogether, the $250,000 nationwide cap long sought by organized medicine would save $1.4 billion in premiums annually, or 8% of current premiums. One other striking finding is that raising a cap carries considerable cost -- nearly a 4% premium rise with every added $100,000.
• In terms of physician supply, another study found the number of physicians in high-risk specialties was between 4% and 7% higher in states with caps. Other research determined that rural areas benefit from award limits, specifically in the greater number of surgical and support specialists -- 10% and 11%, respectively.

The report also looked at research on insurer payouts and found caps were associated with lower payments per physician and fewer claims. The full report is available on the AMA's Web site.

While a federal tort reform law is still sought but elusive, there has been considerable success at the state level. Nearly half the states have enacted caps, though of widely varying amounts. In many of those states, courts have negated the laws. Those decisions have sometimes been followed by new laws, but new laws can face court challenges as well.

Plaintiff lawyers are well-entrenched and highly motivated foes of liability award limits. Medical liability remains a growth industry for them. A study by the Tillinghast insurance consulting arm of Towers Perrin, not included in the AMA report, noted that medical liability accounted for nearly 6% of tort costs in 1975, and more that twice that percentage in 2006. Lawyers have a lot to lose.

Hard, credible facts are an important factor in countering their arguments. For use in both the statehouse and the courthouse, this updated AMA guide to the evidence makes it easier to make clear the case for caps.