Malpractice insurance costs less in states that limit damage awards, but the absence of such caps in other states does not fully explain why malpractice premiums increased more than 23% in 2002, according to a study on the Health Affairs' Web site. Insurance premiums were about 17% lower in the 24 states with some limit on damage awards, according to the study by Kenneth Thorpe, chairman of the health policy and management department at Emory University's Rollins School of Public Health. Larger awards and settlements have contributed to premium increases; nearly 8% of all awards now exceed $1 million, double the share five years ago. But declines in insurers' investment income and a reduction in the number of insurers also have been factors, the study said.
Although a federal limit on damages would "ultimately result in lower premiums," Thorpe said, he questioned whether such a measure would benefit doctors and insurers at the expense of patients. "At issue is whether we should adopt short-term, stopgap solutions to slow the growth in premiums, or use the recent experience to more fundamentally evaluate and perhaps reform the liability system," Thorpe wrote. "The results suggest that capping awards may improve the profitability of malpractice carriers and reduce premiums. Whether this is socially desirable or improves the goals of deterrence and compensation remains an open question." Read the abstract. -- by Michael Romano