On July 28 the U.S. House of Representatives passed important medical malpractice legislation, a measure that would, among other things, cap noneconomic damages at $250,000 and limit each party's share of damages to its share of responsibility for a patient's injury.
If history is a guide, this critically important bill will die in the Senate. One side will blame greedy insurance companies and the other side will blame rapacious trial lawyers -- and another year will pass without legislation to deal with this pressing issue.
That would be truly unfortunate.
Consider the situation in New York. According to a Greater New York Hospital Association survey, medical malpractice insurance premiums for hospitals in the New York metropolitan area skyrocketed 147% from 1999 through 2004. Annual increases averaged 27%. Yet, in most cases, the amount of coverage hospitals could obtain remained the same or decreased.
For physicians, the New York State Insurance Department just approved a 7% increase in premiums for the second year in a row. Although this increase places a heavy burden on some physicians -- particularly obstetricians -- who already pay some of the highest premiums in the nation, it is lower than the 30% increase requested by some of the state's medical malpractice insurers, and thus may cause some doctors to leave New York. In the past four years, two of the six insurance companies offering physician coverage in New York have become insolvent and two more have stopped offering excess coverage, which is the amount a physician purchases beyond the primary layer of insurance to protect against very large claims.
These surging costs, which are by no means exclusive to New York, appear to be affecting patients' access to care. One of the first services that financially strapped hospitals are forced to eliminate is obstetrics, precisely because of its high malpractice insurance costs and low reimbursements. In 2003, 86% of hospitals in New York City lost money providing maternity care, which had a net negative profit margin of 27%, as hospitals lost a total of $160 million.
Because of this, a number of New York hospitals have discontinued maternity care, sometimes as a prelude to closing their doors altogether. To make matters worse, the number of practicing OB/GYNs per 100,000 residents in the state decreased by 4.1% from 1998 to 2002, suggesting that rising insurance premiums may be forcing these physicians to close their practices and work elsewhere. Other states are facing the same dilemma.
Many members of Congress from New York and other states have refused to support the House bill. They argue that insurance companies are inappropriately raising rates to make a profit and, therefore, the states should regulate them, or physicians and hospitals should self-insure. But the state of New York already regulates medical malpractice insurers and even limits premium increases. Further, nearly all New York City-area hospitals already self-insure, so the insurance companies are not to blame.
Opponents also argue that the caps on damages included in the House bill unfairly limit the amount a victim can collect. But no responsible doctor or hospital chief executive officer would ever support a limit on economic damages -- funds awarded to enable a plaintiff to pay for needed medical care. The $250,000 cap supported by both President Bush and the House is on noneconomic damages only, such as compensation for pain and suffering.
Finally, the opponents argue that the real problem is medical errors. While reducing medical errors is a critical priority for all hospitals, little relationship has been found between negligence and medical malpractice claims. A major study in the New England Journal of Medicine has found that the severity of a patient's disability is much more predictive of payment than is negligence, strongly suggesting that reducing errors alone will not solve the malpractice insurance crisis.
Nonetheless, much, much more needs to be done to reduce medical errors. That is why New York's hospitals volunteered to be the first to report quality data to the CMS, reporting that is now required of all hospitals in the U.S. in order to avoid Medicare cuts. New York's hospitals also strongly supported landmark legislation passed by the state Legislature last month to require hospitals to report nosocomial infections to the state health department, which will drive vast improvements in hospital care.
Further, the GNYHA has launched a major initiative aimed at eliminating one of the most common, yet preventable, hospital-acquired infections -- central line-associated bloodstream infections. And we worked with Gov. George Pataki and the Legislature to provide critical funds to help hospitals implement information technology systems that will greatly reduce medical errors. All of these efforts -- not higher malpractice insurance premiums -- will drive down medical errors.
The skyrocketing cost of malpractice insurance alone is not the cause of the severe financial distress at hospitals in New York and beyond, but it has become a significant factor. It is my fervent hope that the stalemate of past years will not be repeated in 2005, and that traditional opponents of malpractice insurance legislation will find a way to reach across the aisle and arrive at an acceptable compromise. Such cooperation would go a long way toward ensuring that the constituents of all members of Congress continue to receive the healthcare they need and deserve.
Kenneth Raske is president of the Greater New York Hospital Association.