Can Caps on Jury Awards Solve the Healthcare Problem? By ...

By Robert Kaestner<strong>Can</strong> <strong>Caps</strong> on Jury Awards Solve the Healthcare Problem?There appears to be widespread support in Illinois to impose caps on jury awards in malpracticeliability cases. Governor Blagojevich, in his state of the state address, called for medicalmalpractice reform and members of both the Illinois Senate and House have introducedlegislation with bipartisan sponsorship that would cap jury awards at $250,000 for non-economicdamages, or what is usually referred to as pain and suffering.And the public is behind their political leaders, or perhaps the politicians are behind their public,on this issue, as there is strong public support for capping jury awards in medical malpracticecases. According to a 2003 Kaiser Family Foundation poll, 72 percent of Americans favorplacing limits on jury awards, and an earlier Kaiser survey revealed that only 27 percent ofAmericans believe that most medical malpractice lawsuits are justified.Unfortunately, the political rhetoric and public support for caps on malpractice awards is notjustified by the facts. A recent summary of the scientific literature by the Congressional BudgetOffice (CBO) concluded that existing evidence suggests that malpractice reforms such ascapping jury awards for non-economic damages will have little effect on the way physicianspractice, on access to physician services, and on the costs of healthcare. My own and otherexperts review of the evidence is consistent with the CBO conclusion.First, there is little evidence that the size and number of jury awards are the main determinant ofthe increase in malpractice premiums. The insurance cycle and competitive structure of theinsurance market are primarily responsible for the ups and downs of malpractice premiums. Soreforms such as caps may lower premiums somewhat, but they will not eliminate the spikes inpremiums that have occurred recently, and which providers dislike most.Second, most studies on the effect of malpractice premiums find that higher premiums lead toonly a slight increase in healthcare utilization because of changes in physicians practice patterns,or what is commonly referred to as defensive medicine. So reducing malpractice premiumsthrough reforms such as capping jury awards will have little effect on health care costs.Third, there is little systematic, as opposed to anecdotal, evidence that physicians’ choice ofspecialty or the location of their practice is significantly affected by malpractice premiums. In arecent study of five states with a reported “malpractice crisis,” the U.S. General AccountingOffice (GAO) concluded that high malpractice premiums had not resulted in widespreadproblems of access, although there were some reports of access problems in “scattered, oftenrural, areas where providers identified other long-standing factors that also affect the availabilityof services.” In addition, a recent study of national data by researchers at Dartmouth Universityfound no evidence of a systematic decrease in physician services in areas with high malpracticepremiums. Like the GAO, these researchers found a small decrease in the number of physiciansin rural areas where malpractice premiums were relatively high. So, if there is anything to bedone, it should involve special efforts to help rural areas attract physicians; caps on jury awardsare not targeted this way.

Assume the best case: caps on jury awards lower malpractice premiums significantly, say 15 to20 percent, and as a result physicians order slightly fewer “defensive” tests, and a few physiciansin rural areas stay in business. Is it worth it? The answer is probably no, and the most importantargument against implementing caps is that it will weaken the incentive to provide high-qualitycare because physicians will have even less incentive to use the proper amount of precaution.There is no greater problem in our healthcare industry today than the quality of care, which isexemplified by the rate of medical errors that the Institute of Medicine says is responsible fornearly 100,000 deaths per year. And according to a compelling analysis by researchers atHarvard University, most persons who experience inadequate, even negligent care, fail to pursuelegal remedies.The legislative focus on caps is severely misplaced. Reforms that will improve the quality ofcare and reduce the number of medical errors are desperately required. <strong>Caps</strong> on malpractice juryawards will have relatively few benefits and will hurt those who were significantly harmed byinadequate care by limiting the amount of compensation.