Medical Malpractice Insurance and Health Reform

Bernadette Fernandez
Analyst in Health Care Financing

Baird Webel
Specialist in Financial Economics

Vivian S. Chu
Legislative Attorney

Medical malpractice liability insurance has attracted congressional attention numerous times over the past few decades, particularly in the midst of three "crisis" periods in the mid-1970s, the mid- 1980s, and the early 2000s. These crises were marked by sharp increases in physicians' liability insurance premiums, difficulties in finding any insurance in some areas as insurers withdrew from providing coverage, reports of physicians leaving areas or retiring following insurance difficulties, and a variety of public policy measures at both the state and federal levels to address the crises. Which public policy measures have been effective in addressing the successive insurance crises has been a matter of debate, in part because these crises have been at the intersection of the health care, tort, and insurance systems. 

Currently, the medical liability insurance market is not exhibiting crisis symptoms. Over the past four years, losses incurred by medical malpractice insurers have dropped dramatically and premiums paid have fallen, albeit more modestly. Problems with the affordability and availability of malpractice insurance persist but are less acute compared with other time periods. Even during a non-crisis period, the current malpractice system experiences issues with equity and access. For example, some observers have criticized the current system's performance with respect to compensating patients who have been harmed by malpractice, deterring substandard medical care, and promoting patient safety. Yet there are differing opinions as to the extent that each of these particular areas has been affected by the current malpractice system. 

The current legislative interest in medical malpractice reform differs from the past in that it is largely driven by overall health reform, rather than an immediate crisis in medical malpractice insurance. In terms of direct costs, medical malpractice insurance adds relatively little to the cost of health care. According to the National Association of Insurance Commissioners (NAIC), medical malpractice premiums written in 2008 totaled approximately $11.2 billion, while health expenditures are estimated by the Congressional Budget Office (CBO) to total $2.6 trillion. Indirect costs, particularly increased utilization of tests and procedures by physicians to protect against future lawsuits ("defensive medicine"), have been estimated to be much higher than direct premiums. These conclusions, however, are controversial, in part because synthesis studies have claimed that national estimates of defensive medicine are unreliable. 

To date, although slightly different, both the House and Senate health reform bills (H.R. 3962, the Affordable Health Care for America Act, and H.R. 3590, as passed by the Senate, the Patient Protection and Affordable Care Act) include language that would allow states to receive incentive payments to enact and implement medical liability laws. .


Date of Report: January 28, 2010
Number of Pages: 12
Order Number: R40862
Price: $29.95

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