Putting in place noneconomic damage caps appears to reduce payouts more than not having caps, but when caps increased to $500,000, the effect on payments was neutralized, new research shows.
Specifically, any cap trimmed average payments by 15% ($42,980) compared with no cap, and a $250,000 cap reduced average payments by 20% ($59,331), researchers report in an article published in Health Affairs. However, when caps reached $500,000, they no longer had a significant effect, compared with no cap.
Seth Seabury, PhD, an associate professor at the Leonard D. Schaeffer Center for Health Policy and Economics, and colleagues analyzed 220,653 total claims from 1985 to 2010, of which 74,366 (33.7%) involved indemnity, from the Physician Insurers Association of America Data Sharing Project. The database is the largest collection of paid and unpaid malpractice claims from private insurers in the United States.
They merged that information with information on state liability reforms to gauge the effect of state malpractice reforms on the average size of malpractice payments in 10 physician specialties.
Effect Varies by Specialty
In general, higher caps had little effect on payouts by specialty. The more restrictive caps were linked to significant drops in award sizes for seven of the 10 specialties. Researchers found the largest effect came with claims involving pediatricians and the smallest effect was on claims involving surgical subspecialties and ophthalmologists.
Bernard Black, JD, professor at Northwestern University Law School and Kellogg School of Management in Chicago, Illinois, said he found similar results for payout of claims relative to size of caps in his research 2 years ago, using a different data source.
Huge caps may have little effect because physicians have total policy limits, he said.
“So if you have a cap of a million dollars on noneconomic damages, but the physician basically has a hard cap on all damages because he has a million-dollar policy, the cap doesn’t mean anything anymore,” he said. “It’s really, really hard to go over a physician’s limits and collect from personal assets.”
Higher noneconomic caps might matter more for hospital payouts, he said, because they have deeper pockets, but that goes beyond the focus of the current study.
“Caps are good for physicians. We know that. They’re bad for health care spending, bad for quality, and don’t attract more physicians. Why would you do this?” Black said. “The case that it’s good for anybody else is just not there.”
The authors say their findings do not necessarily mean the caps benefit society.
“Other researchers have questioned the fairness of noneconomic damages caps by pointing out that they lower award sizes the most for patients with grave and disfiguring injuries. Our study was limited to assessing the impact of noneconomic damages caps on claim outcomes. A comprehensive assessment of the implications of the caps for social welfare would require a complete accounting of the costs and benefits of reform, including the potential impact on patients,” they write.