After years of debate, Medical malpractice reform has moved closer to actual enactment as it has been forwarded to the U.S. House of Representatives.
The legislation, HR 5, titled the HEALTH Act (Help Efficient, Accessibly, Low-cost, Timely Healthcare), includes a $250,000 cap on noneconomic damages, a ban on subrogation by collateral sources, a sliding-scale fee schedule for attorney contingency fees and periodic payments of future damages. The bill limits punitive damages to "instances where a person acted with malicious intent or deliberately failed to avoid injury," according to a statement from the committee majority, according to Insurance News Net.
In passing the bill through committee, mostly on a party line vote, the GOP majority rejected all but one of 14 Democratic amendments, including a proposal to allow states the option of choosing their own approach to MPLI reforms citing a need to remain consisten across state lines. This is, of course, inconsistent with their opposition to the Affordable Care Act when the GOP argues states should have autonomy on health care reform.
But, in the end, most will agree that malpractice reform is long overdue. "The medical liability system in this country is not a system at all. It is a fragmented patchwork of policies that jeopardize access to care and impose added costs to the American people and their government, through Medicare and Medicaid," Chairman Fred Upton, R-Mich., said in a statement. "It is time to enact real, comprehensive reform so we can finally have a medical liability system that works for our nation's patients and doctors."
The Obama administration is looking to provide $250 million in incentives to encourage states to adopt medical professional liability reforms. The Affordable Care Act assigned $50 million for demonstration projects to help states craft alternatives to litigation for medical liability cases, which insurers and physicians believe deserve part of the blame for rising medical costs as reported by BestWire on Feb. 17, 2011.
How Medical Malpractice Insurance Works
Most health care providers need to buy professional liability insurance. Nearly all states require that physicians have liability insurance. Even in states that don’t, physicians usually have to have insurance coverage in order to get privileges to see patients at a hospital. In some contexts, however, physicians can choose to go without coverage. In Florida, for example, it is estimated that about five percent of physicians carry no liability coverage, according to the Journal of Law, Medicine and Ethics.
Physicians usually buy their insurance from a commercial company or a physician-owned mutual company, either individually or through a group practice. Hospitals and other health care facilities purchase their own insurance, and hospitals that directly employ physicians typically buy a policy that covers both the hospital and its medical staff.
For those physicians employed by the federal government there is no need to purchase liability insurance; if they are sued, the suit is brought against the federal government, which insures itself. Some state-employed physicians receive coverage from the state.
Premiums for malpractice insurance vary with the provider’s degree of risk, but experience rating is not widely used. A podiatrist's risk, for instance, is substantially different than that for a brain or heart surgeon. Insurers set premiums on a prospective basis based on:
- their expected payouts for providers in a particular risk group;
- the uncertainty surrounding this estimate;
- their expected administrative expenses and future investment income;
- the profit rate they seek.
They use information on past losses and expenses, combined with other information, to help them set rates.
The top five writers of medical professional liability insurance in the United States in 2009 were MLMIC group, with a 7.1% market share; Berkshire Hathaway Insurance Group, with 6.8%; Doctors Co.Insurance Group, with 6.7%; ProAssurance Group, with 5.1%; and American International Group Inc., with 5.0%, according to BestLink.
