Caps on malpractice awards to plaintiffs for noneconomic damages result in lower insurance premiums for doctors, according to a research team from the University of Alabama and Samford University, both in Birmingham.
Noneconomic damages are assessed for intangibles such as pain and suffering or loss of companionship. Unlike medical bills or lost wages, their value can only be approximated. In an effort to stem multi-million dollar pain-and-suffering awards, some states have placed limits on such payments.
The Alabama team examined 10 studies published since 1990 that covered various time periods between the mid-1970s and 2004. They concluded “the more rigorous empirical analyses consistently showed that damages caps reduced medical malpractice premiums.” The degree of reduction, however, varied widely.
For example, a study that covered 1974-1986 found damages caps cut premiums for general practitioners by 13.4%, for general surgeons by 14.3%, and for obstetricians by 16.9%. But a study covering 1991-2004 found caps reduced premiums for these groups by 17.3%, 20.7% and 25.5%, respectively.
The size of the cap seemed to affect its impact. A study covering the period from 1994 through 2003 found the rate of premium increase was 5.7% lower in states that had noneconomic caps $500,000. Higher noneconomic limits or limits set on total damages had no statistically significant effect. Similarly, the 1991-2004 study found that with each $100,000 that a cap was increased, insurance premiums rose by 3.9%.
“This implied that caps of $250,000 or less reduced premiums substantially,” the Alabama researchers state. “Those caps between $250,000 and $750,000 had no impact, but those caps above $750,000 increased premiums substantially” (The Milbank Quarterly 2007;85:259-286).