Policy Limits, Payouts, and Blood Money: Medical Malpractice Settlements in the Shadow of Insurance

초록

In prior research, we found that policy limits in Texas medical malpractice (“med mal”) cases often served as de facto caps on recoveries in both tried and settled cases. We also found that physicians faced little personal exposure on malpractice claims. Out-of-pocket payments (OOPPs) by physicians were rare and usually small. Physicians could reduce their personal exposure to near zero by carrying $1millioninprimarycoverage―astandardamountinmanystates.Finally,therealamountofinsurancecoveragepurchasedbyphysicianswithpaidclaimsdeclinedsubstantiallyover1988–1999,consistentwithphysicianslearningovertimehowlowtheOOPPriskwasanddecidingtocarrylesscoverage.Wenowrevisitourfindings,usinganextendeddataset(1988–2005)thatletsusstudypoliciespurchasedthrough2003,whichencompassestheperiodduringwhichTexasexperiencedamedmalinsurancecrisis(1999–2003)andadoptedtortreformtolimitmedmallawsuits(2003).Ourupdatedfindingsarelargelyconsistentwithouroriginalfindings:policylimitscontinuetocaprecoveries;physiciansstillrarelymakeOOPPs;mostOOPPsaremodest;andrealpolicylimitscontinuetoshrink.Wealsofindevidencethat,attheendoftheextendedperiod,physiciansoftenpurchasedlesscoverage(i.e.,policieswithlimitsof$100,000–$200,000insteadof$500,000–$1 million). Our findings have important policy implications. If physicians carry less real coverage over time, lawsuits should become less profitable. This will make it harder for injured patients to find plaintiffs’ lawyers willing to handle their cases; shift the cost of medical injuries away from providers and toward patients and first-party health insurers; weaken liability insurers’ incentives to monitor providers; and diminish the (already modest) deterrent effect of tort law. If these findings are representative, they may help explain the nationwide decline in med mal claiming that we document elsewhere. Finally, our findings raise questions about the explanatory power of Baker’s “blood money” norm, at least for med mal litigation.

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