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Medical Malpractice: Background and
Legislation in the 112th Congress
Baird Webel
Specialist in Financial Economics
Vivian S. Chu
Legislative Attorney
David Newman
Specialist in Health Care Financing
April 26, 2011
Congressional Research Service
7-5700
www.crs.gov
R41693
CRS Report for Congress
P
repared for Members and Committees of Congress
c11173008

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Medical Malpractice: Background and Legislation in the 112th Congress

Summary
As a policy area, concerns about medical malpractice have often involved issues related to the
market for provider liability insurance, the prevalence of malpractice in the health care system,
and the resolution of malpractice complaints through the tort system. Medical malpractice has
attracted congressional attention numerous times over the past decades, particularly in the midst
of three “crisis” periods for the liability insurance market in the mid-1970s, the mid-1980s, and
the early 2000s. These periods were marked by sharp increases in medical liability insurance
premiums, difficulties in finding any insurance in some areas as insurers withdrew from
providing coverage, reports of providers leaving areas or retiring following insurance difficulties,
and a variety of public policy measures at both the state and federal levels to address these
historic crises. Which public policy measures have been effective in addressing the difficulties in
the medical malpractice liability market has been a matter of debate, in part because these
difficulties have been at the intersection of the health care, tort, and insurance systems.
The overall medical liability insurance market is not currently exhibiting the same level of
disruption as in the past. Nonetheless, concerns with the affordability and availability of
malpractice insurance persist, especially in particular regions and physician specialties (e.g.,
obstetricians). In addition, the fear of claims for medical malpractice may impact individual
provider decisions and drive up the overall cost of health care. In terms of direct costs, medical
malpractice insurance adds relatively little to the cost of health care overall. According to the
National Association of Insurance Commissioners (NAIC), medical malpractice premiums
written in 2009 totaled approximately $10.8 billion, while overall health expenditures are
estimated by the Congressional Budget Office (CBO) to total $2.6 trillion. Indirect costs,
particularly increased use of tests and procedures by providers to protect against future lawsuits
(“defensive medicine”), have been estimated to be much higher than direct premiums. CBO
estimated that enacting federal tort reforms would reduce both health care spending by
approximately 0.4% (roughly $10.5 billion) and the federal budget deficit by $40.1 billion over a
10-year period.
Even during a period of relative calm, the 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 President’s 2012 budget encouraged Congress to reform the medical malpractice system and
requested $250 million for the Department of Justice to test a variety of reform proposals. In the
112th Congress, the specific issue of medical liability reform was addressed by the House
Committee on the Judiciary in a January 20, 2011 hearing. The committee marked up H.R. 5, the
Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011, on February 9
and February 16, 2011, and reported the bill on March 17, 2011. Among other things, the
HEALTH Act would implement a cap on non-economic damages for health care lawsuits.

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Medical Malpractice: Background and Legislation in the 112th Congress

Contents
Introduction ................................................................................................................................ 1
Recent Action and Proposals on Medical Malpractice.................................................................. 1
During the 112th Congress ..................................................................................................... 1
The Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of
2011 (H.R. 5) ............................................................................................................... 2
FY2012 President’s Budget ............................................................................................. 3
During the 111th Congress ..................................................................................................... 4
PPACA and Medical Malpractice .................................................................................... 4
Costs of Medical Malpractice...................................................................................................... 4
Challenges in Medical Malpractice Policymaking ....................................................................... 6
Health Care System............................................................................................................... 6
Tort System........................................................................................................................... 7
Insurance System .................................................................................................................. 7
Recent Experience ...................................................................................................................... 8
The Medical Malpractice Insurance Market........................................................................... 8
State Reform Efforts ........................................................................................................... 10
Recent Experience Among Providers................................................................................... 13

Figures
Figure 1. Nationwide Direct Losses Incurred............................................................................... 9
Figure 2. Nationwide Loss Ratio ............................................................................................... 10
Figure 3. Change in the Average Paid Medical Malpractice Claim ............................................. 13

Tables
Table 1. Percentage Change in the Number of Paid Medical Malpractice Claims (2003 –
2009) and Claims Per 100,000 Population (2009) ................................................................... 11

Contacts
Author Contact Information ...................................................................................................... 14

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Medical Malpractice: Background and Legislation in the 112th Congress

Introduction
Medical malpractice has attracted congressional attention numerous times over the past few
decades, particularly in the midst of three “crisis” periods for medical malpractice liability
insurance in the mid-1970s, the mid-1980s, and the early 2000s. These periods were marked by
sharp increases in medical liability insurance premiums, difficulties in finding any liability
insurance in some regions and among some specialties as insurers withdrew from providing
coverage, reports of providers leaving areas or retiring following insurance difficulties, and a
variety of public policy measures at both the state and federal levels to address the market
disruptions. In each case, attention receded to some degree after a few years as premium increases
moderated and market conditions calmed.
The overall medical liability insurance market is not currently exhibiting the same level of crisis
as in previous time periods. Nonetheless, problems with the affordability and availability of
malpractice insurance persist, especially in particular regions and physician specialties (e.g.,
obstetricians). In addition, the fear of claims for medical malpractice may affect individual
provider decisions particularly through increased use of tests and procedures to protect against
future lawsuits (“defensive medicine”) and drive up the overall cost of health care. The
malpractice system also 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,1 deterring substandard medical care,2 and promoting patient safety.3
Which public policy measures have been effective in addressing the successive insurance market
disruptions, and may be effective in the future, has been a matter of debate. Some proposals (such
as the current Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011,
H.R. 5) have addressed the tort system, particularly limits on claims brought in medical liability
cases; others have addressed the insurance system, particularly increased direct regulation of
insurance companies, or removal of the existing partial exemption from federal antitrust laws for
the “business of insurance.”
Recent Action and Proposals on Medical
Malpractice
During the 112th Congress
The 112th Congress has acted early to address health reform generally and medical malpractice
issues specifically. H.R. 2, which would repeal P.L. 111-148 in its entirety, including the medical
malpractice provisions discussed below (under the section “During the 111th Congress”), was
introduced by Representative Eric Cantor on January 5, 2011. This bill was passed by the House

1 E. Thomas et al., “Incidence and Types of Adverse Events and Negligent Care in Utah and Colorado,” Medical Care,
vol. 38, no. 3, (March 2000); T. Brennan et al., “Incidence of Adverse Events and Negligence in Hospitalized Patients,”
New England Journal of Medicine, vol. 324, no. 6, (February 7, 1991).
2 Michelle M. Mello and Troyen A. Brennan, “Deterrence of Medical Errors: Theory and Evidence for Malpractice
Reform,” 80 Tex. L. Rev. 1595 (2002).
3 L. Sato et al., “Legal Liability and Protection of Patient Safety Data,” Harvard Risk Management Foundation, 2005.
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on January 19, 2011. Medical liability reform was the topic of the first committee hearing in the
House Committee on the Judiciary for the 112th Congress, held on January 20, 2011, and the
Committee has acted on H.R. 5 as discussed below.
The Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of
2011 (H.R. 5)
H.R. 5 was introduced by Representative Phil Gingrey on January 24, 2011.4 The House
Committee on the Judiciary marked up the bill on February 9, and February 16, 2011, and
reported the bill on March 17, 2011. The bill has also been referred to the House Energy and
Commerce Committee for further consideration ending not later than May 13, 2011.
H.R. 5 would, with certain exceptions, preempt some aspects of existing state medical
malpractice laws. Although H.R. 5 seeks to address both medical malpractice and product
liability, this report is limited to provider medical malpractice. The bill defines a “health care
lawsuit” to encompass not only suits between a provider and patient, but also any claim against a
health care organization, manufacturer, distributor, supplier, marketer, promoter, or seller of a
medical product and any claims concerning health care goods and services or medical products
affecting interstate commerce. Among other things, H.R. 5 would mandate a uniform statute of
limitations for health care lawsuits and set parameters and caps for non-economic damages,5
punitive damages,6 and attorneys fees. However, it would also grant states flexibility in that it
would not preempt any state law that imposes greater procedural or substantive protections for
health care providers and organizations from liability, loss, or damages. It would also not preempt
any state law that specifies a particular monetary amount of compensatory or punitive damages,
regardless of whether the state’s monetary amount is greater or lesser than is provided for in the
act.
In the February 16, 2011, markup of the bill, an amendment to eliminate a provision in H.R. 5
that would have allowed juries to hear evidence of “collateral source benefits,” such as workers’
compensation payments or long-term disability insurance payments, was adopted by voice vote.
The amendment also struck a provision that would have prohibited providers of collateral source
benefits from recovering any amounts paid after a court award is made to a plaintiff.7

4 Prior versions of this bill have been introduced in past Congresses. See H.R. 4600, 107th Cong. (2nd sess., 2002); H.R.
5, 108th Cong. (1st sess., 2003); H.R. 4280, 108th Cong. (2nd sess., 2004); H.R. 5/H.R. 534 (1st sess., 2005); H.R. 2580,
110th Cong. (1st sess., 2007); H.R. 1086, 111th Cong. (1st sess., 2009).
5 Non-economic damages typically compensate for intangibles, such as pain and suffering and capacity to enjoy life, as
opposed to economic damages, which compensate for more tangible elements, such as medical expenses and loss of
earnings.
6 Punitive damages are damages in excess of those needed to compensate an individual for injuries or loss and are
designed to punish the alleged wrongdoer for bad behavior.
7 See also CRS Report R41661, Medical Malpractice Liability Reform: Legal Issues and 50-State Surveys on Tort
Reform Proposals, by Vivian S. Chu.
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FY2012 President’s Budget
The President’s FY2012 budget made general reference to reforming medical malpractice:8
To do more to restrain health care costs, the President is ... :
Calling for a more aggressive effort to reform our medical malpractice system to reduce
defensive medicine, promote patient safety, and improve patient outcomes. The President
encourages Republicans to work constructively with him on medical malpractice as part of
an overall effort to restrain health costs.
In addition, the President’s budget “makes available $250 million in grants to states to reform the
way they resolve medical malpractice disputes.” These grants would be awarded in consultation
with the Department of Health and Human Services.9
According to information from the Justice Department,10
[S]tates could use the grant money to test out reforms such as:
Health courts which use specially-trained judges and medical experts to review
medical liability cases, rather than the traditional trial-by-jury approach.
Safe harbors, which would provide physicians, hospitals, and other medical
providers a legal safety net; those who adhered to best-practices standards of care
would be considered non-negligent. Funding could be used toward identifying and
certifying practice guidelines.
Early disclosure and offer, which would require doctors and hospitals to follow a
protocol after a medical error occurred that could include disclosing the error to a
safety officer and the patient, apologizing to the patient, and offering fair
compensation. If the patient decided to sue, the provider’s disclosure and apology
could not be used as evidence of liability.
States could also use the money to try out other reforms, such as a “fair share” rule that
would allocate responsibility for malpractice payments that are in proportion to
responsibility for the damages.
These grants are ultimately dependent on further legislative action by Congress.

8 The White House Office of Management and Budget, Fiscal Year 2012 Budget of the United States Government, p.
25, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/budget.pdf.
9 The White House Office of Management and Budget, Fiscal Year 2012 Budget of the United States Government, p.
737, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/jus.pdf.
10 Emily P. Walker, “Obama’s Budget Includes $250M in Malpractice Grants,” MedPage Today, February 16, 2011,
http://www.medpagetoday.com/PracticeManagement/Medicolegal/24904.
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Medical Malpractice: Background and Legislation in the 112th Congress

During the 111th Congress
PPACA and Medical Malpractice
The Patient Protection and Affordable Care Act (PPACA; P.L. 111-148), as amended, included
two provisions related to medical malpractice reform.
PPACA, § 6801, expressed the Sense of the Senate that (1) health care reform presents an
opportunity to address issues related to medical malpractice and medical liability insurance; (2)
states are encouraged to develop and test litigation alternatives while preserving an individual’s
right to seek redress in court; and (3) Congress should consider establishing a state demonstration
program to evaluate alternatives to the existing civil litigation system with respect to medical
malpractice claims.
PPACA, § 10607, authorized $50 million for a five-year period beginning in FY2011 for the HHS
Secretary to award demonstration grants to states for the development, implementation, and
evaluation of alternatives to current tort litigation for resolving disputes over injuries allegedly
caused by health care providers or organizations. States that receive a grant are required to
develop an alternative that (1) allows for the resolution of disputes caused by health care
providers or organizations, and (2) promotes a reduction of health care errors by encouraging the
collection and analysis of patient safety data related to the resolved disputes.
Prior to receiving a grant, a state will have to demonstrate that its alternative (1) increases the
availability of prompt and fair resolutions of disputes, (2) encourages the efficient resolution of
disputes, (3) encourages the disclosure of health care errors, (4) enhances patient safety by
reducing medical errors and adverse events, (5) improves access to liability, (6) informs the
patient about the differences between the alternative and tort litigation, (7) allows the patient to
opt out of the alternative at any time, (8) does not conflict with state law regarding tort litigation,
and (9) does not abridge a patient’s ability to file a medical malpractice claim.
The demonstration grant provisions do not limit any prior, current, or future efforts of any state to
establish any alternative to tort litigation. Monies for this demonstration have not been
appropriated as of this time.
Costs of Medical Malpractice
In terms of direct costs, medical malpractice insurance adds relatively little to the direct cost of
health care relative to total health care spending, but medical malpractice tort reform could still
save, as noted below, a not insignificant amount of money over time. Medical malpractice
premiums written in 2009 totaled approximately $10.8 billion,11 while health expenditures
estimated by CBO total $2.6 trillion.12 Indirect costs, particularly increased use of tests and
procedures by providers to protect against future lawsuits (“defensive medicine”), have been

11 NAIC, “Countrywide Summary of Medical Malpractice Insurance, Calendar Years 1991-2009,” provided to CRS on
December 16, 2010.
12 Douglas Elmendorf, “Expanding Health Insurance Coverage and Controlling Costs for Health Care,” testimony
provided to the Senate Budget Committee, February 10, 2009, http://www.cbo.gov/ftpdocs/99xx/doc9982/02-10-
HealthVolumes_Testimony.pdf.
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estimated to be much higher than direct premiums. These conclusions, however, have been
controversial, in part because some synthesis studies have claimed that national estimates of
defensive medicine are unreliable.13 A recent analysis on the subject estimated that the total costs
of defensive medicine in 2008 were $45.6 billion.14
Prior to the passage of the health care reform law, CBO conducted its own analysis, as well as
synthesized and analyzed previous studies on the relationship between medical malpractice and
health care costs.15 The most recent CBO analysis estimated that federal tort reforms would
reduce national health care spending by about 0.4% in 2009 (equivalent to approximately $10.5
billion).16 This estimate is the cumulative impact of tort reform on both lowering medical
malpractice insurance premiums and reducing use of health care services, and takes into account
the fact that because many states have implemented tort reforms, a significant proportion of
potential cost savings already has been realized. Other earlier studies have estimated the reduction
of health care spending attributable to state tort reforms. These studies compared pre- and post-
reform spending within each state that implemented such reforms, and found varying impact
(e.g., a set of studies found 4%-9% reduction in hospital spending for Medicare patients with
heart disease; another study found that state tort reforms reduced personal health care
expenditures by 3%-4%).17
CBO also estimated the effect of malpractice tort reform on the federal budget. In its latest
analysis, CBO estimated that such reforms would reduce spending under Medicare, Medicaid, the
State Children’s Health Insurance Program, and the Federal Employees Health Benefits Program
by approximately $34 billion from 2011 to 2021. In addition, Congress’s Joint Committee on
Taxation (JCT) estimated that such reforms would lead to an increase in federal revenues of $6
billion over the same 10-year period.18 By combining the impact of tort reform on mandatory
health spending and tax revenues, CBO estimated that tort reforms could reduce the federal
budget deficit by approximately $40.1 billion over 10 years.19

13 See, e.g., Michelle Mello, “Understanding medical malpractice insurance: A primer,” Robert Wood Johnson
Foundation, Research Synthesis Report No. 8, January 2006, and Office of Technology Assessment, “Defensive
Medicine and Medical Malpractice,” 1994.
14 Michelle M. Mello, Amitabh Chandra, and Atul A. Gawande et al., “National Costs Of The Medical Liability
System,” Health Affairs, vol. 29, no. 9 (September 2010), pp. 1569-1577.
15 See CBO, “Budget Options, Volume 1: Health Care,” December 2008.
16 Congressional Budget Office, “Cost Estimate of H.R. 5 Help Efficient, Accessible, Low-cost, Timely Healthcare
(HEALTH) Act of 2011.” March 10, 2011, available at http://www.cbo.gov/ftpdocs/120xx/doc12095/hr5.pdf.
17 See P. Danzon, “Liability for Medical Malpractice,” Handbook of Health Economics, Culyer and Newhouse, eds.,
2000; D. Kessler and M. McClellan, “How Liability Law Affects Medical Productivity,” Working Paper No. 7533,
National Bureau of Economic Research, February 2000, and “Do Doctors Practice Defensive Medicine?,” Quarterly
Journal of Economics, vol. 111, no. 2, May 1996; and F. Hellinger and W. Encinosa, “The Impact of State Laws
Limiting Malpractice Damage Awards on Health Care Expenditures,” American Journal of Public Health, August
2006.
18 Much of health care consumed in the private sector is provided through employer-sponsored health benefits that are
not taxed as income for the employee. The JCT assumed that implementation of tort reforms would lead to lower health
care costs, which in turn, would lead to higher wages, which are taxable. Thus, higher taxable income would result in
greater revenue.
19 Congressional Budget Office, “Cost Estimate of H.R. 5 Help Efficient, Accessible, Low-cost, Timely Healthcare
(HEALTH) Act of 2011,” March 10, 2011, available at http://www.cbo.gov/ftpdocs/120xx/doc12095/hr5.pdf.
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Challenges in Medical Malpractice Policymaking
Addressing problems in medical malpractice can be challenging, particularly due to the
interactions of three different systems, each of which is complex in its own right: health care, tort,
and insurance.
Health Care System
Medical errors can lead to injury, and injury is the medical basis on which a malpractice claim is
made. Reducing errors through improved medical practices and effectuating penalties against
poorly performing providers may benefit the overall performance of the medical malpractice
insurance system by, for example, possibly lowering premiums or improving access to insurance.
States have the primary authority to define the process for granting and renewing a medical
license, and regulating the medical practice. Currently, there is a lack of uniformity across states
regarding both medical licensure and the medical practice. Moreover, states face financial
challenges and many are likely to lack clinical expertise to fully implement patient safety
strategies. For example, current state initiatives vary regarding the existence, scope, and
robustness of data-collection efforts to track and analyze medical errors and possible instances of
malpractice. Federal input may be implemented through a variety of approaches, both voluntary
(e.g., support for research on evidence-based medicine, and toolkits to evaluate the adoption of
patient safety efforts) and mandatory (e.g., “conditions of participation” standards for institutional
providers under the Medicare program).
While reducing medical errors may be a worthy goal in its own right, it is unclear to what degree
medical malpractice insurance will be affected if only patient safety concerns are addressed.
Multiple older studies have found that the majority of malpractice claims filed involve medical
injuries not caused by negligence.20 Moreover, only a small proportion of patients whose injuries
are caused by negligent medical care actually end up filing a malpractice claim.21 However, there
is an emerging consensus in the academic literature that, while there are legal errors in paying
undeserving individuals in addition to medical errors, “the merits of a claim are the best predictor
of the likelihood of payment and the amount received.”22 These findings speak to the complexity
of the existing medical liability system and difficulty in designing effective policies without
consideration of the interrelated systems.

20 See, e.g., David Studdert et al., “Negligent Care and Malpractice Claiming Behavior in Utah and Colorado,” Medical
Care (March 2000); Paul Weiler et al., A Measure of Malpractice (1993); T. Brennan et al., “Incidence of Adverse
Events and Negligence in Hospitalized Patients: Results of the Harvard Medical Practice Study I,” New England
Journal of Medicine, vol. 324, no. 6 (February 7, 1991).
21 David Studdert et al., “Negligent Care and Malpractice Claiming Behavior in Utah and Colorado,” Medical Care
(March 2000).
22 David A. Hyman and Charles Silver, “Medical Malpractice Litigation and Tort Reform: It’s the Incentives, Stupid,”
Vanderbilt Law Review, vol. 59, no. 4 (2006), p. 1100. “For instance, one major study of closed insurance claims found
that injured (non-injured) individuals were compensated (not compensated) in a total of 73% of the cases. Moreover, it
was 1.6 times more likely that an injured individual would not receive compensation than it was that a non-injured
individual would receive compensation. Finally, the amount a non-injured individual received when compensated in
error was almost half that received by those truly injured.”
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As noted above, some observers suggest that the current malpractice system encourages the
practice of “defensive medicine,” that is, the fear of liability and the potential negative outcomes
associated with malpractice claims lead providers to administer additional health care treatments
or avoid high-risk services primarily to reduce their liability risk. The implication is that
defensive medicine results in either an increase in overall consumption of and spending on health
care services that may not be medically necessary or a decrease in access to certain services or for
certain patients. Multiple studies have found some evidence of defensive medicine, but even
providers acknowledge that it is a difficult concept to measure.23 Moreover, some evidence
suggests that factors other than defensive medicine, such as physician payment systems (e.g., fee-
for-service vs. capitation) and financial incentives, may explain the over-provision of health
services.24
Tort System
The tort system acts as a mechanism through which a person suffering injury due to medical
errors is monetarily compensated when he or she establishes that a provider provided substandard
health care. Some argue that the tort system is an efficient way to both compensate those who
suffer from an injury and to deter the errors that created the injury, and that the tort system is the
primary way that the present system deals with such issues. However, there are those who argue
that, in the case of medical malpractice, the current system does neither particularly well.25 Some
observers have suggested that the medical malpractice tort system is arbitrary in its outcome.26 As
noted above, many valid claims are never filed and many filed claims are not the result of
negligence. Jury verdicts can vary significantly from case to case, with substantial variation also
occurring among states and among counties within states.
Insurance System
Liability insurance insulates providers from the direct cost of medical malpractice. It acts as a
buffer between the actual award for malpractice determined under the tort system and the
provider who may have committed malpractice. The vast majority of providers have liability
insurance, although there is anecdotal evidence about some providers practicing medicine without
malpractice insurance. By its nature, insurance spreads the costs across a wide base of providers
in a particular specialty or geographic area, so that the actions of a relatively small number of
providers can have a wider impact.
Specific aspects of the insurance system can arguably catalyze or magnify crises. Medical
malpractice claims tend to play out over an extended period of time, due both to the lag in
recognizing that a claim might exist and to deliberations in the court system. Insurance is based
on estimating future claims and estimating the investment returns on premium payments from the

23 General Accounting Office, “Medical Malpractice: Implications of Rising Premiums on Access to Health Care,”
GAO-03-836, August 2003.
24 Ibid.
25 See analysis presented by M. Mello and D. Studdert, “The Medical Malpractice System: Structure and Performance,”
Medical Malpractice and the U.S. Health Care System, W. Sage and R. Kersh, eds., Cambridge University Press, 2006.
26 “Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the Quality of Health
Care,” Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services,
March 3, 2003.
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time premiums are paid until the time claims are paid. The longer time period associated with
liability insurance losses increases uncertainty in these estimations (both in terms of the
frequency of claims and the dollar amount of awards), with such uncertainty possibly leading to
increased volatility in premiums.
Medical malpractice liability insurance is regulated by the individual states under the federal
McCarran-Ferguson Act of 1945,27 which also provides a limited exemption from federal antitrust
laws. This system of state regulation has resulted in variations in the structure of the markets as
well as in the data generated. NAIC aggregates some insurance data; however, much potentially
useful data is either not collected or not available. For example, data encompassing all the
medical malpractice claims closed by insurers can give a broad picture of the situation in medical
malpractice insurance; however, only a handful of states either collect such data or make it
available to researchers.
Recent Experience
Recent experience in the medical malpractice insurance market, within the states with respect to
the number of malpractice law suits and their average settlement amounts, and among providers
that have embarked on quality improvement efforts that reduce malpractice exposure and
premiums, can be described as encouraging. It is not yet clear whether these trends are long term
or whether they reflect the trough of another cycle in the medical liability insurance marketplace.
The Medical Malpractice Insurance Market
The cyclical experience of medical malpractice insurers is reflected in aggregate data about the
industry compiled and analyzed by the NAIC (see Figure 1). From 1992 to 1998, direct incurred
losses were relatively stable,28 varying from a low of $3.18 billion in 1994 to a high of $4.46
billion in 1998. However, from 1998 to 2003, losses grew steadily year after year, to a high of
$8.46 billion in that last year, coinciding with the last crisis period. Since 2003, losses have fallen
every year. In 2009, losses totaled $4.01 billion, the lowest amount in more than a decade. (The
loss data are in nominal dollar amounts.)29

27 15 U.S.C. §1011 et seq.
28 Incurred losses are payments for claims during a certain time period, in this case during a calendar year. Incurred
losses for any given year include payments for claims submitted prior to that year, and account for outstanding claims
at the end of the time period. The NAIC loss data is in nominal dollar amounts.
29 The distinction between nominal vs. real dollars is significant when considered over the longer-time period. For
example, while the 2008 loss of $4.09 billion does not seem much more than the 1992 loss of $4.04 billion, because
these amounts do not reflect the effects of inflation, the 2008 losses are actually much lower than those in 1992.
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Figure 1. Nationwide Direct Losses Incurred
(Nominal)
10
8.46
8
$)
s (
6
n
4.04
4.09
4.46
4
3.18
4.01
illio
B
2
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Calendar Year

Source: National Association of Insurance Commissioners.
Malpractice insurance premiums roughly followed losses as those amounts increased.30 However,
premiums have not fallen nearly as much as losses in recent years as the trend reversed. The loss
ratio, which compares losses to premiums, reflects this uneven trend (see Figure 2). A high ratio
generally implies lower profits for insurers on the insurance portion of their operations. The loss
ratio for the industry rose steadily from 78.41% in 1997 to 126.83% in 2001, tracking closely
with the losses trend. Since 2001, the loss ratio has rapidly decreased. In 2008, the loss ratio of
54.62% was the lowest one in nearly two decades and the 2009 ratio was the second lowest at
55.66%, meaning that over the past two years, the industry experienced its highest profit margin
on direct premiums earned in the calendar years analyzed.31
Insurers, who are regulated by state insurance regulators, may also profit, or lose, from their
investments. In general, with such low loss ratios, theory would suggest that there is an increase
in competition because insurers are entering the market in search of profits. This, however, may
not be happening as quickly as expected in medical malpractice if prospective insurers are wary
due to past variations in medical malpractice losses, or if prospective insurers’ capital has been
depleted due to losses incurred during the recent financial crisis.

30 This aggregate national data does not include, among other things, the number of policies written or the number of
providers covered. As such, other trends such as consolidation of providers within hospitals or changes in the number
of providers self-insuring or changes in the level of self insurance can impact the aggregate figures.
31 Other factors, such as returns on investments and administrative costs, in addition to losses, are likely to impact the
total profitability of insurers.
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Figure 2. Nationwide Loss Ratio
126.83
130
103.18
120
)
% 110
(
78.41
100
tio
90
80
54.62
s Ra
70
60
Los
55.66
50
40
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
Calendar Year

Source: National Association of Insurance Commissioners.
Notes: Loss Ratio = (Direct Losses + Direct Defense and Cost Containment Expenses Incurred)/Direct
Premiums Earned.
State Reform Efforts
Over the past 35 years, many states have adopted various tort reform proposals, including, among
other things, caps on non-economic damages, caps on punitive damages, reform of the collateral
source rule,32 and changes in statutes of limitations. These reforms were designed in part to
reduce the number of claims, the dollar amount of claims, or both.
In 2009, there were 10,739 paid medical malpractice claims in the United States—27.6% fewer
than in 2003.33 Some of these claims were paid without a trial. Paid claims represent only a part
of total claims and a majority of claims were either dropped or settled through litigation in which
the defendant provider was not found liable. At least one study found that in roughly 80% of the
cases that went to trial, the alleged wrongdoer in a medical malpractice case has been
exonerated.34 Table 1 shows the percentage change in the number of paid medical malpractice
claims between 2003 and 2009. Only two states, Massachusetts and New Mexico, experienced an
increase in the number of paid claims over this time period. Six states (Connecticut, Delaware,

32 A collateral source rule provides that the benefits received by an injured party from a source wholly independent of
the wrongdoer, such as the injured party’s insurer, will not operate to lessen the damages recoverable from the
wrongdoer.
33 See http://statehealthfacts.kff.org/comparemaptable.jsp?ind=436&cat=8.
34 David A. Hyman and Charles Silver, “Medical Malpractice Litigation and Tort Reform: It’s the Incentives, Stupid,”
Vanderbilt Law Review, vol. 59, no. 4 (2006), p. 1107.
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Medical Malpractice: Background and Legislation in the 112th Congress

Indiana, Kentucky, Ohio, and Texas) and the District of Columbia experienced a 50% or greater
percentage decline in the number of paid claims.
Table 1. Percentage Change in the Number of Paid Medical Malpractice Claims
(2003 – 2009) and Claims Per 100,000 Population (2009)
% Change in
% Change in
Number of
Claims Per
Number of
Claims Per
Claims
100,000
Claims
100,000
State
(2003-2009)
(2009)
State
(2003- 2009)
(2009)
AL -37.5 0.650
MT
-37.9
3.759
AK -36.8 1.770 NE
-41.5
2.723
AZ -43.6 2.630 NV
-35.0
2.490
AR -29.4 1.694
NH
0.00
3.591
CA -30.7 2.499 NJ -19.9
5.441
CO -23.0 2.515 NM 13.7
4.201
CT -51.9 2.980 NY
-26.5
6.712
DE -71.9 2.070
NC
-47.8
1.191
DC -52.4 3.393 ND
-45.5
2.857
FL -38.7 4.232
OH
-65.4
1.744
GA -35.6 2.116 OK 0.00
3.677
H1 -35.4 2.517 OR
-34.2
1.931
ID -28.1 1.513 PA
-38.3
6.203
IL -42.4 2.225 RI
-40.8
4.057
IN -56.4 2.913 SC
-28.3
2.559
IA -39.7 2.367
SD
-35.1
3.027
KS -29.4 2.612
TN
-12.3
2.182
KY -53.2 2.414 TX
-56.5
1.910
LA -02.9 6.080 UT
-08.8
3.012
ME -16.7 2.306 VT
-34.6
2.763
MD -36.0 3.184 VA -35.5
1.544
MA 23.7 4.741
WA
-37.3
1.848
MI -40.2 3.477
WV
-23.8
4.462
MN -40.4 1.078 WI -42.0
1.168
MS -34.0 2.361
WY
-45.8
2.436
MO -26.9 2.776

Source: CRS analysis of Kaiser Family Foundation data, http://www.statehealthfacts.org/comparemaptable.jsp?
ind=436&cat=8.
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Medical Malpractice: Background and Legislation in the 112th Congress

The average claim paid in the United States in 2009 was $323,273. Although the 2009 figure is
up from $289,891 in 2003, the rate of increase over this time period mirrors that found in medical
inflation generally. These averages, however, mask considerable variance across states.35 For
instance, in Kansas the average claim paid in 2009 was roughly $155,622 (72 cases) whereas in
Wisconsin it was almost $761,000 (65 cases). Figure 3 shows the change in the average total
dollars in medical malpractice claims paid from 2003 through 2009.36 Sixteen states saw a decline
in their average medical malpractice claims paid, ranging from roughly 5% to 50%. An additional
17 states saw their average total dollars in medical malpractice claims paid from 2003 through
2009 rise slower than medical inflation. Eighteen states saw their average total dollars in medical
malpractice claims paid from 2003 through 2009 rise faster than medical inflation.
These statistics, while illustrative, still lend themselves to different interpretations. Averages may
not fully reflect circumstances in particular states or among particular high-risk specialties. Some
states appearing to have sticky premiums which have not fallen despite a reduction in the number
of claims, and some specialties experienced premium increases over the past decade well in
excess of medical inflation.

35 There are also considerable year-to-year variations for some states both in the numbers of cases and the average
dollar amounts of claims paid.
36 The actual number of cases in some states, particularly those with a small number of cases each year on average, can
vary considerably from year to year just as the average dollar amount of claims paid in Figure 3 can be dependant on
the nature of the claims settled in any one year.
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Medical Malpractice: Background and Legislation in the 112th Congress

Figure 3. Change in the Average Paid Medical Malpractice Claim
2003 - 2009

Source: http://www.statehealthfacts.org.
Notes: Decline indicates state experienced actual decline in the average total dollars in medical malpractice
claims paid. Increase less than medical inflation indicates state experienced an increase in the average total dollars
in medical malpractice claims paid but the increase was less than the rate of medical inflation during the 2003-
2009 period. Increase less than medical inflation indicates state experienced an increase in the average total dollars
in medical malpractice claims paid and the increase exceeded the rate of medical inflation during the 2003-2009
period.
Recent Experience Among Providers
Providers, both physicians and institutional, appear to have been increasingly successful at
identifying the causes of medical injuries and reducing them through quality improvement efforts.
This appears to have reduced the number of medical malpractice suits and resulted in lower
medical malpractice premiums. For instance, the American Society of Anesthesiologists (ASA)
reports that the number of anesthesiology deaths declined dramatically, from 1 in 5,000 to less
than 1 in 200,000, and real malpractice premiums for anesthesiologists declined more than 40%
in real terms since 1985.37
The apparent connections between quality improvements and safety, lower premiums, and fewer
law suits extend beyond anesthesiology. A recent RAND Corporation study found that

37 Karen B. Domino, Professional Liability Insurance Premiums for Anesthesiologists: Stability Despite the Economic
Crisis, American Society of Anesthesiologists, 2010, http://depts.washington.edu/asaccp/prof/asa73_8_44_45.pdf.
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Medical Malpractice: Background and Legislation in the 112th Congress

“improvements in patient safety reduce malpractice claims.” Specifically, the study, conducted at
the county level in California, found that a county that “saw a decrease of 10 adverse events
(achieved through improvements in the quality of care provided) in a given year would also see a
decrease of 3.7 malpractice claims.”38 Similarly, in 2010, Virginia Mason Medical Center, in
Seattle, Washington, was named Hospital of the Decade by the Leapfrog Group, along with the
University of Maryland Medical Center, for “major achievements in reducing medical errors and
other innovations in patient safety and quality.” Virginia Mason reports that39
with improving quality of care and preventing errors, we have seen a decline in our medical
malpractice premiums. We have seen decreases in medical malpractice premiums every year
since 2005. As of 2011, our premiums have dropped by 52% since 2005, saving us literally
millions of dollars.
Although other medical systems have also achieved similar improvements while pursuing efforts
to raise quality and prevent medical errors,40 some argue that enough is not being done to ensure
that hospitals and other providers fully internalize the costs of their errors such that they have a
good solid business case for improving quality and reducing errors.41


Author Contact Information

Baird Webel
David Newman
Specialist in Financial Economics
Specialist in Health Care Financing
bwebel@crs.loc.gov, 7-0652
dnewman@crs.loc.gov, 7-1277
Vivian S. Chu

Legislative Attorney
vchu@crs.loc.gov, 7-4576



38 Michael D. Greenberg, Amelia M. Haviland, and J. Scott Ashwood, et al., Is Better Patient Safety Associated with
Less Malpractice Activity? Evidence from California, Rand Corporation, Santa Monica, CA, 2010,
http://www.rand.org/content/dam/rand/pubs/technical_reports/2010/RAND_TR824.pdf.
39 E-mail from Dr. Craig Blackmore, Virginia Mason Medical Center, January 25, 2011.
40 One major integrated health care system reported a roughly 70% decline in malpractice costs between 2005 and 2010
and attributes the decline to both the soft insurance market and its quality improvement efforts.
41 Michelle M. Mello1, David M. Studdert, and Eric J. Thomas, “Who Pays for Medical Errors? An Analysis of
Adverse Event Costs, the Medical Liability System, and Incentives for Patient Safety Improvement,” Journal of
Empirical Legal Studies, vol. 4, no. 4 (December 2007), pp. 835-860.
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