Medical
Liability Insurance Rates and Quality of Care
In late 2001, MSNJ began receiving a significant number of physician complaints regarding rapidly rising medical liability insurance rates. This expanded on a trend that had started in 2000.
Over the first half of 2002 those complaints escalated, as several of New Jersey’s major medical liability carriers left the market. Those that remained substantially increased their rates, often to unaffordable levels.
The result is a crisis in both the availability and affordability of mandatory medical liability insurance, which comes at a time when managed care has taken a great toll on physician’s incomes. Because of reduced managed care reimbursements, it is impossible for physicians to pass any costs of higher liability premiums on to patients.
The MSNJ has been actively monitoring the insurance market and advocating for legislative and regulatory changes to stabilize the environment. One key component in the debate on solutions has been the previous lack of New Jersey-specific data. In September 2002, MSNJ polled its membership along the lines of two objectives:
ü Determine the current and projected rate experiences of New Jersey physicians, and, more important,
ü Gauge the impact of premium increases on patients’ access to quality care.
The survey results were disturbing, yet not surprising. New Jersey citizens are rapidly losing access to their doctors. Those physicians that remain in practice are finding it harder to provide quality care. As a result, patients’ lives are being placed in jeopardy. Impacts are already being seen and will grow exponentially if this crisis continues unabated.
· Mandatory medical liability premiums, already among the highest in the nation, increased on average by 40% in 2002.
· Certain specialties, such as emergency medicine physicians (91%), ob/gyns (67%), radiologists (145%), and general surgeons (99%) saw much higher average premium increases.
· Among individual physicians, some saw premium increases much higher than the average, including some well over 500%.
· Anticipated increases for 2003 can be expected to be as high or higher than those in 2002 — if any insurance is available at all.
· As a result of out-of-control medical liability insurance costs, 44% of all physician practices reported the quality of their medical services have already been negatively impacted through one or more of the following measures:
ü increasing or decreasing patient hours (21%)
ü ceasing to provide certain services (21%)
ü deferring the purchase of medically necessary equipment (26%)
ü laying off staff (12%)
ü not accepting any new patients (6%).
· Some services no longer being performed include dropping of obstetrics, ceasing to perform risky surgeries or seeing high risk patients, ceasing to do emergency care, not conducting or reading mammographies, and stop providing charity care.
· If rates continue to escalate, the number of practices planning to enact one or more of these impacts will rise to 70% from the current 44%. Many of these practices will be forced to take multiple negative steps to maintain their viability.
· In addition, the liability crisis is driving many physicians into early retirement, to leave the state, or to change specialties. The survey found that 21% of all practices report having one or more physicians considering retirement, 5% report having one or more physicians contemplating a change in specialty, and 8% report having physicians in their practice who are considering leaving the state to practice medicine.
In order to determine the percentage and actual dollar figure amount of recent medical liability premium increases, the MSNJ mailed a one-page survey form to 4,347 active physician practices in New Jersey. Most of these practices consist of more than one physician. Thus the total number of physicians who received the survey far exceeds the number of distributed surveys. Also, although the practices that received the survey were limited to MSNJ members, it is very possible that other physicians in that practice are not members. Thus the survey results may contain responses of MSNJ members and nonmembers alike.
The survey was mailed on September 6, 2002. Responses were required to be submitted by September 27, 2002. A total of 479 responses from practices were received by the deadline. These practices represented a total of 1,104 physicians. A small number of responses received after that date was not included in survey results.
Every response adequately answered the questions concerning the impact to practice and quality of care. However, not all responders provided adequate or appropriate information for the survey’s tabulation of insurance increases in 2002 and 2003.
For instance, if a practice only provided one year’s insurance premiums it was not possible to calculate the rate of increase over multiple years. There were also a few instances where the information provided did not make sense for a variety of reasons (e.g. the number of physicians were too high or the increase too great). In those instances an effort was made to contact the practice to verify or clarify the information. Where that was possible, the data was calculated. Where it was not, it was excluded.
There were also several surveys excluded because premium rates had changed due to an adjustment in coverage, such as a lower liability threshold or a higher deductible. In those instances the surveys were also excluded because it would not be accurate to compare yearly rates for different coverage.
Also, many more surveys contained rate information for 2001 and 2002 thus allowing a realistic approximation of rates and increases for 2002.
The need for legislative action to remedy this situation is obvious. Physician practices whose reimbursement rates — and thus revenue — is limited by managed care companies and government programs are being significantly impacted by double- and even triple-digit rate increases. Rate increases for individual physicians often have been over 100%, some as high as 500%. Without the ability to pass these costs along, many physicians have had to make painful choices to leave the profession or limit the quality of care they can provide. Liability insurance rates that are unaffordable are, in reality, unavailable.
When physicians are forced to see more patients, they must spend less time with each one, which can affect patient diagnosis, treatment and compliance. When physicians stop providing certain services, their patients are denied easy and safe access to care. When medically necessary equipment cannot be purchased, patients are not provided with the best care possible. When staff is laid off, not only are those individuals impacted but patients suffer as well. Of course when physicians stop practicing medicine, their patients must find other doctors, often at a greater distance and with less assurance and comfort. If anything, an aging population needs more access to medical care, not less.
These impacts to patient care, access, and safety will only exacerbate as premiums continue to increase at alarming rates. All indications are that premiums will continue to rise indefinitely at these levels.
Although there are many causes for these rate increases, such as a hardening market and lower investment income to offset losses, leading actuaries and insurance experts state that the primary cause of rising premium rates is the frequency and severity of jury awards and settlements.
In New Jersey the number of medical malpractice cases filed has decreased since 1995; however, the amounts of money paid out overall and in million dollar-plus jury awards/settlements have increased exponentially. In the last decade the money paid out in these million dollar-plus awards has increased by 379%. In the last year alone, these awards increased by 57%, an alarming rate that has significantly contributed to the increase in premiums.
The solution advocated by the MSNJ is serious tort reform including a cap on non-economic damages (e.g. pain and suffering). MSNJ proposes that the cap be set at $250,000 as has been in place in California since 1975. MSNJ is not recommending any caps on economic damages for medical expenses, lost wages, and costs to care for a patient or his or her family. While some have argued that there should be no limit on jury awards, the overwhelming evidence is that without reasonable limits in place the system will bankrupt itself through out-of-control verdicts. All patients will suffer as a result. There needs to be reasonable limitations placed on the system.
The proof that such a cap works is demonstrated by the success of the California model. From 1975 (when the cap was enacted) to 1999, rates in California have increased by a total of only 167% — much lower than the rate of inflation. In contrast, rates for the nation as a whole rose by 505% over the same time period. The experience of California clearly demonstrates that caps work over the long time to promote competition, stabilize the market, and keep rates affordable. The Governor and the New Jersey Legislature need to act immediately to avert an immediate and continuing health care crisis in New Jersey.
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