Articles

(March 2004) Pennsylvania’s health care system is under fire and facing a crisis with the potential to negatively impact access, cost and quality of health care statewide. The skyrocketing cost of medical liability insurance is making headlines in Pennsylvania - and nationally.

What are the key issues? IssuesPA analyzed them.

The big picture?

Medical malpractice insurance costs have risen dramatically, especially in high-risk specialties such as obstetrics and surgery. So has the cost of health care in general. William Sage, J.D., M.D., principal investigator for the Project on Medical Liability in Pennsylvania, reported national expenditures on health care rose from 7% of the Gross Domestic Product (GDP) in 1970 to 13.2% of the GDP in 2000. That’s an increase from $251 billion to $1.3 trillion. From 1976 to 1999, national expenditures on malpractice liability premiums and self-insurance jumped from nearly $1 billion to $5.2 billion.

The medical liability crisis has been described as The Perfect Storm - the confluence of advances in medical technology and concerns for patient safety, cost containment efforts, the influence of the legal system, a slow economy and a weakened insurance industry, changes in the insurance and health care industries, and increases in malpractice litigation. Add to that concerns about availability and rising costs of health care insurance, increases in Medical Assistance and Medicare spending, and Pennsylvania’s unique circumstances - and Pennsylvania finds itself in the proverbial eye of the storm.

After the market underpriced insurance in the 1990s, Pennsylvania became a state where only a few medical liability insurers continue to offer coverage. Companies writing malpractice insurance policies have declined significantly. Insurance reforms implemented in other states - which rely on healthy competition among insurers - would be difficult in Pennsylvania because of the scarcity of insurers.

Pennsylvania’s demographics don’t help, either. Pennsylvania’s population grew only 3.4% (roughly 400,000 residents) during the 1990s, badly lagging the 13.2% national growth rate. Pennsylvania’s population is aging, and the state is struggling to attract and keep young adults, including well-educated professionals. The problem of attracting young doctors to Pennsylvania - and keeping them here - is not only a result of the medical liability crisis, but also reflects broader demographic patterns.

Contributing factors?

Here are seven:

1. Technology improvements. Advances in treatment and medical technology increase medical costs. As technology improves, patients’ expectations rise, sources of avoidable error increase, and the costs of long-term care for victims of medical error grow.

2. Concerns for patient safety. Doctors - like all human beings - make mistakes. A 0% error rate isn’t attainable. Issues of patient safety and medical liability are closely entwined. Researchers point to evidence of serious, avoidable errors that usually remain undetected and undisclosed under current methods of quality control in medicine. Quality reviews are confidential and confined within members of the medical community. Generally, reports aren’t made public. Patient safety advocates continually struggle to do their jobs effectively. There’s a reluctance to disclose avoidable mistakes due to the threat of malpractice lawsuits.

3. Cost containment. Those who pay for and insure health care focus on cost containment measures, such as managed care and discount pricing. Health care providers, therefore, are less able to absorb the costs of increased liability insurance. And they’re less able to pass costs along to the consumer.

4. The economy. The 9/11 terrorist attacks knocked the wind out of the insurance industry. Subsequent lower returns on investments and higher payouts from an increased number of settlements and lawsuits have made it difficult for the insurance industry to recover in the weakened economy.

5. Insurance industry changes. The dramatic decline in the number of companies writing malpractice insurance policies has driven prices up. Some firms exited Pennsylvania’s medical malpractice market. Others went out of business after using aggressive discounting practices to capture higher market shares. Policyholders using the state insurer of last resort increased from 212 in 1999 to 1,547 in 2002 - a 630% increase. Health care providers increasingly are exploring alternative ways to obtain medical liability coverage, such as self-insurance or physician group risk pools.

6. The legal system. The legal system’s approach to resolving medical malpractice disputes runs counter to efforts to improve patient safety and reduce medical error. Because the process is slow, costly, adversarial and the outcomes uncertain, relatively few injured patients ever enter the legal system. However, the fear of lawsuits leads medical professionals to keep quiet about potential errors or preventable negative outcomes, which, in the long term, threatens patient safety.

7. Health care industry changes. The concentration of medical technology, treatments in specialty centers, and the development of large networks of providers under a single corporate entity have increased risk and broadened liability for health care firms.

What’s next?

Pennsylvania already has made a number of adjustments to the medical liability system including venue restrictions, requirements for certificates of merit prior to filing a lawsuit, dissolution of joint and several liability, and increased funding for the state’s MCARE fund through an increase in the cigarette tax. Their impact hasn’t been fully realized yet.

Pennsylvania is poised to consider other policies, particularly giving the legislature authority to place caps on non-economic damages. The State Senate recently took the next step in a long legislative and Constitutional process to establish caps, though there is not yet agreement between the House and the Senate about how and where the limit should be applied. Other options -- such as efforts to improve patient safety, the use of mediation and alternative dispute resolution, and increased continuing education requirements for medical professionals -- also are being considered.

Fixing Pennsylvania’s medical liability crisis isn’t simple. What’s needed? Long-term, out-of-the-box thinking.