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Texans’ health care worse after damages cap

November 4, 2011

Study discussed in November 2011 TRIAL magazine, American Association for Justice, finds Texans’ health care worse after damages cap

Matthew Malamud

Texans’ health care costs and insurance premiums have continued to grow, outpacing the national average, since the state imposed a cap on noneconomic damages for medical liability lawsuits in 2003, according to a new report by the consumer advocacy organization Public Citizen.

The report’s findings undercut the tenet espoused by proponents of the cap: that medical malpractice lawsuits contribute significantly to the cost of health care. Since Texas instituted a $250,000 cap on noneconomic damages, malpractice litigation has declined precipitously, but health care costs and insurance premiums have not followed suit.

“Those who blame medical malpractice litigation for rising health care costs and diminished access to care tend to focus on the theory that the fear of litigation motivates doctors to prescribe unnecessary tests and procedures to insulate themselves against potential lawsuits,” the report’s authors said.

But that’s not what they found.

The data shows that Medicare spending for prescribed tests and procedures in Texas increased nearly 40 percent faster than the national average in the four years after the cap was implemented. Medicare spending for diagnostic testing increased approximately 25 percent faster than the national average over the same time period.

The damages cap also hasn’t had any effect on the cost of health insurance in Texas. The report’s authors found that family health insurance premiums have increased approximately 13 percent faster in Texas than the national average. The number of uninsured Texans increased as well, from 23.6 percent in 2003 to 24.6 percent in 2010.

The report also dispels the myth that Texas has seen an influx of doctors, especially in underserved areas, since it implemented the cap. “The number of doctors practicing in rural areas increased 23.9 percent in the seven years before the caps were implemented,” the report said. “Since then, their ranks have deceased by about 1 percent.” Any statewide increase in doctors is more likely due to the overall growth in the state’s population, not the damages cap, the report’s authors contend.

Medical liability insurance providers seem to be profiting greatly, according to the report’s findings. Even though doctors are paying lower premiums, insurers are paying far less for malpractice damages.

“This report verifies everything I’ve experienced on the ground as a medical malpractice lawyer in Texas,” said Paula Sweeney of Dallas. “Patient safety depends on a robust tort system. When you take away the ability to hold bad providers accountable, you take away their incentive to do the right thing.”

Sweeney, a past president of the Texas Trial Lawyers Association, said one needs only to look to the quality of nursing home care in Texas as an example. Trial lawyers “were the only ones holding [nursing home operators] to account,” she said. But because of the cap on damages, she can no longer take cases of nursing home neglect. “We spend more than we can get. [Nursing homes] know it, and patients are left to suffer. It’s just terrible.”

“The shame of it is that the cap was sold to the people of Texas through promises that they would dramatically decrease their health insurance rates, and that has simply not happened,” said lawyer William Angelley, also of Dallas.

In related news, the Cato Institute, a Washington, D.C., think tank with a libertarian bent, explained in a recent policy analysis that caps on medical malpractice damages harm consumers. The analysis concluded that “legislators who see mandatory liability caps as a cost-containment tool should look elsewhere.”

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