Medical Malpractice: Effects of Varying Laws in the District of Columbia,
Maryland, and Virginia (Letter Report, 10/15/1999, GAO/HEHS-00-5).

Pursuant to a congressional request, GAO provided information on the
effects of laws in Virginia, Maryland, and the District of Columbia,
focusing on: (1) the rationale behind selected reforms states have made
to their medical malpractice tort law; (2) whether selected tort reforms
have reduced malpractice insurance costs and the costs associated with
defensive medicine; (3) the extent to which the District, Maryland, and
Virginia have adopted selected tort reforms; and (4) comparing
malpractice claim payments, insurance premiums, and numbers of
physicians in the District; Baltimore, Maryland; and Richmond, Virginia.

GAO noted that: (1) during the last 25 years, many states have adopted
various changes to their tort law, collectively referred to as tort
reforms; (2) generally, states that adopted reforms were attempting to
reduce malpractice insurance premiums; (3) each type of reform is viewed
as having a number of possible benefits and negative consequences, as
follows: (a) capping damages lowers the highest awards but could
restrict payments to most seriously injured people; (b) amending the
collateral source rule may prevent double recovery but could shift
payment of health care costs due to a malpractice injury from the
malpractice insurer to the health insurer; (c) modifying statutes of
limitations may reduce the number of malpractice claims but may prevent
recovery by victims of malpractice who do not discover the injury until
some time after it occurs; and (d) implementing alternative dispute
resolution systems may remove claims from the courts but could increase
the costs associated with malpractice by encouraging more claims; (4)
limited evidence shows that tort reforms may have had some effect in
reducing medical malpractice insurance premiums; (5) to date, the
District has not adopted any major changes to its tort law, while both
Maryland and Virginia have adopted selected tort reforms with differing
approaches; (6) for filing claims, Virginia provides 2 years from the
date of the injury with some stated extensions, while Maryland provides
5 years from the date of injury or 3 years from discovery, whichever is
earlier; (7) while the District does not have a specific arbitration
program for malpractice cases, as do Maryland and Virginia, the courts
can order nonbinding arbitration or the parties can agree to binding
arbitration; (8) how these differences among the tort approaches of the
District, Maryland, and Virginia have affected malpractice costs is
unclear; (9) median malpractice claim payments for District, Baltimore,
and Richmond physicians from 1996 through 1998 were $200,000, $150,000,
and $112,500; (10) malpractice insurance premiums for one traditionally
high-cost specialty, obstetrics/gynecology, were higher in Baltimore
than in the District in 1998 but lower for internal medicine and general
surgery; (11) premiums for these specialties were lowest in Richmond;
(12) high malpractice claim payments or insurance premiums have not
reduced the number of physicians in the District relative to Baltimore
or Richmond; and (13) the number of physicians in the District per
100,000 people increased by about 24 percent between 1985 and 1997.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-00-5
     TITLE:  Medical Malpractice: Effects of Varying Laws in the
	     District of Columbia, Maryland, and Virginia
      DATE:  10/15/1999
   SUBJECT:  Insurance premiums
	     Insurance cost control
	     Malpractice (medical)
	     Liability insurance
	     Torts
	     Claims settlement
	     State law
	     Comparative analysis
IDENTIFIER:  Maryland
	     Virginia
	     District of Columbia

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Cover
================================================================ COVER

Report to Congressional Requesters

October 1999

MEDICAL MALPRACTICE - EFFECTS OF
VARYING LAWS IN THE DISTRICT OF
COLUMBIA, MARYLAND, AND VIRGINIA

GAO/HEHS-00-5

D.C.  Medical Malpractice Reform

(101801)

Abbreviations
=============================================================== ABBREV

Letter
=============================================================== LETTER

B-282171

October 15, 1999

The Honorable Dick Armey
The Honorable Charles H.  Taylor
House of Representatives

In both the mid-1970s and mid-1980s, medical malpractice insurance
premiums grew significantly, causing the medical profession to be
alarmed by a crisis in the affordability and availability of
insurance.  As a result, many states adopted various tort reforms\1
designed to limit the number of malpractice claims and the size of
payments.  The states expected the changes to reduce insurance
premiums--one component of medical liability costs.  States took such
actions as

  -- placing caps on the amount that could be awarded for damages for
     malpractice;

  -- amending collateral source rules that prevent providers from
     introducing evidence that the injured person's expenses have
     been reduced by payments from third parties, such as health
     insurers;

  -- modifying statutes of limitations to decrease the time injured
     people have to file a claim in court; and

  -- implementing alternative dispute resolution systems, such as
     arbitration, where forums other than the courts are used. 

Furthermore, many tort reform advocates believed that by adopting
tort reforms the costs associated with the practice of defensive
medicine\2 --a second component of medical liability costs--would
also decrease, thereby lowering overall health care costs and
enhancing access to care.\3

Unlike the neighboring states of Maryland and Virginia, the District
of Columbia has not adopted multiple tort reforms.  You expressed
concern about the District's lack of significant tort reforms and the
effect this may have on the quality, availability, and cost of health
care in the District.  As a result, you asked us to

  -- identify the rationale behind selected reforms states have made
     to their medical malpractice tort law;

  -- report on whether selected tort reforms have reduced malpractice
     insurance costs and the costs associated with defensive
     medicine;

  -- describe the extent to which the District, Maryland, and
     Virginia have adopted selected tort reforms; and

  -- compare malpractice claim payments, insurance premiums, and
     numbers of physicians in the District; Baltimore, Maryland; and
     Richmond, Virginia. 

To meet these objectives, we reviewed health policy and legal
literature, state tort law and reforms, and data on malpractice
premiums and claim payments as well as data on the number of
physicians in the District, Baltimore, and Richmond.  Appendix I
provides more detailed information on our methodology.  We performed
our work between February and September 1999 in accordance with
generally accepted government auditing standards. 

--------------------
\1 Medical malpractice lawsuits are generally based on tort law
(which includes both statutes and court decisions).  A tort is a
wrongful act or omission by an individual that causes harm to another
individual.  Typically, a tort claim of malpractice would be based on
the claim that the provider was negligent and the injured party would
seek damages.  To reduce the cost of malpractice insurance and for
other reasons, some have advocated changes to the states' tort
systems.  These changes are referred to as tort reforms. 

\2 The Office of Technology Assessment defined defensive medicine as
follows:  Defensive medicine occurs when doctors order tests,
procedures, or visits, or avoid high-risk patients or procedures,
primarily (but not necessarily solely) to reduce their exposure to
malpractice liability .  .  .  .

\3 We previously reported that, in addition to costs associated with
medical malpractice insurance and defensive medicine, medical
liability costs include (1) liability-related administrative costs
and (2) medical device and pharmaceutical liability costs.  See
Medical Liability:  Impact on Hospital and Physician Costs Extends
Beyond Insurance (GAO/AIMD-95-169, Sept.  29, 1995).  As our
work--both previous and current--only identified literature on
malpractice insurance and defensive medicine costs, this report will
focus on these two components of medical liability costs. 

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

During the last 25 years, many states have adopted various changes to
their tort law, collectively referred to as tort reforms.  Generally,
states that adopted reforms were attempting to reduce malpractice
insurance premiums.  Each type of reform is viewed as having a number
of possible benefits and negative consequences, as follows: 

  -- Capping damages lowers the highest awards but could restrict
     payments to the most seriously injured people. 

  -- Amending the collateral source rule may prevent double recovery
     but could shift payment of health care costs due to a
     malpractice injury from the malpractice insurer to the health
     insurer. 

  -- Modifying statutes of limitations may reduce the number of
     malpractice claims but may prevent recovery by victims of
     malpractice who do not discover the injury until some time after
     it occurs. 

  -- Implementing alternative dispute resolution systems may remove
     claims from the courts but could increase the costs associated
     with malpractice by encouraging more claims. 

Limited evidence shows that tort reforms may have had some effect in
reducing medical malpractice insurance premiums.  A 1993 synthesis by
the Office of Technology Assessment of six studies done in the 1980s
and early 1990s concluded that, while damage caps and collateral
source rule changes reduced malpractice payments, only caps were
demonstrated to reduce premiums.  However, this research did not
study tort reforms' effect on a potentially larger medical liability
cost--defensive medicine.  A 1996 study did attempt to relate the
effect of tort reforms on defensive medicine costs, but it had a
limited scope.  This study found that in states that imposed a
package of tort reforms including caps on damages and collateral
source rule amendments, hospital costs grew 5 to 9 percentage points
less than in other states for Medicare patients with heart conditions
without adverse effects on selected outcomes, such as mortality. 
Because this study was focused on only one condition and on a
hospital setting, it cannot be extrapolated to the larger practice of
medicine.  Given the limited evidence, reliable cost savings
estimates cannot be developed. 

To date, the District has not adopted any major changes to its tort
law, while both Maryland and Virginia have adopted selected tort
reforms with differing approaches.  For example, Virginia has a
$1.5-million cap on total damages, whereas Maryland caps nonmonetary
damages at $575,000.  For filing claims, Virginia provides 2 years
from the date of the injury with some stated extensions, while
Maryland provides 5 years from the date of injury or 3 years from
discovery, whichever is earlier.  Neither state has amended its
collateral source rule.  While the District does not have a specific
arbitration program for malpractice cases, as do Maryland and
Virginia, the courts can order nonbinding arbitration or the parties
can agree to binding arbitration. 

How these differences among the tort approaches of the District,
Maryland, and Virginia have affected malpractice costs is unclear. 
However, limited data show the following: 

  -- Median malpractice claim payments for District, Baltimore, and
     Richmond physicians from 1996 through 1998 were $200,000,
     $150,000, and $112,500, respectively. 

  -- Malpractice insurance premiums for one traditionally high-cost
     specialty, obstetrics/gynecology, were higher in Baltimore than
     in the District in 1998 but lower for internal medicine and
     general surgery.  Premiums for these specialties were lowest in
     Richmond. 

  -- High malpractice claim payments or insurance premiums have not
     reduced the number of physicians in the District relative to
     Baltimore or Richmond.  In fact, the number of physicians in the
     District per 100,000 people increased by about 24 percent
     between 1985 and 1997. 

   BACKGROUND
------------------------------------------------------------ Letter :2

In the United States, patients injured while receiving health care
can sue health care providers for medical malpractice under governing
state tort law, usually the law of the state where the injury took
place.\4 The law governing malpractice varies from state to state,
but among the goals of tort law are compensation for the victim and
deterrence of malpractice.  To prevail in court, the injured person
must demonstrate that the injury was caused by a health care
provider's negligence.  In the context of malpractice, negligence
means proving that the provider failed to meet the same standard of
care expected of a member of the profession in good standing in the
same circumstances, and that the provider's failure caused the injury
that resulted in damage or loss. 

Critics of the system of malpractice resolution through the courts
doubt that it achieves any of the goals of the tort system in an
efficient and effective manner--neither compensating victims fairly
nor deterring future malpractice.  Furthermore, the vast majority of
patients injured by health care providers do not pursue claims,\5 and
of those who do, most of the claims are either dropped or settled
outside of court. 

Nearly all health care providers buy medical malpractice insurance to
protect themselves from claims.  Under the insurance contract, the
insurance company agrees to investigate claims, to provide legal
representation for the health care provider if warranted, and to
accept financial responsibility for payment of any claims up to a
specific monetary level during an established time period. 
Therefore, in addition to medical malpractice claim payments,
insurers incur costs for investigating and defending claims--even
those closed without a payment.  The insurer agrees to do this in
return for a fee--the medical malpractice insurance premium.\6

Setting premium rates for malpractice insurance can be very
complicated.  The environment that influences premium rate-setting
changes over time, affecting the number of claims or the amount of
payments--the two factors most directly affecting premiums.  For
example, inflation and changes in legal theories can affect claims,
payments, or both.  The long tail of malpractice insurance--the
long amount of time that can pass after the injury but before a claim
is filed and closed--is a further complicating factor.  In addition,
premiums for malpractice and other insurance depend in part on
projections of companies' investment income, which cannot be
predicted with certainty. 

--------------------
\4 The Employee Retirement Income Security Act limits the ability of
a person covered by an employer-based health care plan to sue the
plan, instead of or in addition to the provider, for malpractice. 
The Act preempts state law related to employee benefit plans.  The
courts have generally interpreted this to prevent an employee's suit
against an employer-based managed care plan for injury resulting, for
example, from the plan's decision that a procedure is not medically
necessary.  For more information, see Employer-Based Managed Care
Plans:  ERISA's Effect on Remedies for Benefit Denials and Medical
Malpractice (GAO/HEHS-98-154, July 13, 1998). 

\5 The findings of a comprehensive study conducted at New York
hospitals showed that the number of negligent adverse outcomes was
eight times the number of tort claims filed.  See A.  Russell Localio
and others, Relation Between Malpractice Claims and Adverse Events
Due to Negligence, The New England Journal of Medicine, Vol.  325,
No.  4 (1991), pp.  245-51. 

\6 Most policies are sold on a claims made basis.  In this type of
policy, the insurer is only liable for injuries that occur and claims
that are filed while the policy is in effect.  When changing or
canceling coverage, the health care provider may purchase a tail
policy to cover those injuries that occurred during the life of the
claims made policy but for which claims were not yet filed. 

   STATES ADOPTED TORT REFORMS IN
   RESPONSE TO INCREASING MEDICAL
   LIABILITY COSTS
------------------------------------------------------------ Letter :3

Medical malpractice insurance premiums grew rapidly in the mid-1970s
and mid-1980s.  When costs increased several hundred percent for some
specialties in the 1970s, health care providers became concerned
either about the availability or affordability of medical malpractice
insurance, or both.  In response, the majority of states made some
changes to their tort law.  These tort reforms were adopted in part
to limit the number of malpractice claims and the size of payments,
thereby ultimately reducing malpractice insurance premiums.  Also,
tort reforms were intended to lower overall health care costs by
getting health care providers to practice less defensive medicine as
the threat of liability decreased.  State tort reforms adopted during
the malpractice insurance premium increases in the 1970s and 1980s
included (1) capping malpractice damage amounts, (2) changing
collateral source rules, (3) changing statutes of limitations, and
(4) implementing alternative dispute resolution systems.\7 Proponents
of malpractice reforms, including health care providers and insurers,
offered rationales for why each reform would be generally beneficial
and should be viewed positively.  Conversely, opponents of tort
reforms, including consumer advocates and trial attorneys, offered
reasons intended to demonstrate the negative aspects of these
reforms. 

--------------------
\7 Other types of tort reforms adopted by the states include paying
for damages through periodic rather than lump-sum payments, changing
joint and several liability rules, controlling attorney fees, and
establishing patient compensation funds and joint underwriting
associations. 

      CAPS ON DAMAGES HAVE BEEN
      CONTROVERSIAL
---------------------------------------------------------- Letter :3.1

Some states enacted laws to limit the amount of money that can be
awarded as damages for injuries resulting from malpractice.  Caps on
damages were the centerpiece of many state tort reform packages.\8

States limited payments for damages in several ways--some, for
example, capped the total amount that can be paid as monetary and
nonmonetary damages; more commonly, states capped only the amounts
payable to compensate for nonmonetary losses.\9 In some states, caps
and other tort reforms have been challenged.  These challenges have
argued that tort reforms violate various provisions of federal and
state constitutions, such as the guarantees of equal protection,
trial by jury, and the separation of legislative and judicial
powers.\10

Cap proponents--health care providers and insurers--believed that
adopting statutory caps on nonmonetary damages would result in
several benefits that would help to reduce insurance premiums.  For
example, they believed that nonmonetary damage caps would

  -- help to prevent excessive awards and overcompensation.  While
     monetary damages have specific dollar values that can be
     calculated, juries have considerable discretion and little
     guidance for nonmonetary damages. 

  -- ensure consistency among jury verdicts.  More consistency in
     awards would aid in setting insurance premiums because it is
     difficult for actuaries to calculate realistic premiums without
     knowing all the financial risks involved. 

  -- provide incentives for the injured person to settle claims
     rather than pursue litigation.  Caps help to eliminate the
     possibility of large jury verdicts, with the result that both
     injured people and attorneys paid on a contingency fee basis may
     have less incentive to go to trial. 

In contrast, cap opponents--trial attorneys and consumer
advocates--believed that caps on nonmonetary damages created several
disadvantages for people who were injured through medical malpractice
incidents.  For example, they believed that nonmonetary damage caps

  -- could restrict compensation for severe injuries.  An injured
     person's damages based largely on pain and suffering could be
     undercompensated compared to damages for someone with little
     pain and suffering but large medical bills. 

  -- hurt deterrence.  Reducing health care providers' financial
     accountability for losses associated with their mistakes could
     also reduce providers' incentives to prevent mistakes and
     adverse outcomes. 

  -- were a disincentive to attorneys accepting some malpractice
     cases because the potential for recovering a large amount of
     money is reduced.  Therefore, injured patients with legitimate
     claims may find it more difficult to obtain legal counsel. 

Furthermore, opponents stated that factors other than payment size
affect the premiums charged by malpractice insurers.  They stated
that investment income changes also contributed to premium
volatility. 

Nonmonetary damage cap amounts vary among the states that have them. 
For example, in 1975, California adopted a $250,000 cap on
nonmonetary damages, and the amount remains unchanged to date. 
Maryland, on the other hand, adopted a $350,000 cap on such damages
in 1986 that has increased to $575,000 through legislation that
included automatic annual adjustments.\11 Our review of the health
and legal literature did not reveal any particular reasons for the
cap amounts states adopted. 

--------------------
\8 See Randall R.  Bovbjerg, Lessons for Tort Reform from Indiana,
Journal of Health Politics, Policy and Law, Vol.  16, No.  3 (1991),
p.  466. 

\9 Monetary losses include medical bills, rehabilitation costs, and
lost income.  Nonmonetary losses include pain, suffering, and the
loss of a spouse's companionship.  (These are sometimes referred to
as noneconomic damages.) Some states have also limited payments for
punitive damages--damages to punish wrongdoers for egregious
behavior.  However, the literature on malpractice indicates that
punitive damages are rarely awarded in medical malpractice cases. 

\10 For example, Ohio's statutory cap on nonmonetary damages was
found to have violated several provisions of the Ohio Constitution. 
See State ex rel Ohio Academy of Trial Lawyers v.  Sheward, No. 
97-2419, __ Ohio St.  3d __ (Ohio S.C.  Aug.  16, 1999); Morris v. 
Savoy, 61 Ohio St.  3d 684, 576 N.E.  2d 765 (Ohio S.C.  1991). 
However, challenges to statutory caps on damages in some other states
have not been successful.  For example, Virginia's cap on total
damages has been upheld, as has Maryland's cap on nonmonetary
damages.  See Etheridge v.  Medical Center Hospitals, 237 Va.  87,
376 S.E.  2d 525 (Va.  S.C.  1989) and Edmonds v.  Murphy, 87 Md. 
App.  133, 573 A.  2d 853 (1990), aff'd 325 Md.  342, 601 A.  2d 102
(Md.  S.C.  1992), respectively. 

\11 The law provides for the nonmonetary damage cap to increase
$15,000 each October 1. 

      COLLATERAL SOURCE RULE
      REFORMS AFFECT PAYMENTS, BUT
      ARE COMPLICATED BY
      SUBROGATION CLAUSE
---------------------------------------------------------- Letter :3.2

A number of states modified or eliminated the collateral source rule. 
The collateral source rule provides that payments for medical
malpractice damages may not be reduced to account for the benefits
that an injured person received from other, unrelated sources such as
health insurance.  The rule prevents the provider being sued from
introducing evidence in a trial that the injured person's insurance
covers the health care costs arising from the injury.  Generally,
states that have changed their collateral source rule either permit
or require malpractice payments to be reduced if there is evidence
that related costs have been or will be covered by other sources. 

Reforming the collateral source rule may have the effect of reducing
the size of a malpractice payment.  Proponents of reform believed
that the injured person should not be paid twice for the same harm. 
In addition, proponents believed that the rule undermines the jury's
role by withholding information that it might use in calculating
damages. 

Opponents of reform, who support maintaining the collateral source
rule, believed that the provider causing the malpractice injury
should be held responsible for the full extent of the damages he or
she caused.  If not, the deterrent effect of the malpractice damages
awarded is reduced.  Also, opponents believed that allowing
collateral sources to reduce the liability of the provider found at
fault results in an unfair financial gain for the provider or his or
her malpractice insurer.  They contend that health insurance should
not bear the financial risk of malpractice acts--rather, that is the
purpose of malpractice insurance. 

Health insurance contracts often contain a subrogation clause that
can mitigate the effect of the collateral source rule.  Under a
subrogation clause, when the insurer has paid for health care needed
by the insured person as a result of malpractice, the insurer is
entitled to be reimbursed for that payment from whatever amounts the
insured person collects from a liable third party.\12 Health
insurance policies typically contain these clauses, and to the extent
that health insurers exercise them there is already protection
against double recoveries.  However, if subrogation is not available
or is not pursued and the collateral source rule is changed, the
malpractice insurer of the provider at fault benefits at the expense
of the injured person's health insurer. 

--------------------
\12 The federal government requires that medical expenses paid by
Medicare and Medicaid be reimbursed from medical malpractice awards. 

      STATUTES OF LIMITATIONS
      ESTABLISH TIME LIMITS FOR
      FILING LAWSUITS
---------------------------------------------------------- Letter :3.3

Limiting the time to file medical malpractice lawsuits can help to
reduce the number of malpractice claims.  Statutes of
limitations--the period of time during which lawsuits can be
filed--help to protect health care providers and the courts from
stale claims by providing an incentive to the injured person to
file a timely claim.  It can be difficult for the provider being sued
to gather evidence if a long time passes between when an alleged
injury occurs and when an injured person files a lawsuit.  After a
period of time, needed documents can be lost or destroyed. 

Unlike traumatic injuries that may occur in automobile accidents, for
example, medical malpractice injuries may not become apparent until
years after they occur.  To allow for this, the limitation period in
some states does not begin to run until after the injured person has
discovered, or should have discovered, the injury.  However, this
discovery rule makes writing malpractice insurance more difficult
actuarially because of the long period of time over which claims
could be filed.\13 Therefore, one of the most common tort reforms
states have undertaken has been to change their statutes of
limitations for malpractice claims.  Many states shortened the time
during which lawsuits could be filed by either setting an overall
time limit or by modifying their discovery rule.  However, shortened
statutes of limitations can prevent some injured people who had no
way of knowing that they were the victims of malpractice from having
a legal remedy. 

--------------------
\13 If the injured person is a minor or is otherwise not legally
competent to sue, the statute of limitations may also begin to run
only when the person becomes competent. 

      ALTERNATIVE DISPUTE
      RESOLUTION OFFERS THE
      POSSIBILITY OF AVOIDING
      LITIGATION
---------------------------------------------------------- Letter :3.4

Critics have long charged that litigation--ending with trial by
jury--is slow, inefficient, inconsistent, and expensive.  States have
established several ways to resolve medical malpractice claims other
than through litigation.  Included among these alternative dispute
resolution systems are arbitration, mediation, and no-fault programs,
described below: 

  -- Under arbitration, malpractice claims are submitted for
     resolution to one or more professional arbitrators who generally
     are not bound by rules of evidence and procedure that would
     apply in court.  Depending on state law and the agreements of
     the parties, the arbitrators' decisions may not be binding:  a
     party who does not like the outcome may be able to take the
     matter to court where the outcome of the arbitration may not be
     taken into account. 

  -- Under mediation, a neutral third party helps the parties
     involved come to an agreement. 

  -- Under no-fault programs, the injured person can be compensated
     for the expenses associated with the injury without proving that
     the injury was caused by someone's negligence or other wrongful
     conduct. 

Proponents of alternative dispute resolution generally say that these
systems can resolve claims in a faster, less costly manner.  For
example, they contend that less severe malpractice claims may be
resolved in a relatively inexpensive manner, any excessive jury
verdicts may be eliminated, and claims may be settled quickly. 
Therefore, medical liability costs, including premium costs, could be
lower. 

Opponents believe that litigation alternatives may encourage injured
people to pursue claims that they might not take to court, either
because the amount is not substantial or the evidence is weak,
thereby increasing liability costs.  On the other hand, if voluntary,
alternatives may seldom be used.  Also, if the decisions reached
through alternative systems are nonbinding, claims can still be filed
in the courts, thus extending claim resolution times and increasing
overall liability costs.  Furthermore, the deterrent effect provided
by the threat of litigation may be removed if no-fault approaches are
adopted. 

   LIMITED EVIDENCE SHOWS THAT
   SOME TORT REFORMS MAY REDUCE
   PREMIUMS AND DEFENSIVE MEDICINE
   COSTS
------------------------------------------------------------ Letter :4

While evidence on reduced premiums and defensive medicine costs is
limited, a review of studies done as of the early 1990s indicated
that while two tort reforms--caps on damages and collateral source
offsets--may reduce medical malpractice payments, only caps were
shown to reduce insurance premiums.  Recent companion studies also
found that these two reforms may have some effect on reducing
defensive medicine costs.  However, these studies provide only a weak
basis for estimating the specific dollar savings associated with
these two components of medical liability costs. 

      DAMAGE CAPS FOUND TO REDUCE
      MALPRACTICE INSURANCE
      PREMIUMS
---------------------------------------------------------- Letter :4.1

A 1993 Office of Technology Assessment synthesis of six empirical
studies found evidence which demonstrated that some tort reforms we
reviewed had either direct or indirect effects on medical malpractice
insurance premiums--one component of medical liability costs.\14

However, according to the synthesis, only damage caps were shown to
reduce malpractice insurance premiums.  For example, a 1990 study
reviewed in the synthesis found that caps on total damages reduced
premiums by one-third.\15 None of the six studies demonstrated that
collateral source offsets directly reduced insurance premiums. 
However, the synthesis did find that both caps and offsets reduced
medical malpractice claim payments, which in turn can affect
premiums.  According to a 1989 study, damage caps reduced malpractice
payments about 38 percent and collateral source offsets reduced them
by 21 percent.\16 According to the synthesis, by lowering claim
payments, damage caps and collateral source offsets could also
indirectly reduce premiums.  Studies assessing the effect of shorter
statutes of limitations on malpractice premiums showed mixed
results--one study found that they did reduce premiums while another
found that they did not.  And, due to the limited amount of use, the
synthesis found that the effect of alternative dispute resolution
systems on premiums could not be assessed. 

Estimating the actual savings generated by tort reforms from
reductions in malpractice premiums is difficult.  Neither the
synthesis nor more recent studies have developed dollar-savings
estimates.  Moreover, insurance premium costs are estimated at less
than 1 percent of the total cost of health care in the United States,
a small component of overall health care costs.  Other tort reform
studies have focused more on another component of medical liability
costs--defensive medicine. 

--------------------
\14 U.S.  Congress, Office of Technology Assessment, Impact of Legal
Reforms on Medical Malpractice Costs, OTA-BP-H-119 (Washington, D.C.: 
U.S.  Government Printing Office, 1993). 

\15 Stephen Zuckerman, Randall R.  Bovbjerg, and Frank Sloan,
Effects of Tort Reforms and Other Factors on Medical Malpractice
Insurance Premiums, Inquiry, Vol.  27 (1990), pp.  167-82. 

\16 Frank A.  Sloan, Paula M.  Mergenhagen, and Randall R.  Bovbjerg,
Effects of Tort Reforms on the Value of Closed Medical Malpractice
Claims:  A Microanalysis, Journal of Health Politics, Policy and
Law, Vol.  14, No.  4 (1989), pp.  663-89. 

      TORT REFORMS' EFFECT ON
      DEFENSIVE MEDICINE COST
      SAVINGS CANNOT BE RELIABLY
      ESTIMATED
---------------------------------------------------------- Letter :4.2

Medical liability costs include a potentially more expensive
component than insurance premiums--defensive medicine.  While several
studies done in the 1990s indicate that defensive medicine practices
exist, the extent of defensive medicine and the effects of tort
reform on defensive medicine have been difficult to quantify.  For
example, one 1993 study found that obstetricians and gynecologists
practicing in New York hospitals with high malpractice insurance
premiums and claims frequency performed more cesarean sections than
did physicians in hospitals with lower premiums and claim
frequency.\17 The Office of Technology Assessment concluded that this
study presented strong evidence that hospitals with the excess
cesarean sections were practicing defensive medicine.\18 The Office's
broader study of defensive medicine, published in 1994, estimated
that less than 8 percent of diagnostic procedures might be caused by
liability concerns.\19 However, the study stated that it is not
possible to estimate the level and cost of defensive medicine.  There
may be a number of other reasons why a provider performs a particular
service, including local standards of care, academic training, or
requirements of managed care organizations.  This study could not
determine the primary motivation for a provider's decisions. 

A more recent study found that a package of reforms including damage
caps and collateral source rule changes may decrease some defensive
medicine costs.  This 1996 study found the cost of annual hospital
treatment for newly diagnosed Medicare heart patients grew 5 to 9
percentage points less after states implemented this package of
reforms compared to other states.\20 The slowdown occurred 3 to 5
years after tort reform passed.  Despite these reductions in
treatment costs in the reform states, there was no difference for
selected adverse outcomes (such as mortality) between patients in
states with and without tort reforms.  The authors concluded that the
reduced costs measure the size of defensive medical practice and
demonstrate the power of certain tort reforms to reduce defensive
medicine costs; in a follow-up study, they found similar results.\21
However, the limits of the study--focusing only on heart patients
with Medicare between 1984 and 1990--make generalization to overall
medical practice impossible and offer limited opportunities for
estimating cost savings resulting from tort reform.\22

--------------------
\17 A.  Russell Localio and others, Relationship Between Malpractice
Claims and Cesarean Delivery, The Journal of the American Medical
Association, Vol.  269, No.  3 (1993), pp.  366-73. 

\18 U.S.  Congress, Office of Technology Assessment, Defensive
Medicine and Medical Malpractice, OTA-H-602 (Washington, D.C.:  U.S. 
Government Printing Office, 1994). 

\19 U.S.  Congress, Office of Technology Assessment, Defensive
Medicine and Medical Malpractice, 1994. 

\20 Daniel Kessler and Mark McClellan, Do Doctors Practice Defensive
Medicine? The Quarterly Journal of Economics, Vol.  CXI, Issue 2
(1996), pp.  353-90. 

\21 This latter study using nationally representative American
Medical Association physician surveys for the same period found that
physicians' perceptions of reduced malpractice pressure corresponded
to the tort reforms and reduced practice costs in the original study. 
See Daniel P.  Kessler and Mark B.  McClellan, The Effects of
Malpractice Pressure and Liability Reforms on Physicians' Perceptions
of Medical Care, Law and Contemporary Problems, Vol.  60, Nos.  1
and 2 (1997), pp.  81-106. 

\22 The authors took several steps to assure that tort reform rather
than any other factors explained the pattern of reduced treatment
costs.  First, a simple comparison of states that reformed and states
that did not found similar baseline expenditures and outcomes. 
Second, they controlled for several other factors, including proxies
for regional differences that might have influenced trends in
treatment costs, and dismissed them as explanatory factors. 

      TORT REFORMS' EFFECT ON
      OTHER MEDICAL LIABILITY
      COSTS UNKNOWN
---------------------------------------------------------- Letter :4.3

We found no studies of tort reforms' effect on the two other
categories of medical liability costs GAO previously
identified--liability-related administrative costs and medical device
and pharmaceutical liability costs.\23 Furthermore, we found no
studies specifically demonstrating how the presence or absence of
tort reform in the District, Maryland, or Virginia affects any of the
four components of medical liability costs. 

--------------------
\23 Liability-related administrative costs include certain risk
management activities, time and travel associated with litigation,
and creating and maintaining records subject to discovery or required
for defense.  Medical device and pharmaceutical liability costs
include manufacturers' insurance and liability-related production and
warning costs passed on in the price of their products. 

   DIFFERENT APPROACHES TO TORT
   REFORM FOUND AMONG THE
   DISTRICT, MARYLAND, AND
   VIRGINIA
------------------------------------------------------------ Letter :5

Each state and the District determines whether to adopt tort reforms
and what forms they take.  As a result, the law under which medical
malpractice claims are resolved varies considerably among states. 
For example, there is considerable variation between malpractice
reform in the District, Maryland, and Virginia.  The District has not
adopted any major tort reforms, whereas the two neighboring states
have adopted various tort reforms.  Even though Maryland and Virginia
have implemented similar types of reforms, they vary in their
specific design. 

      THE DISTRICT HAS NOT ADOPTED
      ANY MAJOR TORT REFORMS
---------------------------------------------------------- Letter :5.1

The District has not adopted any major tort reforms during the past
25 years.  As shown in table 1, the District's tort law

  -- has no limits on the amount of damages that may be recovered,

  -- has a collateral source rule that prohibits introducing evidence
     that can be considered in reducing the amount of an award,

  -- provides for a 3-year statute of limitations for filing claims
     that begins after the injured person discovers the injuries, and

  -- makes arbitration available.\24

                          Table 1
          
           Implementation Status of Selected Tort
                          Reforms

Tort
reform      District        Maryland        Virginia
----------  --------------  --------------  --------------
Caps on     None            Nonmonetary     Total damage
damages                     damage cap of   cap of $1.5
                            $575,000\a,b    million\c,d

Collateral  Collateral      Collateral      Collateral
source      source rule     source rule     source rule
rule        followed        followed        followed

Statute of  3 years from    5 years from    2 years from
limitation  date of injury  date of injury  date of
s           or discovery,   or 3 years      injury; for
            whichever is    from            malpractice
            later           discovery,      cases
                            whichever is    involving
                            earlier         foreign
                            (statute deals  objects--for
                            exclusively     example,
                            with medical    sponges left
                            malpractice     in the body--
                            cases)          or fraud or
                                            concealment,
                                            time is
                                            extended for 1
                                            year from
                                            discovery but
                                            no longer than
                                            10 years

Arbitratio  The District    All             Health care
n           does not have   malpractice     provider being
            a specific      claims over     sued for
            arbitration     $2,500 must be  malpractice
            program for     arbitrated by   may request
            malpractice or  state-          review by a
            for torts.      appointed       court-
            However,        health claims   appointed
            court-          panel, unless   panel.
            sponsored       one of the
            arbitration is  parties waives  Review panel
            available in    arbitration.    issues
            all types of                    nonbinding
            cases,          Arbitration is  opinion;
            including       not binding;    parties may
            medical         any of the      proceed with
            malpractice;    parties may     trial.\e
            unless parties  initiate court
            agree           trial.\e
            otherwise,
            arbitration is
            not
            binding.\e

            Any of the
            parties may
            initiate court
            trial after
            nonbinding
            arbitration.\e
----------------------------------------------------------
\a Nonmonetary damage cap increases $15,000 each October 1. 

\b Does not include punitive damages, which are not capped. 

\c Effective August 1, 1999, the cap increased from $1 million to
$1.5 million.  Under the law, it is to increase annually by $50,000
through 2006 and by $75,000 in 2007 and 2008. 

\d Punitive damages are capped at $350,000 within the overall $1.5
million limit. 

\e In addition, the Uniform Arbitration Act, which establishes
arbitration procedures to be followed when parties have an
arbitration agreement, has been adopted. 

Source:  GAO analysis of District, Maryland, and Virginia tort law. 

While the District has not adopted any major tort reforms, its law,
as in neighboring states, contains procedures to help prevent the
filing of frivolous lawsuits.  Attorneys filing a lawsuit, whether
for medical malpractice or any other cause of action, certify that it
is evidence-based and not frivolous.\25 Attorneys can be disciplined
by the courts for violating these requirements.  Other procedures,
such as pretrial conferences, pretrial discovery, and the need for
expert testimony to support malpractice claims, also seek to
discourage frivolous legal actions in the District. 

Legislation to change the District's tort law has been introduced but
major changes have not been adopted.\26 In 1991, for example, the
Council of the District of Columbia considered but did not adopt any
major reforms.  Changes considered at that time included capping
nonmonetary damages at $350,000 and amending the collateral source
rule.  More recently, the House version of the District of Columbia
appropriations bill for fiscal year 1998 (H.R.  2607) contained
provisions which would have, among other things, capped nonmonetary
damages at $250,000, amended the collateral source rule, and
eliminated the right of subrogation by collateral sources.  However,
the District's appropriation as adopted into law did not contain
these provisions.\27

Though it did not include the tort reform provisions in its version
of the District's fiscal year 1998 appropriations bill, the Senate
Appropriations Committee did direct the District's Financial
Responsibility and Management Assistance Authority to study the need
for malpractice reform in the District.  In reports issued in March
1998 and February 1999, the Authority found that District-specific
evidence did not support the need to adopt tort reforms.\28 On the
contrary, the Authority found evidence that malpractice premiums in
Baltimore, with tort reforms in place, were often as high as or
higher than in the District. 

--------------------
\24 District law provides for court-sponsored arbitration in all
civil cases, not specifically for malpractice or other torts.  In
addition, the District has adopted the Uniform Arbitration Act, which
establishes arbitration procedures to be followed when parties have
an arbitration agreement. 

\25 Under District court rules, by filing a lawsuit an attorney
certifies that it is (1) not being presented for any improper
purpose, (2) warranted by existing law or a nonfrivolous argument,
and (3) based on evidentiary support. 

\26 The District has adopted certain limited tort reform measures. 
For example, the District provides limited civil immunity from
damages for a health care professional who provides voluntary health
care or treatment at one of the city's free health clinics. 

\27 See P.L.  105-100, Nov.  19, 1997. 

\28 See District of Columbia Financial Responsibility and Management
Assistance Authority, Report on Medical Malpractice Liability
(Washington, D.C.:  1998) and District of Columbia Financial
Responsibility and Management Assistance Authority, 1999 Report to
Congress on Medical Malpractice (Washington, D.C.:  1999). 

      MARYLAND AND VIRGINIA
      ADOPTED TORT REFORMS BUT
      CHOSE DIFFERENT APPROACHES
---------------------------------------------------------- Letter :5.2

In contrast to the District, its two neighboring states have adopted
changes to their tort law, but each in somewhat different ways.  For
example, while both states have limited the size of malpractice
payments, Virginia capped total damages, including punitive damages,
whereas Maryland capped nonmonetary damages but not monetary or
punitive damages.  Furthermore, Virginia established a no-fault
program to provide a mechanism for resolving some of the most
expensive malpractice claims outside the court system--those
resulting from very severe birth-related neurological injuries.\29
Also, Virginia has a different time period for filing medical
malpractice claims than Maryland.  Neither state has chosen to amend
its collateral source rule. 

--------------------
\29 Under the Virginia Birth-Related Neurological Injury Compensation
Act, which was passed in 1987, claimants in cases involving
birth-related neurological injuries may recover compensation awards,
covering enumerated losses, without having to prove that the health
care provider caused the injury. 

   LIMITED DATA SHOW MIXED RESULTS
   OF TORT LAW FOR THE DISTRICT,
   BALTIMORE, AND RICHMOND
------------------------------------------------------------ Letter :6

Comparisons of malpractice claim payments, liability insurance
premiums, and number of practicing physicians in the District,
Baltimore, and Richmond provide some indications of the effects of
the varying tort law in each jurisdiction.  However, results are
inconsistent across these indicators.  Moreover, any differences in
these indicators cannot be fully attributed to differences in
malpractice law; other legal, social, and economic factors also
influence the indicators. 

      MALPRACTICE CLAIM PAYMENTS
      MADE FOR PHYSICIANS
---------------------------------------------------------- Letter :6.1

Reported payments for claims against physicians varied among the
District, Baltimore, and Richmond.  Table 2 shows that the District
had higher median and average cumulative claim payments than the
other two cities for the years 1996 through 1998, as reported to the
National Practitioner Data Bank.  Five of the claims closed during
this 3-year time period by the largest malpractice insurer of
physicians in the District were for $1 million or more.  Such high
claims, though relatively infrequent, contribute to the higher
average claim payments in the District.  These payments would have
exceeded the total damage cap in effect in Virginia until August 1,
1999.  See appendix II for more information on malpractice claim
payments as reported by the District's largest physician insurer. 

                          Table 2
          
            Physicians' Paid Medical Malpractice
                    Claims and Payments

           (Cumulative for 1996, 1997, and 1998)

                      District     Baltimore      Richmond
----------------  ------------  ------------  ------------
Number of paid             190           203            49
 claims\a
Median payment\b      $200,000      $150,000      $112,500
Average               $425,813      $299,058      $218,843
 payment\b
----------------------------------------------------------
\a These data represent the years that the insurance company
considered the claims to be closed and reported them to the National
Practitioner Data Bank.  They do not represent the years in which the
medical malpractice incident occurred or when the claim was filed. 

\b Data do not include allocated loss adjustment expenses unless they
are included in a medical malpractice payment.  These expenses
include, but are not limited to, fees for legal services, expert
witnesses, court reports, and medical records.  Medical malpractice
claims closed without any payments can incur significant allocated
loss adjustment expenses. 

Source:  Unpublished special analyses by the National Practitioner
Data Bank, Bureau of Health Professions, Health Resources and
Services Administration, U.S.  Department of Health and Human
Services, at the request of GAO. 

      MALPRACTICE INSURANCE
      PREMIUMS VARY FOR THREE
      PHYSICIAN SPECIALTIES
---------------------------------------------------------- Letter :6.2

Medical malpractice insurance premiums, another possible indicator of
the effect of tort reforms, varied by physician specialty in the
District, Baltimore, and Richmond in 1998.  Table 3 shows that the
Richmond insurer had the lowest medical malpractice insurance
premiums compared to the premiums of the District and Baltimore
insurers.  However, the insurance rating territory that includes
Richmond includes some rural areas as well, which may lower rates. 
While the District's premiums for internal medicine and general
surgery, which are traditionally relatively low-cost specialties,
were higher than were those in Baltimore City and County, the
premiums for obstetrics/gynecology, a traditionally high-cost
specialty, were lower.  These premium variations also occur for 1999
premiums for several specialties when comparing the District's and
Baltimore's largest malpractice insurers of physicians.  Appendix III
shows 1999 medical malpractice insurance premiums for selected
physician specialties as written by the leading physician malpractice
insurers in the District and Maryland. 

                          Table 3
          
           Medical Malpractice Insurance Premiums
           for Three Physician Specialties, 1998

                    District\a   Baltimore\b    Richmond\c
----------------  ------------  ------------  ------------
Internal               $11,051        $8,109        $2,585
 medicine
General surgery        $36,467       $32,414       $10,340
Obstetrics/            $75,143       $77,619       $18,094
 gynecology
----------------------------------------------------------
\a Shows premiums for the National Capital Reciprocal Insurance
Company. 

\b Shows premiums for the Medical Mutual Liability Insurance Society
of Maryland.  Premiums are for the rating territory that includes
Baltimore City and Baltimore County. 

\c Shows premiums for the Mid-Atlantic Medical Insurance Company
(Medical Mutual of Maryland).  Premiums are for the rating territory
that includes Richmond and counties such as Henrico, Goochland, and
Chesterfield. 

Source:  Trends in 1998 Rates for Physicians' Medical Professional
Liability Insurance, Medical Liability Monitor, Vol.  23, No.  8
(1998), pp.  2, 5, and 12. 

      NUMBER OF PHYSICIANS PER
      100,000 PEOPLE
---------------------------------------------------------- Letter :6.3

The total number of active, nonfederal physicians in the District,
Baltimore, and Richmond increased between 1985 and 1997.  The number
of physicians per 100,000 people in each of the three cities either
increased or stayed the same for all categories, as shown in table 4. 
Overall, the number of physicians per 100,000 people increased by
about 24 percent in the District, and by about 29 and 14 percent in
Baltimore and Richmond, respectively.  Appendix IV provides
information for more physician specialties in the three cities in
1997. 

                          Table 4
          
          Number of Physicians per 100,000 People
            for Three Specialties, 1985 and 1997

               District       Baltimore       Richmond\a
            --------------  --------------  --------------
              1985    1997    1985    1997    1985    1997
----------  ------  ------  ------  ------  ------  ------
Active         567     704     672     864     464     528
 physicians
Internal       125     149     158     197      92     103
 medicine
General         47      47      57      57      29      33
 surgery
Obstetrics      39      45      46      52      27      31
 /
 gynecolog
 y
----------------------------------------------------------
\a Shows the number of physicians in Richmond and neighboring Henrico
County. 

Source:  GAO analysis of the Area Resource File, Bureau of Health
Professions, Health Resources and Services Administration, U.S. 
Department of Health and Human Services, February 1998 and February
1999. 

---------------------------------------------------------- Letter :6.4

As agreed with your offices, unless you announce the report's
contents earlier, we plan no further distribution of it until 10 days
after the date of this letter.  At that time, we will make copies
available upon request.  If you or your staff have any questions,
please call me or Kathryn Allen at (202) 512-7114.  Other major
contributors to this report are listed in appendix V. 

William J.  Scanlon
Director, Health Financing
 and Public Health Issues

METHODOLOGY
=========================================================== Appendix I

The objectives of our study were to (1) identify the rationale behind
selected reforms states have made to their medical malpractice tort
law; (2) report on whether selected tort reforms have reduced
malpractice insurance costs and the costs associated with defensive
medicine; (3) describe the extent to which the District, Maryland,
and Virginia have adopted selected tort reforms; and (4) compare
malpractice claim payments, insurance premiums, and numbers of
physicians in the District with those in a large city within each of
the two neighboring states:  Baltimore, Maryland; and Richmond,
Virginia. 

LITERATURE REVIEW

To identify the rationale behind selected reforms states have made to
their medical malpractice tort law, we reviewed health policy and
legal literature.  We identified the literature to be reviewed by
searching 17 different databases.  We searched such databases as
MEDLINE, HealthStar, Social SciSearch, Sociological Abstracts, Social
Sciences Abstracts, Legal Resource Index, and Westlaw.  We selected,
reviewed, and synthesized more than 100 health policy and legal
articles found through the literature search and published since
1990. 

We also used information obtained through our literature search and
through contacts with experts and affected parties to report on
whether selected tort reforms have reduced malpractice insurance
costs and the costs associated with defensive medicine.  To ascertain
whether selected tort reforms reduced medical malpractice insurance
premiums, we primarily relied on the results found in a 1993
literature synthesis published by the Office of Technology
Assessment.  This Office synthesized the results of all six known
studies published in the 1980s and early 1990s.  We relied on more
recent literature to show the relationship between tort reforms and
defensive medicine costs. 

STATUTE REVIEW

To describe the state of tort reform in the District and to compare
selected provisions of its law to those of Maryland and Virginia, we
reviewed applicable state statutes, law review articles, and relevant
case law. 

CLAIM PAYMENT DATA

We used medical malpractice claim payment data obtained from the
National Practitioner Data Bank.  The Bank, administered by the
Bureau of Health Professions, Health Resources and Services
Administration, Department of Health and Human Services, collects
data on medical malpractice payments made for physicians, dentists,
and other types of health care practitioners.  Malpractice payment
data must be reported to the Bank when an insurance company or a
self-insured entity makes a payment of any amount for these health
care providers to settle or satisfy a judgment on any malpractice
action or claim.  We asked the Bank to provide data on the number of
malpractice claims and median and average malpractice payments
reported for physicians during calendar years 1996 through 1998 in
the District, Baltimore, and Richmond. 

INSURANCE PREMIUM DATA

We used insurance premium data published in the Medical Liability
Monitor, which annually compiles a comprehensive premium rate
overview.  The Monitor obtained malpractice insurance premium data
for three specialties--internal medicine, general surgery, and
obstetrics/gynecology--through a survey of 47 companies writing
insurance in 49 states in 1998.  Premiums were reported by the
insurers' rating territories within each state.  While the District
has only one insurance rating territory, Maryland and Virginia have
multiple rating territories.  These premiums represent rates for
mature (generally defined as having been in force with the insurer
for 5 or more consecutive years) claims made coverage of $1 million
per claim/$3 million in total.  Almost all members of the Physician
Insurers Association of America participated in this survey. 

PHYSICIAN DATA

We analyzed physician data obtained from the Area Resource File. 
This file, maintained by the Bureau of Health Professions, Health
Resources and Services Administration, Department of Health and Human
Services, centralizes several kinds of health-related and other data
obtained from different sources.  Included on the file are physician
data from the American Medical Association.  While specific data are
reported for the District and Baltimore City, Richmond data are
reported along with Henrico County.  Among the categories of
physicians reported, we analyzed active, nonfederal physicians
practicing in 1985, 1990, 1995, and 1997 in total and by selected
specialties. 

OTHER INFORMATION

We contacted several other sources including (1) the primary
physician malpractice insurer in the District, (2) malpractice
insurers of physicians in Maryland and Virginia, (3) the Physician
Insurers Association of America, (4) the District's Financial
Responsibility and Management Assistance Authority, and (5) the
Association of Trial Lawyers of America. 

MEDICAL MALPRACTICE PAYMENT DATA
FOR THE LARGEST PHYSICIAN INSURER
IN THE DISTRICT OF COLUMBIA
========================================================== Appendix II

The National Capital Reciprocal Insurance Company is the largest
malpractice insurer of physicians in the District of Columbia in
terms of market share.  Table II.1 shows that between 16 and 22
percent of the claims closed in the District by this insurer were
closed with a payment in each year between 1996 and 1998.  When paid,
about 46, 62, and 48 percent of the payments were for $250,000 or
more in 1996, 1997, and 1998, respectively.  Even though the
percentage of paid claims stayed relatively consistent over the
3-year period, median and average medical malpractice claim payments
changed each year. 

                         Table II.1
          
          Number of Medical Malpractice Claims and
            Claim Payments for Physicians at the
             Largest Insurer in the District of
                          Columbia

                          1996          1997          1998
----------------  ------------  ------------  ------------
Number of claims           129           130           124
 closed\a
Percentage of               22            16            19
 closed claims
 paid\
Median payment\b      $221,000      $348,486      $237,500
Average               $314,442      $450,475      $219,228
 payment\b
Number and                  13            13            11
 (percentage) of          (46)          (62)          (48)
 payments
 $250,000 or
 more\b
Number and                   2             3             0
 (percentage) of           (7)          (14)           (0)
 claims $1
 million or
 more\b
----------------------------------------------------------
\a Data are shown for the year in which the insurance company
considered the claim to be closed.  These data do not show when the
incident occurred or when the claim was filed. 

\b Payment data do not include allocated loss adjustment expenses. 
These expenses include, but are not limited to, fees for legal
services, expert witnesses, court reporters, the court, and medical
records. 

Source:  National Capital Reciprocal Insurance Company, Inc. 

The National Capital Reciprocal Insurance Company closed 11 medical
malpractice claims with payments of $250,000 or more in 1998 in the
District.  As shown in the following list, these 11 claims involved
several different types of physician specialties, including internal
medicine, pediatrics, and orthopedic surgery.  Almost half of the
injuries occurred because of the physician's failure to diagnose a
problem: 

  -- General surgery--Improper performance of a surgical procedure

  -- Internal medicine--Failure to diagnose disease

  -- General surgery--Failure to treat malignant mass

  -- Internal medicine--Medication error

  -- Obstetrics and gynecology/traumatic surgery--Improper
     performance of a surgical procedure

  -- Cardiothoracic surgery--Improper management/monitoring of
     condition

  -- Pediatrics--Failure to diagnose disease

  -- Obstetrics/gynecology--Failure to diagnose malignant mass

  -- Internal medicine--Failure to diagnose disease

  -- Pediatrics--Failure to diagnose disease

  -- Orthopedic surgery--Improper performance of a surgical
     procedure. 

MEDICAL MALPRACTICE INSURANCE
PREMIUMS FOR SELECTED PHYSICIAN
SPECIALTIES IN THE DISTRICT OF
COLUMBIA AND BALTIMORE, 1999
========================================================= Appendix III

Medical malpractice insurance premiums vary by specialty and by area
of the country.  For example, areas like the District of Columbia and
Baltimore, which are close to each other in distance, can have very
different premiums.  Table III.1 shows that for several specialties
in 1999, medical malpractice insurance premiums are higher in
Baltimore than in the District of Columbia.  Of particular note are
premiums for obstetrics/gynecology, a specialty long associated with
among the most expensive medical malpractice claim payments.  Higher
premiums in Baltimore occur even though Maryland adopted a cap on
nonmonetary damages more than a decade ago. 

                        Table III.1
          
           Medical Malpractice Insurance Premiums
                     by Specialty, 1999

                              District           Baltimore
Specialty                 premiums\a,c        premiums\b,c
------------------  ------------------  ------------------
Internal medicine              $11,051              $8,325
Ophthalmology                   12,156              13,190
General surgery                 36,467              33,334
Anesthesiology                  16,576              20,152
Obstetrics/                     75,143              79,850
 gynecology
----------------------------------------------------------
\a Premiums written by the largest physician malpractice insurer in
the District. 

\b Premiums written by the largest physician malpractice insurer in
Maryland.  These premiums are for the rating territory that includes
Baltimore City and Baltimore County. 

\c Premiums represent a mature claims made policy with coverage
limits of $1 million/$3 million.  In a claims made policy, the
insurer is only liable for injuries that occur and claims that are
filed while the policy is in effect.  A mature claims made policy is
generally defined as having been in force with the insurer for 5 or
more consecutive years. 

Source:  District premium data are from the National Capital
Reciprocal Insurance Company, Inc.  Baltimore premium data are from
Medical Mutual of Maryland. 

NUMBER OF PHYSICIANS BY SPECIALTY
IN THE DISTRICT, BALTIMORE, AND
RICHMOND PER 100,000 PEOPLE IN
1997
========================================================== Appendix IV

The number of physicians in total and by specialty per 100,000 people
varies for each of the three urban areas--the District, Baltimore,
and Richmond.  However, table IV.1 shows that, with the exception of
general practitioners, Baltimore had more physicians per 100,000
people in total and in each specialty than either the District or
Richmond in 1997. 

                         Table IV.1
          
          Number of Physicians per 100,000 People
                     by Specialty, 1997

                      District     Baltimore    Richmond\a
----------------  ------------  ------------  ------------
Active                     704           864           528
 physicians
General                     30            33            46
 practitioners
Cardiologists               15            24            19
Internists                 149           197           103
Pediatricians               74            80            46
Surgeons                    47            57            33
Neurosurgeons                7             9             6
Obstetricians/              45            52            31
 gynecologists
Anesthesiologist            20            32            20
 s
Diagnostic                  15            19            17
 radiologists
Emergency                   12            20             7
 medicine
Gastroenterologi             9            11            10
 sts
----------------------------------------------------------
\a Shows the number of physicians in Richmond and neighboring Henrico
County. 

Source:  GAO analysis of the Area Resource File, Bureau of Health
Professions, Health Resources and Services Administration, U.S. 
Department of Health and Human Services, February 1999. 

GAO CONTACT AND STAFF
ACKNOWLEDGMENTS
=========================================================== Appendix V

GAO CONTACT

John Dicken, (202) 512-7043

STAFF ACKNOWLEDGMENTS

In addition, Barry Bedrick, Barbara Chapman, Robert Crystal, Joseph
Petko, and Roger Thomas made key contributions to this report. 

*** End of document. ***