Why Damage Caps in Medical Malpractice Lawsuits Harm Healthcare

Victims of medical malpractice can seek legal recourse and hold a healthcare provider responsible for deviation from standard practice or negligent medical care. But some states in the United States have enacted laws that place a limit on the amount of compensation that can be awarded (by a jury) or offered as a settlement (out of court) to the injured patient. This means that when a plaintiff’s lawsuit is successful and the jury finds the physician negligent, the state limit places a cap on the amount of compensation the victim ends up receiving.

These limits on the damages a victim can receive are part of tort reform or what some might call deform in the United States justice system. The issue remains politically contentious. Advocates of tort reform argue that capping awards is necessary to control the high liability insurance costs physicians have to pay. Healthcare policymakers say putting limits on compensation is the only way to control healthcare costs. But, three new studies have indisputably shown that caps on damages are harming healthcare.

Damage Caps Cause More Errors

The authors of one study looked at five states that have implemented caps on damages. In these states, data on patient safety indicators (PSIs) was available for at least two years prior to the enforcement of the caps so that a fair comparison could be made. The study authors also looked at data from control states where no caps on compensation are enforced. The study findings revealed after the cap was enforced:

• Overall, there was a fall in patient safety standards
• Gradual relaxation of care
• Failure to enforce standards of care
• Widespread decline in all aspects of care
• Lack of deterrence that medical malpractice liability provides
• No incentive for doctors to be careful
• Higher rates of preventable adverse events due to reduced risk of litigation

Damage Caps Lead to Higher Costs

The authors of another study looked at nine states that have implemented limits on awards and settlements in medical malpractice lawsuits. The data was compared to control states where no caps exist. The study findings revealed:

• Higher post-cap Medicare Part B (physician) spending, perhaps due to physicians performing a greater number of high-risk procedures
• Lack of deterrence to practice risky medicine (which a physician would avoid in a state with a tort system)
• No evidence to suggest that placing limits on medical malpractice lawsuits curtails healthcare spending

No Increase in the Number of Physicians

The authors of a third study looked at nine states where limits on medical malpractice damages have been enforced by law and compared the data to control states. The study findings revealed:

• No increase in the number of physicians following adoption of damage caps
• No relationship between the number of medical malpractice claims filed and the physician supply in a state
• No link between physician supply rate and the risk of medical malpractice

The law varies from state to state (see this list of medical malpractice damage caps in your state). For instance, there is no limit in the State of Arizona, whereas California limits non-economic damages to $250,000. In Ohio, non-economic damages are capped at $250,000 or three times the economic damages up to a maximum of $350,000 per plaintiff, whichever is more, and subject to a limit of $500,000 in total for multiple plaintiffs. However, in catastrophic cases, Ohio state law allows compensation up to $500,000 per plaintiff or $1 million per case.