Inflationary Pressure on Medical Liability Reforms Increasing

For several years, general economic inflation has been a daily news topic on every type of media platform, including conservative, liberal, and middle of the road. That constant drumbeat and the increasing effects of social inflation are significantly influencing how policymakers and the public view the value of money—and what constitutes “fair” medical liability awards. Because most limitations on awards are only for noneconomic damages (pain and suffering), they are not subject to the same cost increases as economic damages (such as past and future medical care and lost wages). Despite this distinction, inflationary pressure is at the top of many lawmakers’ minds when it comes to capping damages.

This year, we have seen an unprecedented number of bills that attempt to chip away at medical liability reforms. Many of the bills are aimed at increasing or repealing caps on damages. To date, 15 states have introduced bills dealing with limitations on damages: Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Michigan, Missouri, Nevada, New Mexico, New York, Rhode Island, Texas, Utah, and Virginia. Legislation and/or ballot measures aimed at upending liability reforms are also expected in Colorado and possibly Montana.

Forgotten Historical Perspective

Many of the country’s medical liability reforms were enacted on a bipartisan basis, with the support of physician-owned insurers like The Doctors Company, as a result of two medical liability crises that unfolded in the mid-1970s and the early 2000s. During those times, out-of-control medical liability costs forced some doctors and other healthcare practitioners out of practice. As a result, 30 states have enacted some kind of medical liability reform laws that promote access to healthcare. With good reason: Medical liability reforms preserve access to care by keeping doctors, nurses, and other healthcare practitioners in practice and hospitals, facilities, and community health centers open. Reforms also ensure that injured patients receive fair compensation while protecting patients’ rights and preserving access to the courts.

Most of these reforms were, however, enacted more than 20 years ago by lawmakers who are no longer in office, and the public has long since forgotten the dramatic effects of past crises on healthcare services. One stark example from an earlier crisis: A Las Vegas trauma center—Nevada’s only federally designated Level I facility—closed as a direct result of the state’s insurance crisis.

Social Inflation and Changing Attitudes

Social inflation is another factor affecting jury awards and how policymakers and the public view compensation in damage awards. Social inflation refers to jury awards and claims costs that rise above general economic inflation. It also signifies shifts in societal perceptions and attitudes, such as desensitization to large jury awards, the politicization of healthcare, an increasing mistrust in scientific experts and healthcare professionals, and negative sentiment toward insurance companies and corporations.

Unlike general economic inflation, social inflation is also influenced by factors such as rising costs attributed to recent outsized verdicts, increases in third-party litigation funding, and rollbacks in tort reform that increase or eliminate limits on noneconomic damages. When awarding damages, jurors often sympathize with plaintiffs because they feel the doctor, hospital, or insurer “can afford it,” and they want to help, even if they are unsure about the healthcare practitioner’s negligence.

A recent study by The Doctors Company, Medical Malpractice Claims-Made Social Inflation and Loss Development Report, estimates that in the decade ending in 2021, between $2.4 and $3.5 billion, or 8 to 11 percent, of all medical malpractice losses incurred by physician-focused insurers stemmed from social inflation. The study showed that the pace of settlements larger than $1 million has accelerated and that these large settlements are notable drivers of social inflation.

We have seen a substantial uptick in verdicts over $10 million—as well as “megaverdicts” ranging from $50 million to more than $200 million—occurring in a variety of jurisdictions. Until recently, megaverdicts were nearly unheard of in medical liability cases. The public, lawmakers, and jurors increasingly hold the belief that a damage award of anything less than multiple millions of dollars is inadequate. The fear that an outsized award, disproportionate to the alleged harm, or even a megaverdict might occur also drives higher settlement values.

Fighting to Preserve Reforms

These shifts in societal attitudes affect lawmakers of both political parties and provide momentum to efforts by the plaintiffs’ bar to overturn long-standing medical liability reforms and eliminate or significantly increase caps on damages. The organized plaintiffs’ lawyer lobby also intentionally misleads lawmakers to believe that noneconomicdamages are the only recovery available to injured plaintiffs despite the fact that economic damages are typically available and have continued to grow faster than inflation in states that have noneconomic damage caps.

Additionally, plaintiffs’ lawyer associations have been phenomenally successful in recruiting plaintiffs’ lawyers and their allies from both parties to run for office—and in providing their candidates with the funding and support needed to win, and then elevating them to key leadership positions in those legislative bodies.

In the current environment, it is essential that we continue fighting to preserve medical liability reforms, including caps on noneconomic damages. With the last medical liability crisis occurring in most states 20 years ago, it is more challenging than ever to help policymakers understand the importance of what is at stake as they consider laws to overturn reforms.

Recently, the only avenue to protect medical liability reforms has been to make painful compromises, such as those reached in California and Nevada. With medical liability costs already increasing due to ever-higher awards and settlements, it is imperative that healthcare practitioners make their voices heard. An outcry from healthcare professionals is the only action that has pressured lawmakers into considering more reasonable compromises, rather than overturning medical liability reforms outright.

With so many communities already suffering from practitioner shortages, losing medical liability reforms will ultimately lead to closing hospitals, clinics, and trauma centers—and leave patients with fewer options or no doctors (particularly specialists) in their immediate vicinity. Liability reforms also maintain access to care and protect the most vulnerable and under-resourced communities from increasing healthcare costs.

The Doctors Company has played an instrumental role in the passage—and continued preservation—of historic medical liability tort reform legislation on behalf of doctors and healthcare professionals nationwide. The Doctors Company is fiercely committed to advocating on behalf of our members in advancing and defending medical liability reforms, safeguarding patient access to care, and protecting against adverse legislation.

For additional information on making your voice heard, visit our Legislative, Regulatory, and Judicial Advocacy page.

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