High Medical Liability Premiums: Women Shouldn't Have to Pay the Price

by Leah Thayer

Earlier this year, the “crisis in malpractice insurance” hit close to home for Maria Coe. Pregnant with her second child, the 36-year-old Maryland woman (whose real name is being withheld at her request) wanted to deliver with a nurse-midwife, as she had with her son almost three years before. She herself is a nurse-midwife, and she had identified “a lovely practice” at Georgetown University Hospital that, with just four nurse-midwives and a focus on personalized care, resembled “the way I had practiced.”

Coe’s pregnancy went smoothly, and her difficulty getting appointments suggested that the nurse-midwives’ practice was thriving as well. In April, her second son was born. But a short time later, Georgetown University Hospital announced that its Clinical Nurse Midwifery Program would close at the end of June. “This was a difficult decision to make,” read the announcement on the hospital’s website, but factors including “the economic challenges the entire medical community faces with regard to decreased reimbursement for medical procedures and skyrocketing medical liability premiums” left it with few options.

Had Coe’s pregnancy come just a few months later, she too may have had few options – at least in terms of working with a nurse-midwife. In the Washington-Baltimore area alone, no fewer than two other midwifery practices in an already small field have closed in the past year or so, with each citing high liability premiums as a decisive factor. Marion McCartney, director of professional services at the American College of Nurse-Midwives (ACNM), estimates that nurse-midwife premiums have doubled, on average, nationwide, with some rising as much as 1,000 percent. This is despite nurse-midwives not being named in any of the “astronomical” medical liability cases affecting obstetricians, she says, and despite nurse-midwives having “a reputation among insurers for doing the right thing with patients who have less than perfect outcomes – talking to them, not avoiding them.” Many nurse-midwives are also struggling to find obstetricians willing to be emergency backups, as required by law. Escalating liability premiums for obstetricians – in some cases, to well over $100,000 a year – are driving many to cut their ties to nurse-midwife practices. “I’m getting more frequent telephone calls” from ACNM members, says McCartney. Basically, physicians “are saying their insurance companies don’t want them affiliating with anyone else because of risk.”

Nobody disputes that medical liability premiums have risen – for nurse-midwives and ob-gyns as well as for most other health care providers considered high risk. What’s less clear is why they’re so high, the impact they’re having on providers and patients, especially women, and the best ways to bring them down. Medical groups including ACNM, the American Medical Association (AMA) and the American College of Obstetricians and Gynecologists (ACOG) say a key culprit is excessive malpractice liability litigation – commonly characterized as “frivolous lawsuits” – against providers. They’re calling for federal tort reform legislation that would cap awards for noneconomic (“pain and suffering”) damages at $250,000.

But are more lawsuits being filed against nurse-midwives and obstetricians? Are such lawsuits really the reason for the rate hikes? And would capping damage awards really bring down premiums – or would they instead hurt women and others who have been injured by incompetent or inadequate care by imposing arbitrary limits on remedies?

Fear, loathing and reality

In the months leading up to the November elections, voters were bombarded with the message that women’s health care was in crisis. Advertisements airing in battleground states spoke of maternity wards closing their doors, “ob-gyns being forced out,” women waiting months for mammograms, and, in each case, a single villain: “frivolous lawsuits from out-of-control personal injury trial lawyers.” The president and vice president embraced this theme, heaping scorn on John Edwards’ trial lawyer past, and by election day many Americans may have felt more threatened by the prospect of being named in a ruinous lawsuit than of ever receiving improper or inadequate medical care.

Medical groups helped further this perception. Testifying in early 2002 in support of federal tort reform legislation (Senate bill 2061), ACNM executive director Deanne Williams said: “As nurse-midwives, we are the small, well-established, women-owned businesses that, because of skyrocketing professional liability premiums, are now struggling to pay our bills…. We, and the women we care for, many of whom are low income and who are already struggling for access to care, are victims of the current professional liability system.” (S. 2061 failed on a procedural motion but could be revived.) ACOG, drawing from a 2002 survey of its 28,000 members, claimed that soaring liability insurance would compel so many members to stop practicing obstetrics that nearly 160,000 pregnant women in 11 “crisis states” would have to find new physicians for obstetric care.

A closer look at the numbers, however, suggests that the solution isn’t as simple as capping noneconomic damage awards – a practice that consumer advocacy organizations say unfairly penalizes women, children and other patients whose ability to recover economic damages is limited by their typically low or nonexistent incomes. In California, which led the nation by capping noneconomic damages at $250,000 in 1975, a study by the Rand Institute for Civil Justice found that tort reform had cut women’s verdicts by 34 percent, compared to 25 percent for men. “’Pain and suffering’ is a sort of nebulous pot of money,” says Arthur Levin, director of the Center for Medical Consumers, “but that award is going to give some parity back to the woman.” Lower-income women take the biggest hit. A recent Wall Street Journal article reported on a California lawyer who had handled two cases involving women who died of breast cancer. The cases were identical except one woman was a Silicon Valley executive, and the other was a housewife. The executive’s family won a $2 million settlement. The housewife’s family settled for $300,000.

Women are singled out in other ways as well. In addition to capping noneconomic damages at $250,000, S. 2061 would limit the liability of an entity – a doctor, HMO, hospital, drug company, medical device manufacturer – in cases involving a woman’s reproductive health. “That was a clear discriminatory treatment of women,” says Sandy Brantley, legislative counsel for the Alliance for Justice. Under these terms, for example, if a woman takes medication to treat high blood pressure during her pregnancy, and if that drug turns out to be defective, her damage awards would be capped. The very same scenario involving a male patient would have no caps. The legislation “basically places a higher value on the man’s injury than the woman’s,” says Brantley.

What’s more, there seems to be little correlation between damage caps and liability premiums, or between premiums and damage awards. A report by the General Accounting Office (GAO) found wide regional variation among medical malpractice premiums, noting that states with $250,000 noneconomic damage caps had seen their premium rates and damage awards grow somewhat more slowly from 2001 through 2002 than had states with limited tort reforms. But “we could not determine the extent to which differences in premiums and claims payments across states were attributable to states’ tort reform laws” or to additional factors, including local insurance competition and state laws, read the report. Average premiums for obstetrics-gynecology, internal medicine and general surgery were 15.3 percent higher in the 26 states with caps than in states without caps, according to a 2003 report by the Medical Liability Monitor. “There are lots of states that find when you pass caps, you don’t necessarily see the benefit,” says Levin. “And it’s being done on the backs of victims.” Even ACNM’s McCartney concedes that tort reform is “just a band-aid” on the huge health care challenges facing the country.

As for damage awards, when adjusted for inflation, they actually declined from 2002 to 2003 and have been flat or dropping since the mid-1980s, according to Americans for Insurance Reform, a coalition of consumer and public interest groups. Jury Verdict Research, which maintains a national database of personal injury claims, says that the number of cases filed, on a per capita basis, has been steady for a decade. Most malpractice victims don’t even pursue cases. “People don’t want to sue,” says Carlton Carl, director of media relations for the American Trial Lawyers Association (ATLA). A 1990 study by the Harvard Medical Practice Study Group concluded that for every eight potential medical malpractice claims, only one was actually filed, and fewer still went to trial.

There’s also the matter of rising health care costs overall. The Congressional Budget Office found that medical liability premiums for ob-gyns increased an average of 22 percent between 2000 and 2002. Physician Insurers Association of America, the trade group for medical liability insurers, claimed in a press release earlier this year that “total payments to plaintiffs” “shot up over 30 percent” from 1999 to 2003. But double-digit premium hikes have become common for other kinds of insurance as well, and overall national health expenditures have risen more than 600 percent since 1980, according to the Centers for Medicare and Medicaid Services.

Robert Hunter, former federal insurance administrator and now director of insurance for the Consumer Federation of America, acknowledges that liability premiums have created “a genuine crisis for some doctors and midwives.” But he and others, including GAO, say premiums reflect cyclical economic fluctuations – more pointedly, the health of insurers’ investment income – rather than trends in damage awards, he says. For insurers, “medical malpractice is a great line of business when interest rates are high or the stock market is doing well,” because high investment returns let insurers set aggressively low rates in order to gain market share, says Hunter. In the current economy, as during previous “malpractice crises” of the mid-1970s and mid-80s, low interest rates and a sluggish stock market drive insurers to raise premiums to compensate for lower investment returns. Another factor pushing premiums upward is the withdrawal of many insurers from the medical liability market, limiting competition and choices. Whatever the impetus, some groups say bluntly that the result is price-gouging.

Finally, there’s the disappearing doctor myth. Dick Cheney, in his October debate against John Edwards, said the country has “lost one out of 11 ob-gyn practitioners.” But his numbers came from an ACOG study that didn’t specify whether this loss was because of malpractice insurance or because the doctors wanted to retire. ACNM’s McCartney says that because of high liability premiums, no Maryland medical residents chose obstetrics last year. That may be true, but the American Board of Medical Specialties says the number of board-certified ob-gyns grew by 18.1 percent from 1999 to 2004. In New York, where malpractice premiums have risen higher than almost any state, “our ob-gyn to population ratio is among the highest in the country,” says Levin. “In our mind, that really debunks one of the arguments that the physician community uses to get patients on their side, that you won’t be able to find a surgeon when you need one.”

Most of the doctor shortages that the GAO did find were in “scattered, often rural areas” that have longstanding problems attracting doctors. “Rural people have a problem getting quality health care,” says Hunter, a challenge that holds regardless of medical specialty. In Maine, where he spends his summers, “there are no dentists anywhere near us. You can’t find a neurosurgeon out there either.” Maryann Napoli, associate director of the Center for Medical Consumers, says “women in the boonies are always going to have a problem accessing care.” Pro-tort reform forces “always make a big deal out of that.”

Alternative Solutions

In another telling statistic, the number of birth centers, which usually employ midwives, is on the rise. Kate Bauer, director of the National Association of Childbearing Centers (NACC), says that even though some birth centers “have seen their malpractice insurance quadruple,” there are more than 170 of these centers nationwide, up from roughly 130 in the early 1990s. “I think one of the reasons we see birth centers growing when midwifery practices are closing is because many midwifery practices are hospital-based,” says Bauer. “If a hospital decides they can provide that service more economically with residents,” or considers “hiring an obstetrician who will see more patients and can do C-sections,” that’s what the hospital is likely to do. “We’re kind of at the mercy of hospitals,” she adds.

Not that birth centers aren’t feeling the insurance squeeze. Under managed care, Bauer says, “a lot of times you’re receiving less reimbursement for services than you were five years ago. You can make it up by doing more volume, but that’s really contrary to the nurse-midwife model of care.” That’s also, she notes wryly, “why you have five minutes with your doctor.”

Maria Coe, the nurse-midwife mother of two cited earlier, speculates that the volume argument also influenced thinking at the Washington-area midwifery practices that recently closed. Rather than paying ever-higher nurse-midwife premiums, some physicians groups probably “just said, ‘well, we’re going to double the patients we see” in order to make enough money to offset their own high premiums. “I would argue that it’s not a good choice to make,” she says, “but I’m not the one who’s writing the check.” And when a woman is left mid-pregnancy without a midwife, it’s easier to simply switch to an obstetrician in the same practice than to go through the trouble of finding the rare midwife who’s nearby and on the woman’s health plan. In the case of the shuttered Georgetown midwifery practice, says Coe, “of course the patients don’t have to see the physicians” operating out of the same office, “but many will.”

NACC’s Bauer says that her association “has not come out with an official statement” on tort reform. “It’s so complex that I don’t know that capping awards is going to help.” The National Women’s Health Network agrees that solutions to the medical liability issue – “crisis” or not – won’t come easily, but may need to include some or all of the following:

• Universal health care, so that patients hurt in the course of medical treatment know that they will be taken care of.
• Tighter regulation of the insurance industry, so that swings of the business cycle won’t trigger extreme premium hikes.
• Open and timely acknowledgment of mistakes offered to patients who’ve been harmed, so that patients and their families won’t turn to the legal system for apologies they didn’t receive from practitioners.
• Changes to the health care culture that result in caregivers not feeling rushed, preventable mistakes being less common and continual quality improvement being embraced by every health care organization.

Leah Thayer is editor of The Women’s Health Activist.