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Physician supply increases in States with caps on malpractice lawsuit awards, with the greatest impact in rural areas

States that have capped malpractice lawsuit awards have seen a larger growth in the number of practicing physicians than those States without such caps, according to a new study from the Agency for Healthcare Research and Quality. Between 1970 and 2000, the number of physicians per 100,000 residents more than doubled in the 13 States that in the 1980s enacted caps on non-economic damages, compared with an 83 percent physician growth rate in the 23 States that did not cap malpractice awards before 2000. The study was conducted by William E. Encinosa, Ph.D., and Fred J. Hellinger, Ph.D., of AHRQ's Center for Delivery, Organization, and Markets.

Drs. Encinosa and Hellinger found that the dollar amount of the cap also had an impact on the supply of physicians, especially in rural areas. Between 1975 and 2000, the growth in the median number of rural physicians per 100,000 residents in States with caps of $250,000 was 9 percent higher than in States with caps above $250,000.

Currently, 27 States have caps on malpractice awards; of those, five States have caps with a $250,000 limit.

Surgeons and obstetrician/gynecologists—who are most likely to be sued and who often pay the highest malpractice premiums—were the specialists most likely to be affected by caps of $250,000. The median number of surgical specialists per 100,000 population increased by 41 percent for States with caps of $250,000 but only by 31 percent for States with caps above $250,000. The increases in obstetrician/gynecologists per 100,000 women ages 15 to 44 were 61 percent in States with caps of $250,000 and 49 percent in States with higher caps.

Drs. Encinosa and Hellinger used county-specific data from the Area Resources Files maintained by the Health Resources and Services Administration. They compared physician supply in 49 States, excluding Alaska and the District of Columbia, from 1985 to 2000 to study the impact of the malpractice caps.

Caps generally increased physician supply by 2 to 3 percent 3 years after adoption, after accounting for other factors that impact physician supply. These other factors included fixed differences across counties, such as socioeconomic, political, cultural, and regulatory factors, as well as factors that could impact the demand for physicians, including HMO and Medicare enrollment, whether the county has a medical school, disease rates, and the county's birth rate. In addition, the authors also accounted for the effects of four other State malpractice reforms, including collateral source rule reform, prejudgment interest reform, joint and several liability reform, and caps on punitive damages.

For more information, see "Have State caps on malpractice awards increased the supply of physicians?" by Drs. Encinosa and Hellinger, in the May 31, 2005, Health Affairs, available online at www.healthaffairs.org.

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