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Caps on malpractice awards increase the State supply of physicians, especially in rural areas

Twenty-eight States currently have caps on non-economic damages in medical malpractice cases. Proponents of capping medical malpractice awards contend that high medical malpractice insurance rates are driving physicians out of business or to States where such awards are capped. A new study by William E. Encinosa, Ph.D., and Fred J. Hellinger, Ph.D., senior economists in the Center for Delivery, Organization, and Markets, Agency for Healthcare Research and Quality, found that States with a cap have more physicians per capita and the amount of that cap influences the number of physicians practicing in those States.

The researchers analyzed county-level data on physician supply from all 50 States from years both before and after most States had adopted caps on non-economic damages (1985-2000). They examined the impact of the size of caps on malpractice awards on the supply of physicians in both rural and urban areas, as well as the impact caps had on the supply of surgeons and obstetrician-gynecologists (OB-GYNS)—two types of physicians that have been particularly hard hit by the surge in medical malpractice premiums.

Counties in States with a cap had 2.2 percent more physicians per capita because of the cap, and rural counties in States with a cap had 3.2 percent more physicians per capita. Rural counties in States with a $250,000 cap had 5.4 percent more OB/GYNS and 5.5 percent more surgical specialists per capita than did rural counties in States with a cap above $250,000.

More details are in "Have State caps on malpractice awards increased the supply of physicians?" by Drs. Encinosa and Hellinger, in the May 31, 2005 Health Affairs, pp. 250-258. Reprints (AHRQ Publication No. 06-R001) are available from the AHRQ Publications Clearinghouse.

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