The Reform of Medical Malpractice Law: Historical Perspectives
Olsen, Reed Neil, The American Journal of Economics and Sociology
Although medical malpractice claims occurred before the 1960s, their existence has been perceived to have been quite rare and to have had little impact on the practice of medicine (Danzon, 1985 and 1988; Sloan, et al., 1991; Weiler, 1992). Beginning in the 1960s, however, ever increasing public policy concern focused on the medical malpractice liability system (Sloan et al., 1991; U.S. Senate, 1969). In fact, the belief that the medical malpractice liability system in the U.S. is and has been in crisis has become extremely widespread. Physicians decry a system which they view as being out of control (Blackman and Bailey, 1990; Edwards, 1989). Public policy makers and researchers alike begin with the assumption that the law related to medical malpractice liability needs reform.(1)
This paper presents evidence which weakens the conclusion that the U.S. medical malpractice liability system is in crisis and in need of reform. To lay the groundwork, it first carefully explores the basis for the perception that the system is in crisis. Perhaps, more than any other event, the significant changes in the medical malpractice insurance market during the past few decades have prompted the view of a malpractice system in disarray. Malpractice insurance premiums rose dramatically during the 1960s and 1970s. During this period physicians in a few states were unable to buy malpractice insurance at any price.
Rising malpractice insurance premiums are caused by a number of factors. However, increased physician liability under medical malpractice law is the primary explanation for the higher premiums. Physician liability has increased since the 1960s because patients began filing more malpractice cases, winning a higher percentage of the cases filed, and receiving ever larger awards from juries for successful malpractice cases.
The paper also examines responses by researchers and public policy makers to the perceived medical malpractice crisis. The perception of a crisis has led to at least some legislative reform of the medical malpractice system in every state. Furthermore, the average number of state medical malpractice reforms has increased dramatically over the past two decades. Although medical malpractice reforms do vary widely across jurisdictions, the impetus for the reforms appears to be the same; the current system is perceived to be inadequate due to sudden and dramatic increases in physician liability.
However, historical data demonstrate that, contrary to the common perception, recent increases in physician liability are neither sudden nor dramatic. There is no doubt that physician liability and, hence, medical malpractice insurance rates have reached unprecedented highs in the past three decades. Nevertheless, a careful examination of the data reveals that recent growth rates in physician liability are comparable to U.S. growth rates before the 1950s.
Given that neither malpractice litigation nor significant growth rates in the frequency of such litigation are recent phenomena, an explanation for recent and past increases is needed. It is implausible that the medical malpractice system could have been dysfunctional throughout most of U.S. history. The possibility that the medical malpractice system has been and is currently functioning efficiently becomes more plausible when medical malpractice is placed in its historical context.
Previous research, as well as the public policy debate, has focused on solutions to a "runaway" medical malpractice system rather than focusing on the possibility that recent increases in physician liability have been warranted. However, if the increases in physician liability are warranted, then the public policy debate on medical malpractice reform may be severely flawed.
The Medical Malpractice "Crisis"
Reliable statistics on medical malpractice insurance before the mid 1970s are sparse. However, available evidence indicates that during most of the 1950s the market for medical malpractice insurance was quite stable. …