The Impact of the 2003 Texas Medical Malpractice Damages Cap on Physician Supply and Insurer Payouts: Separating Facts from Rhetoric

Abstract

In 2003, Texas adopted House Bill 4 ("HB 4") which capped non-economic damages in medical malpractice cases and included several other smaller reforms. To proponents, HB 4 is a silver bullet, encouraging physicians to move to Texas by reducing frivolous lawsuits, preventing excessive damage awards by run-away juries, and reducing malpractice insurance premiums. To critics, it is ineffective (because it will neither materially increase the number of physicians, lower malpractice premiums, nor reduce health care costs) and unfair (because it forces injured patients to accept inadequate compensation and hits plaintiffs who are severely injured, women, children, or elderly especially hard).

In this short paper, prepared for a special issue on the effects of HB 4, we present new evidence of its effect on the number of physicians in Texas. There is, as yet, no evidence that HB 4 increased the number of physicians involved in direct patient care, but some evidence consistent with a delayed effect. There may have been a modest increase in the number of specialists engaged in direct patient care, in line with population growth. We also summarize our findings from a previous article on how the damages cap will affect payouts. We estimate that, if the same cases were brought, the cap would result in an18-25% drop in per-case payouts in settled cases, and a 27% drop in tried cases. We also find that a cap on non-economic damages will have different effects on different groups of plaintiffs, with larger effects on the unemployed and deceased, and likely on the elderly as well. Because one would expect the cap to dissuade some plaintiffs from suing at all, especially those in the more severely affected groups, the cap's effect on insurers' costs -- and thus its long-run effect on malpractice insurance premiums -- will likely exceed our per-case estimates.

Keywords: medical malpractice, tort reform, physician supply, damage caps