Can the No-Fault Approach Contain Malpractice Insurance Costs?
From 1995 to 1997, researchers from Duke University Medical Center evaluated the Florida and Virginia administrative no-fault medical malpractice compensation programs for birth-related neurological injuries.
The programs, enacted by the two states in the late 1980s, were the first medical malpractice no-fault programs in the United States. Thus, they offered an opportunity for investigation of the practical issues encountered in implementing what some critics of the tort system view as a leading alternative.
The research team surveyed plaintiffs' attorneys, obstetricians and parents, and examined maternal and infant medical records.
The project was part of the Robert Wood Johnson Foundation (RWJF) Improving Malpractice Prevention and Compensation Systems national program.
- The two programs achieved their primary objective of maintaining the availability of affordable obstetrical liability coverage for physicians.
- The administration of no-fault was less expensive than the tort system, and the speed of resolving no-fault cases was very high.
- Only a small portion of potential claimants sought compensation.
- The Florida and Virginia programs were too limited in scope to achieve many of the goals that proponents ascribe to the no-fault system such as broader access to compensation and increased prevention of medical injuries.
RWJF supported this project through a grant of $509,589.
In 1987 and 1988, Virginia and Florida, respectively, enacted no-fault programs to compensate serious, birth-related neurological injuries. Although they covered only a narrow segment of medical injuries, these were the first medical malpractice no-fault programs of any kind in the United States.
Thus, they provided an opportunity for investigation of the practical issues encountered in implementing what some critics of the tort system view as a leading alternative for resolving medical injuries. Under no-fault, claims for compensation are decided administratively instead of in the courts, and the injured party does not have to prove negligence.
Proponents contend that this approach can compensate more injured patients more fairly and with less administrative overhead than the tort system.
The Virginia statute the Birth-Related Injury Compensation Act covered live births involving permanently disabling spinal cord or brain damage caused by oxygen deprivation or mechanical injury during labor, delivery, or resuscitation. The Workers' Compensation Commission heard claims for compensation, and families were compensated for monetary loss plus reasonable attorney fees.
Although similar, the Florida Birth-Related Neurological Injury Compensation Act differed in several respects, including compensation for non-economic-loss up to $100,000. The Virginia Medical Society had predicted the state's program would receive 40 claims a year, but the actual number fell short of that; by February 1995, according to the agency, only 15 claims seeking compensation had been filed (nine were paid; two were denied; and four were pending). The Florida program had a higher caseload; as of that same date it had received 128 claims for compensation (43 were accepted for payment; 57 were ruled noncompensable; 5 were under appeal; 10 were denied but awaiting a hearing; and 13 were undergoing evaluation).
Frank A. Sloan, PhD, Duke University professor of economics and of health policy and management, was experienced in medical malpractice research. Under RWJF's 198788 Medical Malpractice Program, he had directed a study of Florida claims for birth-related and emergency room injuries (ID# 014045).
This grant from RWJF through its IMPACS program funded an evaluation of the Florida and Virginia administrative no-fault compensation programs for birth-related neurological injuries. Specifically, the project sought to answer five key questions about the two programs:
- What was the intent behind them?
- What explains the level of no-fault claims filed in each state and the disparity between the two states?
- How well are infants' families compensated by the programs compared to tort claimants and others who receive no compensation?
- To what extent have savings in administrative overhead been realized?
- How have the programs affected claimants' satisfaction, the quality of care received by birth-injured children, and access to obstetrical care?
To assist with the surveys of plaintiff's attorneys, obstetricians and parents, the grantee organization subcontracted with Princeton, N.J.-based Mathematica Policy Research (MPR), a private consulting and survey firm.
To address the five key questions, the project team:
- Reviewed legislative materials, news articles, and court cases to learn the legislative intent behind the two no-fault statutes.
- Surveyed 40 Florida plaintiffs' attorneys to learn their experience with and opinion of the no-fault program. The attorneys were selected from telephone directory "yellow pages" in areas of varying population size.
- Interviewed personnel in legal and medical professional associations, administrative agencies, and liability insurers as well as law professors and other independent observers about the program's legislative history, goals, modifications, and performance.
- Surveyed 117 obstetricians in the two states about their experience with and perceptions of the programs.
- Surveyed 124 Florida and Virginia parents who had filed either a medical malpractice tort claim or a no-fault claim. The survey was designed to determine the effectiveness of the no-fault programs from parents' perspective. The parents were identified through public records, including court files. The telephone interviews, which lasted 1.8 hours on average, were conducted by MPR.
- Examined maternal and infant medical charts of families who had contact with either of the no-fault programs. The records were abstracted by two nurses and reviewed by two obstetricians to determine the quality of care by the delivering obstetricians.
- Linked data obtained from the study's various sources with survey data obtained in earlier Florida malpractice research.
The following were among key findings reported by members of the project team:
- The Florida and Virginia no-fault programs achieved their primary objective, which was to maintain the availability of affordable obstetrical liability coverage for physicians. Project staff reported in the Fall 1998 issue of the University of Cincinnati Law Review that obstetrical liability premiums in the two states "declined much more rapidly after no-fault than in the rest of the nation. This success was achieved by taking many of the most expensive obstetrical cases out of tort litigation."
- Administration of no-fault is less expensive than under the tort system, and the speed of resolving no-fault cases, once filed, is very high. Project staff wrote in the combined Winter/Spring, 1997 issue of Law and Contemporary Problems that the two no-fault programs "achieve major gains in efficiency compared with the tort process for similar cases. That is, no-fault delivers benefits quite similar in value to tort, but much faster and with far lower administrative costs."
- No-fault claimants generally expressed satisfaction with the programs. In a second article in the same Law and Contemporary Problems issue, project staff reported that no-fault claimants who were compensated were satisfied, although those who filed and did not receive compensation were dissatisfied. The project staff reported that physicians with no-fault experience also were generally satisfied with the programs. However, the research team reported in the American Journal of Obstetrics and Gynecology that more than half of the obstetricians surveyed were dissatisfied with the cost of their no-fault insurance premiums. Of the surveyed physicians who had quit obstetrics, 39 percent said the threat of malpractice claims was a factor despite the existence of no-fault insurance.
- Only a small portion of potential claimants seeks compensation under either no-fault or tort. Project staff reported in Obstetrics & Gynecology that in Florida only 13 no-fault claims were paid per year compared to 497 live births estimated to have resulted in cerebral palsy in 1990. (Cerebral palsy, a disorder of motor system control attributed to faulty development of or damage to the brain, was used as a rough indicator of the total number of claimants who might seek compensation under no-fault.) While the annual number of Florida injuries potentially compensable was uncertain, the authors' best estimate was 53. In Law and Contemporary Problems, project staff cited three possible factors restricting use of the no-fault programs:
- A reliance on attorneys to bring claims even though the no-fault programs assist potential claimants in filing.
- A limited outreach effort to educate families about the programs.
- Continued use of the tort system, particular in Florida, to litigate cases covered by the no-fault programs.
- The Florida and Virginia programs are too limited in scope to achieve many of the goals that proponents ascribe to the no-fault system such as broader access to compensation and increased prevention of medical injuries. Those broader goals would require a larger program, which would necessitate larger funding. "The existing programs do not support the expectation that broader no-fault would be less expensive to operate than a liability system alone," the project team reported to RWJF.
- Although total combined payments to patients and all lawyers did not decrease, a much larger portion went to patients. The project team reported to RWJF that less than 3 percent of total payments went to lawyers under no-fault versus 39 percent under tort. Patient compensation minus attorney fees increased either 4 percent or 44 percent, depending on the projection method used.
Project team members published six journal articles describing the Florida/Virginia no-fault study and findings. They also made two presentations at the 1997 IMPACS/Duke Medical Malpractice Conference. (See the Bibliography for details.)
AFTER THE GRANT
The project director planned no further investigations of no-fault compensation. He said ongoing stability in the liability insurance market had curtailed interest in the no-fault concept and the impetus for change in the malpractice system.
GRANT DETAILS & CONTACT INFORMATION
Evaluation of No-Fault Malpractice Insurance Programs in Florida and Virginia
Duke University Medical Center (Durham, NC)
Dates: June 1995 to November 1997
Frank A. Sloan, Ph.D.
(Current as of date of this report; as provided by grantee organization; not verified by RWJF; items not available from RWJF.)
Bovbjerg RR and Sloan FA. "No-Fault for Medical Injury: Theory and Evidence." University of Cincinnati Law Review, 67(Fall): 53125, 1998.
Bovbjerg RR, Sloan FA and Rankin PJ. "Administrative Performance of 'No-Fault' Compensation for Medical Injury." Law and Contemporary Problems, 60(Winter & Spring): 3570, 1997.
Sloan FA, Whetten-Goldstein K, Entman SS, Kulas E and Stout E. "The Road from Medical Injury to Claims Resolution: How No-Fault and Tort Differ." Law and Contemporary Problems, 60(Winter & Spring): 71115, 1997.
Sloan FA, Whetten-Goldstein K and Hickson GB. "The Influence of Obstetric No-Fault Compensation on Obstetricians' Practice Patterns." American Journal of Obstetrics and Gynecology, 179(3 Pt. 1): 671676, 1998. Abstract available online.
Sloan FA, Whetten-Goldstein K, Stout EM, Entman SS and Hickson GB. "No-Fault System of Compensation for Obstetric Injury: Winners and Losers." Obstetrics & Gynecology, 91(3): 437443, 1998. Abstract available online.
Whetten-Goldstein K, Kulas E, Sloan F, Hickson G and Entman S. "Compensation for Birth-Related Injury: No-Fault Programs Compared with Tort System." Archives of Pediatrics & Adolescent Medicine, 153(1): 4148, 1999. Abstract available online.
Presentations and Testimony
Frank A. Sloan and Randall R. Bovbjerg, "The Road from Medical Injury to Claims Resolution: How No-Fault and Tort Differ" and "Administrative Performance of 'No-Fault' Compensation for Medical Injury," at the IMPACS/Duke Medical Malpractice Conference, September 1213, 1997, Durham, NC.
Report prepared by: Michael H. Brown
Reviewed by: Robert Crum
Reviewed by: Marian Bass
Program Officer: Joel C. Cantor
Program Officer: Beth A. Stevens
Program Officer: Judith Y. Whang