Fixing Medical Malpractice through Health Insurer Enterprise Liability

The United States medical malpractice regime is broken. Medical malpractice liability exists to serve two ends: it encourages efficient behavior by providers and compensates those harmed by the providers’ negligent acts or omissions.1 Unfortunately, empirical evidence shows that the system is exceedingly imperfect on both counts. The current malpractice regime distorts physician incentives in a manner that is harmful for both the patient and the provider. Moreover, compensation often has neither the correct magnitude nor the correct target: judgment and settlement sums vary widely for similar injuries, undeserving patients get compensated, and negligently injured patients slip through the cracks.2 Even more disturbing are the recent flare-ups with the malpractice insurance market that have risen to such a level that the word “crisis” is frequently invoked.3 Though it is clear that rising premiums and a drop in the number of insurance companies are impacting the medical profession, the cause of the recent crisis is unclear. Professor Kenneth Thorpe suggests that the recent downturn may be the result of a nadir in the cycle that is inherent in all insurance markets, decreased investment yields, increased damage awards, increased reinsurance costs, decreased insurance capacity, and increased frequency of malpractice