Does Public Health Insurance Expansion Influence Medical Liability Insurance Prices? The Case of the ACA’s Optional Medicaid Expansion

Abstract

Medical liability insurance covers physicians’ liability, and its price could affect physicians’ practice. In this article, we use a unique county-level dataset to study how medical liability insurance prices of three specialties, internal medicine, general surgery, and obstetrics–gynecology (OB-GYN), changed after the Affordable Care Act (ACA) elective Medicaid expansion provision. The Medicaid expansion has largely increased the demand for health care services and potentially exposed physicians to higher medical liability risks. With higher expected losses, insurers could react by increasing medical malpractice insurance prices. We first study all counties in states that elected to expand Medicaid and compare them to counties in nonexpansion states. Then we narrow our analysis to consider differential effects in bordering counties with different Medicaid expansion statuses over the period 2010–2018. In both samples, we find significantly higher medical liability insurance prices 2 years after the expansion (on average) in expansion states in comparison to nonexpansion states, and the difference is larger for physicians practicing internal medicine (6–8% at 2 years after expansion) and general surgery (12–16% at 2 years after expansion) but less so for OB-GYN. Our OB-GYN results are likely because significant numbers of births were already covered under Medicaid and were not affected by the expansion. Our finding suggests that the expansion of health insurance increases liability costs to medical practitioners.

ACKNOWLEDGMENTS

We thank Bernard S. Black, Jeanette W. Chung, Jeffrey Traczynski, Victoria Udalova, and Sonal Vats for kindly sharing the Medical Liability Monitor (MLM) data with us.

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Notes

1 Malpractice insurance is a requirement for practicing medicine in seven states: Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin. The minimum levels of insurance vary greatly, ranging from $100,000 to $1 million in coverage per claim and from $300,000 to $3 million in total coverage each year. In addition, another seven states, Indiana, Louisiana, Nebraska, New Mexico, New York, Pennsylvania, and Wyoming, require a minimum amount of insurance coverage to participate in state programs such as a patient compensation Fund (PCF), which is a state-administered fund used to compensate patients for medical malpractice of a physician or entity participating in that fund. For other states, many hospitals and health insurance companies require physicians to obtain malpractice insurance to gain visiting privileges and to participate in their coverage. See https://smallbusiness.chron.com/doctors-required-malpractice-insurance-60552.html

2 We also conduct additional analysis by using unweighted county average rate. Our results are largely the same.

3 https://www.countyhealthrankings.org/explore-health-rankings/rankings-data-documentation

4 The tort system is stable for most of the states in our sample period. During our sample period, only eight states adopted caps or struck down these four tort reforms. Specifically, North Carolina and Tennessee adopted caps on noneconomic damage reform in 2012; South Carolina and Tennessee adopted caps on punitive damage reform in 2012; and Pennsylvania adopted joint and several liability reform in 2011. In contrast, Mississippi, Missouri, and Utah struck down caps on noneconomic damage reform in 2013; Arkansas and Missouri abolished caps on punitive damage in 2012 and 2015, respectively.

5 Connecticut expanded Medicaid on April 1, 2010, followed by Minnesota on August 1, 2010, California on November 1, 2010, Washington on January 3, 2011, and New Jersey on April 14, 2011.

6 https://www.census.gov/geographies/reference-files/2010/geo/county-adjacency.html.

7 The literature refers to the ups and downs in markets as cycles. We recognize that these ups and downs are not necessarily cyclical in the sense that they are measurable and predictable. We believe, like Boyer, Jacquier, and Van Norden (2012), that cycles do not exist in the mathematical sense, and changes in underwriting performance are more likely related to other events like shocks or exogenous changes in demand or supply. This interpretation does not change our analysis.