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You are likely paying hundreds of dollars each year due to the ripple effects of medical malpractice litigation.

While the number of insurance claims against doctors, nurses and other medical professionals has stabilized for the first time in several years, the average size of malpractice claims continues to rise. A study of claims in 2006 by Aon shows that the average size of malpractice claim payouts increases 6 percent annually and amounts paid to defend against liability claims grow by 17 percent every year.

In a U.S. Department of Justice study of medical malpractice claims closed from 2000 to 2004, most cases were closed without any payment. But when payments are made they can be whopping. In Florida, Maine, Missouri and Nevada, for example, nearly 10 percent of all claims closed with payments of $1 million or more.

Malpractice payouts are at their highest when the patient has serious or permanent injuries and when cases advance to jury trials. The median medical malpractice jury award is $1,045,000, according to Jury Verdict Research. In settlements where a malpractice case is resolved before it reaches a jury, the median payout is $1 million.

While insurance premiums paid by doctors seem to have stabilized in most states, they are still much higher than they were five to 10 years ago. The median medical malpractice premium is $15,000, according to a 2006 survey by Medical Economics, but doctors in New York, for example, have just been hit with a 14 percent increase.

Defensive medicine is expensive

Higher malpractice awards led to a crisis in medical liability insurance rates in recent years, leading many doctors to decrease their liability coverage, drop out of high-risk specialities, cease performing certain surgeries, shift to research, or move their practices to states with tort laws that hold down malpractice claims. And, no matter where you live, malpractice litigation has led doctors to practice "defensive medicine": procedures that are meant to avoid liability rather than benefit the patient, That can include ordering additional testing or treatment that has little or no medical value, referring patients to other doctors or facilities, and refusing to treat particular high-risk patients.

Nationwide, although doctors admit it wasn't medically necessary:

• 79 percent ordered additional medical tests
  
• 74 percent referred patients to specialists
  
• 51 percent suggested invasive procedures such as biopsies
  
• 41 percent prescribed unnecessary additional medications such as antibiotics
  

In addition, defensive medicine often leads to doctors agree to patient demands for expensive or unnecessary diagnostic studies and refuse to care for patients with pre-existing conditions, workers comp cases, and obese persons.

In Pennsylvania, for example, where there is no cap to jury awards, more than 90 percent of physicians admit to defensive medicine, according to a 2005 study in the Journal of the American Medical Association:

• 43 percent used imaging technology when it wasn't necessary
  
• Over 50 percent referred patients to other specialists
  
• 70 percent of emergency physicians ordered additional diagnostic tests
  
• One third prescribed more medications than were necessary
  
• 60 percent used unwarranted invasive procedures (except neurosurgery)
  
• 42 percent have restricted their practices by eliminating procedures like trauma surgery and avoiding patients with complex medical issues.

How much this ultimately costs you, the patient, depends on where you live. In "tort-friendly" states (with no caps on damages) like Florida, New Jersey, New York, Pennsylvania, and West Virginia, defensive medicine ultimately costs each person $320-$536 a year in extra health care spending. In California, where damages are capped, defensive medicine costs $182 extra per person, according to the U.S. Department of Health and Human Services (HHS).

Also left holding the bag is the federal government, paying an estimated $23.66 billion to $42.59 billion extra per year due to defensive medicine costs. HHS estimates that medical liabilities reform would lead to a 5 to 9 percent decrease in medical expenses linked to defensive medicine.

Caps on medical liability would not only reduce costs but also bring more physicians where they are badly needed. The HHS estimates that in states with a cap on noneconomic damages (such as pain and suffering awards), there are 2 to 3 percent more doctors per capita. Rural counties in states with a $250,000 cap had 5 percent more specialists per capita than rural counties with caps above $250,000.

Women's medicine is especially prone to whopping liability insurance rates, defensive medicine and an exodus of doctors from certain regions. Specialties like obstetrics and breast cancer detection are high-liability fields, and defensive-medicine practices have reduced access to care.

According to a 2006 survey by The American College of Obstetricians and Gynecologists: 70 percent of ob-gyns have made changes to their practices because of the lack of available or affordable medical liability insurance; 65 percent have made changes due to a fear of claims or litigation; and 7 to 8 percent have stopped practicing obstetrics altogether due to the fear of being sued or liability insurance issues. The average age at which doctors stop practicing obstetrics is 48 — an age once considered the mid-point of an ob-gyn's career.

What can be done

Both sides of the tort-reform debate make compelling arguments. Proponents of tort reform (such as damage caps) say that high awards increase medical costs and lower availability of doctors. Tort defenders connect liability to medical quality. Medical malpractice liability claims typically take five years to resolve. Defense and cost-containment expenditures account for 48 percent of the cost for an insurer to settle a claim, but there are ways to reduce costs and speed up compensation for patients. Proposals include:

• Emphasizing "risk management" such as medical practice standards to reduce errors, electronic health records and electronic prescribing.
  
• Take action against the small proportion of doctors with multiple claims against them.
  
• Have doctors disclose medical errors quickly when there is an adverse outcome, so that claims can be resolved more quickly.
  
• Create special courts to handle medical malpractice claims.
  

The idea of "health courts" for medical malpractice claims has been gaining steam recently. These courts would offer a way to expedite medical malpractice cases. The goal is to compensate patients fairly for injuries, without patients waiting years for resolution and without one-third of a payout going to lawyers. Patients with claims would be reimbursed for medical costs and lost income. Noneconomic damages, such as pain and suffering, would be paid according to a schedule or maximum amount for specific injuries.

Health courts would have judges dedicated full-time to resolving health care disputes; there would be no juries. Judge would issue written rulings on disputes that would then be used as legal precedent for other cases, and rulings could be appealed to a new Medical Appellate Court.