Using claim-level data, we estimate the effect of Texas's 2003 cap on noneconomic damages on jury verdicts, post-verdict payouts, and settlements in medical malpractice cases closed during 1988-2004. For pro-plaintiff jury verdicts, the cap affects 47-percent of verdicts and reduces mean allowed non-economic damages, mean allowed verdict, and mean total payout by 73-percent, 38-percent, and 27-percent, respectively. In total, the non-econ cap reduces adjusted verdicts by $156M, but predicted payouts by only $60M. The impact on payouts is smaller because a substantial portion of the above-cap damage awards were not being paid to begin with. In cases settled without trial, the non-econ cap affects 18-percent of cases and reduces predicted mean total payout by 18-percent. The non-econ cap Downloaded from 356 ~ Hyman, Black, Silver, Sage: Estimating the Effect of Damages Caps in Medical Malpractice Cases has a smaller impact on settled cases than tried cases because settled cases tend to involve smaller payouts. The impact of the non-econ cap varies across plaintiff categories. Deceased, unemployed, and (likely) elderly plaintiffs suffer a larger percentage reduction in payouts than living, employed, and non-elderly plaintiffs.We also simulate the effects of different caps and fi nd substantial differences in cap stringency across states. Different caps reduce aggregate payouts in tried cases (all cases) by between 16-percent and 65-percent (7-percent and 42-percent). Caps on total damages have especially large effects.

Using a comprehensive database of closed claims maintained by the Texas Department of Insurance since 1988, this study provides evidence on a range of issues involving medical malpractice litigation, including claim frequency, payout frequency, payment amounts, defense costs, and jury verdicts. The data present a picture of stability in most respects and moderate change in others. We do not find evidence in claim outcomes of the medical malpractice insurance crisis that produced headlines over the last several years and led to legal reform in Texas and other states. Controlling for population growth, the number of large paid claims (over $25,000 in real 1988 dollars) was roughly constant from 1990-2002. The number of smaller paid claims declined. Controlling for inflation, payout per large paid claim increased over 1988-2002 by an estimated 0.1 percent (insignificant) to 0.5 percent (marginally significant) per year, depending on the data set we use. Jury awards increased by an estimated 2.5 percent (insignificant) to 3.6 percent (marginally significant) per year, depending on the data set, but actual payouts in tried cases showed little or no time trend. Real defense costs per large paid claim rose by 4.2-4.5 percent per year. Real total cost per large paid claim, including defense costs, rose by 0.8-1.2 percent per year.In this article, we examine 15 years of closed medical malpractice claim reports gathered by the Texas Department of Insurance (TDI). Texas is the second most populous state in the country and was among those identified by the American Medical Association as being caught in the recent malpractice insurance crisis. 3 Texas began collecting closed-claim reports after the prior insurance crisis in the 1980s. The Texas Closed Claim Database (TCCD) provides detailed information about payments, defendants, trial outcomes, defense costs, and other matters. 4 The TCCD allows us to assess changes over time in the number and cost of malpractice claims. We find that malpractice claims and payments were stable over the period for which we have data. More specifically (unless otherwise noted, all dollar values in this article are in real 1988 dollars):• Adjusted for population growth, the total number of closed claims, the number of "large" paid claims (payouts of at least $25,000 in 1988 dollars), and the percentage of claims that produced large payouts were stable over 1990-2002. Adjusted for number of physicians or growth in real health-care spending (which proxy for the intensity with which people use the health-care system), the total number of paid claims and the number of large paid claims declined. 5• The number of smaller paid claims (less than $25,000 in 1988 dollars) declined sharply.

Using a comprehensive database of closed claims maintained by the Texas Department of Insurance since 1988, this study provides evidence on a range of issues involving medical malpractice litigation, including claim frequency, payout frequency, payment amounts, defense costs, and jury verdicts. The data present a picture of remarkable stability in most respects and slow, predictable change in others. We find no evidence of the medical malpractice crisis that produced headlines over the last several years and led to legal reform in Texas and other states. The rapid changes in insurance premiums that sparked the crisis appear to reflect insurance market dynamics, largely disconnected from claim outcomes.Controlling for population growth, the number of large paid claims (over $25,000 in real 1988 dollars) was roughly constant from 1991-2002. Controlling for the quantity of health care delivered (based either on real health care spending or number of physicians), the frequency of large paid claims declined over this period. The number of small paid claims declined sharply. Payout per claim on large claims was constant over 1988-2002, while jury awards were constant or even declined. Real defense costs rose at 4.4% per year, and produced an average 1% annual increase in the real total cost to insurers per large paid claim. Jury verdicts showed no significant trend.

Legal scholars, legislators, policy advocates, and the news media frequently use jury verdicts to draw conclusions about the performance of the tort system. However, actual payouts can differ greatly from verdicts. We report evidence on post‐verdict payouts from the most comprehensive longitudinal study of matched jury verdicts and payouts. Using data on all insured medical malpractice claims in Texas from 1988–2003 in which the plaintiff received at least $25,000 (in 1988 dollars) following a jury trial, we find that most jury awards received “haircuts.” Seventy‐five percent of plaintiffs received a payout less than the adjusted verdict (jury verdict plus prejudgment and postjudgment interest), 20 percent received the adjusted verdict (within ± 2 percent), and 5 percent received more than the adjusted verdict. Overall, plaintiffs received a mean (median) per‐case haircut of 29 percent (19 percent), and an aggregate haircut of 56 percent, relative to the adjusted verdict. The larger the verdict, the more likely and larger the haircut. For cases with a positive adjusted verdict under $100,000, 47 percent of plaintiffs received a haircut, with a mean (median) per‐case haircut of 8 percent (2 percent). For cases with an adjusted verdict larger than $2.5 million, 98 percent of plaintiffs received a haircut with a mean (median) per‐case haircut of 56 percent (61 percent). Insurance policy limits are the most important factor in explaining haircuts. Caps on damages in death cases and caps on punitive damages are also important, but defendants often paid substantially less than the adjusted allowed verdict. Remittitur accounts for a small percentage of the haircuts. Punitive damage awards have only a small effect on payouts. Out‐of‐pocket payments by physicians are rare, never large, and usually unrelated to punitive damage awards. Most cases settle, presumably in the shadow of the outcome if the case were to be tried. That outcome is not the jury award, but the actual post‐verdict payout. Because defendants rarely pay what juries award, jury verdicts alone do not provide a sufficient basis for claims about the performance of the tort system.

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