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  • Print publication year: 2006
  • Online publication date: December 2009

15 - Governments as Insurers in Professional and Hospital Liability Insurance Markets

Summary

Insurance issues rarely dominate the front page in public discussions of medical malpractice. Sharply rising premiums and nonavailability of coveragehave been the main precipitating factors in each medical crisis that has occurred in the United States in the past three decades. Whatever long-run trends in claims frequency and amounts paid per claim may be (“claims severity”), the immediate causes of premium increases and lack of supply can be found in the workings of the market for medical malpracticeinsurance.

Beginning with the rationale for public provision, this chapter describes the forms such provision has taken. Some public insurance is designed to mitigate fluctuations in the insurance cycle, which is characterized by periodic sharp increases in premiums and reductions in insurer capacity and availability of insurance to individual health care providers. This objective is accomplished by providing coverage for large claims. Other forms of public insurance focus directly on assuring availability of medical malpractice insurance through public risk-pooling arrangements or on protecting policyholders from insurer bankruptcy. Next, we discuss lessons learned from the states' experiences with public provision of medical malpractice insurance coverage.

Although common themes emerge, some lessons only pertain to a single type of public insurance. One common theme is moral hazard, including reducing the potential deterrent effect of tort liability for health care providers to implement precautions to avoid injuries. Additionally, because combining public provision and patient safety may be efficient, we examine the relationship between public provision and patient safety in the following section.