Who Pays? The Incidence of High Malpractice Premiums

  • April 28, 2007
  • By Mark Pauly, Christy Thompson, Thomas Abbott, James Margolis, and William Sage
This Pew-funded study, Published in Forum for Health Economics & Policy, examined the relationship between malpractice premium levels and physician net incomes for the years 1994, 1998, and 2002, a period in which malpractice premiums rose rapidly.

It found that in a large nationwide sample of group practices, higher malpractice premiums do not depress physician net incomes. Instead, by a combination of increasing prices and increasing quantity of (apparently) profitable outputs, the group practice physicians studied appear able and willing to offset the effect of higher premiums on their incomes.

Regardless of the form, physicians appear able to shift premiums forward whether premiums are increased by an adverse legal climate or for other more practice-specific reasons. They were equally able to do so in different time periods or in practices with heavy managed care presence.