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The report says Americans increasingly are finding that their doctors are closing their practices, limiting the types of patients they will see, or leaving communities where they have long practiced because they cannot afford the rapidly increasing cost of malpractice insurance or because it is simply not available.

"This is a problem for America's doctors -- and a danger to all Americans," Secretary Thompson said. "Americans are paying the price of excessive lawsuits through higher health insurance premiums, difficulty in getting a doctor when they need one, higher taxes and missed opportunities to improve patient safety. We must put an end to the malpractice litigation lottery that favors a handful of powerful personal injury lawyers and instead create a common-sense system that ensures injured patients receive fair and prompt compensation without threatening access to quality care for all other Americans."

The report, "Confronting the New Health Care Crisis: Improving Health Care Quality and Lowering Costs By Fixing Our Medical Liability System," highlights the problems created by the rising costs of malpractice insurance for doctors and hospitals -- particularly in states that have not reformed their legal systems. The system is raising the cost of health care that all Americans pay through out-of-pocket payments, insurance premiums and taxes.

The report also cites specific problems that result from the current system. For instance, women are losing their obstetricians in mid-pregnancy in states that have not reformed their litigation systems. Also, earlier this month, the major trauma center in Las Vegas had to close temporarily after its surgeons quit when their malpractice premiums increased sharply.

The report cites estimates showing the cost of malpractice insurance for specialists has risen more than 10 percent in recent years and could increase by an average of 20 percent or more this year. States without any limits on non-economic malpractice damages are experiencing the sharpest increase -- 30-50 percent.

It also details other threats to quality health care caused by rising malpractice costs:

• Patients undergo unnecessary tests and treatments as doctors and hospitals practice "defensive medicine" to ward off potential malpractice lawsuits. This exposes patients to additional risk and drives up the cost of health care.

• Fears of malpractice litigation may stop doctors and hospitals from reporting adverse events and potential errors to quality improvement groups -- reducing the chances that potential threats to patient safety are identified and corrected before anyone is hurt.

• Doctors are avoiding high-risk specialties, such as obstetrics and surgery, due to the excessive costs of malpractice insurance. Hospitals also may drop high-risk services, such as trauma care and emergency rooms, to reduce their insurance costs.

• Fearing malpractice litigation, retired physicians and others health-care professionals are choosing not to volunteer their services at community clinics and other locations that people without health insurance rely on for needed care.

It calls for key national reforms that would both strengthen patient safety and quality improvement efforts by making it possible for doctors to collaborate to identify problems and fix them, and establish reasonable limits on non-economic damages in malpractice cases.

The report also suggests ways to reform the way lawsuits are conducted and to avoid litigation in the first place. It suggests adoption of a plan called Early Offers that would encourage doctors to offer economic compensation to injured patients soon after an adverse event and encourage patients to accept them. In this way patients would be assured of fair compensation quickly, and without having to undergo the long delays, great expense and trauma of litigation.

The report also suggests adoption of strengthened medical review panels that would provide streamlined disposition of malpractice claims, with incentives for doctors and patients to use them and accept their judgments.

"California led the way for the nation by establishing statewide limits on malpractice claims 25 years ago, with bipartisan support," Secretary Thompson said. "We should learn from the successes of California and other states that have successfully reformed their malpractice systems. The billions of dollars we could save would permit increased benefits such as a reasonable prescription drug benefit for seniors and help for the uninsured to obtain insurance."

The report is available at aspe.hhs.gov/daltcp/reports/litrefm.htm.

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