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Econ Focus

First Quarter 2014

Upfront

Babies and Dollars

MD Considers a Birth Injury Fund

In light of rising medical malpractice insurance costs for obstetricians in Maryland, legislators in the state are considering a bill to create a “no-fault birth injury fund.” The bill, designed to curb pressure on providers of obstetric services, was discussed at a General Assembly hearing in March.

Proponents of the bill assert that the root of the rising insurance costs is increasingly staggering sums awarded in recent years to parents of children who have suffered catastrophic neurological injuries during birth. For example, two 2012 verdicts awarded $55 million and $21 million, respectively, to families whose children had suffered severe brain injuries during birth. Some fear that the threat posed by these verdicts will continue to lead insurance companies to raise rates. By removing the most costly cases from the tort system, some legislators hope to lower the overall cost of obstetric malpractice insurance.

The Maryland bill is modeled in large part after a similar program enacted in Virginia, the first of its kind. In the mid-1980s, Virginia saw a comparable rise in malpractice insurance premiums for obstetricians, prompting legislators in the state to implement the Virginia Birth-Related Neurological Injury Compensation Program. A 2002 report from the state’s Joint Legislative Audit and Review Commission found that the program caused an almost immediate increase in the availability of affordable malpractice insurance for obstetricians. The “no-fault” feature of the program allows all children who meet the program’s qualifications to receive benefits, regardless of whether the doctor was at fault; the report found that the program was able to serve more children than the tort system, while providing more generous benefits per child, on average.

Critics of the proposed Maryland legislation argue that a fund would inadequately discipline negligent doctors. Whether or not this shift of incentives has had any actual effect on the health outcomes of infants is unclear, but a 2008 paper published in the American Journal of Law and Medicine noted that deterrence and doctor incentives were simply not a ”founding objective” of the Virginia program.

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