Medical Malpractice:

Case Study on Indiana

HRD-87-21S-4: Published: Dec 31, 1986. Publicly Released: Jan 8, 1987.

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GAO provided a supplement to its report on medical malpractice insurance. GAO identified Indiana's actions to address its medical malpractice insurance problems.

GAO found that, since Indiana passed its malpractice legislation 11 years ago, it has: (1) held down premium costs; (2) attracted additional insurance companies into the market; and (3) had no rate increases for 10 years. A key provision of the legislation was the establishment of a Patient's Compensation Fund to pay malpractice awards or settlements in excess of $100,000 with a $500,000 cap. In order to participate, physicians and hospitals must pay a surcharge based on premiums paid to their insurance companies for the basic coverage. In 1984, the fund was kept solvent only with a transfer of $7.2 million from the reserves of the state's medical malpractice association. Since then, Indiana has taken several actions to strengthen the fund, including: (1) increasing the surcharges; (2) allowing the state insurance department to hire private-sector lawyers and other personnel to help defend claims against the fund; and (3) permitting periodic payments in lieu of lump-sum payments. Although the legislation has benefitted the malpractice situation, many feel that the injured parties have lost certain rights and believe that the cap should be raised to at least $1,000,000 per claim, with the insurance companies covering the first $200,000 and the fund covering the remainder.

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