New Report Shows Rising Medical Liability Costs Drain Medicaid Resources for Long Term Care
State-by-state analysis shows tort reform helps reduce costs
Washington, DC - Medical liability costs in the long term care profession are increasing by four percent annually and are projected to grow into 2013. A study of claims costs in long term care conducted by Aon Global Risk Consulting reports that while medical liability costs are rising, the frequency of claims has declined over time. State-by-state medical liability reform has a clear impact on preserving access to long term care services while reducing providers’ medical liability costs.
“Rising liability costs add to the many challenges already facing our profession,” said Governor Mark Parkinson, president and CEO of AHCA/NCAL. “Lengthy, costly litigation drives up costs for our residents, long term care facilities and ultimately taxpayers. This analysis shows costs exploding in states without meaningful, effective medical liability reform. As state and federal governments search for ways to contain health care costs, this is one area that warrants close examination.”
Claim severity and loss rates have been growing consistently since 2009 at a rate of four percent annually, even though the frequency of claims has been stable since 2008. Since 2005, liability costs have grown from $1,040 to a projected $1,480 in 2012. Costs are expected to increase again in 2013 to $1,540 per bed. Claim severity also has grown from a low of $109,000 per claim in 2005 to a projected $175,000 per claim in 2013.
While in some states their validity has been limited by statute or challenged in courts, this report demonstrates the effect of pre-dispute arbitration agreements in long term care settings. Claims settled using alternative dispute resolution agreements are 21 percent less costly than other claims. The average total cost of an outcome subject to an arbitration agreement is about $140,000, while the average cost of a non-arbitrated outcome is about $180,000.
The analysis concludes that states with medical liability reform, like Texas, have seen a dramatic decline in medical liability costs. At the same time, liability expenses in states without reform or where reforms have been challenged, like Kentucky and West Virginia, are rising.
“The state-by-state facts clearly show that comprehensive medical liability reform is the right solution to this problem. For the long term care profession, reducing medical liability costs can help preserve dwindling resources,” said Parkinson.
The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) partnered with Aon to conduct the analysis, which reviewed approximately 19,500 claims from 37 long term care providers.
Download the full report (pdf)
The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) represent more than 11,000 non-profit and proprietary skilled nursing centers, assisted living communities, sub-acute centers and homes for individuals with intellectual and development disabilities. By delivering solutions for quality care, AHCA/NCAL aims to improve the lives of the millions of frail, elderly and individuals with disabilities who receive long term or post-acute care in our member facilities each day. For more information, please visit www.ahca.org or www.ncal.org.