Doctors love to talk about tort reform – states passing laws to put limits on awards such as non-economic damages for harms such as pain and suffering, and on the legal process of suing a doctor for malpractice . They speak of defensive medicine – the practice of ordering extra tests, treatments, and days in a hospital to cover their medical-legal butts.
Texas passed a comprehensive tort reform law in 2003 that has resulted in an approximately 30% decrease in doctors’ malpractice insurance costs. These savings are passed along to Texans because Medicare includes malpractice insurance costs in its formulas on doctors’ fee schedules, and most private insurance companies calculate their rates as a percentage of Medicare. The larger effect in Texas has been to attract more doctors to the state including underserved areas.
It’s amazing how malpractice insurance premiums vary across the U.S. In 2004, annual premiums  for OB/GYNs were nearly $200,000 in Florida and less than $20,000 in Nebraska. I can’t believe this reflects 10 times higher quality care in Nebraska vs. Florida. I think it speaks volumes about the cultures and expectations of the citizens of those states.