GAO: malpractice awards linked to higher premiums; called primary contributor: government report also implicates other factors; consumer group says report flawed.

WASHINGTON -- Losses on malpractice claims may be driving up medical liability premiums.

Multiple factors have contributed to the increases in medical malpractice premium rates, such as falling insurer investment income, a less competitive climate, and rising reinsurance costs, the General Accounting Office concluded in an analysis of large insurers in seven states.

However, losses on medical malpractice claims, which make up the largest part of insurers' costs, appear to be the primary contributor to higher medical malpractice premium rates over the long term, the report found.

Annual paid losses and incurred losses for the national medical malpractice insurance market began to rise in 1998. Paid losses are cash payments an insurer makes in a given year, irrespective of the year in which a claim was incurred or reported. Incurred losses reflect an insurer's expectations of the amounts that will be paid on claims reported in that year.

After adjusting for inflation, GAO determined that the average annual increase in paid losses from 1988 to 1997 was approximately 3%. However, this rate rose substantially to 8.2% from 1998 through 2001. Inflation-adjusted incurred losses increased by 18.7% from 1998 through 2001.

Insurer losses on medical malpractice claims increased more rapidly in some states than in others. The GAO found that in Mississippi, the amount insurers paid annually on medical malpractice claims increased by 142% from 1998 to 2001, after adjusting for inflation.

The report "confirms what we have long held: Since 1999, medical liability premiums have skyrocketed in some states and specialties--and increasing awards are the main driver," Dr. Donald Palmisano, president of the American Medical Association, said in a statement.