Although Gov. Robert L. Ehrlich Jr. vetoed malpractice reform legislation yesterday, he and Democratic legislative leaders agree that action is needed to resolve what both sides call a crisis. Most of the state's doctors were hit with a 33 percent increase in premiums Jan. 1, after a 28 percent increase last year. In this Q&A, Sun staff writer M. William Salganik explains how the issue developed.

Why are malpractice premiums going up so fast?

Insurers have raised premiums because they're paying out a lot more in claims. Medical Mutual Liability Insurance Society of Maryland, which covers most of the state's doctors, paid out $75.7 million in verdicts and judgments in 2003, nearly twice the $39.6 million it paid in 2002.

Is that because more malpractice suits were filed?

No. The number of claims has been fairly steady. Med Mutual has been paying on more claims, but the biggest difference is that the average payment has gone way up, from $271,000 in 2002 to $386,000 in 2003.

Why have payouts been going up so much?

The insurers say it's because juries are awarding bigger judgments.

These big payouts are all being ordered by juries?

No. About nine out of 10 payouts result from settlements, in which the patient, the doctor and the insurer reach an agreement before a court decision. Insurers say that as court awards have grown, they're agreeing to larger settlements rather than go to court.

So most patients who sue collect something?

No. The majority of cases result in no payment. But those cases can also be expensive. It's not unusual for a doctor, hospital or insurer to spend $15,000, $25,000, or more on lawyers, expert witnesses and other legal expenses before dismissal.

Who decides what malpractice premiums should be? Can the insurers just charge as much as they want?

An insurer files with the Maryland Insurance Administration for permission to raise rates, presenting data on the rate of increase in claims and payments, and showing how it projects costs. The regulators have their actuaries review the projections and bring in outside actuaries for a second look. Public hearings are not mandatory, but the agency has held them regularly in malpractice rate cases. Med Mutual requested a 41 percent increase for this year, and the administration, on the advice of its actuaries, approved 33 percent. Another insurer, GE Medical Protective, filed for a 67.9 percent increase last year, and the state agency approved 59.6 percent.

Are Maryland premiums much higher than those in other states?

About average. According to testimony by GE Medical Protective at its rate hearing, premiums in Maryland are similar to those in Pennsylvania, New Jersey and Delaware. Premiums are lower in Virginia and higher in West Virginia.

Do all doctors pay the same premiums for liability insurance?

No. Doctors in high-risk specialties pay a lot more. Obstetricians, for whom the risk is rated highest, pay more than $150,000 a year. A pediatrician would pay about $20,000. Rates also vary based on the claims history of the doctor and on geography.

Why should anybody else be worried if doctors have to pay higher insurance premiums for their liability coverage?

The doctors say the high premiums will cause them to leave the state, retire or cut back their practices.

Have lots of doctors left?

There's no clear evidence of that. The number of licensed doctors in the state hasn't dropped, although that includes doctors who are researchers, teachers or otherwise don't actively treat patients.

Does that mean there's not really a problem?

No. Particularly in a rural county that might have, say, eight obstetricians and three neurosurgeons, a few retirements can have a large impact on access. Also, although it's not possible to measure, there are indications that doctors have taken steps to reduce services where the risk of suit is relatively high or the reimbursement is relatively low. Some obstetricians, for example, have stopped delivering babies. They're still practicing as gynecologists, and their much lower insurance premiums make up for the drop in revenue. Hospitals say doctors are less willing to sign up to be on call for emergency room duty, which could mean more patients will have to be transferred to large medical centers for complex treatments.

What solution did the legislature come up with?

The legislature, in a special session, created a fund that would hold doctors' premium increases to 5 percent this year and help pay premiums over the following three years. The bill also includes reforms in the way malpractice cases are handled by the courts, in the way insurance rates are set and in the way the state disciplines doctors who are found negligent. The theory is that the reforms will reduce the number of cases filed and the amounts of the payouts.

Why did Ehrlich veto that bill? What happens now?

The governor opposed a 2 percent tax the bill imposed on health maintenance organizations to subsidize malpractice premiums and increase the amount Medicaid pays doctors. He also said the bill didn't contain enough long-term help.

If the law goes into effect, will those changes bring down the costs of payouts this year?

Not much. It typically takes three to four years to resolve a malpractice claim, and claims in the works are handled under the old rules. That's why the law creates a fund to subsidize premiums for four years. The hope is that costs will moderate by the time the fund closes up.