One of the nation’s more contentious medical malpractice reform battles is unfolding in New Mexico amid rising med-mal insurance premiums and doctor shortages.

More than half of the US states already limit malpractice damages, while courts in others, including Florida and Oregon, have struck down certain caps as unconstitutional.

Now, New Mexico’s latest effort to cap punitive damages has healthcare and trial attorney lobbyists working overtime to sway lawmakers.

Supporters argue that a new bill could bring predictability to an “unbounded litigation environment,” which they say is increasing malpractice premiums and settlement amounts and influencing physicians’ decisions to reduce services, retire early, or leave the state.

Critics counter that the bill would restrict patient compensation and may not meaningfully lower premiums or adequately address the state’s long-standing physician shortages, often stemming from too few residency slots and rural recruitment challenges.

Little Consensus on Malpractice Costs

The factors contributing to malpractice insurance costs  are complex, and experts disagree on what is driving rates upward and pushing physicians out.

That uncertainty has not slowed intense advocacy efforts both for and against punitive caps, with committee hearings drawing large audiences, questionable emails, and significant political spending  and advertising campaigns by key New Mexico stakeholders, including trial attorneys, medical societies, and health systems.

New Mexico’s med-mal insurance premiums have risen steadily in recent years, according to data compiled by the state’s Office of the Superintendent of Insurance (OSI).

Christian Myers, chief actuary at OSI, Santa Fe, told Medscape Medical News that annual malpractice premiums for general surgeons climbed from $76,000 in 2021 to more than $114,000 in 2026, while those for obstetricians and gynecologists have increased 50% to $122,000.

According to OSI data, these numbers are significantly higher than in neighboring states, such as Arizona, Colorado, and Texas, where average ob/gyn premiums are about half the cost.

Insurers initially attributed rate increases to the 2021 law changes before relying more on actual claims data to support subsequent adjustments, Myers said. Meanwhile, OSI estimates that New Mexico has one of the highest malpractice loss ratios in the country, with insurers paying roughly $1.92 in claims for every $1.00 collected.

A concentrated insurance market may also play a role, as OSI reports that just 5 carriers write nearly 70% of malpractice policies in the state. Some hospital executives have reported seeking coverage abroad, and an Albuquerque OB/GYN said she stopped performing surgeries after her premiums nearly doubled.

Record Verdicts and Workforce Shortages

An analysis of National Practitioner Data Bank records by the Albuquerque Journal  found malpractice payments in New Mexico reached a record $68.5 million in 2024, while half of all payouts over the past 30 years were attributed to just 0.7% of physicians.

In one high-profile case, a jury awarded more than $412 million — including $375 million in punitive damages — to a man alleging injury from treatment at NuMale Medical Center. In a separate lawsuit, a jury ordered Presbyterian Healthcare Services to pay about $16.75 million, including $15 million in punitive damages. The health system has been vocal in its support of HB 99, sponsoring the “Keep NM Doctors” advertising campaign.

Some analysts have also noted that pandemic-era court backlogs may have temporarily inflated settlement totals as delayed cases moved through the court system, making it harder to identify a single factor causing the increase in payouts.

Workforce shortages have added another layer to the debate. About 80% of the state’s counties are designated Health Professional Shortage Areas, and a 2024 report by the New Mexico Health Care Workforce Committee found the state was short nearly 150 primary care physicians and 15 ob/gyns.

A recent survey found that 65% of New Mexico physicians were considering leaving the state, with most citing punitive damages as a primary reason.

Annie Jung, MEd, executive director of the New Mexico Medical Society, Albuquerque, New Mexico, told Medscape Medical News that malpractice costs are increasingly shaping those decisions. While New Mexico doesn’t have the lowest physician-to-patient ratio, Jung said that the state lost 248 physicians between 2019 and 2024, and was the only state to experience a net loss over that period. She said society members report being accused of “punitive-level conduct in roughly 90% of lawsuits,” calling the move a “negotiating tactic to force quick, high settlements,” rather than the result of intentional or egregious misconduct.

Latest Legislative Proposal

House Bill 99  builds on a 2021 amendment  to the state’s Medical Malpractice Act that raised liability limits on compensatory damages, such as economic losses and pain and suffering, but left punitive damages uncapped.

The bill would tie punitive damages to the existing statutory limits on compensatory damages under the Medical Malpractice Act.

Independent physicians and clinics would be subject to approximately $1 million in punitive caps. Locally owned hospitals would face caps around $6 million, while larger hospital systems may have to pay two-and-a-half times their statutory cap, roughly $15 million.

The structure would align New Mexico more closely with nearby states, such as Colorado and Texas, which impose statutory limits on punitive damages.

The bill would also require “clear and convincing evidence” that a provider’s actions were malicious or reckless before punitive damages could be awarded. Plaintiffs would not be permitted to seek punitive damages in their initial complaint and could do so only after presenting sufficient evidence to a judge.

Earlier versions of the bill included debate over whether hospitals owned by private equity firms or out-of-state corporations should be exempt from punitive limits. Of New Mexico’s 47 private hospitals, roughly one third are owned by private equity companies, the highest proportion in the nation, according to the Private Equity Stakeholder Project’s hospital tracker.

Feliz Rael, president of the New Mexico Trial Lawyers Association, stated in January that although the bill was not perfect at that time, she appreciated the protections it offered to patients harmed by multi-billion-dollar corporations.

Beyond punitive damages, HB 99 would require medical damages to be calculated based on amounts actually paid or owed rather than billed charges, a change Myers said could reduce premiums by 6%-16%. The bill would also redefine what constitutes a malpractice “occurrence,” treating related acts by multiple providers that result in a single injury as one occurrence while preserving multiple caps for separate injuries caused by independent acts. Myers said that adjustment could reduce premiums by about 3%.

The measure would also require hospitals to continue contributing to the state’s Patient Compensation Fund (PCF) through January 1, 2030, rather than allowing a phase-out at the end of 2026. The fund, financed by provider and hospital surcharges, pays malpractice awards above primary insurance limits but would not pay punitive damages.

Caps Bring Mixed Results

“I don’t know that caps are a slam dunk either way,” Benjamin McMichael, JD, professor at the University of Alabama School of Law, Tuscaloosa, Alabama, who studies medical malpractice and tort reform, told Medscape Medical News. “Malpractice caps tend to impact the physician workforce at the margins, like specialists in less populated areas.”

One study found that noneconomic damage caps, which New Mexico has already adopted, were associated with about 2 more high-risk physicians younger than 35 years per 100,000 residents over time. For a state the size of New Mexico, this amounts to roughly 40 additional young high-risk specialists.

McMichael urged providers to keep the big picture in mind. “Caps don’t take you from whatever you otherwise would have paid all the way to zero,” he said, adding that malpractice reforms may matter more for independent physicians who pay their own premiums than for hospital-employed doctors whose systems absorb those costs.

HB 99’s punitive damage caps are not expected to reduce malpractice premiums immediately because punitive awards are not paid by private insurers or the PCF, Myers said. However, he and Jung anticipate that, if passed, the bill will affect settlement behavior and outcomes over time.

Steph Weber is an award-winning freelance journalist specializing in health care and law.