Congressional Budget Updates Estimates on Savings From Malpractice Reform

The Congressional Budget Office has updated their estimates with regards to the economic effects of tort reform. (Hat top to Ed Morrissey). A summary of the full report is on their director’s blog:

Today CBO released a letter updating its analysis of the effects of proposals to limit costs related to medical malpractice (“tort reform”). Typical legislative proposals for tort reform have included caps on awards for noneconomic and punitive damages, rules allowing the introduction at trials of evidence about insurance payments and related sources of income, statutes of limitations on suits, and replacement of joint-and-several liability with a fair-share rule.

Tort reform could affect costs for health care both directly and indirectly: directly, by lowering premiums for medical liability insurance; and indirectly, by reducing the use of diagnostic tests and other health care services when providers recommend those services principally to reduce their potential exposure to lawsuits. Because of mixed evidence about whether tort reform affects the utilization of health care services, past analyses by CBO have focused on the impact of tort reform on premiums for malpractice insurance. However, more recent research has provided additional evidence to suggest that lowering the cost of medical malpractice tends to reduce the use of health care services.

CBO now estimates that implementing a typical package of tort reform proposals nationwide would reduce total U.S. health care spending by about 0.5 percent (about $11 billion in 2009). That figure is the sum of a direct reduction in spending of 0.2 percent from lower medical liability premiums and an additional indirect reduction of 0.3 percent from slightly less utilization of health care services. (Those estimates take into account the fact that because many states have already implemented some of the changes in the package, a significant fraction of the potential cost savings has already been realized.)

Enacting a typical set of proposals would reduce federal budget deficits by roughly $54 billion over the next 10 years, according to estimates by CBO and the staff of the Joint Committee of Taxation. That figure includes savings of roughly $41 billion from Medicare, Medicaid, the Children’s Health Insurance Program, and the Federal Employees Health Benefits program, as well as an increase in tax revenues of roughly $13 billion from a reduction in private health care costs that would lead to higher taxable wages.

A previous CBO report had minimized the impact of tort reform on health care costs. In evaluating this report it must also be considered that the process the CBO uses to estimate savings might very likely underestimate potential savings from tort reform (as they have also likely underestimated  potential cost savings from the proposed health care reform proposals). On the other hand, I also fear that even if the fear of frivolous malpractice suits was immediately removed, doctors would still be slow in changing habits which include increasing costs due to defensive medicine.

The report concludes by looking at contradictory evidence as to whether there would be any adverse impact on patients’ health from limitations on malpractice suits. While the evidence is certainly not clear, I lean towards those studies which show minimal if any adverse impact. The current malpractice system is so flawed that we have both a tremendous number of suits filed which lack merit while those who truly suffer from negligence are unlikely to benefit under the current system. As I’ve argued in the past, rather than the limited reforms being considered, I would prefer to remove the process compensating those injured from the legal system and establish new bodies to handle this.

In the past Barack Obama has expressed willingness to consider tort reform. Malpractice reform was also a component of John Kerry’s health reform plan during the 2004 election. So far we are not seeing this in current legislation. Hopefully the fact that these new estimates were requested indicates that there now is some interest in including tort reform in the final health care reform legislation.

While there is certainly room to question the exact amount of savings which this might represent, and the amount of likely savings is often exaggerated by conservatives, tort reform does present an area where real savings are possible without needing to limit necessary health care. Tort reform is certainly not the sole solution to health care costs as some conservatives claim but should be included in any efforts to reduce costs and pay for more comprehensive health care reform. Other reforms which are not considered by the Congressional Budget Office but which would be tremendously beneficial to society include shipping all the lawyers who run those tasteless commercials to drum up business to Gitmo.


  1. 1
    Captin Sarcastic says:

    The idea of limiting liability to a specific dollar amount concerns me deeply.  I believe that most business business people are general good people, but we all know the ambition and agressiveness it takes to get the top of any business and we know that the guy who wins the “most ethical employee” award is not the guy who gets promoted. Though high ethical standards and ambition are not mutually exclusive, let’s just say they are divergent. I believe that potentially unlimited pain keeps some of these folks honest. Corporations love the idea of a sum specific liability because it allows them to precisely weigh risk vs. reward. If they have a policy that they know will cause the deaths of some certain number of people, and they can determine that the cost of continuing this policy will cost them X, and the cost fixing the policy will cost them Y, they will be able to quickly determine if Y<X, keep killing people.

    I realize that this opens the door for frivolous lawsuits, but I don’t think frivolous lawsuits are as prevelant as tort reform advocates would lead us to believe.  I would also suggest that tort reform will not really change anything with respect to actual care. Care providers careers will still and always be on the line for the decisions they make, so while some may make the argument that defensive medicine practices are the result of doctors conducting tests to save liability dollars, we know instinctively that this is not the case, to the extent it is practiced by doctors, it is done to protect future earnings. And those dollars would still be at risk if the doctor makes avoidable mistakes that cost lives.

    A doctor that conducts tests to protect themselves is trading kitchen sink medicine for actual medical knowledge. If the doctor lacks the specific knowledge for why a specific test is unnecessary, they might do the test anyway, but that is not a failure caused by the tort rules, but rather by the doctors lack of knowledge. I will cede that there is an enormous amount of information available and that doctors cannot possibly be aware of all of it, but again, limiting liability will not help to improve this at all.

  2. 2
    Ron Chusid says:

    Keep in mind that the proposals to cap malpractice awards are for pain and suffering–not for true economic damages. This is not a total limit on liability.

    You misunderstand where defensive medicine comes from. It does not come from any lack of real medical knowledge. It comes from knowing that, even when doctors have followed medical guidelines, plaintiffs have still won cases based upon lawyers convincing juries that doctors should have ordered a certain test. The cost of defensive medicine most certainly does come because of the tort rules and not from any lack of knowledge on the part of the doctor.

    Among the reforms which I would want, even more than caps, would be to make following generally accepted medical guidelines an absolute defense, and demonstrating this should prevent the filing of a suit. Some states already have hurdles that must be overcome to weed out frivolous suits even before a suit can be filed, and I would like this added.

  3. 3
    Eclectic Radical says:

    I’ll be totally honest, because I’m not saying anything Ron hasn’t seen me say before. 🙂
    I don’t like award caps, I don’t like lawsuits being defined as ‘frivolous’ in the casual manner they frequently are (they are rarely frivolous to the people suing and lawyers know truly ‘frivolous’ cases aren’t worth taking), and I don’t like the ideas many of the conservatives who advocate tort reform communicate in their tort reform proposals.
    I’m not totally opposed to all tort reform, but talk of tort reform makes me extremely nervous because four out of five proposals will be written to shield corporations from liability rather than to truly prevent frivolous suits.
    I will say that I don’t believe juries should decide most civil cases. Civil cases are about points of law that juries frequently are not equipped to properly understand. Juries may feel sorry for a kid in the wheelchair but the doctor may have done everything right and the kid had complications outside the doctor’s control. In such cases, the sympathy is likely to outweigh the point of law.
    Currently many cases can be decided by judges under special circumstances that exclude appeals. This is called ‘binding arbitration’ and both sides agree to let the judge make the final decision and to abide by it. I believe civil cases, across the board, should be decided by a modified form of binding arbitration that allows appellate courts  to conduct judicial review of such decisions (and appeal to higher courts when necessary.)
    I think that would do a lot more to solve real problems with the system than most of the tort reform proposals made by the right.

  4. 4
    Ron Chusid says:

    The description as “frivolous” has stuck because that is the perfect word for a tremendous number of law suits. Many are filed because a patient just dislikes the doctor they saw, or are unhappy about the outcome even if there was no medical negligence. Lawyers know that taking on frivolous suits might not pay off but it is often worth the gamble–such as in the situation you note of juries feeling sorry for someone. John Edwards made a fortune this way.

    Having judges as opposed to juries decide might help–but only if the judge has some understanding of the medical issues. Otherwise a judge could also feel sorry for someone and be misled by attorneys,  even if they are less likely to be influenced than juries.

    Changes at the point of trial will only help if this dissuades attorneys from taking frivolous suits in the first case. Most cases do not make it to trial due to lack of merit, and of those which do a large number lose. The problem is not just the cases when their is victory with a frivolous suit but the risk of being sued at all. Doctors change behavior not just to avoid suits but to reduce the risk of a frivolous suit being filed at all. Defensive medicine is practiced to have things so well documented with every test in the book that an attorney won’t think it is worth risking a suit.

  5. 5
    Eclectic Radical says:

    ‘Having judges as opposed to juries decide might help–but only if the judge has some understanding of the medical issues.’
    Actually, in most states malpractice has a very specific definition at law. Deciding whether the definition of malpractice has been met is as much (or more) about understanding the law than understanding the medical issues. Naturally, I’d favor a specialized court for malpractice cases with judges experienced/educated in the medical issues, and a neutral Friend of the Court with appropriate medical expertise can be of great assistance to judges as they gain experience.
    I don’t want to completely dismiss the doctor’s side of the argument. Yet I’ve seen real or borderline malpractice based on the patient’s ability to pay quite frequently around here. Doctors here frequently avoid assigning tests when those tests will not be fully reimbursed, while ordering sloughs of tests for insured patients. If the tests are necessary, why is the doctor taking the risk of cutting corners without them? If unncessary, why is the doctor wasting an insurance company’s money?
    The hospital up the road (or rather the collection agency they own) regularly sues patients. Stripping patients of their rights to the same recourse at law rubs against my left wing grain.

  6. 6
    Ron Chusid says:

    You can’t determine if something is malpractice without understanding the medical issues. The questions which come up are far more questions of whether medical care is appropriate than questions about what the law says.

    The unnecessary tests are often done for medical-legal reasons (defensive medicine).  Doctors will sometimes try to  limit this when someone is uninsured to keep the patient from going too far into debt. In cases like this I’ll typically offer the tests and then document if the patient refuses.

    Suing for nonpayment of bills is far more straight forward than suing for malpractice. Malpractice suits also create a situation which is harmful for everyone (other than the lawyers) as cost of health care is increased.

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