Tort reform could cut billions in federal spending, study says

Critics say the congressional report is a partisan work of fiction.

By Tanya Albert, amednews staff. May 26, 2003.

Tort reforms similar to those in a bill that cleared the House would benefit the entire health care system in a range of ways -- from saving the government billions of dollars to stopping physicians from leaving high-risk specialties, according to a new congressional report.

Savings for Uncle Sam
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Topic: Liability crisis

A Joint Economic Committee study released May 6 says a $250,000 cap on noneconomic damages awarded in medical malpractice lawsuits, combined with other reforms, would save Medicare and Medicaid nearly $15 billion over 10 years.

The study also estimates that reform would bring in nearly $3 billion extra in taxes because employees would have less money coming out of their paychecks pre-tax to pay for health insurance.

The report, "Liability for Medical Malpractice: Issues and Evidence," also concludes that tort reform would:

Reduce defensive medicine by physicians because they wouldn't be as worried about lawsuits. That would save the government an additional $9.3 billion to $16.7 billion in 2012.
Encourage quality improvement efforts to identify and reduce medical errors.
Stop physicians from leaving certain states because liability insurance is unaffordable or unavailable.
Improve the nation's access to health care, especially for women, low-income citizens and rural residents. Women have been especially affected because obstetricians have been among the first to give up practice in certain states. Rural residents are often already underserved, so they are more quickly affected when physicians begin to leave the area.
Increase the number of Americans with health insurance by 3.9 million by lowering the cost of coverage.

"The United States health care system offers the best quality care in the world," said Jim Saxton (R, N.J.), vice chair of the Joint Economic Committee, which is made up of 12 Republicans and eight Democrats from the House and Senate. "It is, therefore, dismaying to see the consequences of exploding malpractice insurance costs. ... The time has come to reform the medical malpractice system."

The committee's report bolsters the position of the American Medical Association, which has been fighting for tort reform on the federal level for years.

Trial lawyers say the plan would save less than 0.5% of the total cost of the health care system.

"It is extremely well done, and it adds more solid data to the story," said William G. Plested III, MD, chair-elect of the AMA Board of Trustees. "We have said all along that this is nonpartisan and is about access to care. This report underlines that and puts an exclamation point on it."

Trial lawyers say that the report is fiction.

"Clearly, they are pulling numbers out of the air to support a rather partisan position," said Carlton Carl, spokesman for the Assn. of Trial Lawyers of America. "It is ludicrous. If you eliminated every medical malpractice claim, you would save less than one-half of 1% of the total cost of the health care system."

The study comes in the middle of a partisan fight over federal legislation that is generally supported by Republicans and opposed by Democrats. The House-passed bill would cap noneconomic damages at $250,000, limit the deadline for filing suit to three years in most cases, and hold physicians responsible only for their portion of damages.

The Senate has not taken up the issue, and passage of any bill that includes a $250,000 cap is expected to be difficult in the narrowly Republican-controlled chamber.

A call for fundamental change

The report also says tort reform could make such a big difference because the current system doesn't meet its two basic goals: Getting money to patients who are negligence victims and deterring physicians and hospitals from negligent behavior.

Only about 3% of people injured by negligent behavior file a claim, so injured patients aren't receiving what they deserve, the study states, citing statistics from a Harvard University medical practice study. In about 80% of medical malpractice claims, no signs of negligent injury are shown, the study notes.

"If such claimants receive a payout, then the tort system is providing compensation to the wrong people," the study said.

And when legitimately injured patients do receive an award, they still only get a part of the money because lawyers receive 33% or more of the award for legal fees, according to the congressional study.

Carl disagreed with that analysis and said people who choose to pursue a claim are generally compensated. Tort reforms similar to those in the House-passed bill would "deprive compensation for some of those most seriously injured in the system," he said.

In addition to not getting money to the right people, the current liability tort system also fails to deter negligent behavior, the report finds. Physicians or other health professionals who provide negligent treatment often aren't penalized, and physicians who have provided adequate care sometimes are punished, the study states. That results in defensive medicine, and it discourages physicians from recognizing and reporting errors and ensuring that they won't happen again.

"Taken as a whole, the medical liability system appears to be, quite simply, ineffective at consistently penalizing negligence," the study finds. "As one critic has observed, 'It's like a traffic cop giving out lots of tickets to people not speeding and lots of speeders are not getting tickets.' "

ADDITIONAL INFORMATION:

Savings for Uncle Sam

The Congressional Budget Office estimates that tort reform would provide about $3 billion in revenues to the government and more than $15 billion in savings over 10 years.

Item Savings
2004-2013

Income and Medicare payroll taxes $2.1 billion

Social Security payroll taxes $925 million

Reduced spending for Medicare and Medicaid $14.9 billion

Reduced spending for federal employees $230 million

Total savings $18.1 billion