Tort reform wouldn't dent health spending -- CBO report

Changes should focus on fairness to both patients and physicians, the study concludes.

By Tanya Albert amednews correspondent — Posted Feb. 23, 2004

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Medical liability reforms proposed in Congress likely wouldn't have a big impact on overall health care spending in the United States, according to the latest in a series of Congressional Budget Office reports on the subject.

The estimated $24 billion in malpractice costs in 2002 accounted for less than 2% of health care spending. "Thus, even a reduction of 25% to 30% in malpractice costs would lower health care costs by only about 0.4% to 0.5%, and the likely effect on health insurance premiums would be comparatively small," the CBO stated in its report, "Limiting Tort Liability for Medical Malpractice."

Even if tort reform doesn't have an impact on the larger overall economy, action is still warranted, said Larry Smarr, president of the Physician Insurers Assn. of America.

"There are a lot of issues that Congress takes up that don't affect the entire gross national product," he said. "For example, gun control and campaign finance. Still, these are very important issues."

The budget office also said its initial studies showed that savings from decreased "defensive medicine" aren't expected to add up to much.

The CBO analyzed data from hospitalized Medicare patients and found no evidence that limits on tort liability reduced medical spending. It also failed to find statistically significant spending differences in states that have tort reform and states that do not.

But outside studies have shown a strong relationship between medical costs and the threat of litigation, the report said. Therefore, the CBO stated, it will continue to study the issue using other research methods, and the question of whether tort reform reduces spending remains open.

American Medical Association President Donald J. Palmisano, MD, said he respectfully disagreed with the CBO's finding about defensive medicine.

"What we see now are physicians getting additional tests to protect against litigation," he said. "Studies have shown that tort reform saves money from being spent on defensive medicine, and studies will continue to show that money will be saved."

Focusing on equity

The report also states that "there is weak or inconclusive evidence that tort reform would prevent widespread problems of access to health care as proponents argue or increase medical injuries as opponents argue."

Consequently, the report concludes, the decision about whether to enact certain types of tort reform should hinge "more on their implications for equity. In particular, on their effects on health care providers, patients injured through malpractice and users of the health care system in general."

That statement strikes at the heart of the tort reform debate, which has been taking place for years.

Trial lawyers believe that caps on noneconomic damages would result in a system that would be unfair to injured patients, particularly stay-at-home mothers or others who likely would not receive large dollar amounts in the economic portion of a jury award.

"It's not reform to take away the rights of the American family," said Carlton Carl, spokesman for the Assn. of Trial Lawyers of America. "It is not fair to those who have been injured by the negligence of others."

But physicians and insurers argue that tort reform -- particularly a $250,000 cap on noneconomic damages -- is needed to stabilize insurance rates and keep physicians in business.

Without reform, physicians say, patients will lose access to care because doctors won't be able to afford to stay in business. An earlier CBO report concluded that a tort reform bill that passed in the House but not in the Senate would have lowered physician premiums by an average of 25% to 30%.

Smarr said changes such as those in last year's bill would bring fairness to a system in which lawyers receive a large percentage of awards to injured patients.

"We are looking at making the system more equitable because we know we are not doing a good job right now of compensating patients," he said.

The AMA is also unhappy with the way injured patients receive awards.

"The current medical liability system is not reliable," Dr. Palmisano said. "There is randomness in awards. Consequently, physicians believe even if they give exemplary care in this system, it is not enough."

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External links

"Limiting Tort Liability for Medical Malpractice," Congressional Budget Office report (link)

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