The Congressional Budget Office (CBO) has released an analysis of the effects of reforming the medical malpractice system.  The CBO estimates that, over the next ten years, reform could reduce federal spending by $41 billion and the federal deficit by $54 billion.  

The estimate examines several reform proposals:

• Limiting awards for noneconomic (“pain and suffering”) damages to $250,000;

• Limiting awards for punitive (punishing) damages to $500,000 or two times the award for economic damages (lost wages, medical bills, damage to property), whichever is greater;

• Requiring or allowing other income, such as health and life insurance, workers’ compensation, and automobile insurance, to be subtracted from awards;

• A statute of limitations—one year for adults and three years for children—from the date of discovery of an injury; and

• Making a defendant in a lawsuit liable only for the percentage of the final award that was equal to his or her share of responsibility for the injury.

CBO research shows that many states have adopted some of the reforms on this list.  Typically, these reforms result in lower medical costs.  Essentially, these reforms lower costs for two reasons:

1. Physicians and other health care providers pay lower malpractice insurance premiums, which mean lower costs for consumers. 

2. Physicians are more likely to order medical tests and procedures based on the needs of the patient, rather than to protect themselves from possible lawsuits. 
   
   

Speaking about medical malpractice issues, Ronald Sroka, the former president of the Maryland State Medical Society, said that “one of the things that make us err on the side of doing more tests is the fear of being sued.”

The CBO estimates that reforms like the ones in the above list could reduce total national health care spending by approximately $11 billion per year.  As for the federal budget, government programs like Medicare, Medicaid, and the Children’s Health Insurance Program would be less expensive, saving the government around $41 billion over the next ten years.

In a press release about the CBO’s analysis, Senator Charles Grassley (R-IA) said that the reforms “would significantly cut down on health care costs.  Doctors often order tests just to protect themselves from lawsuits, not to treat patients.  Doctors limit their services or even shut down their practices altogether because of skyrocketing malpractice costs.  The more federal health care programs spend on unnecessary tests, the less money is available for necessary patient care.  Cutting medical liability costs would help preserve patients’ access to care.”

Perhaps most importantly, the CBO notes that several studies have shown these kinds of reforms would produce no significant negative effect on patients’ health. 

Currently, neither the House nor the Senate health care bills include these kinds of malpractice insurance reforms.  The Senate Finance Committee is scheduled to vote on their health care bill tomorrow, October 13.

Sources:

Letter from the Congressional Budget Office to Senator Orrin Hatch

http://www.cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort_Reform.pdf (.pdf file)

Memorandum from Senator Charles Grassley

http://finance.senate.gov/press/Gpress/2009/prg100909.pdf (.pdf file)

WashingtonPost – Obama to Speed Up Tort Reform Tests, but Doctors Want More

http://www.washingtonpost.com/wp-dyn/content/article/2009/09/17/AR2009091704676.html?hpid=topnews

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