Would medical malpractice reform (tort reform) significantly reduce the cost of health care?
General Reference (not clearly pro or con)
The Congressional Research Service (CRS) stated in its Apr. 15, 2010 report, "Medical Malpractice Insurance and Health Reform," available at www.hospitalmedicine.org:
"The current legislative interest in medical malpractice reform differs from the past in that it is largely driven by overall health reform, rather than an immediate crisis in medical malpractice insurance. In terms of direct costs, medical malpractice insurance adds relatively little to the cost of health care. According to the National Association of Insurance Commissioners (NAIC), medical malpractice premiums written in 2008 totaled approximately $11.2 billion, while health expenditures are estimated by the Congressional Budget Office (CBO) to total $2.6 trillion. Indirect costs, particularly increased utilization of tests and procedures by physicians to protect against future lawsuits ('defensive medicine'), have been estimated to be much higher than direct premiums. These conclusions, however, are controversial, in part because synthesis studies have claimed that national estimates of defensive medicine are unreliable."
[Editors Note: Costs typically associated with medical malpractice include the settlements and fines resulting from medical malpractice lawsuits as well as the costs of malpractice insurance and the practice of "defensive medicine", a term used to describe tests and procedures that doctors perform primarily as a safeguard against improper medical malpractice lawsuits. Defensive medicine is considered to represent the majority of expenses within the current medical malpractice system.
The total costs associated with the medical malpractice system shown below vary widely. The "Pro" side below claims that tort reform could help save part of the $191 billion to $325 billion a year they estimate goes toward defensive medicine (about 7.4% - 12.5% of the $2.6 trillion spent annually on health care), while the "Con" side below estimates that tort reform would save $11 billion (0.42% of total health care expenses) since they estimate $55.6 billion (2.1%) is spent annually on defensive medicine.
The discrepancy between the "pro” and "con” calculations results from each side including or excluding specific elements of tort reform in their totals, using different methodologies to calculate the totals, having different organizations produce the results, and perhaps ideological motivations to have the number be larger or smaller.]
Would medical malpractice reform (tort reform) significantly reduce the cost of health care?
Tom A. Coburn, MD, US Senator (R-OK), stated during the Feb. 25, 2010 "Bipartisan Meeting on Health Reform," (transcript available at www.whitehouse.gov):
"What we do know - and I'm guilty of this; Dr. Barrasso is guilty of it; Dr. Boustany is guilty of it - is a large portion of the tests we order every day aren't for patients, they're for doctors. And the reason they're there is because we are risk-averse to the tort system and extortion system that's out there today in health care. And there are a lot of ways to fix that, but I just went through last night - if you add up what Thomson Reuters, which looked at all the studies that have been done and combined them in - they say between $625 billion and $850 billion a year of health care dollars are wasted [$250-$325 billion of which they report as being for defensive medicine]...
So it seems to me if cost is the number one thing that's keeping people from getting care, then the efforts of us as we go after cost ought to be to go to those areas where the cost is wasted...
We have a system throughout the country where we're encouraging lawsuits that aren't productive for the country and what they actually do is cause the cost of health care to go through the roof."
[Editors Note: According to the study 40% of the figure of $625-$850 billion a year ($250-$325 billion) reflects "unnecessary care" defined as "unwarranted treatment, such as the over-use of antibiotics and the use of diagnostic lab tests to protect against malpractice exposure," which is commonly refered to as defensive medicine. The remaining 60% of costs include those associated with "fraud," "administrative innefficiency," "health care provider errors," "preventable conditions," and "lack of care coordination." These categories are not associated with medical malpractice, tort reform, or defensive medicine.]
Edwin Meese, III, JD, Ronald Reagan Distinguished Fellow in Public Policy and Chairman of the Center for Legal and Judicial Studies at the Heritage Foundation and former US Attorney General, stated the following in a Jan. 28, 2010 lecture titled "Health Care and Medical Malpractice Reform: The Necessity of Reform in the Current Debate," available at www.heritage.org:
"Medical malpractice is a crucial issue in the area of medical and health care reform. The costs of abusive tort litigation have added billions of dollars to the annual cost of medical care in the United States...
Doctors can pay over $400,000 a year in [medical malpractice] premiums in some parts of the country, and medical malpractice premiums can represent a very high percentage of the average doctor's operating expenses...
A survey by the Journal of the American Medical Association found that 93 percent of physicians practice what we call defensive medicine: that is, ordering tests, procedures, and referrals that are not medically necessary for the sole purpose of protecting the doctor or the hospital against medical malpractice claims. The estimated cost of defensive medicine ranges from $191 billion to $239 billion in the last year for which we have statistics, 2008 [Pacific Research Institute, "Health Policy Prescriptions," (115 KB) Oct. 2009]. These higher costs are passed on to consumers in the form of higher health care insurance premiums, and that in turn squeezes an estimated 3.4 million people out of the ability to purchase health insurance."
Darrell Issa, United States Representative (R-CA), wrote in his Feb. 25, 2010 Politico article "Bipartisan Health Care Reform Must Include Tort Reform":
"The unsustainable path of rising costs is a serious national problem. Currently, health care spending exceeds $2.5 trillion per year. By 2019, it is expected to top $4.7 trillion per year. Any hope for cost containment would involve comprehensive medical malpractice reform to end the practice of defensive medicine, close the loopholes that allow frivolous lawsuits to clog up the system, and set reasonable limits on jury awards...
Defensive medicine - when doctors order unnecessary and usually expensive tests and procedures in order to avoid lawsuits - is a major contributor to skyrocketing health care costs. As much as $210 billion is spent on defensive medicine annually - equal to $700 for every U.S. man, woman and child. This helps drive up insurance premiums that are already too high for many Americans. And the excessive malpractice litigation inevitably leads to physician shortages - especially among obstetricians, neurosurgeons and emergency room physicians."
Sherman "Tiger" Joyce, JD, President of the American Tort Reform Association, stated the following in a Nov. 2, 2009 article "Tort Reform Is Key to Health Reform," published in the Metropolitan Corporate Counsel:
"Though common-sense Americans repeatedly raised the issue of tort reform while discussing health care legislation with members of Congress during town hall meetings this past summer, too many lawmakers and analysts still stubbornly insist that medical liability lawsuits do not contribute significantly to rising health care costs. These lawmakers and analysts are wrong...
Beyond the obvious costs of litigation, more subtle costs related to the practice of 'defensive medicine' are contributing to runaway health care inflation.
How much? In a Massachusetts Medical Society survey published last November, 83 percent of Bay State physicians cited the fear of being sued in their decisions to practice defensive medicine.
According to the 900 doctors anonymously surveyed, on average, 18 percent to 28 percent of tests, procedures, referrals and consultations and 13 percent of hospitalizations were ordered to avoid lawsuits. All of this adds at least $1.4 billion to annual health care costs in Massachusetts alone, and national estimates range as high as $200 billion."
Newt Gingrich, PhD, Senior Fellow at the American Enterprise Institute and former Speaker of the US House of Representatives, wrote in his Feb. 21, 2010 article "How the GOP Can Fix Health Care," published in the New York Times:
"CAT scans, blood tests, ultrasounds, Caesarean sections- in many instances, these diagnostic tools and procedures are vital for treating patients. Too often, however, such procedures are ordered unnecessarily and drive up the cost of medicine for patients, taxpayers and insurance carriers...
Doctors order these procedures to protect against frivolous suits filed by trial lawyers seeking an easy payout, particularly after a doctor makes a simple mistake. Seventy-three percent of the doctors surveyed said they had practiced defensive medicine in the past year. As a result, American patients not only endure extra hours of tests and treatments but also pay more for health care...
Congress must give states the incentive to reform their civil justice systems so that lawyers will think twice before suing doctors for frivolous cases.
These reforms would allow doctors to stop playing defense, and make it possible for patients and taxpayers to better afford health care."
Michelle M. Mello, JD, PhD, Professor of Law and Public Health at the Harvard School of Public Health, and Amitabh Chandra, PhD, Professor of Public Policy at Harvard University’s John F. Kennedy School of Government, et al., stated in the abstract to their Sep. 11, 2010 study, "National Costs of the Medical Liability System," published in Health Affairs:
"This paper estimates the national costs of the medical liability system, including indemnity payments, administrative costs, defensive medicine costs, and lost clinician work time, synthesizing data from a variety of sources. Total costs are estimated at $55.6 billion in 2008, including $45.6 billion in defensive medicine costs, $5.7 billion in indemnity payments, and over $4 billion in administrative and other expenses... We conclude that although the liability system is costly in absolute terms, because it accounts for only a small proportion (2.4%) of total health care spending, medical liability expenditures cannot be the main, or even one of the most important, drivers of rising health care costs."
The Congressional Budget Office (CBO) stated in an Oct. 9, 2009 letter to Senator Orrin G. Hatch, "CBO's Analysis of the Effects of Proposals to Limit Costs Related to Medical Malpractice," available at www.cbo.gov:
"On the basis of newly available research, CBO has updated its analysis of the effects of tort reform to include not only direct savings from lower premiums for medical liability insurance but also indirect savings from reduced utilization of health care services. Many analysts surmise that the current medical liability system encourages providers to increase the volume or intensity of the health care services they provide to protect themselves against possible lawsuits...
CBO now estimates, on the basis of an analysis incorporating the results of recent research, that [tort reform]... would reduce total national health care spending by about 0.5 percent (about $11 billion in 2009). That figure is the sum of the direct reduction in spending of 0.2 percent from lower medical liability premiums, as discussed earlier, and an additional indirect reduction of 0.3 percent from slightly less utilization of health care services."
[Editors Note: The CBO estimates total health care spending at $2.6 trillion dollars. Since the CBO finds that $11 billion in savings would result from tort reform (medical malpractice reform), this means that tort reform would reduce health care spending by about 0.5%. We have placed this entry in the "con" column because 0.5% is not "a major contributor" to total health care costs.]
The WellPoint Institute of Health Care Knowledge stated the following in its May 2009 research report "What's Really Driving the Increase in Health Care Premiums?," available at www.wellpoint.com:
"Despite the common belief that costs increase due to excess insurer profits, the aging of America and the high cost of medical malpractice, these factors have little if any impact on health care premiums...
Medical malpractice is not a major driver of spending trends. Premiums for liability coverage and defensive medicine contribute to health spending at any moment in time but are not considered a recent significant factor in the overall growth of health care spending. Put another way, tort reform would lower health insurance premiums but medical malpractice is not currently driving the rate of increase."
Robert I. Field, PhD, JD, Professor of Law at the Earle Mack School of Law and Professor of Health Management and Policy at Drexel University, wrote in his Sep. 8, 2010 article "Why Is Health Care So Expensive?," published in the Philadelphia Inquirer:
"Health care costs more in the United States than anywhere else on earth. It’s not even close. We spend almost twice as much as the average of developed countries, and almost forty percent more than the second most costly country, which is France.
This would make sense, if we were healthier as a result. Unfortunately, we are not. We get chronic diseases at least as often as citizens of other countries, we rank 38th in life expectancy, and our infant mortality rate is number 33. The highest life expectancy in the world is in Japan, which spends about half per person what we do on health care. Something is driving up costs in the United States, and it is not an expense that gives us better health.
So, why does American health care cost so much?
Many people point to malpractice liability as the culprit. We are definitely the most litigious country. However, direct costs of medical malpractice amount to only about one percent of total system expenses. The bill is higher if you also consider the cost of defensive medicine, which is the extra tests that some physicians order to try to protect themselves from lawsuits, but no one knows by how much. Even the highest estimates put the cost of defensive medicine at less than three percent of the total – a large number but hardly enough to account for the high system cost alone."
Thomas Baker, JD, Professor of Law at the University of Pennsylvania, stated in an Aug. 31, 2009 interview with Newsweek Correspondent Anne Underwood, available on the New York Times website:
"As the cost of health care goes up, the medical liability component of it has stayed fairly constant. That means it’s part of the medical price inflation system, but it’s not driving it. The number of claims is small relative to actual cases of medical malpractice...
[M]edical malpractice tort costs were $30.4 billion in 2007, the last year for which data are available. We have a more than a $2 trillion health care system. That puts litigation costs and malpractice insurance at 1 to 1.5 percent of total medical costs. That’s a rounding error. Liability isn’t even the tail on the cost dog. It’s the hair on the end of the tail...
We have approximately the same number of claims today as in the late 1980s. Think about that. The cost of health care has doubled since then."