Tort Reform to Reduce Healthcare Spending .5%

[Startraveler]

CBO has a new letter out today with some interesting analysis. From the Congressional Budget Office's blog:

CBO’s Analysis of the Effects of Proposals to Limit Costs Related to Medical Malpractice (“Tort Reform”)

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.

Spending would be reduced 0.2% because of lower liability premiums for doctors and it would be reduced 0.3% for reductions in "defensive medicine." That's a grand total of a 0.5% reduction in health care spending or $11 billion a year.

A decent chunk of money to be sure but tort reform is hardly the silver bullet conservatives seem to think it is.

Edited October 9, 2009 by Startraveler

[Pseudo Intellectual]

Tell that to Texas.

[Startraveler]

Texas proves the rule: whatever its merits, tort reform will have minimal impact on the big problems facing our health care system.

Look at Texas, which enacted some of the most extensive malpractice reforms in the nation in 2003. The number of lawsuits in the state has fallen by half since then, and malpractice premiums are down 30%. But health-care costs in Texas are still among the highest in the nation and are growing at a faster rate than in most other states. "I think tort reform is a good idea as a carrot to get doctors to go along with more significant health-care reforms," says law professor Charles M. Silver of the University of Texas at Austin. "But as we've proved, it isn't the answer on its own."

[Pseudo Intellectual]

http://www.americanthinker.com/2009/08/health_care_reform_that_actual.html

[Startraveler]

I'm not sure what the point is. When people discuss the issues with our health care system they tend to focus on three areas: cost, access, and quality.

Your article doesn't mention any kind of cost containment in Texas (aside from liability insurance premiums) resulting from tort reform because there hasn't been any. Costs there continue to rise and fast.

Your article mentions more doctors but that doesn't necessarily imply greater access. Has Texas been improving on that front?

Texas still leads nation in rate of uninsured residents:

Texas once again led the nation with the highest percentage of residents without health insurance, a U.S. Census Bureau report showed Tuesday, although the same study also reports a slight dip last year in the percentage without coverage across the nation.

Almost one of every four Texas residents – 24.8 percent – were uninsured in 2006 and 2007, based on an average of the rates for those two years. That's up from 23.9 percent for 2004 and 2005

Even if you take out the 5-6% of the state's population that is here illegally, Texas still finds itself toward the bottom of the list in terms of health insurance levels. Take a look at the map.

That leaves quality. Your article suggests that quality has gone up because "the percentage of complaints about medical care [is] actually going down." That's an odd conclusion to draw, particularly when that article links to another article that points out:

The main opponents to tort reform question if the reforms have really improved quality of care and patient access to care. Jay Harvey, president of the Texas Trial Lawyers Association, highlights a 2006 study by the American College of Emergency Physicians that gave the Texas emergency care system a C grade overall. The system was given a D+ in access to emergency care and quality and patient safety, a D in public health and injury prevention, and an A+ in medical liability environment.

It appears that an "A+ medical liability environment" doesn't necessarily correlate with higher quality care.

So, again, the moral is that tort reform--whatever its merits--is not a serious solution to the big problems facing our health care system.

Edited October 9, 2009 by Startraveler

[preacherman76]

Personaly Id like to see the bill first, before I decide what it will save.

[Startraveler]

What bill? This thread is about a proposal (national implementation of common tort reform ideas), not a specific bill. The point being that this proposal wouldn't make much of a dent in health care costs.

[ninjadude]

its so cool that the cbo agrees with me. i did this analysis weeks ago and have been posting it here on um.

[whitelight]

What bill? This thread is about a proposal (national implementation of common tort reform ideas), not a specific bill. The point being that this proposal wouldn't make much of a dent in health care costs.

"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)."

The CBO only works with what has passed a committee. So, what the CBO is saying is, their is very little in savings from tort reform in democrat bills.

[Startraveler]

"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)."

Read the OP, where a "typical package" is defined: "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."

These are not in the current reform bills (the closest they get is the Baucus bill expressing the sense of the Senate that states should be encouraged to try different types of tort reform). This analysis was done because Orrin Hatch asked the CBO to determine how much tort reform could save us (presumably in an attempt to show it should be in any reform legislation). More specifically, the analysis considers "National implementation of a package of proposals similar to" this:

• A cap of $250,000 on awards for noneconomic damages;
  
• A cap on awards for punitive damages of $500,000 or two times the award for
  economic damages, whichever is greater;
  
• Modification of the “collateral source” rule to allow evidence of income from
  such sources as health and life insurance, workers’ compensation, and automobile
  insurance to be introduced at trials or to require that such income be subtracted
  from awards decided by juries;
  
• A statute of limitations—one year for adults and three years for children—from
  the date of discovery of an injury; and
  
• Replacement of joint-and-several liability with a fair-share rule, under which a
  defendant in a lawsuit would be liable only for the percentage of the final award
  that was equal to his or her share of responsibility for the injury.

This isn't taken from H.R. 3200 or its Senate counterparts, this is taken from the proposals of people who want aggressive national tort reform.

The CBO only works with what has passed a committee. So, what the CBO is saying is, their is very little in savings from tort reform in democrat bills.

This is false. CBO does score bills that pass out of committee; they also analyze various scenarios when asked to (as in this case) or even occasionally legislation that has merely been proposed (CBO is supposedly scoring H.R. 676--the single-payer health care bill--right now).

This analysis has nothing to do with the existing health care bills. It's an analysis of what effect national tort reform (period) would have on health care expenditures.

[Guardsman Bass]

I imagine you won't see the Republicans always touting the "It's over 1 trillion dollars!" bit from an old CBO Report touting this. But it's not unexpected, either - malpractice suits amount to only about $2 billion a year in costs. And as Startraveler pointed out, the claim that it was encouraging so-called "defensive medicine" and a primary source of spiking the costs upward turned out to be illusory.