Blog on the Run: Reloaded

Saturday, October 10, 2009 2:20 pm

“Tort reform,” lawyers, malpractice and health-care reform

You no doubt believe, in significant part because a lot of people who ought to know better are saying so, that malpractice insurance is a big and preventable part of our huge health-care costs.

It’s an attractive scenario, not least because it makes lawyers the bad guys. Just one problem: It’s not true.

Also, a lot of people will be making a big deal out of a Congressional Budget Office report that “tort reform” would save $54 billion from federal deficits during the next 10 years — $41 billion in spending reductions and $13 billion in new revenue.

That’s not peanuts … except in the case of what the U.S. spends for health care. We spend roughly $2.4 trillion every year on it. So these savings would be the equivalent of saving a nickel on a $24 restaurant tab.

Here are the relevant facts about medical malpractice:

  • A disproportionately small number of health-care professionals is responsible for a disproportionately large percentage of malpractice claims.
  • This can happen because the states and professions do not adequately police their own. In particular, details on every malpractice claim, merited and unmerited alike, need to go into a publicly available national database.
  • The biggest driver of malpractice-insurance premiums isn’t malpractice-suit judgments or settlements, it’s the performance of the insurers’ own investments. This was true a long time before last year, when all the markets went to hell.
  • The fact that doctors push patients toward diagnostics and treatments in which they have a financial interest is a far bigger driver than all malpractice-associated costs.

This information has been publicly available and factually undisputed far too long for the misinformation to be entirely accidental. So we must ask ourselves: Who benefits from having this misinformation out there?

Well, because malpractice patients’ lawyers tend to donate disproportionately to Democrats, and because the targets of suits against doctors, hospitals, and drug and device makers tend to be run disproportionately by Republicans, you can argue that Republicans benefit financially and politically.

Of course, you also can argue that, financially and politically, Republicans would benefit equally, if not more so, from an actual reduction in malpractice, following some of the steps suggested above. But where would the fun be in that?

UPDATE: From the comments, Mark Baird adds ammunition to the argument that talk about “tort reform” is just a distraction:

Following is a [Government Accountability Office] report on medical malpractice [that] could not find any evidence to substantiate the claims of lawsuits impacting health care costs, access to health care or defensive medicine (with one possible lose connection relating to OBGYN). But of course you will not see this report on any media outlet swinging left or right.

Remember the CBO report regarding the cost of a single payer system that we all grasped to support our arguments against a single payer system…

Well, there is the CBO report which had this to say about tort reform:

“But even large savings in premiums can have only a small direct impact on health care spending–private or governmental–because malpractice costs account for less than 2 percent of that spending.”

And of course there is Tillinghast-Towers Perrin (one of the largest in the world that provides risk management for the insurance and reinsurance industry).

According to the actuarial consulting firm Towers Perrin, medical 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.

Of that 1 to 1.5 percent what portion of that is “frivolous”? (Page 10)

And then of course the report from Towers Perrin that states that the total tort cost in the US is 2% of the GDP. What percentage of that is “frivolous” and of that percentage what percentage is “frivolous” corporate lawsuits. So how much are “frivolous” lawsuits driving up the cost of everything? Maybe less than 2 cents on the dollar or maybe even less the 1 cent on the dollar?


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