Reducing healthcare costs via tort reform?

I was under the impression that a big part of the cost of healthcare in the U.S. could be attributed to doctors running exhaustive batteries of tests, some would say unnecessarily exhaustive, “just in case” they were sued for malpractice.

Yes? No? How much? How little?

And that doctors were in “cover your ass” mode largely because of a litigation-happy society and ambulance-chasing attorneys*. And that it was these attorneys, and these kinds of lawsuits, that are what people mean when they talk about the need for “tort reform”.

Yes? No? Kind of?

So… if costs are high, in part because of frivolous litigation, but if the frivolous litigation could be reduced via tort reform, then that would help reduce the cost of healthcare, right?

Obviously I’m not 100% certain of the particulars, or even the exact cause and effect. But, is any of this even vaguely on target? Are healthcare costs driven up by frivolous litigation? Would tort reform reduce the amount of frivolous litigation? Ergo, would tort reform reduce the cost of healthcare?

And if so… is tort reform part of Obama’s healthcare plan? (And if not, should it be? Why or why not?)


(* And no… unless you, personally, really are litigaion-happy or an ambulance-chaser then I wasn’t referring to you.)

No and no.

Healthcare costs are arguably driven up by lack of litigation. The insurance companies need to grow a pair, and fight these cases if they are so frivolous. Plaintiff lawyers work on a no-win, no-eat basis. At the moment, the threat of a law suit sends insurance companies racing to the check book to settle, so it is worth making the threat. Why do the insurance companies do this? Because they can simply pass the cost on to the health care provider, who, in turn, passes it on to Joe Public.

If a case has no value, it will, in the vast majority of instances, lose. Yes takign it to court will cost money, in the short run, but in the long run it sends a message to PI lawyers that they need to have better cases.

Would tort reform reduce the costs? Not in the proposed forms. Simply capping damages won’t reduce the costs. The majority ofo cases settle for below the damages cap anyway. Yes there would be some downward pressure on the size of settlements, but the main driving cost the insurance company faces is the cost of litigation, not the payout at the end, because frivilous cases almost invariably lose.

So the “frivoulous” plaintiffs won’t be harmed by tort reform. The people who will be are those who suffer catastrophic harm as a result of medical incompetence. And a system that leaves them with a pitifully low pay out as a result doesn’t strike me as a good one.

So, to reduce the effects of litigation on health costs you need an incentive for insurance companies to defend suits that have no merit. As long as the costs can be shunted to the end customer, they won’t do it. If the government, on the other hand, grows a pair and pushes back, if it is a health care insurance provider, then we might see some action.

Most states have adopted malpractice caps. This has led to a drop in Insurance premiums that doctors have to pay in those states, but haven’t done much to cut the actual per-captia cost of health care. I suspect that insurance costs were simply not that big a percentage of total healthcare costs in the first place. This article (which is just the first thing that came up on google) claims less then one percent.

And of course there’s a trade off, malpractice awards discourage…well malpractice. If awards are capped too low, it risks lowering the disincentive for hospitals and doctors to spend money preventing problems.

Doctoes run batteries of tests because they’re paid per treatment. They also favor more expensive treatments because the more expensive, the more they get paid. Malpractice suits, payouts etc. cost half of one percent of total healthcare costs. The whole malpractice issue is just a GOP talking point. It allows GOP pols to blame the lawyers, always a popular move, but like most GOP talking points it has no basis in reality. If you want to cut healthcare costs pay by results not per treatment, open a single-payer system to a. create huge purchasing power (Wal Mart healthcare providers ) and b. cut the 30+% overhead/profit private insurance companies take, do comparative-effectiveness studies on the most efficient treatments etc. It’s easy to do but there’s no political will to do it as almost all the politicians are bought and paid for by the healthcare lobby.

Malpractice refers to accidents, 99% of the time. Doctors don’t sabotage their own work, and trying to dissuade them from accidents is rather pointless.

If they were sabotaging their patients, then being insured, again, makes no sense. You might as well get thievery insurance for paying your duty if you get caught steeling your neighbors refrigerator.

I just heard today on NPR that litigation/lawsuits/malpractice does not make up a significant amount of the “cost of healthcare” overall - only about 1%. So this isn’t really an issue.

[Going to look for cite, brb]

Back - From All Things Considered (at 6:55 in the audio)

The relevant quote from the audio:

The Bar Association told me so! Anyway, a neurosurgeon in MA currently pays over $200,000 in insurance…and this has NO effect on healthcre costs?
If you believe that one, I have a bridge to sell you in Brooklyn

Some cites would be nice. Other than a cite to a radio show, that is. Could someone point to some real studies which indicate that this isn’t a problem?

And just like it’s important to beware of tobacco studies put out by tobacco growers, you should be leery of studies put out by firms employed by trial lawyers.

Some studies include the cost of lawsuits against drug manufacturers, some don’t. Some only consider the actual settlement costs of cases, and ignore the cost of defensive medicine driven by litigation. Others also include the cost of liability insurance, and some don’t. Partisan groups will lump as much or as little together to try and make the point they want to make. Some studies will include the total cost of all litigation, and others will try to sort out the ones that were ‘good’ litigation and those that weren’t.

I have seen estimates for the cost of medical litigation as high as $3300 per US family.

For example, this cite makes the following claims:

This cite makes the following claim:

I’m not claiming that these numbers are accurate - I don’t have time today to satisfy myself that these studies aren’t just industry shills. But the point is that there are a lot of conflicting claims out there, and until someone cites some actual peer-reviewed studies and lists the assumptions they make, I wouldn’t just accept that the cost of medical lawsuits is ‘trivial’.

I have two cousins who are doctors (in the US). One, an OB/Gyn pays 46k in malpractice insurance when he was in private practice, and had never been sued. The other, a psychiatrist, paid “less than auto insurance”. I have been in a conversation with the two of them together about the difference. When you have a child born and something goes wrong, the child could either die or have some kind of horrible disability. The sympathy factor involved makes the liability practically unlimited, and no one really believes that the jury can understand whether or not the doctor was at fault. For the priviledge of delivering babies at a hospital, the doc had to carry more than twice as much coverage ($5m instead of $2m, PER INCIDENT) because, while the doctor would be personally bankrupted by a $2m award, the hospital was the deep pocket. Even if the doctor is an “independent contractor” the hospital has virtually unlimited liability in practice.

In the case of a psychiatrist, the big danger is that someone will either harm themselves or someone else. But since you are dealing with a nut-job patient, it is hard to blame the doc. Especially as it is very difficult now to involuntarily confine anyone, for better or for worse.

These numbers are about eight years, so it could be different now.

The successful lawsuits maybe, but not the whole bullshit of litigation.

From this 2002 cite

No wonder American doctors demand much higher salaries than Canadian doctors.

Yes you need tort reform. You can start with those who fail to succeed with their lawsuits paying the court costs and defense fees of the defendants. Thats what we do in Canada, and we have caps on pain and suffering

here’s another cite

Now it seems to me that doctor’s pay is a huge factor in health care costs, and its a no brainer that paying the huge sums for medical malpractice insurance demand a much higher salary.

This cite explains why France cna deliver health care at 11% of national income
compared to the US at 16 %

-bolding mine

No, as has already been cited, it has a 1% effect on healthcare costs. It may be inconvenient to your politics, but it is a fact. Tort reform will not have a significant effect on healthcare costs.

President Bush said in his State of the Union address this year that the threat of lawsuits against doctors and hospitals was one of the “prime causes” of rising health-care costs. Bush’s words suggest a correlation between health-care costs and the premiums physicians and hospitals pay to protect themselves in lawsuits.

Yet between 1988 and 1998, U.S. health-care costs increased 74.4 percent while malpractice premiums increased 5.7 percent. The total premiums paid in 2000 added up to 0.56 percent of the nation’s total health-care bill.

Bush asked Congress to “pass medical-liability reform” that would limit malpractice awards. The House passed it. Senate Democrats thwarted the bill this week. Bush wants Americans to believe that if insurance companies have to pay smaller damages to injured patients, physicians will have lower premiums and health-care costs could actually be held down.

Wrong again.

New information in a national database that collects reports of every judgment and settlement paid in malpractice demonstrates just the opposite. An analysis of that data by a consumer-advocacy group reveals malpractice payouts decreased by 8.2 percent between 2001 and 2002. Meanwhile, doctors" premiums didn’t go down.

Damage awards greater than $1 million decreased more than 10 percent between those years. Doctors" premiums weren’t affected.

There’s simply no correlation between lawsuits and insurance rates. Rather, insurance rates are tied to the climate of the stock and bond market, where insurance companies invest much of their money.

Study suggests insurers raise rates to make up for investment declines

By Liz Kowalczyk, Globe Staff | June 1, 2005

Re-igniting the medical malpractice overhaul debate, a new study by Dartmouth College researchers suggests that huge jury awards and financial settlements for injured patients have not caused the explosive increase in doctors’ insurance premiums.

The researchers said a more likely explanation for the escalation is that malpractice insurance companies have raised doctors’ premiums to compensate for falling investment returns.

The Dartmouth economists studied actual payments made to patients between 1991 and 2003, the results of which were published yesterday in the journal Health Affairs. Some previous studies have examined jury awards, which often are reduced after trial to comply with doctors’ insurance coverage maximums or because the plaintiff settles for less money to avoid an appeal. Researchers found that payments grew an average of 4 percent annually during the years covered by the study, or 52 percent overall since 1991, but only 1.6 percent a year since 2000. The increases are roughly equivalent to the overall rise in healthcare costs, said Amitabh Chandra, lead author and an assistant professor of economics at the New Hampshire college…

Meanwhile, malpractice insurance premiums for internists, general surgeons, and obstetricians have skyrocketed since 2000, jumping 20 to 25 percent in 2002 alone…

''It’s not payments that’s causing this," Chandra said. ''The simple explanation that comes to mind is the underwriting cycle. If they’re making less money from the investment side of things, it’s going to cause [insurance companies] to raise rates."

WASHINGTON, D.C. – A General Accounting Office (GAO) study showing that medical groups manufactured a crisis to push their agenda of changing the medical malpractice insurance system is further proof that Congress and state legislatures should abandon efforts to take away patients’ legal rights, Public Citizen said today.

The GAO study, which was released on the Friday before Labor Day, found that the American Medical Association (AMA) and other medical provider groups manufactured a “crisis” of access to care – a crisis they claimed was caused by malpractice lawsuits.

Eighteen of the GAO report’s 41 pages are devoted to debunking claims that doctors in AMA-designated “crisis states” were no longer providing medical care to patients. Most damaging to the AMA’s argument was the GAO’s finding that the volume of medical care delivered to patients in five states had increased during the period during which the AMA suggested it was decreasing.

Congressional lawmakers earlier this year considered a measure to cap non-economic damages provided to victims of medical malpractice at $250,000. Proponents of the measure cited the AMA’s information. Public Citizen offered data showing no crisis existed and explained how the insurance industry was pushing damage caps because it suffered losses as a result of the economic cycle. Now, however, lawmakers are talking about reconsidering the cap this fall.

“The GAO report confirmed what Public Citizen has found in its numerous state studies — that liability laws have a positive effect on doctors’ behavior, not the negative effects so often alleged,” said Joan Claybrook, Public Citizen president. “The GAO study also shows that Bush administration lies are not limited to foreign policy.”…

I suspect that it’s true that reducing the cost of medical malpractice fees is not any sort of panacea. Largely, it will only be surgeons (and hospitals?) with high malpractice rates/costs. Which is only a small, though not-insignificant, portion of overall health care costs once you include equipment, pharmaceuticals, etc.

It’s unlikely that any single act to reduce costs will be a silver bullet that cleans everything up.

But that’s just as true as universal health care. For instance, if you look at health spending (per GDP) over the last 40 years, not a single country suddenly decreases it’s total spending by half, even though several of them have, almost certainly, swapped over to a universal health care system during that time. Point in fact, nearly all of them continue on in a nice steady, unrelenting slope. There’s no evidence of any change to their system anywhere.

There isn’t going to be a single answer short of rebuilding the whole system from scratch. That can’t happen, simply because it would throw everything into chaos. So the only other solution is to go through everything piece by piece cutting off fat. Tort reform is most certain to be one of those items, but it is definitely not going to be the only place that needs the knife.

ETA: And in case anyone thinks I’m being sly, here’s spending per capita which is by-and-large the same graph.

Those articles make a good case for socialising malpractice insurance as well as healthcare, don’t they? *

Ctrl-C failed.

Amen, right out of law school I worked in an employment defense shop (employment law being a cousin of tort work) and the amount of completely baseless claims that settled for 5 or 10 grand was shocking.

This is incredibly annoying. The 1% figure is supported by a cite to a talking head on a public radio show. It’s not even sourced. No one has provided the actual cite to the study so we can evaluate exactly what it’s including. It has been countered in this thread by a number of cites in opposition, which DO have links to the source material.

But to you, it’s mind closed - you’ve got your number that you want to use to justify your position, so the debate is ended.

How convenient.

Here’s a cite from The Department of Health and Human Services which would indicate that medical litigation and liability is a bigger factor than Fear Itself’s 1%:

The report compares liability insurance costs between states that do not have tort reform against California, which does.

As an example, in Florida the cost of liability insurance for an OB/GYN ranges between $78,000 and $211,000 per year. In California, the respective numbers are $28,000 to $75,000.

In the two years 2001-2002, states which capped non-economic damages at <350,000 saw rate increases averaging 18%. The average for all the states with no caps was 45%. This directly contradicts some of the information posted earlier in this thread.

I would like to know the profits of companies that sell malpractice insurance. I read that less than 1/3 of the people who have a legitimate suit, actually do. I suspect our insurance companies are making a ton.