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The Truth About Health Care and Tort Reform, Part III

Thursday, May 14th, 2009

Recap: This is the third post in a series. Part I explains that “tort reform” — an idea being pushed by conservatives as the cure for many economic problems, including high health care costs — has never delivered the promised results, yet conservatives keep making the promises. Part II documents how a cabal of extremely wealthy individuals and family trusts has been able to manipulate public opinion to sell “tort reform” to the public.

“Tort reform” proposals include a range of changes in personal injury liability laws, such as caps on the amount of damages the injured person can be awarded in a court. In a later post I will go into more detail about the effect these caps have had on injured individuals.

I am not arguing that personal injury law in the U.S. is perfect, or that it is never abused. Further, there are a number of thorny issues that need to be resolved regarding specific types of claims, such as mesothelioma resulting from decades-past asbestos exposure, if the law is going to be fair to both complainants and defendants.

My argument, however, is that before citizens allow state and federal legislatures to reduce their rights to take grievances to court, we all need to clearly understand the arguments being made for tort reform. Some of those arguments have some validity, but many of them are just flat-out false.

For example, recently Alan Miller, CEO of Universal Health Services, Inc., wrote a “guest blog” for CNBC promoting tort reform. Let’s take a look at his arguments.

Without much-needed reforms to limit jury awards for non-economic damages, the cost of malpractice insurance will continue to rise. That, in turn, will increase the exodus of physicians from states without limits. And large jury awards make healthcare needlessly expensive for all Americans.

This statement is partly true and partly not. It is true that where states have put caps on non-economic damages awarded to juries, the rates of malpractice insurance premiums have gone down. It is also true that at least some states with lower malpractice insurance premiums attract new doctors, especially those at the beginnings of their careers. But are significant numbers of doctors with established practices packing up and moving to other states with lower malpractice insurance?

The American Association for Justice — yes, a trial lawyers’ association — looked at the recent “Physician Characteristics and Distribution” report from the American Medical Association. The data show no correlation between capping malpractice awards and attracting more doctors to a state. In fact, “Using data from 2007, the analysis concludes that states without caps actually have more doctors per 100,000 (319) than states that set limits (283), a difference of 13%.”

CEO Miller’s claim that large jury awards make health care needlessly expensive for all Americans is simply not true. Medical malpractice payouts are less than one percent of total U.S. health care costs. See also “Faulty Data and False Conclusions: The Myth of Skyrocketing Medical Malpractice Verdicts” by Lewis L. Laska, J.D., Ph.D. and Katherine Forrest, M.D., M.P.H.; and “Quick Facts on Medical Malpractice Issues” by Public Citizen.

Miller continues,

Physicians from states without malpractice reform have either abandoned or restricted their practices or moved to states with lower rates for malpractice insurance. In either case, the result is that residents of states that have not enacted tort reform have fewer physicians to provide treatment, and have higher expenses for their healthcare.

That’s a claim one hears a lot — that citizens of states that have enacted “tort reform” enjoy better access to physicians and lower costs for healthcare. But it is not true. Of the many states that have enacted tort reform laws over the past several years, not one has shown reduced overall health care costs, or can even document that health care costs have increased at a slower rate. Health insurance premiums have continued to go up in these states.

Miller:

Malpractice reform will do more than lower costs for physicians. It will help lower the overall cost of healthcare for everyone and help physicians provide better care for patients.

A recent survey by the Massachusetts Medical Society and the University of Connecticut Health Center revealed that among physicians surveyed, 83 percent reported that they had practiced defensive medicine. That study showed that an average of 28 percent of tests, procedures, referrals and consultations were ordered for defensive reasons. The study also concluded that 13 percent of all hospitalizations ordered by physicians were ordered for defensive purposes.

You can find no end of studies that suggest tort reform ought to reduce medical costs. The study cited above is a prime example. But it doesn’t happen. For example, a 2008 study by the MIT Quarterly Journal of Economics that looked at vital statistics of millions of births concluded “it does not appear to be true” that tort reform reduces “defensive medicine” cost.

Other studies that have looked at the results of tort reform say they find no evidence that physicians change “defensive” practices. Physicians may sincerely believe they would not order so many tests or procedures if they weren’t concerned about legal liability, but in practice, it doesn’t happen. See also Jim Landers, “Malpractice damage caps not a cure for high health care costs,” Dallas Morning News, April 21, 2009.

This is the kind of messaging I’m seeing lately from tort reform advocates. They have seized upon the one measurable effect of tort reform — that it lowers the cost of medical malpractice insurance — and imply that all manner of other benefits must flow from that, in particular lower health care costs and an improved supply of doctors. But cheaper malpractice insurance is the only objectively measurable, beneficial effect of tort reform that we can find in states that have enacted it. The other effects amount to empty promises that are never fulfilled.

By the way, CEO Miller’s company, Universal Health Services, Inc., enjoyed a 17 percent increase in first quarter 2009 earnings, at a time in which many other businesses were struggling and going under. Make of that what you will.

Barbara O’Brien
May 11, 2009