America is the land of litigation. A tort lawyer’s paradise. In America, you can sue anyone for just about anything. This has affected the cost of America’s health care, and has demoralized the medical profession. In fact, abusive tort litigation has added billions of dollars to health care costs, both directly, through settlements and high malpractice insurance rates, and indirectly, through the practice of “defensive medicine” to avoid litigation. For health care reform to be successful in bending the cost curve and improving quality of care, policymakers, particularly at the state level, cannot ignore medical liability reform.
Despite this, throughout the health care debate, medical liability reform has been glaringly omitted. Senator John Cornyn (R-TX) recently spoke at the Heritage Foundation about the positive impact that reform could have on the health care system. Sen. Cornyn acknowledged that basic medical liability laws are necessary to protect patients against negligence and medical errors. However, the current legal environment—one without consistent state-wide oversight on punitive and non-economic damages—has fostered excessive litigation. In fact, The New England Journal of Medicine estimates that 40 percent of medical liability lawsuits are brought without merit. Excessive litigation encourages the practice of defensive medicine—ordering unnecessary tests, procedures, and referrals for the sole purpose of protecting the doctor against malpractice claims. A recent report found that 93 percent of physicians admit to practicing defensive medicine. Several studies show that this raises the cost of health care by approximately $200 billion annually.
The medical legal environment in many states drives up the price of malpractice rates to as high as $300,000 a year for some specialties. Costly premiums for malpractice insurance translate into higher premiums for patients, as the burden of this additional cost to doctors is passed down in the rates they charge. Doctors may also decide that the cost of practicing medicine is so high that they must close their practices or refuse to perform high-risk procedures, which in turn decreases patients’ access to care and health care quality in general.
Sen. Cornyn described Texas’ successes in achieving medical liability reform to illustrate its merits. Prior to establishing liability restrictions in 2003, Texas was a haven for big medical tort litigation, triggering a dramatic increase in medical malpractice insurance rates. As a result, doctors left the state. Out of the 254 counties in Texas, 99 lost at least one specialist. Unfortunately, the majority of specialists left rural counties, leaving no additional specialists in the area. Access to care and quality plummeted. In 2003, Texas took action by passing comprehensive medical liability reform. The results were outstanding. Malpractice premiums fell by 27 percent on average and 125 counties added a high-risk specialist. Health systems began saving millions in medical liability costs and reinvested those savings in technologies (such as electronic medical records) designed to improve quality of care.
Examples like Texas prove that medical liability reform has a positive impact on the health care industry as a whole. In all, 27 states have enacted medical liability reform, and all states should follow suit. As the massive and hugely unpopular House and Senate health bills stall, and lawmakers look for better options to achieve reform, Congress should examine ways to encourage all states to enact medical liability reform. Doing so will help cut down on the estimated $200 billion annual waste from defensive medicine and improve access to care and overall patient quality. Even the federal government would benefit, as the Congressional Budget Office has reported that the federal deficit could be reduced by $54 billion over ten years due to enacting tort reform. While medical liability reform cannot solve all of the problems with the health care system, without it reform is unfinished business.
Co-authored by Rick Sherwood.