Health Care: Congress is ready to spend a lot of other people's money on its idea of reform. Yet one sure way to bring down costs is being ignored, and that says a lot about the Democrats' effort.
The Democrats pushing hard for Washington's eventual takeover of the health care industry have dismissed tort reform as a way to bring down medical care costs.
They've said the savings just aren't there. Though some would argue differently, their position was supported by a federal analysis.
Almost a year ago, the Congressional Budget Office estimated that changing the rules governing medical malpractice lawsuits would save a mere $5.6 billion over 10 years. Hardly a speck relative to the $2.5 trillion, or 17.6% of gross domestic product, that Americans will spend on health care this year.
The CBO, however, has issued a new analysis, this one figuring in tort reform proposals that would place reasonable limits on medical malpractice lawsuits. In taking a fresh look, the CBO believes tort reform would save $54 billion over 10 years.
Growing health care costs have been driven in part by the widespread practice of physicians overtreating their patients and high malpractice insurance premiums charged by carriers.
Doctors and insurance companies aren't demonstrating the greed they are so often accused of. They're simply protecting themselves from an aggressive medical malpractice lawsuit industry and the outrageous awards that juries often hand out.
To shield themselves from abusive lawsuits, doctors feel they need to engage in defensive medicine. They order tests and procedures they don't believe to be necessary, and schedule redundant visits and consultations out of an abundance of caution. This raises the demand for services, and when demand grows, so must prices.
Though Speaker of the House Nancy Pelosi has called them "villains," insurers are likewise defending themselves when they raise premiums. It's a reasonable response to the large payouts they have had to hand out in malpractice cases. It's just as reasonable for doctors to pass on to their patients the higher insurance premiums.
The CBO projects premiums can be cut by 10% if Washington were to lessen the incentives to sue simply by establishing:
• A $250,000 cap on damages for pain and suffering.
• A $500,000 or twice the amount of economic damages cap on punitive damages.
• Deductions on court awards in the amount of insurance and workers' compensation benefits a plaintiff receives.
• A one-year statute of limitations from the time an injury is discovered for adults and a three-year statute for children.
• Changes in joint-and-several liability law so that a defendant who's only partially at fault can't be held 100% responsible.
Further savings would be found as the practice of defensive medicine declines in a less litigious climate.
Though it's encouraging to see the CBO revise its estimates to take into account the impact of tort reform, it's not the last word on this issue.
Four years ago, the National Center for Policy Analysis estimated defensive medicine cost from $100 billion to $178 billion a year.
Then last year, Peter Orszag, the current director of the Office of Management and Budget who once headed the CBO, estimated as much as $700 billion a year is spent on defensive medicine that does nothing to improve Americans' health. That figure represents roughly 5% of the economy and 30% of all health care costs.
In an IBD/TIPP poll conducted last month, 48% of the 1,376 doctors who responded said tort reform was the best way to control medical costs. The next most frequent answer — insurance reform — was mentioned by only 18%.
These doctors aren't partisans but professionals. They see on a daily basis the effects of runaway and abusive lawsuits. They've watched closely as the growing willingness of lawyers and plaintiffs to sue has driven medical care costs upward.
Unlike the lawmakers who are trying to rush through health care legislation, these physicians know what they're talking about.
- Written by Investor's Business Daily Editorial
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