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Wednesday, September 08, 2010

"The Odd Logic of Tort Reform"

Aaron Carroll summarizes recent research on tort reform as a means of controlling health care costs:

Health Affairs covers malpractice, by Aaron Carroll: ...The September issue of Health Affairs focuses on medical malpractice in the United States, and there are a number of pieces in there worth reading. I’m going to discuss just a few. ...
Low Costs Of Defensive Medicine, Small Savings From Tort Reform, by J. William Thomas, Erika C. Ziller, and Deborah A. Thayer. While many seem to believe that capping damages and awards is the panacea to the high cost of health care in the US,... the authors ... found that a 10% reduction in premiums would lead to behavior changes that would result in a savings of about 0.1% of health care costs. That doesn’t mean it’s not worth doing; it does mean that those who think simple tort reform is the real answer to lowering health care costs may be misguided.
National Costs Of The Medical Liability System, by Michelle M. Mello, Amitabh Chandra, Atul A. Gawande, and David M. Studdert. This is the all-star team, and they ... found that the annual medical liability system costs are about $55.6 billion in 2008 dollars, or about 2.4% of all US health care spending. You’ll note a theme when I say that this isn’t chump change, but it’s not nearly the amount portrayed during the health care reform debate when some argued tort reform would solve the health care cost issue. ...
Physicians’ Fears Of Malpractice Lawsuits Are Not Assuaged By Tort Reforms, by Emily R. Carrier, James D. Reschovsky, Michelle M. Mello, Ralph C. Mayrell, and David Katz ... found ... tort reform doesn’t appear to change physicians’ malpractice concerns much, and therefore may not decrease defensive medicine or health care costs much.
There are others, and I hope to get to them soon. Since I have often argued (from this post on) that malpractice reform is not the answer to the cost problem, I grant you that most of these conformed with my world view. ...

And, in response to some push back:

The odd logic of tort reform, by Aaron Carroll: Well, I seem to have touched a nerve. I’m getting a lot of email telling me I’m off the mark when it comes to tort reform. Some of this email is coming from physicians who claim to usually agree with me. You’re sure I’m wrong here. You’re sure that tort reform (by which you mean setting caps on damages) really would reduce health care costs and make physicians practice differently.

Unfortunately, most of you are coming at me with anecdotes. So I’m going to ... use data.

Let’s start with Texas. In 2003, Texas capped non-economic damages on malpractice lawsuits at $250,000. It’s pretty much what they Republicans wanted to do with health care reform as well (see their plan). In an op-ed in the Washington Post, Governor Perry and Speaker Gingrich said:

Texas, for example, has adopted approaches to controlling health-care costs while improving choice, advancing quality of care and expanding coverage. Consider the successful 2003 tort reform.

Well, that’s a fact we can check. Did tort reform have any of these effects? Here’s a handy chart from Public Citizen using data from the Dartmouth Atlas of Health Care (Selected Medicare Reimbursement Measures):

Frakt1

That dotted line is when tort reform when into effect. Not only were costs for Medicare enrollees not controlled, they went up faster than the national average. In fact, Texas reimbursement rates in 2007 were the second highest in the country. What exactly did Governor Perry and Speaker Gingrich mean by “successful”?

Maybe they were talking about health insurance premiums? Were they controlled after reform? Again, a handy chart using data from the Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey:

Frakt2

Health insurance premiums again did not see a dramatic decrease after tort reform.

Oddly enough, Governor Perry and Speaker Gingrich also claimed that Texas-style reforms “increased coverage”. To check that you need only go to the US census:

Frakt3

Do you see the increase in coverage? I ask, because I can’t. This claim is actually laughable, because Texas as a state has the highest level of uninsurance in the US. Sometimes the Washington Post baffles me. Is there any fact-checking at all?

Some people believe – just know – that reducing malpractice awards will lead to fewer lawsuits which will lead to a reduction in premiums which will lead to a reduction in defensive medicine which will lead to a reduction in health care costs. It’s a matter of faith. It has to be, because there’s just not that much evidence it will happen.

Update: There's more, this time on California rater than Texas.

    Posted by on Wednesday, September 8, 2010 at 09:14 AM in Economics, Health Care, Regulation | Permalink  Comments (19)


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