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CBO: Tort Reform Would Cut Health Spending by 0.5%

Enacting a comprehensive set of medical malpractice reforms would reduce nationwide health care spending by 0.5* percent, according to a report released today by the Congressional Budget Office. Over 10 years, the changes would reduce federal deficits by $54 billion.

Roughly 0.2 percent of the savings would come as a result of the reduction in providers’ malpractice insurance premiums, while an additional 0.3 percent would come from “slightly less utilization of health care services,” CBO noted.

CBO’s estimate takes into account the fact that because many states have already implemented some of the changes in the package, a significant fraction of the potential cost savings has already been realized.

The estimates are based on a package of reforms “similar” to the following:

– A cap of $250,000 on awards for noneconomic damages;

– A cap on awards for punitive damages of $500,000 or two times the award for economic damages, whichever is greater;

– Modification of the “collateral source” rule to allow evidence of income from such sources as health and life insurance, workers’ compensation, and automobile insurance to be introduced at trials or to require that such income be subtracted from awards decided by juries;

– A statute of limitations—one year for adults and three years for children—from the date of discovery of an injury; and

– Replacement of joint-and-several liability with a fair-share rule, under which a defendant in a lawsuit would be liable only for the percentage of the final award that was equal to his or her share of responsibility for the injury.

Those reforms would reduce federal spending by $41 billion over 10 years, CBO estimated, while increasing revenues an additional $13 billion. The numbers drew immediate praise from Republicans, who have pushed for years to rein in malpractice lawsuits. Sen. Orrin Hatch (R-Utah), who requested the CBO study, issued a statement arguing that the findings “show that this problem deserves more than lip service from policy-makers.”

Unfortunately, up to now, that has been all the President and his Democratic allies in Congress have been willing to provide on these issues.

Sen. Charles Grassley (R-Iowa), the ranking member of the Senate Finance Committee, also weighed in, saying that “it makes no sense that congressional Democrats have taken malpractice reform off the table.”

CBO says comprehensive medical liability reform would reduce federal budget deficits by roughly $54 billion over the next 10 years. That’s not chump change. It’s a no-brainer to include tort reform in any health care reform legislation.

*An earlier version of this post indicated that the savings would represent 0.2 percent of the nation’s health spending. In fact, the 0.2 percent figure represents only the savings derived from decreased malpractice insurance premiums. An additional 0.3 percent in savings would result from a “slightly less utilization of health care services,” CBO said.

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