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More Evidence Tort Reform Doesn’t Lower Healthcare Costs

December 3, 2014

One of the issues this blog has covered tirelessly is tort reform, which (in states that have passed such legislation) has neither created more doctors nor lowered overall healthcare costs. Writing for the New York Times’ healthcare blog The Upshot, medical school professor Aaron E. Carroll provides a really informative and easy-to-understand primer on the high-profile debate, one of whose combination of medical jargon and legal jargon often leaves readers more confused than informed. His piece, titled “Malpractice Reform Won’t Do Much to Reduce Health Spending,” argues that every approach researchers have taken thus far to investigate whether or not tort reform has helped or will help our healthcare budget has been ineffective.

Carroll points out that the main arguments tort reformers lean on in such debates is that doctors, terrified of being sued, practice “defensive medicine.” They “order additional tests, perform extra procedures, or recommend more visits.” According to this theory, doctors waste time and resources shielding themselves from lawsuits. As Carroll explains, however, “the number of malpractice payments made on behalf of doctors has been dropping quite steadily for the last ten years.”

He then looks at Texas (which we have covered extensively over the past few years) and claims that not only did spending not decrease, but “Medicare spending per beneficiary went up more quickly in Texas after [its 2003 tort reform legislation] than it did in the rest of the country.”

Another of Carroll’s sources is a newly-published New England Journal of Medicine article that asserts Texas, Georgia, and South Carolina (all of which passed tort reform laws between 2003 and 2005) did not differ from their neighboring states when it comes to “indicators like how often imaging was used […], how much was spent on average, and how many patients were admitted to the hospital.”

A third study, this one published in HealthAffairs, took a different tack, analyzing more than 15 million claims across thirty states. Researchers compared ways in which the same ailments and complaints were treated in states with different malpractice risks and found that the effects of malpractice risk “were surprisingly minimal.” “Even if malpractice premiums fell by 30 percent (which would be huge),” Carroll notes, “overall spending on defensive medicine would drop only 0.4 percent.”

So why haven’t any of these tort reform measures helped lower costs?

Carroll proposes two reasons. First–even with caps on damages–savings are often pocketed by insurance companies rather than being passed on to doctors (this seems to have happened in Florida). Second, defensive medicine may not be as defensive as it’s cracked up to be. Not only are doctors paid for ordering “tests, procedures, and visits,” but these things are often “in the best interest of their patients.” In fact, a recent JAMA Internal Medicine study found that orders self-reported by doctors as “completely defensive” amounted to less than three percent of overall costs. Carroll notes that while trimming this small fraction from the total would not hurt, it would be a one-time reduction and “won’t do much for the long-term problem.”

As evidence mounts, it is becoming increasingly clear that the tort reform movement has very little ammunition in the form of hard data. Estimation of the total percentage that medical malpractice suits represent among all healthcare costs range from 0.3 percent to 2.4 percent, both of which are negligible. Carroll concludes, “There are many legitimate reasons to reform the malpractice system,” including the cost of defending a claim, the number of cases with merit that never make it to trial, “It just doesn’t appear that reducing healthcare spending is one of them.”

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