Tort-Reform Fundamental to Cutting Medical Costs
It seem like every time the Democrats bring up the subject of Health Care Reform, tort reform, as a possibility, is given short shrift. In fact, it has been a consistent mainstay of Republican reform suggestions throughout the debates. You know… those Republican suggestions that the Democrats continually say the Republicans aren’t making.
In fact, Republicans have been advancing a number of ideas, each of which has potential to reduce costs, and which together comprise what amounts to a total system reform that would dramatically reduce costs.
These include: Tort reform, Allowing interstate commerce among health insurance carriers, reform of intrastate insurance laws to allow customers to cherry-pick the coverages they want (so men don’t for example, have to be covered against pregnancy as is the case in some states where mandates are that everyone have exactly the same coverage), and Increase the viability of MSAs (medical savings accounts).
Among these, tort reform seems to hold the most promise, as it cuts not only malpractice insurance premiums, but it significantly reduces the need for defensive medicine. And we don’t have to speculate on the potential outcomes of tort reform based solely on logic. We have laboratories.
Texas, 1995: Governor Bush enacts the first stage of Texas Tort Reform (Reference Texas Medical Blog, “The Doctor is In”) by accomplishing the following:
* Limited punitive damages
* Reformed joint and several liability
* Restricted venue shopping
* Restored the Deceptive Trade Practices Act to its original purpose of protecting consumers in ordinary consumer transactions
* Enacted a half dozen other reforms to curtail specific lawsuit abuses
In 2003, Governor Perry followed up with the following:
* Enacted comprehensive reforms governing medical liability litigation, including a $750,000 limit on non-economic damages
* Initiated product liability reforms
* Made the burden of proving punitive damages similar to criminal law, requiring a unanimous jury verdict
* Comprehensively reformed the statutes governing joint and several liability and class action lawsuits
* Imposed limits on appeal bonds, enabling defendants to appeal their lawsuits and not be forced into settlements (this is what pushed Texaco into bankruptcy in its famous lawsuit against Pennzoil)
* Further limited the filing of lawsuits that should have been brought in other states or countries
The changes to medical liability in 2003 were extraordinary, and had a very substantial impact, including:
1. In August 2004, the Texas Hospital Association reported a 70% reduction in the number of lawsuits filed against the state’s hospitals.
2. Medical liability insurance rates declined. Many doctors saw average rate reductions of over 21%, with some doctors seeing almost 50% decreases. (Recent information provided to The Perryman Group – a Texas Economic and Financial Analysis Think Tank - during the course of this study suggests that premiums are declining even further in 2008.)
3. Beginning in 2003, physicians started returning to Texas. The Texas Medical Board reports licensing 10,878 new physicians since 2003, up from 8,391 in the prior four years. Perryman has determined that at least 1,887 of those physicians are specifically the result of lawsuit reform.
4. In May 2006, the American Medical Association removed Texas from its list of states experiencing a liability crisis, marking the first time it has removed any state from the list. A recent survey by the Texas Medical Association also found a dramatic increase in physicians’ willingness to resume certain procedures they had stopped performing, including obstetrics, neurosurgical, radiation and oncological procedures.
Last year, TLR commissioned a study by The Perryman Group to figure out the impact of these reforms (the above are excerpted from that report). Here are the economic impact findings of that study:
$112.5 billion increase in annual spending
$51.2 billion increase in annual output – goods and services produced in Texas
$2.6 billion increase in annual state tax revenue
$468.9 million in annual benefits from safer products
$15.2 billion in annual net benefits of enhanced innovation
499,000 permanent jobs
430,000 additional Texans have health insurance today as a result of the medical liability reforms
In Mississippi, reforms instigated by Governor Haley Barbour have been just as dramatic. In June of 2004, Barbour signed into law a tort reform bill that included the following: a $500,000 limit on pain-and-suffering awards in medical malpractice cases, and $1 million in other cases; punitive damage caps; venue reform; joint and several liability limitation; relief of premises owners from liability to contractors’ employees for hazards known to the contractor; and product liability relief for “innocent sellers”
The Canadian Free Press reports that since passing tort reform in 2004, Mississippi has seen the number of medical malpractice claims plummet by 91 percent from its peak. The state’s largest medical liability insurer dropped its premiums by 42 percent, and has offered an additional 20 percent rebate each year since tort reform went into effect.
In addition, Barbour was on Cavuto this afternoon making the points not only of the statistics quoted in the CFP article, but pointing out that Obama had himself stated the possibility of instituting tort reform on a limited basis in one or two states to experientially evaluate the results. HELLO MR. PRESIDENT! THE WORK HAS ALREADY BEEN DONE!
As to allowing companies to sell insurance across state lines, there is no definitive amount of money to be saved that I can find. Arguments go both ways. When the arguments are viewed closely, however, they seem to come down to one side arguing that market competition always results in improved product quality at reduced costs, with the other side stating that capitalists need government controls or they will steal from the poor and uninformed.
Axelrod looked like an idiot (make that smarmy idiot) when the point was being pushed by Wolf Blitzer during a recent interview.
In truth, there are wide discrepancies between costs in different states. In Tennessee, for example the annual cost of Individual Market Single care is $2,221.00. In New York, the same is $4,734.00 according to the AHIP (America’s health Insurance Plans). Part of the reason for the discrepancy is that New York requires certain coverages that Tennessee does not, and a truly competitive marketplace would allow coverages to be tailored to the individual. Probably most men, for example, would fell pretty secure in opting out of pregnancy coverage, and most people really would not want to pay for gender identity disorder coverage given the choice.
As to Medical Savings Accounts, the amounts and ways that these could be used to reduce health care costs is practically endless. The Singapore health care system, for example, mandates them (like our social security), makes them usable within families instead of just individuals, they are inheritable, and they are tax free. Singapore essentially requires that these accounts be used for certain medical procedures, and mandates that the citizens pay out of pocket for routine things. Though the Singapore plan incorporates a system of public option as well as private insurance, all care prices are published by law and the citizen is required to pay 20% (minimum) of any medical bill. This encourages shopping around and competition. The 20% cost is covered generally by MSAs, and the balance through additional health insurance. Catastrophic insurance is available, as is a means-tested safety net for those too indigent to be covered otherwise. The net result is that Singapore spends about 5% of its GDP on health care (compared to 15-17% for the US), while the coverages are rumored to be just as good. The key lies in the system being geared to encourage competition among providers.
A further advantage to the use of MSAs is that without the billing costs and hassles, medical offices could afford to provide services at a reduced rate. Cash talks, and the doctors accepting cash know what they are selling and for how much, and they don’t have to worry about Medicare or Medicaid discounting them into oblivion.
Here in the US, if we just made MSAs, tax-deductible, inheritable, and usable within families, and combined them with available Interstate catastrophic insurance, we would go a long way toward reducing medical costs further through competition.