House Representatives Take Another Stab at Medical Tort Reform, but Will these Proposed Reforms Actually Lower Health Care Costs?

March 23, 2017

Defensive medicine is the term used to describe the practice by which physicians order unnecessary testing for patients in order to shield themselves from potential lawsuits. The practice is criticized not only for the risks it poses to patients, but also for its role in increasing health care costs. Because rising health care costs are a top priority on the policy agenda, lawmakers have endeavored to reform the tort system for medical malpractice claims at the federal level. In late February, the House Judiciary Committee passed a medical tort reform bill. While this bill is still in its early stages, it represents another misguided attempt at lowering health care costs.
The proposed bill is narrow in its attempt as it would apply only to medical malpractice claims that arise out of federally funded health care, in addition to employer health plans that receive federal subsidies and tax benefits. Among a number of things, the bill caps noneconomic damages at $250,000 for plaintiffs. The bill also addresses the amount of fees attorneys can receive if they are working on a contingency fee basis, which is often the fee arrangement for medical malpractice cases. Under this bill, attorneys can collect 40% with the first $50,000 a plaintiff receives, 33.3% for the next $50,000, and 25% for the next $500,000. For awards that are higher than $600,000, however, attorneys would be allowed to collect only 15% of the award. The bill further addresses the statute of limitations for medical malpractice cases, requiring “medical malpractice plaintiffs to file suit within three years of the date of the injury or one year after the patient discovers or should have discovered the injury, whichever comes first.” It is lawmakers’ hopes that these measures will reduce health care costs by resulting in doctors practicing less defensive medicine, by lowering malpractice insurance premiums, and by increasing competition as these reforms are thought to prevent physicians from being forced out of the market due to high litigation costs.
Medical tort reform, of course, is not an untackled issue. In the past several years, states have passed regulations to limit the number of plaintiffs who can bring medical malpractice claims. This current House proposal is also not the first undertaking to reform the medical malpractice system at the federal level. Past attempts have been made since the 1970s, but none have been successful. Since medical malpractice claims are tort claims, traditionally within the domain of states, much of the failure in passing federal reforms stems from federalism concerns.

Lowering health care costs through malpractice reform, however, is a severely misguided and unsuccessful attempt.

Researchers who have examined states that have passed similar reforms have found that this endeavor does not actually reduce health care costs. A case study of Texas, for instance, allowed researchers to conclude that noneconomic caps “reduce litigation, raise health care costs, and have no effect on physician supply.” After Texas implemented caps on noneconomic damages, there was also no evidence of “significant savings from reduced defensive medicine.” Studies of three other states in which legislatures made it more difficult to bring lawsuits against emergency physicians also found no reduction in the rates of “CT scans, MRIS or hospital admissions.” Experts have rejected the belief that lawsuits are a “major driver” of health care costs and defensive medicine, arguing that malpractice litigation “adds only 2 percent to 5 percent to overall health care costs.”
This bill, then, is a futile attempt to address a complex issue. Like past instances proposing medical tort reform at the federal level, this bill will likely not make it very far.