NCPA - National Center for Policy Analysis


October 13, 2009

Medical-liability reforms such as capping noneconomic damages and tightening the statute of limitation for filing a suit would trim $54 billion from the federal deficit over 10 years, largely by curbing defensive medicine, according to a report released Friday by the Congressional Budget Office (CBO).

Other findings:

  • Overall, tort reform would reduce the nation's health care spending by 0.5 percent, the report stated.
  • Some 40 percent of these savings would stem from lower malpractice insurance premiums for providers.
  • The rest of the savings would result from lower use of health care services, as providers would order fewer tests and procedures intended simply to avoid a lawsuit.

The CBO estimate of tort reform's potential to reduce the deficit is roughly 10 times greater than what it projected last December (a reduction of $54 billion instead of $5.6 billion).  At that time, the agency said that evidence about the extent of defensive medicine -- and how tort reform could reduce it -- was murky.  However, more recent research suggests that "lowering the cost of medical malpractice tends to reduce the use of health care services," according to the latest CBO report.

The CBO's number-crunching assumes that five tort-reform proposals are enacted nationally:

  • Cap noneconomic damages -- in other words, for pain and suffering -- at $250,000.
  • Cap punitive damages at $500,000 or 2 times the award for economic damages, whichever is greater.
  • Modify the so-called "collateral source" rule so that juries who are setting malpractice awards must subtract the income that injured plaintiffs collect from health, life and automobile insurance and workers' compensation, or at least be informed of that income.
  • Set the statute of limitations for filing a malpractice suit at one year for adults and three years for children from the date an injury is discovered.
  • Replace "joint-and-several" liability, which makes any defendant in a suit liable for all the damages, with a fair-share rule that sets damages for a defendant in proportion to his or her share of responsibility for the injury.

The CBO notes that many states have already adopted such reforms, with roughly one third limiting noneconomic damages and two-thirds rewriting their laws on joint-and-several liability.

Source: Robert Lowes, "CBO Report Raises Estimate of Savings From Medical Malpractice Reform," Medscape Today, October 12, 2009.


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