CBO Offers New Data on Cost of Medical Malpractice Lawsuits

Senator Orin Hatch (R-Nevada) asked the Congressional Budget Office to update its previous findings concerning the effect that restrictions on the rights of patients to hold the health care industry responsible for errors that kill or injure patients ("tort reform").

Here are some of the findings from the report:

  1. "National implementation of a package of proposals similar to the preceding list would reduce total national premiums for medical liability insurance by about 10 percent, CBO now estimates. … CBO estimates that the direct costs that providers will incur in 2009 for medical malpractice liability—which consist of malpractice insurance premiums together with settlements, awards, and administrative costs not covered by insurance—will total approximately $35 billion, or about 2 percent of total health care expenditures. Therefore, lowering premiums for medical liability insurance by 10 percent would reduce total national health care expenditures by about 0.2 percent."
  2. "Combining the effects on both mandatory spending and revenues, a tort reform package of the sort described earlier in this letter would reduce federal budget deficits by roughly $54 billion over the next 10 years. That estimate assumes that a change enacted in 2010 would have an impact that increased over time, achieving its full effect after four years, as providers gradually changed their practice patterns. Of course, the estimated effect of any specific legislative proposal would depend on the details of that proposal."  Note:  the proposals listed in the letter was a $250,000 cap on non-economic losses, abolition of joint and several liability, changes to the collateral source rule, caps on punitive damages, and reducing the statute of limitations to 1 year for adults and 3 years for children.
  3. "Because medical malpractice laws exist to allow patients to sue for damages that result from negligent health care, imposing limits on that right might be expected to have a negative impact on health outcomes. There is less evidence about the effects of tort reform on people’s health, however, than about its effects on health care spending because many studies of malpractice costs do not examine health outcomes. Some recent research has found that tort reform may adversely affect such outcomes, but other studies have concluded otherwise."

Let us put these numbers in perspective.  Americans spend over $45 billion per year on pet care.