I’ve written or contributed to several stories in the past week on health care reform, and a few readers have e-mailed to ask why I didn’t delve into tort reform to bring down medical malpractice premiums that they believe are driving skyrocketing health care costs.
The answer: Because medical malpractice premiums aren’t driving skyrocketing health care costs.
From Bloomberg News:
(A)nnual jury awards and legal settlements involving doctors amounts to “a drop in the bucket” in a country that spends $2.3 trillion annually on health care, said Amitabh Chandra, a Harvard University economist. Chandra estimated the cost at $12 per person in the U.S., or about $3.6 billion, in a 2005 study. Insurer WellPoint Inc. said last month that liability wasn’t driving premiums.
Obama told an American Medical Association meeting in Chicago yesterday that his efforts to cut costs and increase coverage couldn’t succeed without freeing doctors from the fear of lawsuits. While that may be what his audience needed to hear, the evidence that malpractice drives up health-care costs is “debatable,” said Robert Laszewski, an Alexandria, Virginia, consultant to health insurers and other companies.
“Medical malpractice dollars are a red herring,” Chandra said in a telephone interview. “No serious economist thinks that saving money in med mal is the way to improve productivity in the system. There’s so many other sources of inefficiency.”
The Congressional Budget Office in 2004 concluded that medical malpractice tort reform wouldn’t have a significant effect on health care costs:
Malpractice costs amounted to an estimated $24 billion in 2002, but that figure represents less than 2 percent of overall health care spending. Thus, even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small.
And Americans for Insurance Reform, a coalition of nearly 100 consumer and public interest groups around the country, issued a report in July which found:
• Medical malpractice premiums, inflation-adjusted, are nearly the lowest they have been in over 30 years.
• Medical malpractice claims, inflation-adjusted, are dropping significantly, down 45 percent since 2000.
• Medical malpractice premiums are less than one-half of one percent of the country’s overall health care costs; medical malpractice claims are a mere one-fifth of one percent of health care costs. In over 30 years, premiums and claims have never been greater than 1% of our nation’s health care costs.
• Medical malpractice insurer profits are higher than the rest of the property casualty industry, which has been remarkably profitable over the last five years.
• The periodic premium spikes that doctors experience, as they did from 2002 until 2005, are not related to claims but to the economic cycle of insurers and to drops in investment income.
• Many states that have resisted enacting severe restrictions on injured patients’ legal rights experienced rate changes (i.e., premium increases or decreases for doctors) similar to those states that enacted severe restrictions on patients’ rights, i.e., there is no correlation between “tort reform” and insurance rates for doctors.
Actually, at least 30 states already have capped medical malpractice lawsuit awards. One of ‘em is Texas; wanna see what’s driving health care costs there? This is a good read.