Is Tort Reform the Key to Reining in Medical Costs?

In an effort to rein in the growing costs of health care, Republicans in the U.S. House of Representatives are backing a bill known as the HEALTH Act. The legislation seeks to bring down health care costs by capping “non-economic” damages – these are damages awarded for injuries that are not easily quantifiable, such as pain and suffering – to $250,000 in medical malpractice cases. This type of measure is commonly referred to as “tort reform.”

The theory is that large awards in medical malpractice cases are driving up the cost of health care. And, it is not just the costs of paying the awards or defending the cases that are thought to be responsible, costs for practicing “defensive medicine” (ordering extra or unnecessary tests or procedures for fear of lawsuits) are thought by some to increase health care expenses.

However, new numbers released by the Congressional Budget Office (CBO) seem to indicate that tort reform efforts may not affect the cost of health care as much as some would believe.

Tort Reform May Not Significantly Reduce Health Care Costs

According to the CBO, implementing tort reform measures similar to those proposed in the HEALTH Act only would lower the nation’s health care costs by 0.5 percent. Numbers from the National Association of Insurance Commissioners (NAIC) show that in 2008, $6.2 billion was spent on defending and compensating victims in medical malpractice cases. While that number is high, it only represents a small fraction (0.3 percent) of the total amount of health care costs ($2.339 trillion) in 2008.

Capping non-economic damages through tort reform could save some money, but there are definite costs associated with that savings. For instance, lost wages are awarded through economic damages when they are quantifiable and would not be affected by tort reform. However, when the injured victim is unemployed, lost wages are not easily calculated, and often awarded by juries through non-economic damages. A cap on non-economic damages in these cases could leave many injured victims without full compensation for their injuries.

It is also important to note that tort reform mainly impacts legitimate lawsuits that have made it to the phase of determining damages after trial or settlement discussions. So-called “frivolous lawsuits” generally are dismissed by judges much earlier on in the process.

If you or loved one has been injured due to the negligent actions of a medical professional, speak with an attorney experienced in handling medical malpractice claims.