Obama's Tort Reform: A Tale of Two States

President Obama’s promise to conduct “demonstration projects” to determine whether medical liability and tort reform will work is a day late and many billions of dollars short.  Key states already tell the tale about what works.

Employers pay up to twice the cost for health insurance and health-related services in states that have expansive medical liability laws than they do in states where medical liability reform has been enacted.  There is a clear linkage between the cost of health care in a state and the nature of the state’s medical liability laws.

Consider Pennsylvania, where liberal medical liability laws have enabled more than 10,000 lawsuits to be filed against doctors since 2002, although the Pennsylvania Medical Board reports that only 73 lawsuits were found to have merit.  According to the American Medical Association (AMA), the state is suffering from an “extreme-level” medical crisis.  Pennsylvania’s medical liability insurance rates are among the highest in the nation.

As a result, there are “extreme” shortages in many essential specialties because nearly 4,000 doctors have left the state due to lawsuit abuse.  Facilities are closing, most notably nearly 20 maternity units in the Philadelphia area, which leaves the region without ob/gyn delivery and crisis services.  According to the National Federation of Independent Business (NFIB), small business owners have experienced a 50 percent increase in the cost of employer-provided health insurance premiums during the past three years.

In stark contrast to Pennsylvania, Texas is enjoying a health care renaissance.  A decade ago, Texas had one of the nation’s worst legal environments.  Entire counties languished without access to specialized medical services.  In 2003, Texas enacted comprehensive legal reform, including limits on damage awards.  As a result, nearly 8,000 doctors have moved to Texas, insurance premiums have leveled off or are declining, and patient access to medical services is expanding.  Lawsuits in one county alone dropped from 550 in 2002 — before reforms were enacted — to 204 in 2004, the year after reforms were enacted.

Taxpayers are also hit by the medical lawsuit system because the federal government pays health care for members of the armed forces, veterans and others.  The direct cost of medical liability coverage and the indirect but very real cost of defensive medicine increases the amount the federal government must pay to cover its own by an estimated $28.6 billion to $47.5 billion per year.  Reasonable limits placed on non-economic damages to reduce defensive medicine would reduce cost by an estimated $25.3 billion to $44.3 billion annually — and that’s according to studies conducted by the U.S. Department of Health and Human Services.

State-level legal reforms, which cover the vast majority of the nation’s medical liability and medical services lawsuits, are the most direct way to address the health care access and cost crisis in America.  Rampant lawsuit abuse, runaway verdicts, and a civil justice system that favors personal injury lawyers translates directly into lack of health care access, higher costs for insurance and even higher fatalities.

The facts are as clear as can be found anywhere in the health care reform debate — states that enact reasonable reforms experience better health care at lower cost, and states that linger as lawsuit abuse havens jeopardize public health, lose doctors, and experience spiraling costs.  No new studies needed.  Let’s get on with the reform.