New study shows that the savings from ‘tort reform’ are mythical

“Tort reform,” which is usually billed as the answer to “frivolous malpractice lawsuits,” has been a central plank in the Republican program for healthcare reform for decades.

The notion has lived on despite copious evidence that that the so-called defensive medicine practiced by doctors merely to stave off lawsuits accounts for, at best, 2% to 3% of U.S. healthcare costs. As for “frivolous lawsuits,” they’re a problem that exists mostly in the minds of conservatives and the medical establishment.

A new study led by Michael B. Rothberg of the Cleveland Clinic and published in the Journal of the American Medical Association aimed to measure how much defensive medicine there is, really, and how much it costs. The researchers’ conclusion is that defensive medicine accounts for about 2.9% of healthcare spending. In other words, out of the estimated $2.7-trillion U.S. healthcare bill, defensive medicine accounts for $78 billion.

As Aaron Carroll observes at the AcademyHealth blog, $78 billion is “not chump change ... but it’s still a very small component of overall health care spending.” Any “tort reform” stringent enough to make that go away would likely create other costs, such as a rise in medical mistakes generated by the elimination of the oversight exercised by the court system.

Since it doesn’t appear that “tort reform” would have any effect on this spending, Carroll says, “there seems little reason to pursue it as a means to dramatically reduce health care spending in the United States.”

The prevalence of defensive medicine may be overestimated by doctors themselves, Rothberg and his colleagues found, because many procedures are ordered in part defensively, but partially or mostly for legitimate diagnostic or therapeutic reasons. “Tort reform” would only eliminate orders made purely because of fear of litigation -- that is, 100% defensively -- and that’s a tiny percentage of the total.

Tort reform has seldom been about reducing healthcare spending. For Republicans, it’s about de-funding a bloc of reliable Democratic Party supporters -- trial lawyers.

That’s why the suppression of malpractice lawsuits has remained part of Republican and conservative orthodoxy despite the evidence that its impact on healthcare spending would be minimal. Even in conservative healthcare pundit Avik Roy’s supposedly objective proposed alternative to the Affordable Care Act (which we examined here), malpractice “reform” retains its pride of place.

Roy acknowledges the findings that defensive medicine accounts for only 2% to 3% of spending, but writes, “nonetheless, reform is warranted.” He asserts, curiously, that “the U.S. health care system is uniquely vulnerable to frivolous malpractice lawsuits.” But if the numbers don’t validate that claim, what does?

The minimal impact of defensive medicine on healthcare costs demonstrates the injustice of the stringent limits on malpractice lawsuits advocated by doctors, insurance companies and Republican policymakers.

As we’ve pointed out in the past, “pain-and-suffering” damage caps and other stratagems to discourage malpractice lawsuits benefit mostly insurers. Their impact falls disproportionately on women and families with infants, because their economic damages, which remain subject to jury awards, are hard to estimate and typically underestimated.

As for “frivolous lawsuits,” defined as cases that should never have been brought at all, they’re a lot rarer than most tort reform advocates admit. Studies have documented that the vast majority of them don’t yield a payment to the plaintiff. The converse is a bigger problem -- genuinely injured patients who can’t get redress because the courthouse doors have been shut to them. The victims there are often lower-income or unemployed patients.

The quintessential tort reform law is California’s MICRA, to the state’s shame. The Medical Injury Compensation Reform Act capped noneconomic and nonmedical damages in malpractice to $250,000 in 1975. Inflation has eroded that sum to the equivalent today of about $57,000 in 1975 dollars.

To have retained its value, the MICRA limit would have to be raised to about $1.1 million today. That’s the goal of Proposition 46 on the November ballot. Even though the MICRA increase has been yoked to a silly plan for drug testing of doctors, it’s worth your vote.

Roy’s proposal would impose the same $250,000 limit on noneconomic damages for any patient receiving a federal health insurance subsidy under the Affordable Care Act or enrolled in Medicaid, Medicare or any other federal program.

Why them? Apparently only because they’re within the grasp of federal law. Roy all but acknowledges that there’s no legitimate economic reason for this punitive approach. It won’t save a significant amount of money. It won’t change the direction of healthcare costs. It’s just nastiness, and as is usual with conservatives approaches to healthcare, it punishes the most defenseless members of society. Healthcare policy should do just the opposite.

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