Should Liability Damage Caps be a Part of Health Care Reform?

COMMENTARY Health Care Reform

Should Liability Damage Caps be a Part of Health Care Reform?

Sep 22nd, 2009 2 min read

Policy Analyst


YES. Caps lower liability insurance costs and cut 'defensive medicine.'

Perhaps the most conciliatory moment in President Barack Obama's health care speech before Congress came when he acknowledged concern with the high costs of medical malpractice lawsuits.

He proposed moving forward with state-level demonstration projects to test various ways of reforming the system.

But states already have the ability to reform the system. And Georgia is among the states that has led the way.

In 2005, the Georgia legislature passed comprehensive medical liability reform.

The centerpiece of the reform is a $350,000 cap on noneconomic damages such as pain and suffering.

These kinds of damages are inherently difficult to estimate in dollar terms and add tremendous uncertainty to medical malpractice cases. The cap represents a social compromise.

While it would be nice to say that pain and suffering damages should be limited only by jurors' sympathy, the Georgia legislature decided that a limit must be put in place to ensure access to quality health care for its residents.

Available evidence suggests the reforms are working. The Georgia Medical Association reports that doctors' medical liability insurance costs have gone down 18 percent since reforms were enacted, offering much-needed relief from skyrocketing premiums.

Opponents of tort reform are quick to cite statistics stating that medical liability represents only 2 percent of overall health care costs.

But these statistics fail to take into account the high cost of "defensive" medicine -- ordering extra tests and procedures, primarily to limit one's vulnerability to medical malpractice lawsuits.

President Obama mentioned that he'd "talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs."

Indeed, there is no doubt that defensive medicine does contribute to unnecessary costs, and that those costs are staggering.

A 2008 study found that 83 percent of Massachusetts doctors admitted to practicing some kind of defensive medicine.

The researchers conservatively estimated $281 million in unnecessary physician costs and over $1 billion in excessive hospital admissions in Massachusetts alone.

In 2004, Duke University researchers estimated nationwide defensive medicine costs at $70 billion a year -- a sum that would pay for nearly Obama's entire health plan.

Caps on noneconomic damages can bring rationality to medical malpractice damage awards and lower liability insurance costs.

But they are not the only way.

Today's tort system is slow, unpredictable and costly. Medical injury claims take years to resolve, leaving injured patients hurting and doctors with a cloud over their practices.

Over half of damage awards given to plaintiffs are eaten up by lawyers' fees, administrative costs, and expert witness fees.

Other innovative proposals exist, such as "early offer" programs (designed to encourage injured patients to settle early in the litigation process) and special medical courts.

There are even special kinds of insurance patients can purchase to insure themselves against adverse medical outcomes.

Georgia has already shown leadership in health care by taking solid steps to reform its medical liability laws, improving access to quality medical care.

Georgians should let President Obama know that they've already taken steps to improve their medical malpractice system for all of the state's citizens.

Randolph W. Pate is a visiting fellow at The Heritage Foundation.

First Appeared in Atlantic Journal Constitution

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