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CBO: Medical Malpractice Reforms Could Save Up to $54 Billion

By Lori Montgomery
Lawmakers could save as much as $54 billion over the next decade by imposing an array of new limits on medical malpractice lawsuits, congressional budget analysts said today -- a substantial sum that could help cover the cost of President Obama's overhaul of the nation's health system.

New research shows that legal reforms would not only lower malpractice insurance premiums for medical providers, but would also spur providers to save money by ordering fewer tests and procedures aimed primarily at defending their decisions in court, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, wrote in a letter to Sen. Orrin Hatch (R-Utah).

The CBO report gives a political boost to Republican arguments that any health care package should include substantive limits on malpractice lawsuits, rather than the ill-defined state pilot projects Obama has championed.

"These numbers show that this problem deserves more than lip service from policy-makers," Hatch said in a written statement. "Unfortunately, up to now, that has been all the president and his Democratic allies in Congress have been willing to provide."

The CBO had previously concluded that legal reforms would have a less significant impact on health spending. But "on the basis of newly available research," Elmendorf wrote, "CBO has updated its analysis of the effects of tort reform to include not only direct savings from lower premiums for medical liability insurance but also indirect savings from reduced utilization of health care services....

"CBO now estimates, on the basis of an analysis incorporating the results of recent research, that if a package of proposals ... was enacted, it would reduce total national health care spending by about 0.5 percent (about $11 billion in 2009)."

The federal government would reap a substantial portion of those savings, primarily in reduced Medicare spending, the letter says. Meanwhile, the government would also stand to collect more taxes as money previously directed to health care shifted into workers' wages.

Savings would depend on the shape of reforms enacted, Elmendorf wrote. For today's report, the CBO examined several recent proposals, including a $250,000 cap on damages for pain and suffering, a $500,000 cap on punitive damages and deadline of one year for adults and three years for children to file suit after a medical injury.

By Web Politics Editor  |  October 9, 2009; 1:50 PM ET
Categories:  Health Reform  
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Comments

So, if a doctor amputates the wrong leg how much do I stand to be reimbursed?

Posted by: ATLGuy | October 9, 2009 3:29 PM | Report abuse

Dear ATLGuy

I'm no lawyer, but my reading is that if all of the changes are implemented, it looks like the max would be $750k plus lawyers costs plus any additional medical costs. Does that sound high, low or about right to you?

Posted by: rickedelson | October 9, 2009 3:59 PM | Report abuse

Today's medical professional liability system is too adversarial and too expensive. There are alternatives. More at http://www.healthcaretownhall.com/?p=1596


Posted by: JEngdahlJ | October 9, 2009 4:14 PM | Report abuse

The CBO Report does not say this would 'save' $54 billion. It says it would save $41 billion and add $13 billion in new revenues. And in return Americans give up a huge package:
 A cap of $250,000 on awards for noneconomic damages;
 A cap on awards for punitive damages of $500,000 or two times the award for economic damages, whichever is greater;
 Modification of the “collateral source” rule to allow evidence of income from such sources as health and life insurance, workers’ compensation, and automobile insurance to be introduced at trials or to require that such income be subtracted from awards decided by juries;
 A statute of limitations—one year for adults and three years for children—from the date of discovery of an injury; and
 Replacement of joint-and-several liability with a fair-share rule, under which a defendant in a lawsuit would be liable only for the percentage of the final award that was equal to his or her share of responsibility for the injury.

CBO scores this proposal at 0.5% of total health care costs of which 0.2% or 40% goes to medical providers in the form of premium savings. Overall we are talking about 0.08% of GDP.

Shouldn't we at least have some discussion of the trade-offs here?

Posted by: BruceWebb | October 9, 2009 4:31 PM | Report abuse

Here is a rational approach.

If you or a loved one are killed, the lawsuit pays $10 million.

If you are crippled for life or spend a life in pain as a result of a doctor or facilities staff error, $10 million plus all medical expenses are paid for life by the doctor who crippled you (or his insurance carrier).

If you are scarred for life, but can work and get by you get $5 million one time payment.

Now use this as a bargining chip for promoting a government run program were every citizens pays for health insurance, get the private insurers out of for-profit medical coverage and set prices that doctors and hospitals can charge for their services. Keep prices under the control of the government and let doctors and hospitals operated as private entities.

Use the $58 billion in savings to support the lower cost program of healthcare for all.

And shut up with this "we can't do it" BS.

Posted by: morenews1 | October 9, 2009 4:41 PM | Report abuse

Health provider negligence kills 100,000 Americans in hospitals each year and potentially another 100,000 in outside settings. Major contributors are easily remedied prescription errors and providers' failure to wash their hands or clean their instruments. If they can't improve their performance on these simple killers, they don't deserve malpractice relief. Can you imagine how these numbers will grow when providers are further protected from lawsuits? And what a surprise the GOP that loves dirty air and water would support a "reform" that would put us further in harms way.

Posted by: blackcatpr2020 | October 9, 2009 5:10 PM | Report abuse

Blue Cross and Blue Shield is a not-for-profit organization and enjoy special tax treatments. Senator Baucus needs to take caution with creating not-for-profit health co-ops. Not all not-for-profits are created equal. We do not need more Blue Cross and Blue Shield in America.

http://en.wikipedia.org/wiki/Blue_Cross_and_Blue_Shield_Association

Posted by: dummy4peace | October 9, 2009 7:18 PM | Report abuse

Like the healthcare debate itself people should be presented with both side of this argument along with the up and downsides. Upside: there could be substantial savings over time potentially with minimal impact on healthcare outcomes. Downside: your loved one dies because a doctor makes a horrific mistake (i'm not talking about a "gray" area in judgment but a real screw up) and your estate (family, etc.) get's a capped amount of non-economic damages. However, if you are a wage earner at the time your economic damages could be substantial. Most tort reform plans do not place a cap on economic damages.

My take: I think the president will use this to exact support from the GOP on abortion issues in the bill. The GOP will take it and the abortion issue will fade.

Posted by: am1968 | October 9, 2009 7:58 PM | Report abuse

I'm not sold one way or the other on tort reform, but as far as I can tell, Texas did this in 2003 ($250k caps), and it has failed to save the consumer any money at all. It seems like malpractice premiums have gone down, but the cost of health care is unaffected.

I feel like there's a fairness cost associated with malpractice caps, so it would need to provide pretty substantial savings to be worthy of consideration in my opinion.

I'm not a fan of lawsuits or lawyers by any stretch of the imagination, but the empirical evidence in Texas appears to be that tort reform makes virtually no difference in the end cost of health insurance. I'm open to an explanation of why that is, but so far, I haven't found one.

Posted by: ponkey | October 9, 2009 8:31 PM | Report abuse

If Republicans want malpractice reform included in the package then they need to VOTE for the package.

Even if malpractice reform is included NOT ONE Republicans besides Olympia Snowe is going to vote for it the final bill so why should the Democrats add it?

Why bother since Republicans aren't willing to play ball.

Posted by: maritza1 | October 9, 2009 8:58 PM | Report abuse

Why are bad Doctors being protected. Put Doctors on a grading system, so many mistakes & they turn into the Wal-Mart Greeter. There's to many bad Doctors in the country, especially the foreign Doctors who go to Medical School in places like Granada. Doctors aren't the Golden Goose like so many think they are. Deflate their halos.

Posted by: wasaUFO | October 9, 2009 10:17 PM | Report abuse

dear rickedelson.
Wrong. $250,000. You don't get the $500,000 for punitive because the doctor did not act with personal malice toward you in cutting off your good leg. You also don't get anything for your lawyer costs (paid hourly out of pocket or more typically as a contngency fee reducing your $250 by one third to 40%. That brings your recovery for your lost leg down to $150,000 to $167,000. But wait, you have had to spend $75,000 in litigaton costs and expert witness fees and depositoin expenses because the doctor would not agree to settle because he did not want to be reported to the national data bank and hoped you would die before the trial. You're now down to $75,000 to $92,000 recovery for your lost leg. You also don't get anything extra for your medical expenses as long as you were paying for medical insurance coverage because the CBO has assumed the tort reform measures would include abolishment of the "collateral source rule" which means the doctor who cut off you leg gets the benefit of the insurance protection you paid for. Are you going to go through the time and expense of the lawsuit to recover $75,000 for your lost leg? Are you going to find an attorney who will go through 2-3 years of litigation, invest the time and money involved to pursue the case in order to recover the $75,000 he has had to spend out of pocket and $83,000 for the time he has spent. Doubtful on both counts and Tada, you have the real reason the insurance industry and medical profession wants caps ----it will make a substantially number of medical important and serious medical negligence cases go away and leave seriously injured patients with no practical recourse for the harm they have suffered.

Posted by: deschultz | October 10, 2009 6:29 AM | Report abuse

Almost all the the discussion of malpractice in the current health insurance reform debate has missed the real issue -- malpractice itself. The way to reduce malpractice costs (without simply shifting them to the victims) and also reduce malpractice injuries and death is to do something about malpractice itself.

National Practitioner Data Bank data shows that in most states about only about two percent of physicians are responsible for over half of all the dollars paid out for malpractice. Many of these two percent have multiple payments in their records and have had no actions taken to revoke or restrict their licenses or clinical privileges.

Taking effective action to revoke the licenses or restrict the practices of the few physicians who are causing the bulk of the malpractice problem would both save money and lives. Limiting malpractice victims ability to recover their damages only shifts the costs to them and does nothing to get at the root of the malpractice problem.

Posted by: RobertOshel | October 10, 2009 6:55 AM | Report abuse

deschultz,

With all due respect and humility (and I mentioned that I am not a lawyer), I think your criticism is incorrect. The fact that the doctor did not act with malice does not protect against punitive judgments. Punitive damages are awarded for negligence every day. The proposal is silent on legal fees, but in the past plaintiffs have won legal fees, so you can't assume the worst on that score either. Add it up and I still think you get what I said, a maximum of $750k over and above your expenses.

That may or may not be fair, everyone needs to make that judgment for themselves. Do you think that is fair? (I really don't know.) If not, then what level of compensation is, in your view?

Posted by: rickedelson | October 10, 2009 8:05 AM | Report abuse

Dummy4peace wrote"Blue Cross and Blue Shield is a not-for-profit organization".

This is incorrect... the most of the BCBS member insurance companies are for-profit. The association to that binds them together is a non-profit trade organization.

Posted by: Dataq1 | October 10, 2009 1:27 PM | Report abuse

Rickedelson,

You're right that punitive damages can be awarded for negligence, but that's only sometimes and only if it's "gross negligence." Typically you need to show at least recklessness before punitive damages can be awarded. Deschultz is wrong that you need to show actual malice; it's just that it's difficult to show that the doctor didn't just accidently make a mistake.

Also, it is very unlikely that you would be awarded attorney's fees for a medical malpractice case. It will come out of your recovery, as would expenses. Each side paying their own lawyer is one of the foundations of the American legal system, and there are very few exceptions (which typically relate to "public interest" kinds of suits -- maybe ADA or environmental litigation -- where the prospect of a $$ award is so small that it'd be impossible to get represented otherwise).

$750,000 may sound like a lot of money. (And, to be honest, I haven't read the proposal so I couldn't say whether the "pain and suffering" cap would operate the preclude the award of future lost wages from an inability to work -- most likely not.) But, what one should think about is how you would want to be compensated for the WORST POSSIBLE case of medical malpractice because that's when the caps would be most unfair.

If a doctor who wasn't paying attention injured you in such a way that you were in constant pain for the rest of your life, or had to take dozens of medications with terrible side effects multiple times daily, or needed an aide to help you take a dump, or any other number of potentially horrifying calamities, I do not think that you would be satisfied with $750,000, if you could even recover that much (probably not.)

Posted by: agnosticaphid | October 10, 2009 2:55 PM | Report abuse

Calirornia placed caps on medical malpractice claims years ago and it has not hurt those that are truely injured.

Nancy Pelosi does not want caps on medical malpractice awards because it would hurt those that contribute greatly to her causcus, the trial lawyers.

Nancy Pelosi is the individual that will not allow any amendments to be offered, by the opposition, regarding these caps.

Posted by: mwhoke | October 11, 2009 8:33 AM | Report abuse

CBO issues of health bill costs are a distraction from the key issues of concern in the proposals of Mr. Obama, Mr. Baucus and Ms. Pelosi.

The current proposal in Congress does not address any of the most meaningful issues in health care:

1) The need for single-payer insurance

Multi-payer systems inflate health care costs and give 8-12% of total health system costs to private insurers in system waste

2) True universality of coverage in a plan that doesn't create a second-class citizenry of the insured

Congressional plans still leave 10-15% of our country insured and create a second-class system of the poor insured that will place them below Medicaid recipients with respect to stigma and prioritization of care

3) The crisis of doctor shortages and primary care deficits in American medical care

Doctors are retiring at record rates and they are only being replaced at 75-85% rate because of a monopoly and market-control of the MD control by the AMA. Also, we have a 2/3 primary care / specialist ratio and 40% less per-capita doctors than the best European and Scandinavian countries. We have plenty of dermatologists and radiologists but not enough doctors to complete basic screenings and offer fundamental preventative care

4) Tax shortages for the Federal government and a lack of funding for the Medicare (and Social Security) trust funds

With a $13 trillion deficit and annual budget deficits of greater than $500B, our country and our entitlement programs are heading for bankruptcy without a 7% across the board tax cut. The idea of providing greater benefits without tax hikes is a myth impossible through policy

5) Tort reform and the end of defensive medicine

The featured research section of my website discusses the true costs of defensive medicine, which are high and staggering. Most studies that indicate these costs are 0.5% of total system costs are flawed econometric studies that poorly measure true indirect effects on health care costs within our American system


My website addresses these issues, and many more, as they related to health policy, comparative health systems and public health. I encourage you to all check the site out and appreciate your visits. Every visit also raises money that goes 100% to charity to fight disease.

The url is:

www.satvathealthcare.com

Thanks,

Amir Satvat

Amir Satvat
www.satvathealthcare.com
MBA in Health Care Management, The Wharton School
MPA in Health Policy and Management, New York University
Former Health Care Investment Banker, Goldman Sachs

Posted by: bsatvat | October 11, 2009 1:35 PM | Report abuse

MEDICAL MALPRACTICE IS A VERY SERIOUS MATTER AND NEEDS TO BE EVALUATED BUT NOT IN THE HEALTH CARE REFORM BILL.
IN 2003 I FELL AND BROKE BOTH ARMS. THE HOSPITAL EMERGENCY ROOM DOCTOR WAS SUPPOSE TO CALL AN ORTHOPEADIC SURGEON TO FIX MY ARMS.
THE ER DOCTOR SAID HE COULD FIX MY LEFT ARM BECAUSE IT WAS A DISLOCATION. I TOLD HIM TO WAIT FOR THE SPECIALIST. HE DID NOT. HE PUT ME UNDER ANESTHESIA AND PROCEEDED TO MANIPULATE WHAT HE THOUGHT WAS A DISLOCATION. HE READ THE X-RAYS WRONG.
AFTER MUCH EFFORT, HE WAS UNABLE TO FIX IT.
THE ORTHOPEDIC DOCTOR SET BOTH ARMS, I WENT TO REHAB AND AFTER DISHARGE, I WENT BACK TO THE ORTHOPEDIC DOCTOR FOR FOLLOW UP.
IN NEW JERSEY, YOU ARE ALLOWED A FULL COPY OF YOUR MEDICAL RECORDS. ON MY MEDICAL RECORD FROM THE ER THERE WAS NO RECORD OF THE ANESTHESIA OR THE MANIPULATION OF MY LEFT ARM.
WHEN I BOUGHT THIS INFORMATION TO THE ORTHOPEDIC DOCTOR, HE HAD NO KNOWLEDGE OF IT. NO ONE HAD TOLD HIM. HE COULD HAVE OVERDOSED ME WITH ANESTHESIA BECAUSE HE HAD NO KNOWLEDGE THAT I HAD PRIOR ANESTHESIA.
WITH NO RECORDS, THERE IS NO SUITE. MY ARM IS DEFORMED BUT IS I SUE, THE ORTHOPEDIC DOCTOR WOULD BE BLAMED FOR THE ERROR.
IN STATES WHERE THERE IS TORT REFORM. THESE INCEDENTS HAPPEN MORE FREQUENTLY.
IN ORDER TO SUE, I WOULD HAVE TO PAY ALL OF THE EXPENSES ASSOCIATED WITH THE SUIT IN THE EVENT THAT I LOST. IF I WON, THE LAWYER WOULD RECEIVE 1/3 OF THE GROSS AMOUNT OF CLAIM.
THE ABUSED PATIENT CAN END UP LOOSING MONEY.
MAL-PRACTICE IS A SERIOUS ISSUE, ESPECIALLY IF YOU ARE THE INJURED PERSON. I CANNOT AFFORD THE PHYSICAL THERAPY NECESSARY TO REDUCE THE PAIN AND MAINTAIN MOBILITY. I HAVE MEDICARE AND PRIVATE INSURANCE. NO COVERAGE FOR THIS. MEDICARE WILL PAY IF THE INJURY CAN BE CURED. IT WILL NOT PAY FOR MAINTENANCE CARE.
THE PRIVATE INSURANCE CALLS IT A PREEXISTING CONDITION BECAUSE I HAPPEN TO HAVE RHEUMATOID ARTHRITIS. NO PROBLEM BEFORE THE MEDICAL ERROR.

Posted by: sm98yth | October 12, 2009 12:43 PM | Report abuse

I FORGOT TO ADD THAT THE BUDGET OFFICE IS WRONG TO SAY THAT TORT REFORM WOULD SAVE MONEY. THE COST OF THE RESULTS OF MEDICAL ERRORS IS OVERWHELMING.
IF THE DOCTOR, IN ERROR REMOVES THE WRONG LEG OF A PATIENT, IT IS NOT ENOUGH TO PROVIDE MEDICAL CARE AND A MECHANICAL LEG AND CRUTCHES OR WHEEL CHAIR.
THIS LOSS IS A LOSS TO THE WHOLE PERSON BOTH PHYSICAL AND PSYCHOLOGICAL. IT MAY PROHIBIT HIS ABILITY TO EARN A LIVING. IT IS DIFFICULT TO PUT A PRICE ON LIFE WORTH.
IF A MAN DIES IN SURGERY BECAUSE A MAJOR BLOOD VESSEL WAS CUT; DO YOU BASE HIS LIFE WORTH ON THE FACT THEY HE WAS UNEMPLOYED AT THE TIME OF THE ACCIDENT OR THE FACT THAT WHEN THE ECONOMY WAS UP, HIS MID LEVEL SALARY WAS OVER $200.000?
THERE NEEDS TO BE BETTER QUALITY ASSURANCE IN HEALTH CARE AND SOME FORM OF ACCOUNTABILITY IN TORT REFOR. A JURY OF YOU PEERS STILL SOUND LIKE A DEMOCRATIC PROCESS TO ME.

Posted by: sm98yth | October 12, 2009 12:51 PM | Report abuse

The hidden cost of limiting lawsuits is the lowering the liability risk factor for doctors and hospitals to the point of lawsuits simply being the cost of doing business, which will translate into the cost of doctors and hospitals becoming surgical assembly lines, performing unnecessary surgeries and procedures to increase the bottom line. This in turn will cause inflation, unnecessary deaths and disabilities.

Posted by: owldog | October 13, 2009 1:49 AM | Report abuse

THE "FRIVOLOUS" LAWSUIT - 5.2% of doctors are responsible for 55% of all lawsuits

"The total cost of malpractice constitutes just 0.46 percent of total healthcare expenditures, and settlements have grown modestly with inflation. While approximately 98,000 people die each year from negligent treatment, a mere 2 percent (2%) sue their physicians. As health policy analyst Maggie Mahar [author of "Money-Driven Medicine"] observed, 'A very small group of doctors are losing or settling malpractice lawsuits, but they are losing big.' Between 1990 and 2002, '5.2 percent (5.2%) of doctors were responsible for 55 percent (55%)' of all malpractice payouts."

from the book "Prescription for Real Healthcare Reform" by Howard Dean, MD, pp.90-91

http://www.standwithdrdean.com/about

Posted by: owldog | October 13, 2009 1:54 AM | Report abuse

Why not make caps an individual prerogative for doctors and patients?

Insurance companies should be allowed to offer lower premiums to individual doctors who have patients sign affidavits, on their first appointment, to limit any malpractice award to a specific cap.

I am sure the proponents of lawsuit limitations will be happy to go to those doctors. It might be a deal they can't refuse.

Posted by: owldog | October 13, 2009 2:00 AM | Report abuse

The CBO is talking but most lawyers refuse to listen, I wonder why?

Posted by: thinker12 | October 13, 2009 4:13 PM | Report abuse

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