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The Congressional Budget Office and Malpractice Reform

The Congressional Budget Office has long estimated that malpractice reform won't save much money. Today, however, it reversed course and released an an updated analysis (pdf) saying that strong malpractice reform would save a bit of money: about 0.5 percent of expenditures per year, or $11 billion in 2009.

What happened? Well, "more recent research has provided additional evidence to suggest that lowering the cost of medical malpractice tends to reduce the use of health care services." In other words, CBO added some new studies to their model, and their model spit out some new data.

If nothing else, this is valuable insight into the fallibility of CBO. There is a difference between saying that health-care reform will shrink the deficit by $81 billion and the Congressional Budget Office estimates that health-care reform will shrink the deficit by $81 billion. A big difference. A huge difference. When you're analyzing the impact of proposals on the cutting edge of public policy, the very nature of the exercise assures that you don't have very good data to use. After all, if you did have a lot of data, that would mean the proposal would already be in place, and then you wouldn't have to guess at its impact.

That isn't a knock on the CBO. Congress has to write a budget every year. That budget needs to include numbers. Someone needs to develop those numbers. The CBO is that someone, and it does as good a job as could be asked. But a best guess is just that: a best guess. It's information that should be incorporated into the design of the final bill, but not information that should decide the design of the final bill. After all, sometimes it proves to be wrong.

By Ezra Klein  |  October 9, 2009; 3:29 PM ET
Categories:  Health Reform  
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The research to back up the CBO estimate seems pretty sketch. But even if it did save that much, there are much gentler savings to be had elsewhere. For example the one year statute of limitations is way too short. Most people try to heal and some go back to work for a while before they realize they need to sue. I also think malpractice should be a state prerogative.

Posted by: bmull | October 9, 2009 3:42 PM | Report abuse

Can somebody get the CBO to start using error bars in their estimates? That would better convey what they're trying to say.

Posted by: daw3 | October 9, 2009 4:17 PM | Report abuse

I'm sure these results will lead to a fantastical sideshow on the Senate floor however. Thanks CBO!

Posted by: bmull | October 9, 2009 4:37 PM | Report abuse

bmull -- What if everyone simply accepts the CBO analysis? Really, if the numbers are correct and savings though litigation reform might offset they implementation of a new plan, why not consider them?

Bad old Republicans -- if they're right, it must be wrong!

Posted by: rmgregory | October 9, 2009 5:05 PM | Report abuse

LOL, Ezra.

This post is so hackish.

"In other words, CBO added some new studies to their model, and their model spit out some new data."

Um, no. To be more precise, the CBO states that they didn't find evidence of defensive medicine to be that strong in the past, so didn't include it. Now they do.

THIS is the post you decide to point out CBO could be wrong? Didn't mention that one on the deficit reduction score last week, huh?

It'd be nice for you to put the health system ahead of the Democratic party, at least once. The Dems aren't correct on every issue on health care, and you'd be hard pressed to mention even one thing that you've said where the Republicans are more in the right on health care. There aren't many, I admit, but for this post to be your reaction to CBO's acknowledgment of evidence of defensive medicine is pretty amazing. You pride yourself on having a weird predilection for loving data and reports, but now? Just an estimate, nothing to read here folks. You could say that about every substantive post you write-- its not like you're drawing on anyone's on-the-ground experience. It always reactions to studies, models, extrapolations, econometric data. But THIS is the data that you decide to remind your audience that studies and data only get you so far-- its still an estimate, folks.

Partisan hack seems to be appropriate here.

Posted by: wisewon | October 9, 2009 5:35 PM | Report abuse

The CBO estimated a benefit of $11 billion in 2008 -- out of trillions spent on health care, hardly a big impact -- but did it include or estimate costs, like perhaps increased negligence or riskiness, because there is less deterrent from the fear of being sued?

Not all lawsuit restrictions are good, and not all lawsuit restrictions are bad.

If there were no possibility to sue at all in society, there would be some savings, but there would also be tremendous costs, risks, and tragedies from harmful products and procedures. And commerce would be a lot more costly and less smooth as people could not trust well what they buy, and so would have to unnecessarily waste a lot of time individually on research and testing.

Posted by: RichardHSerlin | October 9, 2009 6:05 PM | Report abuse


Yes, they looked at that issue-- specifically, whether medical outcomes were different between states with/without tort reform. No difference seen.

Posted by: wisewon | October 9, 2009 6:23 PM | Report abuse

The CBO, being a generally pretty conservative organization when it comes to estimating savings, previously only looked at the direct costs associated with malpractice reform. Obviously, that is a ridiculously low number in the big scheme of things. Now they are willing to concede defensive medicine. I think that is appropriate, but practice patterns are pretty long will it take to reverse what has been built into the system over the last few decades?

Posted by: scott1959 | October 9, 2009 6:45 PM | Report abuse

0.5% of Health Care works to 0.08% of GDP.

CBO projects that 0.2% of the savings come in the form of premium savings. Nice for doctors pricing their new Jag but not really bending the cost curve for anyone else.

Savings to the Feds are $41 billion over ten years, nice but not game changing.

Meanwhile legitmately wronged patients get hosed. The most ridiculous provision reducing jury awards dollar for dollar for any insurance benefit you get from workmans comp or your own insurance.

Meanwhile the WaPo news story doesn't even reference the trade off.

This is a bad deal that is driven more by Republican hatred for trial lawyers (who tend to contribute to Dems) than any sense of fiscal responsibility or bending of cost curves.

Posted by: BruceWebb | October 9, 2009 8:48 PM | Report abuse

@wisewon: "looked at that issue-- specifically, whether medical outcomes were different between states with/without tort reform. No difference seen."

Tell that to the 0.02% (500 people) who die each year due to tort reform. Read the CBO report again. According to CBO, tort reform would kill more Americans than Afghanistan.

Assuming, that is, you have confidence in the CBO report.

Posted by: bmull | October 10, 2009 9:53 PM | Report abuse

"Read the CBO report again. "

bmull, verbatim from the report:

"Some recent research has found that tort reform may adversely affect such outcomes, but other studies have concluded otherwise."

It goes on to list one study (that you cited) that suggests a negative impact on outcomes, and THREE studies suggesting no impact.

So... I should read the report again? Did you have trouble reading the sentences before and after the one you cited, or do you just lack intellectual integrity and cherry-picked the 1 of 4 studies that support your point?

Let us know.

Posted by: wisewon | October 10, 2009 10:46 PM | Report abuse

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