Medical Malpractice Tort Reform

The cost of medical malpractice litigation can contribute significantly to health care costs. States are leading the way with tort reform experimentation, seeking ways to curb soaring health care expenses. 

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The cost of medical malpractice is significant.

  • The Congressional Budget Office estimates approximately 2 percent of total health care expenditures in 2009—or $35 billion—will be the direct costs of medical malpractice liability, including insurance premiums, settlements, awards and all other costs not covered by insurance.

States have led the way with tort reform, experimenting with several approaches.

  • Tort reform aims to limit some of the costs associated with medical malpractice by adopting new regulations that govern civil (noncriminal) liability. These regulations primarily limit who can be found liable, when they can be held liable, for how much they are liable and to whom they must pay.
  • One of the most commonly enacted types of tort reform is placing caps on noneconomic damages a defendant—in this case, a health provider—must pay. Noneconomic damages are those damages that are intangible, such as pain and suffering, and are often not easily quantified.
  • About one-half of states have placed legislative caps on noneconomic damages, with caps ranging from $250,000 to $1,000,000.

There are many potential impacts of tort reform.

  • Although it is difficult to quantify the exact economic impact of tort reforms, a recent CBO study estimates that a prescribed set of national tort reforms (including setting a noneconomic damages cap, changing the statute of limitations and implementing a fair share rule) would reduce the cost of total national premiums for medical liability insurance by approximately 10 percent.
  • That 10 percent reduction in premiums, coupled with indirect impacts such as changes in the utilization of health care services, would result in a one-half percent overall reduction in total national health care spending. In 2009, this would have meant savings of $11 billion.
  • The CBO estimates such reforms would reduce federal budget deficits by approximately $54 billion over the next 10 years. Those savings would come largely from reducing mandatory spending in Medicare, Medicaid, the Children’s Health Insurance Program and the Federal Employees Health Benefits program.
  • While tort reform may help reduce health care spending, there are concerns about the constitutionality of such legislation. For example, in 2009, the supreme courts of Georgia and Kansas reviewed the constitutionality of statutes that place a cap on noneconomic damages ($350,000 in Georgia, $250,000 in Kansas). Both cases are still pending a decision.
  • In years past, other state courts in Alabama, New Hampshire and Washington have ruled that such laws are unconstitutional, but most statutes that cap noneconomic damages survive constitutional challenge. The constitutionality of other types of reform—such as requiring pretrial screening panels or allowing evidence of collateral sources—have also been challenged, with mixed results.
  • In addition to concerns about constitutionality, opponents of tort reform argue that such limitations will have a negative impact on the quality of health care and on health outcomes, although there is limited research to either support or disprove this argument.
  • Because health care reform is a primary concern, states will likely continue to explore the costs and benefits of tort reform in 2010, striving to maintain the appropriate balance between preserving patients’ rights and constitutional protections with keeping the cost of quality health care down.

Note: A tort is a breach of duty. In the case of a medical malpractice tort, this breach of duty is by a health care provider that results in personal injury. Plaintiffs can bring a suit in civil court against a health care provider, seeking damages that are compensatory (medical costs and lost wages) and noneconomic (pain and suffering).

   Download Table: "Damages Caps"