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Tort Reform Doesn’t Lower Health Care Costs

Posted Dec 09 2009 9:28am
A few weeks ago the Congressional Budget Office released an analysis that said tort reform would save the federal government $54 billion over ten years. That sounds like a great argument for tort reform. But if you read the analysis more carefully, you see the picture is not so simple. For example, on page 4 of the analysis you can find this little bombshell:

“CBO’s estimate takes into account the fact that because many states have already implemented some of the changes in the package, a significant fraction of the potential cost savings has already been realized.“

The fact is, more than half of the states already have “reformed” tort. The CBO is saying that federal tort reform would not give us an additional $54 billion in savings. Rather, we’re already enjoying a significant fraction of the $54 billion in savings because tort is already “reformed” in most states.

Wait, you didn’t notice that health care costs are dropping because of state tort reforms? That’s because they aren’t.

What we see in states like Texas, which has enacted sweeping “tort reform” laws, is that while the number of lawsuits go down the overall costs of health care and health insurance keep going up — as much as in states that haven’t changed their tort laws.

It is true that states with “reformed” tort law have seen a big reduction in the number of personal injury lawsuits and jury awards, which does save some money. But the costs of caring for people injured by malpractice, mesothelioma cancer, or other injuries from dangerous products or workplaces, don’t go away. And if the responsible party doesn’t pay, usually the rest of us do — in higher insurance premiums and taxes.

And according to a 2006 Harvard study published by the New England Journal of Medicine, only 3 percent of malpractice claims are completely frivolous.

Every state has its own tort laws, and there may be many reasons to reform many of those laws. But reducing health care cost is not one of those reasons.

Guest Post by Barbara O’ Brien

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