Obama Must Push Tort Reform to Lower Health Care Costs

Rep. Darrell Issa
Roll Call
2/25/10

As the administration and Congress try to hit the restart button on health care reform, it’s worth noting that one glaring omission from the debate has been tort reform. For all of the talk about making health care more affordable and lowering premiums and costs, it is inexplicable that this promising mechanism for cost-savings continues to be ignored by the president and Congressional Democrats.

Defensive medicine, frivolous lawsuits and multimillion-dollar jury awards in malpractice cases have helped contribute to the soaring costs of health care. President Barack Obama himself has acknowledged that defensive medicine taxes the health care system, saying, “I’ve talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs,” yet, in an apparent self-contradiction, the president emphatically told the American Medical Association that he would not support caps on medical malpractice jury awards — an effective element of tort reform that has already reduced lawsuits and brought down health care costs in the states that have implemented the caps.

Reversing course and rewriting his own narrative at a recent White House press briefing, Obama said, “If it’s established that by working seriously on medical malpractice and tort reform that we can reduce some of those costs, I’ve said from the beginning of this debate I’d be willing to work on that.”

Why is this pertinent? Because when House Oversight and Government Reform Committee staff recently made an inquiry about litigation costs, the president’s own Health and Human Services Department responded that malpractice litigation reform was “not a priority with [the Obama] administration, so there is no further information on the topic.”

When HHS says malpractice reform is not a priority of this administration, the president’s commitment to working with Congressional Republicans on a bipartisan basis seems insincere. A clarification from the administration would tell us if he truly desires bipartisan discussions or if this is just a public relations charade designed to make the American people think the White House is serious about finding bipartisan solutions.

The fact of the matter is that reining in defensive medicine can help reduce health care costs. A 2008 study by PricewaterhouseCoopers found that defensive medicine is a top area of wasteful spending in health care, accounting for $210 billion annually.

And according to the Congressional Budget Office, legislation providing for caps on damages would “significantly lower premiums for medical malpractice insurance” by 10 percent to 30 percent. California, Georgia, Texas and 36 other states provide proof that capping noneconomic damages and controlling the growth of medical malpractice lawsuits can dramatically cut liability insurance premiums, thus passing the savings on to the insured.

California was the first state to respond to the medical malpractice insurance crisis of the 1970s, when medical liability insurance premiums were so high that many physicians, particularly high-risk specialists such as OB-GYNs and neurosurgeons, were forced to close their doors. Abuse of the civil justice system, including malicious and frivolous malpractice litigation, had become so rampant that it was diminishing access to care for everybody. In 1975, California voters approved the Medical Injury Compensation Reform Act. MICRA caps noneconomic damages at $250,000, provides a statute of limitations on malpractice claims and allows for binding arbitration for disputing claims.

While medical malpractice premiums vary widely depending on location and specialty, rates in California are lower than in many other states. In Florida, for instance, premiums for OB-GYNs are as high as $214,893, whereas in California the average is $89,953. Premiums for other specialties including general surgery and internal medicine are also lower in California, sometimes as much as 50 percent less than in other states. In fact, MICRA has resulted in a stabilization of malpractice premiums, which have increased much more slowly than the national average. Since 1975, premiums nationwide have increased 420 percent, as opposed to just 168 percent in California.

Prior to the passage of tort reform in Texas, one in four doctors faced a medical malpractice claim every year. The liability crisis had grown such that in 2003, Texas voters approved Proposition 12, which limited noneconomic damages in medical malpractice lawsuits to $250,000. The caps have led to fewer lawsuits and lower liability insurance premiums for doctors. The average malpractice award has decreased from $1.2 million to $880,000, and Texas’ largest malpractice insurer has lowered rates repeatedly, equaling a more than 50 percent decrease in rates since 2003.

In 2005, the Georgia Legislature passed comprehensive medical liability reform that included $250,000 caps on punitive damages and $350,000 caps on noneconomic damages. Since then, the average number of medical malpractice claims has decreased by 39 percent, from more than 1,128 in 2004 to 683 in 2008. Additionally, professional liability insurance rates for physicians in the state have decreased 18 percent since the reforms were enacted.

The benefits of enacting tort reform now are clear. If the administration is serious about including real tort reform in a health care reform proposal, it should look to California, Texas and Georgia as case studies in medical malpractice reform that has lowered costs and reduced lawsuits. If the president wants proven bipartisan solutions that will substantially lower health care costs, he needs to focus on the facts and not his own ideological commitments or the special interests of trial lawyers. Tort reform works in the states that have tried it, and it will work nationwide to provide affordable, accessible coverage to every American.

Rep. Darrell Issa (R-Calif.) is ranking member of the Oversight and Government Reform Committee and a member of the Judiciary Committee.