Is Tort Reform Good For America? We Might Soon Find Out.

On Wednesday, February 16th, 2011, the House of Representatives Judiciary Committee is scheduled to consider a new bill that will dramatically take away the rights of victims of medical malpractice (such laws are known as “tort reform”). The new bill will place a maximum cap on the amount that can be recovered for non-economic damages of $250,000 and a cap on the amount that can be recovered for punitive damages.

Republicans in Congress have long touted tort reform as an important step to reduce malpractice insurance premiums and lower healthcare costs. How do you cut through the rhetoic of the Republicans to get to the truth about tort reform? A perfect place to start is the State of Texas.

In September, 2003, Texas enacted the most aggressive medical malpractice reform law of any state in the country. The tort reform enacted in Texas capped the amount that can be recovered in medical malpractice cases to $250,000 per defendant. If there is only one defendant, the injured victim of malpractice is limited to $250,000.

How did tort reform work out for Texas? The facts are contained in a study of tort reform. While insurance premiums for physicians were reduced by tort reform and the malpractice awards and settlements were lowered, there were surprising results from the study. Malpractice settlements and judgments dropped much farther than insurance premiums, suggesting that the main benefactor of tort reform was insurance companies.

Between 2003 and 2007, Medicare spending per patient doubled in Texas, in contrast to the decline in Medicare spending per patient before the enactment of tort reform in Texas. This suggests that the costs of medical treatment for malpractice victims was added to Medicare, since malpractice insurance carriers were paying much less in settlements and judgments. Instead of liability insurance companies picking up the cost of malpractice, Medicare picked up the tab.

Between 2003 and 2007, testing expenditures per Medicare enrollee in Texas grew at a rate that was 50 percent greater than the national average. This was counter to the tort reform argument that caps on malpractice damages would reduce the practice of defensive medicine.

Between 2003 and 2007, healthcare spending in Texas was at best unaffected and may have even increased. Thus, tort reform did not lower healthcare spending as the advocates of tort reform claimed would occur.

Between 2003 and 2007, there have been more physicians in Texas. However, the additional physician presence was increased because of the increasing population. There was only an increase of 0.4% physicians per capita after the tort reform was passed in Texas.

In Congress, Republican legislators tout tort reform as the best thing that can be done to reduce insurance premiums, reduce healthcare costs and keep physicians in business and they cite the Texas experiment as proof that tort reform works. When you look at what actually happened in Texas, you realize that the Congresspersons are not giving you the truth about tort reform.

When you look at what actually happened in Texas, you will realize that tort reform is not about reducing healthcare costs. Tort reform is a political handout to insurance companies and physicians for their financial support of Congresspersons (almost entirely given to Republicans).