Magazine article Medical Economics

Will Congress Buy the Economic Argument for Tort Reform?

Magazine article Medical Economics

Will Congress Buy the Economic Argument for Tort Reform?

Article excerpt

Reform would cut Medicare expenses, and it almost surely would reduce your malpractice premiums. So why are legislators reluctant to face this issue?

Despite the fact that proponents of malpractice reform can demonstrate that the nation would spend far less on health care-and physicians less on liability insurance-with the enactment of federal tort reform, Congress isn't heeding their message. Is it any wonder, then, that to many Americans Washington politics is all about greasing palms and kissing backsides?

Unfortunately, such a cynical view ignores the relatively agreeable and substantive forms of persuasion that are practiced in the nation's capital.

Among the more popular forms is the releasing of studies. Typically, a study is done by an independent research firm that's hired by an advocate of something or other. Naturally, the results of the research advance the advocate's point of view. (Why fund or publish research that doesn't?) But the study can't be blatantly propagandistic. If it's to be convincing, it has to have an aura of scientific eloquence rather than a stench of statistical hocus-pocus.

Timing as well as content determine how well a study is received-by politicians, the public, and the press. For example, poor timing caused me to react skeptically to a recent report commissioned by the American Association of Health Plans, even though it had been done by a respected firm here in Washington. Unfortunately for AAHP, the same week that it released its study, showing that the current Medicare reimbursements to HMOs are just about right (95 percent of feefor-service payments), The New England Journal of Medicine reported that Medicare beneficiaries in HMOs use fewer inpatient services than beneficiaries under FFS and are therefore cheaper to take care of.

In contrast, the case in favor of malpractice reform was timed just right. Back in July, the Physician Insurers Association of America, with the support of the American Medical Association, released a report just as the topic began to weigh on the minds of legislators-a week before the House of Representatives and the Senate began to reconcile differences over that and sundry other health-care issues in their budget bills.

Moreover, the study's content was credible, even to cynics such as me. Yes, it predictably showed that tort reform touted by the two groups would cut health-care costs by millions of dollars. But the conclusion differed only slightly from findings of previous research, including studies done by the Congressional Budget Office. "Every major independent study over the last 15 years has reached the same conclusion," Thomas R. Reardon, the chair of the AMA, said after the report was released.

Imagine for a moment that malpractice liability law is changed across the countryas it has been in some states. Non-economic damages are capped at $250,000, and the collateral source rule is modified so that a plaintiff isn't easily able to collect from both a defending physician and others. What happens to your malpractice insurance premium? According to Barents Group/KPMG Peat Marwick, the firm that did the study for the PIAA, the premium will almost surely shrink. Not immediately, but within a couple of years.

Barents looked at how tort reform would affect the malpractice insurance premiums of internists, cardiologists, ophthalmologists, general surgeons, orthopedic surgeons, and radiologists. Last year they paid annual premiums that ranged, on average, from $9,782 for internists to $35,089 for orthopedic surgeons. If reform were to go into effect in 1998, say, by the year 2000 ophthalmologists would see their premiums drop by 20 percent, orthopedic surgeons by 13.5 percent, general surgeons by 12 percent, radiologists by nearly 12 percent, cardiologists by 10 percent, and internists by 7 percent.

In its study, Barents tracked the performance of insurance premiums in four states-California, Colorado, Missouri, and Oregon-where tort reform went into effect in the 1980s. …

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