Tort reform the key to cutting health-care costs?
posted at 10:12 am on July 30, 2009 by Ed Morrissey
So argues IBD Editorials, and they claim they have the data to prove it. According to data from a study performed by the accounting group Pricewaterhouse Cooper, malpractice actions account for at least 10% of all medical costs — 2% by jacking up legal insurance and as much as 9% from the defensive medicine lawsuits create. Instead of looking at overhauling the nation’s health-care system, we should pursue tort reform, and points the finger at a rather well-known former candidate for President:
Trial lawyers helped create a medical crisis through malpractice suits that raise costs while driving doctors from their practices.
Old Democratic presidential aspirant John Edwards won $175 million in judgments over a 12-year period suing doctors, hospitals and insurance companies, everyone but the candy stripers, over infant cerebral palsy cases allegedly caused by mishandled deliveries.
As the American College of Obstetricians and Gynecologists noted in a study in 2003, cerebral palsy could not be blamed in the “vast majority” of cases on delivery trouble. Edwards enriched himself by using bad science to bankrupt innocent physicians. …
The accounting firm PricewaterhouseCoopers says about 10% of the cost of medical service is attributable to medical malpractice lawsuits. Roughly 2% is caused by direct costs of the lawsuits; an additional 5% to 9% is due to expenses run up by defensive medicine.
I’ve heard this claim made a number of times, but have not seen much data in support of it. Certainly it costs providers something, and the explosion in lawsuits have made it a lot more expensive in recent years. Edwards is a good example of attorneys who latch onto particular specialties in malpractice actions and exploit them for all they’re worth — usually socking it to the insurers who cover the providers. Afterward, everyone wonders why insurers have to keep hiking their rates for coverage and reassessing the risks for new applicants.
However, that doesn’t fully explain the ongoing increases in care or in premiums. The rapid development of technology and therapies also means higher costs as we succeed in curing disease or allowing people to cope with them. The Washington Post noted that over forty years the likelihood of dying from a heart attack went from around 50-50 to 6% — but that the costs of treating that heart attack had increased rapidly during that period. It costs a lot of money to rescue people from death, and usually those rescued don’t gripe about the bill when it comes. Also, the 44% of people whose lives are saved will live long enough to use more medical care, raising the overall costs of care over their lifetimes.
However, the biggest driver of health-care cost increases come from our inefficient insurance model, and ObamaCare only makes it worse. In our present model, consumers are disconnected from costs by third party intervention, either insurers or the government in the case of Medicare/Medicaid, etc. Because consumers do not deal with prices, they do not efficiently use the medical system and their resources. In markets without third-party intervention, such as Lasik and plastic surgery, we see much more efficient pricing through competition, which also promotes an expansion of providers from the incentives of market payment.
IBD-E’s argument works across the entirety of the American economy, which is too vulnerable to predatory lawsuits. If Congress passed sensible tort reform that creates substantial penalties for plaintiffs and their attorneys for filing nuisance suits and baseless claims — in other words, make them bear the costs of abuse rather than the defendants — we could lift a serious burden from the entire economy, not just the health-care industry. However, as long as Democrats remain married to the trial lawyers, the chances of that kind of reform approach zero.