The Congressional Budget Office (CBO) has posted a public letter to Representative Bruce L. Braley (D-IA), in response to questions the Congressman had regarding the CBO's analysis of the budgetary effects of tort reform. This analysis was previously described in an earlier letter to Senator Orrin Hatch (R-UT). In that letter, the CBO explained how tort reform can affect health costs. The CBO reiterated much of the same conclusions in the letter to Rep. Braley.

In the health field, tort reform primarily focuses on curbing litigation, particularly medical malpractice litigation. Many health care practitioners and others in the legal field feel the current laws regarding medical malpractice actions lead to both prohibitive costs in liability premiums, and in practicing "defensive medicine," for example, ordering tests which may be unnecessary or have marginal effect in order to avoid exposure to claims of negligence. The recently passed Senate health reform bill contains provisions for state demonstration programs to evaluate alternatives to current medical tort litigation.

The CBO's letter to Rep. Braley reviews several studies of empirical data that helped inform the CBO's conclusions. The primary conclusion is that a reduction in spending on health care and the positive revenue impact would be due to the combined effect of three elements of tort reform: reduced malpractice costs; reduced use of health care services; and increased purchase of health insurance due to lower insurance prices resulting from the first two factors.

The CBO says tort reform would lower health care costs directly and indirectly. The direct costs would stem from reducing medical malpractice insurance premiums, settlements and awards, legal and administrative costs. The indirect costs include the reduction of health care services because of practice pattern changes enabled by reform. The proposals contained in the letter to Senator Hatch would reduce the federal budget deficit by approximately $54 billion during the 2010-2019 period.

The research the CBO reviewed was mixed in determining the effect of tort reform on patients' health. Some studies found an increase in mortality and others found positive impacts on health. The mixed results, according to one study, arise from data indicating that a majority of patients suffering injuries due to negligence do not file claims, and a significant portion of patients who have filed claims had injuries apparently not negligence-related. However, the CBO says the evidence for negative impact on health care outcomes is not as evident as the effect of such limits on health care costs.

The CBO's letter concluded that tort reform lowers medical malpractice premiums. In addition, the weight of the empirical evidence demonstrates a "link between tort reform and the use of health care services," and there is evidence that tort reform would somewhat reduce the use of health care. A particular study found that use of diagnostic services--particularly imaging services--changed in response to differences in malpractice costs.

The CBO letter to Rep. Braley: http://www.cbo.gov/ftpdocs/108xx/doc10872/12-29-Tort_Reform-Braley.pdf

The CBO letter to Senator Hatch: http://www.cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort_Reform.pdf

More Industry Headlines