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Congressional Budget Office Report Says Tort Reform Does Little to Decrease Healthcare Costs

01/25/2005
Source: 
Congressional Budget Office

On January 8, 2004, the Congressional Budget Office, the CBO, issued a report relating to the limitation of tort liability for medical malpractice. In this report, the CBO establishes that tort reform will do little to decrease overall healthcare costs.

The CBO report notes that cyclical patterns in the insurance market and lower investment income have played major roles in the recent rise in malpractice insurance premiums. "Insurance companies' investment yields have been lower for the past few years, putting pressure on premiums to make up the difference. According to the General Accounting Office (GAO), annual investment returns for the nation's 15 largest malpractice insurers dropped by an average of 1.6 percentage points from 2000-2002."

The report goes on to note that in the late 1980's premiums rose sharply because insurers' expectations of future claims proved to be too high. Moreover, in some states malpractice premiums have been sharply affected when major insurance companies have decided to withdraw from the market. In such instances, a reduction in the supply of malpractice insurance drives up premiums in the short run.

The CBO report also suggests that the available evidents demonstrates that very few medical injuries ever become the subject of tort claims. It cites a 1984 study out of New York that showed only 1.5% of negligence led to a claim.
The CBO also reports that it found no "statistically significant difference in per capita health care spending between states with and without limits on malpractice torts." In fact, the CBO found that malpractice costs only amount to less than 2% of overall health care spending.

The CBO report concludes: "the evidence available to date does not make a strong case that restricting malpractice liability would have a significant effect, either positive or negative, on economic efficiency. Thus, choices about specific proposals may hinge more on their implications for equity--in particular, on their effects on health care providers, patients injured through malpractice, and users of the healthcare system in general"