Friday, February 5, 2010

We’ll Never Know

At a recent meeting with Congressional Republicans, President Barack Obama noted that the effects of passing national medical malpractice tort reform legislation was estimated to be modest: “At best, this could reduce health care costs relative to where they're growing by a couple of percentage points, or save $5 billion a year.”

Mr. Obama’s figures come from a Congressional Budget Office analysis in 2009 which estimated that the savings from tort reform would be ten times greater than previously estimate:

“CBO had previously estimated that enacting a common package of tort reform proposals would reduce federal deficits by $4 billion from 2010 to 2019, but CBO now estimates that those proposals would reduce federal deficits by about $54 billion during that period. The latest estimates are substantially larger for four principal reasons:
  • “The estimates include a larger effect of tort reform on medical malpractice costs;

  • “The estimates incorporate the effect of a gradual reduction in the utilization of health care services resulting from changes in the practice patterns of providers;

  • “The estimated effect on federal revenues was substantially smaller in the previous estimate (which reflected only a reduction in malpractice costs) than the estimated effect on revenues in the current estimate (which reflects the combined effects of the reduction in malpractice costs and the change in spending attributable to changes in practice patterns); and

  • “The reduction in utilization is projected to generate a proportionately larger reduction in federal spending on health care than in other spending on health care.”

In an economy in which health care costs trillions of dollars, a $54 billion reduction in the federal deficit does seem modest. It is, however, in the same range as the effects of the proposed individual and employer penalties in the Senate’s health reform proposal. According to the CBO, those penalties would have totaled about $41 billion over a ten-year period

At the meeting with Republicans, Mr. Obama said that tort reform by itself “will not bend the cost curve long term or reduce premiums significantly … you can't make the claim that that's the only thing that we have to do.”

The already passed Senate and House health reform bills do many of those things that Mr. Obama believes would bend the cost curve—but they do not include tort reform.

Would it have made a difference to the stalled health reform effort if Democrats had conceded the $54 billion in savings from tort reform and included a medical malpractice reform measure in their bills?

We’ll never know.


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