CBO: Tort reform produces real savings

Posted on October 12, 2009


CBO Director Doug Elmendorf released a statement on his blog indicating that the Congressional Budget Office had taken a look at current proposals to limit malpractice lawsuits. They found that tort reform could save $54 billion over the next 10 years, a figure that wouldn’t completely cover budgetary shortfalls but would go a long way in making up the difference. Here’s the key passage:

CBO now estimates that implementing a typical package of tort reform proposals nationwide would reduce total U.S. health care spending by about 0.5 percent (about $11 billion in 2009). That figure is the sum of a direct reduction in spending of 0.2 percent from lower medical liability premiums and an additional indirect reduction of 0.3 percent from slightly less utilization of health care services. (Those estimates take into account the fact that because many states have already implemented some of the changes in the package, a significant fraction of the potential cost savings has already been realized.)

Enacting a typical set of proposals would reduce federal budget deficits by roughly $54 billion over the next 10 years, according to estimates by CBO and the staff of the Joint Committee of Taxation. That figure includes savings of roughly $41 billion from Medicare, Medicaid, the Children’s Health Insurance Program, and the Federal Employees Health Benefits program, as well as an increase in tax revenues of roughly $13 billion from a reduction in private health care costs that would lead to higher taxable wages.

Ed Morrissey goes further and calculates that a 0.5% reduction in spending resulting in $11 billion saved a year is a permanent savings and would result in $110 billion saved over 10 years. Couple this with Mississippi’s experience – the state enacted tort reform that resulted in a 91% drop in malpractice claims and led the state’s largest insurer to lower its premiums by 42%.

Is tort reform the big answer to health care reform? Of course not, but it is an important piece of the solution. However, none of the current Democrat-sponsored bills deal even tangentially with tort reform, a fact that further delegitimizes them as a good-faith effort to drive down costs. If savings are indeed the goal, then there’s no question tort reform should be on the table.

The lack of its inclusion, however, is another piece of proof that savings aren’t the goal – retribution and power are. Howard Dean, in a moment of candor, tells us why tort reform isn’t being considered. It might be a smart political move to keep the trial lawyer lobby in your pocket, but it’s a crass move that throws out billions of dollars of potential savings and serves as another example of the favoritism games being played with health care reform.

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