Tort Reform Bill Would Reduce Deficit by $40 Billion

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  • March 11, 2011

A House bill that caps noneconomic damages in malpractice cases at $250,000 and enacts other reforms to curb frivolous lawsuits against clinicians would reduce the federal deficit by $40 billion from 2011 to 2021, according to the Congressional Budget Office (CBO). The bill, called the Help Efficient, Accessible, Low-Cost Timely Healthcare (HEALTH) Act of 2011, would lower premiums for malpractice insurance and reduce the number of “defensive medicine” services ordered by clinicians to avoid getting sued, the CBO stated in an analysis released yesterday. As a result of these lower costs, direct federal spending on healthcare would decrease by $34 billion over 10 years. In addition, lower costs on the provider side would cause premiums for private health insurance to fall, which would allow employers to increase taxable wages for employees. That, in turn, would boost federal tax revenue by roughly $6 billion. Two House Republicans and 1 House Democrat introduced the HEALTH Act in January, but the bill is no stranger to Washington — it has been regularly submitted by House Republicans since 2002. Curbing medical liability litigation is a major priority for Congressional Republicans, but less so for their Democratic colleagues, who tend to see measures such as caps on damages as an infringement on a person’s right to have his or her case — and awards — decided by a jury. President Barack Obama has proposed gentler tort reforms, such as resolving cases in a speedy, less adversarial manner outside the courtroom. Senate Approval Considered Unlikely In addition to capping noneconomic (pain and suffering) damages in a malpractice case at $250,000, the HEALTH Act would:

  • cap punitive damages at $250,000 or twice the award for economic damages, whichever is greater;
  • eliminate “joint-and-several” liability, which makes any defendant in a suit liable for all the damages, and replace it with a fair-share rule that sets damages for a defendant in proportion to his or her share of responsibility for the injury;
  • let defendants inform juries of workers compensation payments and other outside benefits for injured plaintiffs that could be subtracted from jury awards;
  • set the statute of limitations for filing a malpractice suit at a maximum of 3 years, with more lenient terms for injured children younger than 6 years; and
  • limit the share of a jury award that a plaintiff’s attorney can receive in the form of a contingency fee.

In estimating the bill’s effect on the federal budget deficit, the CBO is revisiting well-crunched numbers. The nonpartisan Congressional agency analyzed a similar set of tort reforms in 2009 and concluded that they would dry up $54 billion in red ink over 10 years. The Republican-controlled House is expected to pass the HEALTH Act of 2011, but political observers, including those in organized medicine, predict that it will die in the Democrat-controlled Senate, just as earlier versions have.