The Republican presidential candidates during last week’s debate offered few useful ideas to improve healthcare and lower costs. But credit to Nikki Haley for highlighting one: tort reform.
Asked how to protect sick Americans from financial ruin, she mentioned the need to protect healthcare providers from excessive legal liability that drives up costs. “You’ve got to deal with tort law,” she said. “The doctors don’t give you the 10 tests because they want to. It’s because of the 90% chance they’ll get sued.”
That 90% estimate is an exaggeration, but a third of doctors report having been sued. A 2011 survey found that 83% of primary-care physicians worried they could easily be sued for failing to order a test, but only 21% thought they could be sued for ordering an unnecessary test. As Ms. Haley noted, doctors sometimes order tests to protect themselves from suits.
Some also seek to protect themselves by refusing to care for high-risk patients, typically those with other health conditions. Some have also moved to states that limit noneconomic damages that can be awarded in lawsuits. Studies have found that the supply of physicians has increased more in these states.
More provider choice and competition can reduce costs for patients. Tort reform also reduces medical malpractice premiums, which filters through to lower patient costs. Consider the dramatic impact on medical malpractice premiums after a 1975 California law capped damages from pain and suffering at $250,000.
Premiums last year for obstetricians and gynecologists were on average $49,804 in Los Angeles compared to $226,224 in Miami-Dade, $208,821 in Cook County, Ill., and $159,639 in New York, according to an American Medical Association report. Malpractice insurance for one year in Miami can cost as much as a condo.
Under pressure from their plaintiff-attorney friends, Democrats in Sacramento last year raised the cap on noneconomic damages to $350,000 this year and $750,000 over the next decade. Plaintiff attorneys have also supported judges in Illinois and Florida who have struck down state laws limiting noneconomic damages. Tort reform is largely a state issue, and it isn’t a panacea for the many regulatory dysfunctions afflicting the U.S. healthcare system. But it was the best reform idea on offer during the debate.