CBO: Malpractice bill would save $54B

The Congressional Budget Office (CBO) gave a notable boost Friday to backers of capping medical malpractice lawsuits, issuing an analysis that concludes reforms would save the government $54 billion over 10 years and cut national healthcare spending by 0.5 percent a year.

WIth a Democratic president and Democrats in control of Congress, passing any bill that would limit how much money patients can win in lawsuits against doctors is highly unlikely. Democrats contend it would be unfair to curb the rights of wronged patients to seek restitution.

The CBO report nevertheless gives fresh ammunition to Republicans who argue that malpractice reform is a serious, unaddressed problem in the healthcare system — and one that would produce real savings to the federal government and American consumers if resolved.

"That’s not chump change. It’s a no-brainer to include tort reform in any health care reform legislation," Senate Finance Committee ranking member Chuck Grassley (R-Iowa) said in a statement.

If Democrats do ignore the CBO's findings, they would also open themselves to Republican attacks that the party is beholden to its allies in the trial bar.

CBO Director Doug Elmendorf, whose agency as recently as December did not believe malpractice reform to be a significant money-saver, explains the changed thinking in a post on his blog.

"Tort reform could affect costs for health care both directly and indirectly: directly, by lowering premiums for medical liability insurance; and indirectly, by reducing the use of diagnostic tests and other health care services when providers recommend those services principally to reduce their potential exposure to lawsuits," Elmendorf wrote.

In the past, the CBO would only score the savings related to lower malpractice insurance premiums but, Elmendorf explains, "more recent research has provided additional evidence to suggest that lowering the cost of medical malpractice tends to reduce the use of health care services."

Republicans and physician groups have waged an aggressive but unsuccessful campaign for years to enact a nationwide limit on how much juries can award patients in malpractice lawsuits. The Republican-controlled House passed legislation numerous times in the 2000s but the matter never prevailed in the Senate. California, Texas and other states have enacted lawsuit damage caps.

President Barack Obama pledged to include measures to address medical malpractice as part of healthcare reform but does not support caps on lawsuit awards.

Sen. Orrin Hatch (R-Utah), who requested the CBO analysis, criticized Obama's stance. "These numbers show that this problem deserves more than lip service from policymakers. Unfortunately, up to now, that has been all the president and his Democratic allies in Congress have been willing to provide on these issues."

Researchers have been divided about just how profound the effect would be on healthcare costs but the CBO had always maintained that balance of the evidence suggested it would be modest. That conclusion was mostly due to the difficulty of quantifying how much money is wasted on so-called defensive medicine, a term for doctors ordering up possibly unnecessary tests and procedures to shield themselves from charges they failed to do enough to help their patients.

According to the CBO, $41 billion of the budgetary savings would be the result of lower spending in Medicare, Medicaid, the Children's Health Insurance Program and the Federal Employees Health Benefits Program. In addition, the government would raise $13 billion in additional tax revenue because wages would increase as healthcare costs decrease.