Responding to a 2009 request from Senator Orrin Hatch (R, Utah), the Congressional Budget Office issued a letter suggesting that medical malpractice tort reform would “reduce federal budget deficits by roughly $54 billion over the next 10 years.” Sounds great—a billion here, a billion there and pretty soon you’re talking real money—but the devil is in the details. The CBO letter reported that 40% of the savings would come in the form of lower malpractice premiums to physicians and 60% from “less utilization of health care services.”
What does that mean, exactly? Insurance companies are only going to lower premiums to physicians if they are paying out fewer and/or smaller settlements to the victims of malpractice. To accomplish this would require placing caps on awards and making it harder to sue. The thinking goes that physicians, once relieved of malpractice fears, would then stop ordering so many unnecessary tests thereby lowering healthcare costs for everyone.
Defensive medicine is defined as the “ordering of treatments, tests, and procedures primarily to help protect the physician from liability rather than to substantially further the patient’s diagnosis or treatment.” And it’s a problem—a big problem. One recent study noted that 93% of physicians in high-risk specialties admit to defensive medicine practices at least some of the time (and the others simply lack self-awareness). Every physician I know practices defensively. Ours is a culture of shame and blame. Physicians have simply responded in kind to protect themselves. Besides, patients are always clamoring for more tests, so where’s the problem in “being careful?” Ignoring the fact that excessive testing often leads to harm rather than benefit, there is the matter of cost. Going well beyond the CBO projections, a 2010 Price/Waterhouse/Coopers study estimated that defensive medicine practices cost the healthcare system $210 billion annually, accounting for 10% of all healthcare costs. The figure is dubious. Nobody really knows how much defensive medicine is costing the system but all agree that it’s a sizable chunk of change. Sizable enough to prompt House Speaker John Boehner (R, Ohio) to state that defensive medicine is the “biggest cost driver” in the American healthcare system. And while I rarely agree with the Speaker about anything, in this case, he just may be right.
But is there any evidence that malpractice reform actually changes the way physicians practice? We need look no further than the great state of Texas for answers. In 2003, the state passed sweeping malpractice reform that not only placed caps on payouts but also made it much harder to sue doctors. Before the legislation, the standard to win a malpractice suit required showing that a physician had deviated from “the standard of customary practice” and that this deviation had resulted in harm to the patient. Texas changed the standard to one requiring “willful and wanton negligence” on the part of the doctor. In Texas, an emergency physician not only has to deviate from customary practice, but also must recognize that this deviation was likely to cause harm and proceed anyway. Under this standard, a patient who accidently had the wrong leg amputated during surgery would not be compensated unless he could prove that the doctor knew it was the wrong leg and cut it off anyway. Anybody want to move to Texas?
Needless to say, the legislation successfully lowered the number of lawsuits by 60% and payouts by 70%. Over the next 7 years, physician malpractice premiums also declined by 50%. But medical insurance premiums paid by patients didn’t. Instead, they rose by more than 50%, at a rate even higher than the national average. Even the Affordable Care Act wasn’t able to help the citizens of Texas much. The state still leads the nation in the percentage of its citizens without healthcare insurance. And there’s no truth to the claim of politicians that malpractice reform led to a huge influx of doctors either. Although many doctors did move to Texas after the reform, roughly an equal number retired or moved away. Instead, the increase in physician population simply mirrored the overall increase in the state’s population as a whole, while the proportion of doctors practicing in physician-shortage areas actually declined a bit. A detailed paper published by the Social Science Research Network clearly shows that Texas was neither “hemorrhaging doctors” before the reform nor achieved an “amazing turnaround” after. The state still has fewer physicians per capita than the rest of the country.
Okay, so malpractice reform didn’t increase the number of insured Texans or increase access to care. But wasn’t the real purpose to reduce medical costs by taking pressure off physicians to order so many unnecessary tests? Certainly that panned out, didn’t it? It did not. For reasons that nobody can adequately explain, Part B Medicare expenditures (e.g. lab tests, doctor visits, and surgeries) markedly increased in Texas after the legislation, and to a far greater degree than the rest of the country. From 2003 to 2007, these expenditures rose nationally by 31% while they increased in Texas by 43%. Strike three, you’re out.
Despite legislation protecting them from lawsuits, physicians in Texas continued ordering tons of tests—even more tests than doctors in places without similar protections. Does this mean ordering more tests and surgeries improves the quality of care? This is a very difficult thing to measure, but if we use the number of complaints filed against physicians as a surrogate for quality then the answer is another no. Once it became almost impossible to sue doctors, patients retaliated in the only manner left to them. Complaints filed to the state Medical Board increased by 13%, investigations by 33%, license revocations by 47%, disciplinary actions by 96%, and financial penalties by 367%. Oops—looks like the doctors of Texas didn’t exactly live up to the promise of providing better care through fewer tests.
To summarize: Malpractice reform in Texas led to a drastic reduction in lawsuits, payouts, and insurance premiums paid by doctors while failing to increase access to care, lower insurance premiums paid by patients, or improve the quality of care delivered. Lastly, the reform failed to save healthcare dollars or reduce Medicare testing. The only winners were the doctors and the insurance companies. The losers were everyone else. What I would call an “epic fail,” Michele Bachmann called “a wonderful job of lawsuit reform.” I guess it just depends on your perspective.
Thirty states now have damage caps in place and there is no evidence that this has done anything to lower healthcare costs or decrease defensive medicine. The three states that have enacted the most drastic reforms—Texas, South Carolina, and Georgia—have seen no change in ER physician practice patterns and have reaped no savings. There are many reasons to change our current malpractice system, but thinking that it will save money by eliminating defensive medicine isn’t one of them.
- Douglas W. Elmendorf, Director, Congressional Budget Office, US Congress, Washington, DC, letter to Senator Orrin Hatch, Oct. 9, 2009, cbo.gov.
- M. Studdert et al., “Defensive Medicine Among High-Risk Specialist Physicians In a Volatile Malpractice Environment,” JAMA 2005; 293: 2609-17.
- Price/Waterhouse/Coopers, “The Price of Excess: Identifying Waste in Healthcare Spending,” 2010, http://www.pwc.com/us/en/healthcarepublications/the-price-of-excess.jhtml.
- Taylor Lincoln, “A Failed Experiment: Health Care in Texas Has Worsened in Key Respects Since State Instituted Liability Caps in 2003,” Public Citizen, Oct. 2011, http://www.citizen.org/documents/a-failed-experiment-report.pdf.
- “Health Insurance Coverage of the Total Population,” Henry J. Kaiser Family Foundation 2013, http://kff.org/other/state-indicator/total-population/.
- David Hyman et al., “Does Tort Reform Affect Physician Supply? Evidence From Texas,” Social Science Research Network 2012, http://ssrn.com/abstract=2047433.
- Ronald Stewart et al., “Tort Reform Is Associated With More Medical Board Complaints and Disciplinary Actions,” Am. Coll Surg. 2012; 214: 567-73.
- Daniel Waxman et al., “The Effect of Malpractice Reform on Emergency Department Care,” NEJM 2014; 371, n0.16: 1518-25.