Many people believe that tort reform will lower health care spending, but this is a myth that can be debunked. In fact, in order to see what effect tort reform will have on health care spending, it is important to distinguish between both the direct and indirect costs of the medical malpractice liability system. The direct costs of the system include the cost of all the awards and settlements to plaintiffs and the costs that are associated with defending the costs.
This means court costs and the administrative costs that come from the medical malpractice insurers. There are also indirect costs of medical malpractice cases. These typically come when insurance providers take a step to reduce their likelihood of being sued. These are expenses like running extra tests for patients and making costly preventative measures in hopes of avoiding any lawsuits with cantankerous patients that seem to be hungry for litigation.
Tort reforms would make lawsuits happen less often, and would make the process of litigation in these cases less expensive. This means that the tort reform might reduce the amount of defensive medicine needed. Defensive medicine is typically the indirect costs of malpractice. This means that health-care spending may do down.
Still, the costs of the malpractice system are not as dramatic as they are made out to be. Claims that medical malpractice reform could reduce indirect costs by $00 billion to $650 billion per year are not actually legitimate. In fact, Kessler and McClellan performed a study on the impact of tort reforms on health-care spending and discovered that damages caps and other reforms can reduce medical treatment costs by between 5% and 9%.
After opposition from other parties who did not believe that the performed their tests right, Kessler and McClellan reassessed their data and discovered that there was a 4% to 5% decline in the data. Later, the Congressional Budget Office weighed on this situation and used the same methods as Kessler and McClellan to dissect a broader range of medical conditions and how tort reform would reduce costs. They found no evidence that restrictions on tort liability will reduce medical spending significantly. Another research project shows that reform on medical malpractice would maybe reduce Medicare Spending by 1.6%, which is a relatively insignificant figure.
Multiple studies that dealt with this issue discovered that even if there was a large reduction in medical malpractice premiums, it may only result in a 0.4% decline in health care spending. While health care reform can often result in a decline in claim frequency or in the payout per claim because of caps, the reform does not typically influence health care spending levels.