Two papers co-authored by a University of Illinois expert in the regulation and financing of healthcare conclude that tort reform has had relatively little impact on the U.S. healthcare system.
Tort reform advocates have hailed caps on noneconomic damages as a silver bullet for controlling healthcare costs by reducing defensive medicine and for attracting more physicians to a state, particularly those practicing in high-risk specialties. But according to David Hyman, JD, the H. Ross and Helen Workman Chair in Law and professor of medicine at the university in Champaign, there is scant evidence to support any of those claims.
“The best evidence is that caps would have, at most, a tiny impact. We find some evidence that caps might actually increase healthcare costs,” Hyman says. “It’s very hard to see how damage caps bend the cost curve down or materially increase the number of practicing physicians in a state.”
According to Hyman, the direct costs of medical malpractice liability are “pretty modest” relative to total healthcare spending in the United States. “Tort reform may be a good idea or a bad idea, but ultimately it’s a very small idea,” he says. “It’s not going to have as big of an impact as many proponents claimed it would.”
One paper published in October 2014 in the Northwestern University School of Law’s Law and Economics Research Paper Series examined the third wave of malpractice reforms, which consisted of studying nine states that enacted tort reform from 2002-05: Florida, Georgia, Illinois, Mississippi, Nevada, Ohio, Oklahoma, South Carolina, and Texas. Thirty-one states covering about 70% of the U.S. population already have adopted damage caps, according to the paper. “We compared what was happening in healthcare spending in those [nine] states before and after tort reform with what was happening in the control states, which were the states that had never enacted tort reform and states that had enacted tort reform during one of the earlier waves,” Hyman says. “Some early studies found evidence that enacting tort reform made a big difference in healthcare spending. Subsequent studies found more modest effects. Other studies found no effect.”
Hyman and his co-authors found enacting a damage cap had no effect on hospital spending, but, somewhat surprisingly, caused an increase in spending on physician services. “It turns out that eliminating liability didn’t lower spending; it actually resulted in a slight uptick in spending,” he said. “So the argument, ‘Just pass tort reform, and you’ll save lots of money’ was not borne out in our study. The bottom line is you’re not going to save a lot of money with tort reform, and there’s some evidence that you might actually increase spending.”
The second paper, published in February 2015 in the Behavior & Social Science Research Paper Series from the University of Illinois College of Law’s Program in Law, considered another common claim about medical malpractice reform: States that enact tort reform will become a “magnet” for physicians, especially those who practice in a high-risk specialty. There is a certain plausibility to that argument, Hyman says. “People decide where to live and work based on many factors. If tort reform means that a practicing physician’s malpractice premiums are lower, then it might factor into whether they move to your state,” he says. “Or it may make some physicians in that state defer retirement. It might also affect physicians deciding where to do a residency and deciding where to set up practice after they finish their residency.”
But outside of a slight increase in the number of plastic surgeons, Hyman and his co-authors found no evidence that adopting a cap on damages from medical malpractice increases the total number of physicians or the number of high-risk physicians.
“The economics of attracting and keeping high-risk specialists and those practicing in rural areas are challenging, and so the question is what tools do you have to do that, so they provide needed services,” he says. “Tort reform proponents argue quite vehemently that enacting a strong cap on noneconomic damages is a good way to get physicians to move to your state. But what we found contradicts that.” (Both papers are available online at http://tinyurl.com/ka8ewq8 and http://tinyurl.com/p7hotfy.)