Does Tort Reform Work?
Posted by Michael P. HalasyComment

Michael HalasyOne of the more commonly proposed solutions to curb U.S. healthcare spending is tort reform, or medical malpractice liability reform. Supporters advocate that physicians are exposed to needless malpractice risk, and that because of this exposure, physicians order costly, needless testing in an attempt to mitigate risk and limit exposure. Opponents counter that if reform were implemented, patients would be left with little compensation if real malpractice occurred and practicing physicians would be immune from liability for medical errors.

Does tort reform work? To start, we need to examine states that have tried tort reform. Texas passed the most aggressive tort reform measures in the country in 2003 by placing a $250,000 cap on malpractice awards. Politicians tried to claim that the Texas effort was a success, with Minnesota Rep. Michele Bachmann stating, “The state of Texas did a wonderful job of lawsuit reform and actually saw medical costs come down. We know it works.”

Empirical data is a powerful thing, however, and the data contradicts Bachmann’s statement. It’s true that this reform lowered malpractice premiums in the state. But settlements and awards have dropped even further than premiums, suggesting that the main benefactors have been insurance companies.

Moreover, a report by the consumer advocacy organization Public Citizen found that Medicare spending per patient had doubled between 2003 and 2007, in contrast to the decline in Medicare spending that was noted prior to the Texas law’s enactment. Additionally, one of the strongest arguments that tort reform supporters use is claiming a reduction in “defensive” medicine expenditures, or unnecessary testing. Unfortunately, between 2003 and 2007, testing expenditures per Medicare enrollee grew at a 50 percent greater rate than the national average. They also found that Texas has the highest rate of uninsured patients in the country, both prior to the law, and accelerating after the law was passed, which suggested that a reduction in healthcare costs, and by extension health insurance premiums, did not occur.

But what about a reduction in defensive medicine practices on a national level? A review of the literature finds that estimates for the costs of defensive medicine vary from as low as 4 percent to as high as 14 percent of total healthcare spending.

To examine this, I looked at a few other studies. In 2006, Janet Currie and Bentley MacLeod at the National Bureau of Economic Research reviewed national data on childbirths to examine whether or not a cap on noneconomic damages would change the types of procedures performed at childbirth. They found that nationally, in those states with tort reform, the rate of C-sections increased, and the rate of preventable complications secondary to childbirth increased by 6 percent.

In 2009, F.A. Sloan and J.H. Shadle examined this same issue in the Journal of Health Economics, using Medicare payments as an index. Their premise was that if tort reform truly changed physician practices with regards to additional testing and/or defensive medicine, they would find a reduction in Medicare payment rates per beneficiary.

In fact, they found that tort reform did not alter defensive medicine practices, with one exception. They did find that so called “indirect” reforms (mandatory periodic payments, joint and severability reform and patient compensation funds) may reduce spending when applied to “any hospitalization.” But inexplicably, these indirect reforms did not affect any of the four diagnoses included in the study.

Another question is the effect on patient care and by extension, mortality-morbidity with defensive medicine reduction. D.N. Lakdawalla and S.A. Seabury found in 2009 that while targeted reforms may be effective, there could be an associated 0.2 percent increase in mortality for every 10 percent reduction in medical malpractice liability costs.

This seems counterintuitive, but defensive medicine practices do uncover illnesses and conditions. Any honest medical provider who has been in practice for any length of time will admit that they’ve done a test presuming it would be negative only to be surprised by the results. We can argue whether or not 0.2 percent is a significant number, but even if we only look at the sickest 5 percent of Americans who are responsible for 47 percent of healthcare spending, this group could have an increase of roughly 30,000 deaths annually with a reduction of 10 percent in spending on medical malpractice.

This is an important discussion, but we need to be honest about the data that’s out there now. Cost containment through tort reform legislation, as measured by the CBO in 2009, would reduce healthcare expenditures by $54 billion over 10 years, or only $5.4 billion per year. This only represents a 0.2 percent reduction in healthcare spending. The evidence that tort reform will genuinely reduce costs simply does not exist.

The truth is, we care about our patients. That’s why we went into patient care as providers. When we order tests, it’s not to prevent a lawsuit. That’s an empty rationalization to explain away our own fears. We’re afraid of missing something because we care, and the thoughts of accidentally harming a patient or missing a diagnosis weigh more heavily on us than any thought of possibly being sued.

Michael P. Halasy, M.S., P.A.-C, D.H.Sc., is an instructor in emergency medicine at the College of Medicine, Mayo Clinic Spine Center in Rochester, Minn. You can reach him at

See also: The ACA and What It Means for You


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