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Monday, March 21, 2011

Medical Malpractice: Background and Legislation in the 112th Congress

Baird Webel
Specialist in Financial Economics

Vivian S. Chu
Legislative Attorney

David Newman
Specialist in Health Care Financing

As a policy area, concerns about medical malpractice have often involved issues related to the market for provider liability insurance, the prevalence of malpractice in the health care system, and the resolution of malpractice complaints through the tort system. Medical malpractice has attracted congressional attention numerous times over the past decades, particularly in the midst of three “crisis” periods for the liability insurance market in the mid-1970s, the mid-1980s, and the early 2000s. These periods were marked by sharp increases in medical liability insurance premiums, difficulties in finding any insurance in some areas as insurers withdrew from providing coverage, reports of providers leaving areas or retiring following insurance difficulties, and a variety of public policy measures at both the state and federal levels to address these historic crises. Which public policy measures have been effective in addressing the difficulties in the medical malpractice liability market has been a matter of debate, in part because these difficulties have been at the intersection of the health care, tort, and insurance systems.

The overall medical liability insurance market is not currently exhibiting the same level of disruption as in the past. Nonetheless, concerns with the affordability and availability of malpractice insurance persist, especially in particular regions and physician specialties (e.g., obstetricians). In addition, the fear of claims for medical malpractice may impact individual provider decisions and drive up the overall cost of health care. In terms of direct costs, medical malpractice insurance adds relatively little to the cost of health care overall. According to the National Association of Insurance Commissioners (NAIC), medical malpractice premiums written in 2009 totaled approximately $10.8 billion, while overall health expenditures are estimated by the Congressional Budget Office (CBO) to total $2.6 trillion. Indirect costs, particularly increased use of tests and procedures by providers to protect against future lawsuits (“defensive medicine”), have been estimated to be much higher than direct premiums. CBO estimated that enacting federal tort reforms would reduce both health care spending by approximately 0.4% (roughly $10.5 billion) and the federal budget deficit by $40.1 billion over a 10-year period.

Even during a period of relative calm, the malpractice system experiences issues with equity and access. For example, some observers have criticized the current system’s performance with respect to compensating patients who have been harmed by malpractice, deterring substandard medical care, and promoting patient safety. Yet there are differing opinions as to the extent that each of these particular areas has been affected by the current malpractice system.

The President’s 2012 budget encouraged Congress to reform the medical malpractice system and requested $250 million for the Department of Justice to test a variety of reform proposals. In the 112
th Congress, the specific issue of medical liability reform was addressed by the House Committee on the Judiciary in a January 20, 2011 hearing. The committee marked up H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011, on February 9 and February 16, 2011, and ordered the bill reported to the full House by a voice vote. Among other things, the HEALTH Act would implement a cap on non-economic damages for health care lawsuits.

Date of Report: March 16, 2011
Number of Pages: 17
Order Number: R41693
Price: $29.95

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