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Wednesday, June 1, 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, medical malpractice involves issues related to its prevalence in the health care system, the market for provider liability insurance, 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 comparable level of disruption as in the “crisis” periods. Nonetheless, concerns persist regarding the affordability and availability of malpractice insurance in particular regions and physician specialties (e.g., obstetricians). In addition, the fear of claims for medical malpractice may affect 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 overall cost of health care. According to the National Association of Insurance Commissioners (NAIC), medical malpractice premiums written in 2010 totaled approximately $10.6 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.

The malpractice system also faces issues of equity and access. For example, some observers have criticized the current system’s performance with respect to (1) compensating patients who have been harmed by malpractice, (2) deterring substandard medical care, and (3) promoting patient safety. 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 and the House Committee on Energy and Commerce. Both committees have marked up and reported H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 to the full House. A Senate companion bill, S. 218, has not been acted on to date. Among other things, the HEALTH Act would implement a cap on non-economic damages for health care lawsuits.

Date of Report: May 18, 2011
Number of Pages: 17
Order Number: R41693
Price: $29.95

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