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Thursday, July 5, 2012

Medical Malpractice: Overview and Legislation in the 112th Congress

Baird Webel
Specialist in Financial Economics

Vivian S. Chu
Legislative Attorney

Amanda K. Sarata
Specialist in Health Policyb

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 medical liability 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. The effectiveness of various public policy measures in addressing the issues in the medical malpractice liability market has been a matter of debate, in part because these difficulties have arisen at the intersection of the health care, tort, and insurance systems.

The overall medical liability insurance market is not currently exhibiting a comparable level of disruption to that in the “crisis” periods. Nonetheless, concerns persist regarding the affordability and availability of malpractice insurance in particular regions and for certain physician specialties (e.g., obstetricians). In addition, concern about medical malpractice claims may affect individual provider decisions and the cost of health care.

In terms of direct costs, medical malpractice insurance adds relatively little to the overall cost of health care. Medical malpractice premiums in 2010 totaled approximately $10.2 billion, whereas overall health expenditures were $2.6 trillion in 2010 according, respectively, to data from insurance rating firm AM Best and the National Health Expenditure Accounts. Indirect costs, particularly increased use of services by providers to protect against future lawsuits (“defensive medicine”), have been estimated to be higher than direct costs. CBO estimated that enacting federal tort reforms would reduce health care spending by approximately 0.4%-0.5% (roughly $9 billion-$11 billion) and the federal budget deficit by between $40 billion and $57 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 areas has been affected by the current malpractice system.

In the 112th Congress, the primary vehicle addressing medical malpractice has been H.R. 5, which focused on medical liability tort reform when introduced but was amended to include language similar to other legislation, specifically H.R. 157, H.R. 1150, H.R. 1943, and H.R. 3586. The amended version of H.R. 5 passed the House in March 2012. Language similar to the introduced version of H.R. 5 was included in H.R. 5652, the House budget reconciliation bill for FY2013, which passed the House in May 2012. The Senate has yet to consider H.R. 5 or S. 218 and S. 1099, companion bills to H.R. 5 as introduced. The President’s budgets for FY2012 and FY2013 both requested $250 million for grants to test a variety of reform proposals, but this funding has not been appropriated by Congress.

Date of Report: June 18, 2012
Number of Pages: 20
Order Number: R41693
Price: $29.95

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