Tort Reform And Changes To Doctor Payment Could Cut Health Costs

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Limiting medical malpractice lawsuits and changing the doctor payment system are being debated as possible ways to make health care more cost-effective.

One of the "gang of six" Senate Finance Committee negotiators, Sen. Mike Enzi, R-Wyo., recently listed changing tort law as a "common sense reform" to reduce health care costs. He said America needs "to reform our flawed medical liability system and eliminate junk lawsuits against doctors and hospitals," NPR reports. "Democrats, who get significant backing from trial lawyers, have generally resisted efforts to curb lawsuits." And "former Democratic Senator Bill Bradley suggests a grand bipartisan trade-off: Give the GOP the relief from lawsuits they want in exchange for the universal health insurance that Democrats want." The American Medical Association's immediate past president, Dr. Nancy Nielsen, says the idea "would be a wonderful thing if it were that simple."

"In general, doctors really like caps on malpractice awards," but the Congressional Budget Office found that "fear of liability is only one reason doctors sometimes perform unnecessary procedures. Their own income is also a factor." So while tort reform alone "won't change a system that gives doctors a financial incentive to do more and more," it could "still be useful, if it helps win doctors' trust" (Horsley, 9/2).

The National Journal reports that "[i]t's almost universally agreed that the threat of lawsuits hangs over doctors and has led to more tests and costs, but wholesale reform of the tort system is viewed by many observers as too big -- or too divisive -- a step without enough of a payoff." Insurance premiums for doctors rose 15% between 2000 and 2002, according to the CBO, but "the real problem isn't the cost of malpractice claims, it's the threat of them. A 2005 study from the Journal of the American Medical Association showed more than 90 percent of doctors reporting that they practice 'defensive medicine,' ordering extra tests to make sure that they don't miss anything," which can lead to wasteful spending. Proposed fixes include setting a nationwide cap on "pain and suffering damages," which was proposed by President George W. Bush in 2002, and "establishing medical courts, or a specialized system modeled after bankruptcy and tax courts" (Plautz, 9/1).

In a separate story, NPR reports that changing the payment system for doctors is an important way to reduce health care costs. "At present, the more procedures doctors perform, the more they get paid. The health industry calls this practice 'fee-for-service.' Many consider it a perverse system - one which lacks incentives to hold down costs. Yet the legislation pending before Congress may not do enough to change it." Rep. Jim Cooper, D-Tenn., "says the real issue is a system bent on telling consumers that more is better," even if it doesn't make the patient healthier. "With the fee-for-service model for health care, Cooper says, doctors have little reason to discourage the demand for more and more health procedures." But it's not clear how to solve the problem. Karen Davis, president of the Commonwealth Fund "says the legislation pending before Congress does offer some incentives for more cost-effective health care: Medicare would crack down on excessive hospital re-admissions, and there would be bonus payments for Medicare providers to improve the quality of their health care. Pilot projects would also be funded" (Welna, 9/2). First of a two-part story.

Rep. Tom Latham, R-Iowa, claims that the House health overhaul bill's changes in Medicare payments to reimburse doctors - based on quality, "would be undercut by lawmakers in charge of financing the legislation," The Des Moines Register reports. "'There's some talk of rewarding physicians as far as outcomes. However, the leadership in Congress has said that will not be part of the final bill,' Latham told an audience in Algona" (Beaumont, 9/2).

This information was reprinted from kaiserhealthnews.org with kind permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery at kaiserhealthnews.org.

© Henry J. Kaiser Family Foundation. All rights reserved.

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