Tort reform became an increasingly popular topic during the health reform debate. Tort reform is the legislative process of reducing outrageous payouts in civil lawsuits. This article is the first in a series and examines how tort reform works.
How Tort Reform Works
Tort reform only affects civil lawsuits. A civil lawsuit is where a victim “brings a case for money damages against the offender or a third party for causing physical or emotional injuries.” ¹
The logic of Tort Reform follows this (or a similar) pattern:
Malpractice Insurance Companies
- The government sets limits for the amount of money rewarded in valid civil lawsuits. The government also creates litmus tests to prevent frivolous lawsuits coming into fruition.
- The number of frivolous lawsuits decline. The amount of money paid out declines as well.
- Malpractice insurance companies retain more capital and can reduce premiums for doctors and hospitals.
Doctors and Hospitals
- Doctors are able to perform better services because they’re treating patients based on symptoms instead of running unnecessary tests to “cover their ass.”
- Doctors and hospitals pay less for malpractice insurance because their premiums are lower (see above).
- Clinics and hospitals can charge less for goods and services.
In short: when the malpractice insurance companies are happy, doctors and hospitals are happy.
Patients
- Patients will not be subjected to unnecessary medical procedures just because the doctor is afraid of losing their license.
- Health insurance companies can reimburse less for office visits and treatments (see above).
- Patient premiums go down.
In short: when doctors and hospitals are happy, patients are happy.
Conclusion
The success marker chains start with the most powerful entity (insurance companies) and ends with the least powerful (consumers). This is known as “Trickle-Down Economics.” The idea is that by helping private companies increase revenue, their wealth will “trickle down” to consumers.
According to the most recent CBO estimate tort reform could reduce the federal deficit by $54 billion over the next 10 years. The current health reform bill does not apply a particular tort reform strategy. Instead, it offers grants to states who wish to experiment with different approaches to tort reform.
Food for Thought
The positive budget implications of tort reform are tangible and blocking any Tort Reform laws is short-sighted. At the same time, where do we draw the line? Is it right for the government to tell you how much you’ve suffered? Why do individuals feel entitled to money they did not earn?