Innovative ways to stimulate the economy: Tort reform to reduce health care costs

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Ask doctors and insurance companies what is the single greatest expense of their health practice and, two times out of three, the answer will be "malpractice insurance." (The other answer is probably "subsidizing the uninsured," an equally great problem, but one for another column.) All economists and medical experts agree that tort reform is sorely needed.

After much introspection, I have decided that no amount of money, no matter how great or small, could change how I felt about the devastating loss of a loved one, or of serious health problems resulting from an accident (even a viciously negligent one) by a medical practitioner. And the way our system works, the punitive damages are neither an effective punishment (after all, the insurance company pays the damages) or a deterrent to the factors typically causing medical incidents (lack of sleep, addiction, and incompetence are hardly prevented by the dim possibility of losing one's malpractice insurance); and they only reward those with the patience -- or bitterness -- sufficient to slog through the legal system long enough to reap financial damages.

So why do we persist in preventing serious tort reform that would greatly diminish the expenses of our medical system, not to mention the millions lost each year in lawyers' fees, court costs, and arbitration expenses? Especially in times like this where it could help lower the cost of doing business in many industries (not just healthcare), leading to lower consumer costs and stimulating the overall economy?

The data supports my supposition; in looking at the twin goals of malpractice insurance, "to deter substandard medical care and to compensate those injured by such care," the current legal system and malpractice insurance industry failed.

Part of the problem is the malpractice insurance industry itself, which spends 60 percent of total costs on defense and administration. What's more, in states with caps on damages awarded in cases of medical negligence, malpractice premiums are 11.7 percent less than in other states. Oregon senattor Ron Wyden, who has long been a supporter of medical malpractice reform, has this to say about its role in the state of our health system: "it's an essential piece for there to be enduring reform, reform that will stick."

While malpractice costs make up only about 2 percent of total health care costs, the enormous amount Americans spend on healthcare each year is big enough that a savings of a quarter to a third of malpractice costs would have a several-billion dollar effect on the economy; at no cost at all to taxpayers.

And tort reform need not only impact health care costs. Substantially limiting noneconomic and punitive damage payouts, and greatly reducing the amount of a claim recoverable by attorneys, could have a cascading effect on the economy, moving resources currently tied up in negotiating disputes between the angry and the frightened to more productive sectors.

What if one of every two personal injury attorneys were to put his or her intelligence and energy into creating more energy-efficient heating systems, or developing community-based barter economies, or helping the unemployed learn new skills, or growing organic vegetables? No studies have yet been conducted on this, but I'm willing to bet it would change a lot.

Do you think this would stimulate the economy? Tells us why, or share your stimulus ideas. And see more of our Innovative Ways to Stimulate the Economy.

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