Over at the Belmont Club, Richard Ramirez has a post citing a proposal by a physician for reform of the health care system. The proposal is thoughtful, with some excellent suggestions (which will never get implemented in today’s environment, sadly).
What caught my eye in the comments was a summary of the changes which tort reform has brought about in Texas by a commenter, Leo Linbeck:
I’m pretty familiar with tort reform in Texas, as my dad was the founding Chairman of Texans for Lawsuit Reform. TLR started in the mid-1990s after forty years of steadily increasing tilting of the civil justice playing field in favor of plaintiffs. There were two major inflection points in this fight:
The 1995 session (with George W. Bush was Governor)
Limited punitive damages
Reformed joint and several liability
Restricted venue shopping
Restored the Deceptive Trade Practices Act to its original purpose of protecting consumers in ordinary consumer transactions
Enacted a half dozen other reforms to curtail specific lawsuit abuses
The 2003 session (with George W. Bush was Governor)
Enacted comprehensive reforms governing medical liability litigation, including a $750,000 limit on non-economic damages
Initiated product liability reforms
Made the burden of proving punitive damages similar to criminal law, requiring a unanimous jury verdict
Comprehensively reformed the statutes governing joint and several liability and class action lawsuits
Imposed limits on appeal bonds, enabling defendants to appeal their lawsuits and not be forced into settlements (this is what pushed Texaco into bankruptcy in its famous lawsuit against Pennzoil)
Further limited the filing of lawsuits that should have been brought in other states or countries
The changes to medical liability in 2003 were extraordinary, and had a very substantial impact, including:
1. In August 2004, the Texas Hospital Association reported a 70% reduction in the number of lawsuits filed against the state’s hospitals.
2. Medical liability insurance rates declined. Many doctors saw average rate reductions of over 21%, with some doctors seeing almost 50% decreases. (Recent information provided to The Perryman Group during the course of this study suggests that premiums are declining even further in 2008.)
3. Beginning in 2003, physicians started returning to Texas. The Texas Medical Board reports licensing 10,878 new physicians since 2003, up from 8,391 in the prior four years. Perryman has determined that at least 1,887 of those physicians are specifically the result of lawsuit reform.
4. In May 2006, the American Medical Association removed Texas from its list of states experiencing a liability crisis, marking the first time it has removed any state from the list. A recent survey by the Texas Medical Association also found a dramatic increase in physicians’ willingness to resume certain procedures they had stopped performing, including obstetrics, neurosurgical, radiation and oncological procedures.
Last year, TLR commissioned a study by The Perryman Group to figure out the impact of these reforms (the above are excerpted from that report). Here are the economic impact findings of that study:
$112.5 billion increase in annual spending
$51.2 billion increase in annual output â€“ goods and services produced in Texas
$2.6 billion increase in annual state tax revenue
$468.9 million in annual benefits from safer products
$15.2 billion in annual net benefits of enhanced innovation
499,000 permanent jobs
430,000 additional Texans have health insurance today as a result of the medical liability reforms
The complete Perryman Group report is here.
As these numbers show, tort reform can have a substantial impact on economic growth and wealth creation, and a huge impact on the healthcare system in particular. Any serious national healthcare reform must include comprehensive tort reform to reduce the practice of defensive medicine and other perverse incentives.
Which is why I do not consider the current proposals from the Obama Administration to be serious (other than being seriously flawed).
Our current re-invention of the health care system, for all its complexity, completely ignores the problem of runaway malpractice lawyers and the costs of defensive medicine. While not surprising, given the huge contributions to the Dems from attorneys, this deficit alone virtually guarantees a disastrous outcome should it be implemented.