Medical Malpractice Reform: The Time is Now

Dear Legislator:

Last week, both the House Judiciary and Energy and Commerce Committees approved language that addresses the nation’s soaring medical malpractice insurance rates. H.R. 5, the “HEALTH Act,” has now moved to the House floor for debate. On behalf of the 280,000 members of Citizens for a Sound Economy (CSE), I urge you to support the meaningful reforms included in H.R. 5. Passage of the “HEALTH Act” would help to alleviate the crisis healthcare institutions, medical practitioners, and the American public face and would control the exponential growth of medical malpractice premiums and lawsuits.

The explosion of malpractice lawsuits and subsequent growth of astronomical jury awards have tremendously increased the costs of medical malpractice insurance. Although truly injured parties must have access to our courts to adjudicate their claims, trial lawyers have taken advantage of our civil justice system to further their own interests. This reality has terrible consequences for all Americans.

Today, it is very possible that an individual who seeks medical attention will not immediately receive it. Skyrocketing insurance rates are forcing many hospitals and clinics to shutter emergency rooms and trauma centers and cancel other vital services like obstetrics. Doctors are now moving to specialty areas with lower premiums, to states with better legal protections, or retiring from the field altogether. In the end, patients suffer the most from runaway jury awards and frivolous lawsuits.

The enormous rise of premiums not only jeopardizes public health, but also increases the overall cost of healthcare in America. Doctors are being forced to use “defensive medicine” (ordering a battery of expensive tests and procedures) when they see patients, so they have a firm defense if a lawsuit is brought against them. Predictably, the costs of “defensive medicine” are passed on to consumers and taxpayers, in the form of higher healthcare premiums and taxes. In fact, a U.S. Department of Health and Human Services study found that doctors spent $6.3 billion in premiums last year and that “the direct cost of malpractice coverage and the indirect cost of defensive medicine increases the amount the federal government must pay through these various channels, it is estimated, by $28.6 to $47.5 billion per year.”

It is time for Congress to pass meaningful legislation that will address our nation’s healthcare crisis. H.R. 5 includes measures that would have a dramatic, positive affect on the nation’s healthcare system and would significantly decrease medical malpractice insurance rates. According to the Congressional Budget Office, H.R. 5 would eventually drop malpractice premiums by an average of 25 to 30 percent below current rates without affecting the safety and well-being of patients receiving medical care.

Medical malpractice reform undertaken in California 25 years ago, which resembles the HEALTH Act, demonstrates that reform significantly controls malpractice premiums and overall healthcare costs. For instance, California obstetricians pay premiums near $23,000 annually, compared to $72,000, which is the national figure. Also, California’s overall healthcare costs are 6 percent lower than other states, saving nearly $6 billion a year.

Undoubtedly, you have heard claims that malpractice insurance rates are climbing because insurance companies wish to make up for losses incurred in their investment portfolios, specifically the precipitous drop in equity evaluations. This is a red herring that does not stand up to scrutiny. First, it is illegal for insurers to increase premiums for past losses incurred on investment income. Secondly, insurers set premium rates based on losses accrued from payouts and defense costs associated with past and future lawsuits. Finally, insurers have very little exposure to equities in their investment portfolios: approximately 85 percent of insurer assets are comprised of bonds, which have stood up well in this bear market relative to equities.

Finally, meaningful reform will not reduce the quality of care that patients receive. For instance, Dan Kessler and Mark McClellan of Stanford University studied Medicare patients across the United States, comparing health care expenditures and care in those states that had passed legal reforms and those that did not. They found that health care costs were lower in states that had passed reforms, but patients were no worse off.

The rising cost of medical malpractice insurance is a serious threat to the well being of American citizens and our nation’s healthcare system. It is time for real reform. Congress must act. I urge you to support the meaningful reforms in H.R. 5, the “HEALTH Act.”

CSE will count this as a KEY VOTE to be reported to our members in your state. This KEY VOTE will be used to determine your eligibility for our Jefferson Award, to be presented at the conclusion of the 108th Congress. This award is provided to those legislators that espouse the CSE principles of limited government, lower taxes, and more freedom.

Sincerely,

Paul Beckner

President and CEO

Citizens for a Sound Economy