Study Finds Caps on Medical Malpractice Lawsuits does Not Impact Healthcare Costs

Two papers written by a University of Illinois professor have found placing caps on medical malpractice lawsuits does not have a positive impact on the healthcare system in the U.S.

David Hyman, the H. Ross and Helen Workman Chair in Law and professor of medicine at the university called the cost of medical malpractice “pretty modest” in relation to the total amount spent on healthcare in this country. These findings go against a general assumption that placing limits on non-economic damages does nothing to control healthcare costs and may even slightly increase costs in some situations.

First paper studies healthcare costs

Hyman’s first paper studied malpractice reforms in nine states that included Illinois, Texas and Florida. Reforms all took effect between 2002 and 2005, which consisted of the third wave of tort reform. Hyman compared healthcare costs in those states before and after malpractice reform, as well as to states that did not enact tort reform. He also looked at states that had enacted tort reform earlier, during the first wave of reform.

Although early studies found some large impacts of tort reform, subsequent research showed little or no impact of tort reform on healthcare costs. While Hyman’s paper found a damage cap had no effect on hospital spending, those same caps did appear to lead to an increase in physician services spending.

Second paper looks at physician “magnets”

In the second paper, Hyman found that tort reform did not appear to impact where physicians chose to practice, contradicting another theory that tort reform could create a physician “magnet” in the states that institute it. Hyman told the University of Illinois New Bureau that other factors would be more likely to attract physicians to a specific state than tort reform, according to his findings.

“Paying physicians more when they treat Medicaid beneficiaries is a clear and direct way of encouraging physicians to move to your state and practice in settings where access to medical services is a problem,” Hyman explained.

Other findings on tort reform

Other recent studies have supported the idea that tort reform would not have a positive impact on the cost of healthcare. A study by the consumer advocacy group Public Citizen found that although medical malpractice payouts decreased from 2001 to 2011, healthcare costs during that same time frame skyrocketed. This finding negates the idea that medical malpractice payouts have a direct correlation to the cost of healthcare in any given are.

Some figures estimate the cost of medical malpractice lawsuits totals less than 0.5 percent of healthcare spending. If these numbers are accurate, it does not appear that tort reform would have any real impact on the cost of healthcare overall.

According to figures by Deiderich Healthcare, medical malpractice verdicts and settlements in 2013 were at the highest levels since 2009. The total amount of payouts exceeded $3.7 billion, with the largest payouts occurring in New York and Pennsylvania. Nearly all (96 percent) of those payouts resulted from settlements, while one-third involved errors in diagnosis. Despite the large numbers, research continues to show that those payouts do not appear to affect the cost of healthcare overall in any area of the country.

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