Additional Information on the Effects of Tort Reform

December 10, 2009

CBO has released a letter responding to questions posed by Senator Rockefeller about our recent analysis of the budgetary effects of proposals to limit costs related to medical malpractice (tort reform), as described in a letter to Senator Hatch on October 9. Todays letter addresses questions about how recent empirical studies affected CBOs analysis, why CBOs latest estimates of the budgetary effects of tort reform are larger than the agencys previous estimates, and whether tort reform would have a negative impact on patients health.

Recent Research Findings

CBOs latest assessment of the effects of tort reform on spending for health care draws on a considerable amount of analysis that the agency has undertaken during the past several years and a stream of recent research studies that have used a variety of data and empirical techniques. Despite that analysis, estimates of the budgetary effects of tort reform are unavoidably uncertain, as is true for many other issues that CBO studies. In dealing with uncertainty, the agency consistently strives to produce estimates that lie in the middle of the distribution of plausible outcomes based upon available knowledge. After a careful evaluation of the research relevant to tort reform, along with discussions with members of the agencys Panel of Health Advisers who have particular expertise in this topic, CBO concluded that the weight of empirical evidence now demonstrates a link between tort reform and the use of health care services.

CBOs Updated Estimates of the Budgetary Effects of Tort Reform

CBO had previously estimated that enacting a common package of tort reform proposals would reduce federal deficits by $4 billion from 2010 to 2019, but CBO now estimates that those proposals would reduce federal deficits by about $54 billion during that period. The latest estimates are substantially larger for four principal reasons:

  • The estimates include a larger effect of tort reform on medical malpractice costs;
  • The estimates incorporate the effect of a gradual reduction in the utilization of health care services resulting from changes in the practice patterns of providers;
  • The estimated effect on federal revenues was substantially smaller in the previous estimate (which reflected only a reduction in malpractice costs) than the estimated effect on revenues in the current estimate (which reflects the combined effects of the reduction in malpractice costs and the change in spending attributable to changes in practice patterns); and
  • The reduction in utilization is projected to generate a proportionately larger reduction in federal spending on health care than in other spending on health care.

Effects of Tort Reform on Patients Health

The potential impact of tort reform on the quality of health care and on health outcomes is an important consideration for policymakers. CBOs letter to Senator Hatch observed that imposing limits on suits for damages resulting from negligent health care might be expected to have a negative impact on health outcomes. However, the limited evidence currently available about the effects of tort reform on health outcomes is much more mixed than the larger collection of evidence currently available about the effects of tort reform on health care spending.