This letter responds to your request for an updated analysis of the effects of proposals to limit costs related to medical malpractice (“tort reform”). Tort reform could affect costs for health care both directly and indirectly: directly, by lowering premiums for medical liability insurance; and indirectly, by reducing the use of diagnostic tests and other health care services when providers recommend those services principally to reduce their potential exposure to lawsuits. Because of mixed evidence about whether tort reform affects the utilization of health care services, past analyses by the Congressional Budget Office (CBO) have focused on the impact of tort reform on premiums for malpractice insurance. However, more recent research has provided additional evidence to suggest that lowering the cost of medical malpractice tends to reduce the use of health care services. CBO has updated its estimate of the budgetary effects of proposals for tort reform to reflect that new information. . . .
Several times over the past decade, CBO has estimated the effects of legislative tort reform proposals. Typical proposals have included:
A cap of $250,000 on awards for noneconomic damages;
A cap on awards for punitive damages of $500,000 or two times the award for economic damages, whichever is greater;
Modification of the “collateral source” rule to allow evidence of income from such sources as health and life insurance, workers’ compensation, and automobile insurance to be introduced at trials or to require that such income be subtracted from awards decided by juries;
A statute of limitations—one year for adults and three years for children—from the date of discovery of an injury; and
Replacement of joint-and-several liability with a fair-share rule, under which a defendant in a lawsuit would be liable only for the percentage of the final award that was equal to his or her share of responsibility for the injury.
The Effect of Tort Reform on Premiums for Medical Liability Insurance
National implementation of a package of proposals similar to the preceding list would reduce total national premiums for medical liability insurance by about 10 percent, CBO now estimates. That figure reflects the fact that many states have already enacted at least some of the proposed reforms. For example, about one-third of the states have implemented caps on noneconomic damages, and about two-thirds have reformed their rules regarding joint-and-several liability.
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