Debate without Data: Lawmakers Debate Tort Reform without Facts

President Bush and Republicans in Congress are pushing legislation supported by the insurance industry and the American Medical Association. Many Republicans, insurers, and doctors would like to see a federal limit to what juries can award for pain and suffering to victims in medical malpractice cases.

The legislation is part of Bush’s overall plan to regulate what he calls frivolous lawsuits. This type of government regulation, called tort reform, has been a priority for Bush since he was governor of Texas.

Bush and tort reform supporters believe that high-cost lawsuits drag down the economy and are a burden to individual tax payers.

But critics are questioning Bush’s claims since there is very little information about how lawsuits affect the economy, and economists themselves say that there’s no way to accurately determine how much litigation costs taxpayers.

A majority priority

Legislation that would set national limits on medical malpractice awards won’t be introduced until March or April 2005, but lawmakers on Capitol Hill are already gearing up for a fierce battle. Senate Majority Leader Bill Frist (R- Tenn.), who is a doctor, says medical malpractice reform is a "majority priority."

Many Republicans want to see a federal limit of $250,000 for pain and suffering awards. Although there would be no limit to compensation for lost wages and medical expenses, Republicans believe the bill would drastically reduce insurance payouts and, in turn, insurance premiums.

But opponents argue that there is no evidence that such limits would lead to smaller malpractice insurance premiums for doctors. They say that there are a variety of factors that contribute to the high cost of premiums and that, in order to enact real change, the insurance industry must be regulated.

Debate without data

In January 2005, President Bush addressed hundreds of health professionals in Missouri, claiming that outrageously expensive medical malpractice insurance premiums were a direct result of legal costs and high insurance payouts.

This is an assertion that Bush has made often, but there are no widely-accepted data to support his claim. In fact, the number of claims against doctors dropped in 2004, but premiums have continued to rise.

According to Congressional Quarterly, most of Bush’s statements about the tort system’s growing costs are based on figures from a single research firm, Tillinghast Towers-Perrin, which works for the insurance industry and, therefore, has an interest in limiting litigation.

Further, the administration cites California as a leading example for tort reform; the state passed a $250,000 cap on medical malpractice awards and now has relatively inexpensive malpractice premiums. But consumer advocates argue that the low costs are due to a 1988 law that prevents insurers from raising rates more than 15 percent a year without a public hearing.

Lack of info

Much of the disagreement surrounding tort reform is due to a total lack of comprehensive information on the subject. According to Congressional Quarterly, there are no national statistics on how many tort claims are made, how many of these claims reach a courtroom, how often plaintiffs win or lose, how much money juries actually award, and what percentage of those awards are compensation for pain and suffering.

And there are no organizations or think tanks out there that regularly collect data on insurance claims or out-of-court settlements, so no one really knows how much money is really flowing through the tort system.

Without such information, it’s difficult to estimate how much money is going towards legitimate injuries and economic losses and how much is unnecessary or "excessive," as Bush says.

But that’s not to say that large malpractice payouts aren’t affecting insurance premiums. The lack of information makes it impossible to determine either way - so there’s really no data to either support or deny the efficacy of the proposed legislation.

Fear and perception

It’s possible that the fear of large payouts encourages insurance companies to keep their premiums high and that the public perception of economy-draining lawsuits is helping to fuel the bill. Insurance companies lost profits on their investments (that’s what they do with our premiums) during the recession and are raising their rates to try to make up for several years of stiff competition for market share.

The New York Times reports that media coverage of malpractice victims who get large awards has outpaced the payouts themselves. And some economists say that the debate is merely a barrage of anecdotes:" [the debate] has become emotions untethered to facts," says Robert E. Litan, senior fellow at the Brookings Institution, "it’s like the abortion debate."

Economists and insurance industry regulators agree that Washington should authorize and fund a project to gather information on state court filings, out-of-court settlements, insurance claims, and verdicts before any attempt to reform the tort system. Without sufficient data, they say, a new law could be misguided.

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Posted on: 3/4/2005