Ohio Has Already Proven That ""Tort Reform"" Does Not Lower Health Care Costs

Ohio's tort reform law hasn't lowered health-care costs

By Stephen Koff, The Cleveland Plain Dealer

March 20, 2010

WASHINGTON, D.C. - As the House of Representatives prepares to vote Sunday on a package that

Democrats say will make health care more affordable, critics insist the ""big government

takeover of health care"" is not only unwarranted, but that a part of the solution is so

obvious it's a crime Democrats failed to embrace it.

It's called tort reform, or putting the brakes on junk lawsuits. If doctors and hospitals

don't need to worry about defending themselves against baseless malpractice lawsuits,

they'll stop ordering needless, duplicative tests and halt the practice of defensive

medicine, Republican congressional leaders say. It's an easy and necessary way to bring down

costs for all Americans, they say.

The problem is, Ohio has already taken that step, as have many other states. Yet five years

after a difficult but successful fight in Columbus to pass tort reform, health-care costs in

the state have not gone down. And health policy analysts say it may not be possible to say

whether costs would have spiked even higher had Ohio not passed lawsuit reform.

Costs climbed even after the legislature limited the size of jury verdicts for pain and

suffering to $250,000 except in catastrophic cases, restricted punitive damages, and made it

tougher to take a case to trial. In 2004, the year Ohio passed lawsuit liability reform,

average premiums for employer-based family health plans were $9,590, according to data from

the nonpartisan Kaiser Family Foundation. By 2008, average family premiums were $11,425.

This means that four years after the state passed reform, health insurance for Ohio families

in employer plans had gone up by 19 percent.

That compared with a national average rise of nearly 22 percent during that time.

While Ohio's cost hike was smaller, too many other factors go into health-care spending to

conclude that the limits on lawsuits accounted for that difference, policy analysts say. The

American Association for Justice, a trade group that represents trial lawyers, notes with

the same data that while health insurance premiums in Ohio rose more slowly than the

national average, the Ohio pace still outstripped the hikes in neighboring Kentucky.

And Kentucky did not put caps in malpractice verdicts, so tort reform could not explain its

savings.

That's not to say that by limiting lawsuits against doctors and hospitals, the Ohio

legislature did not make any dent. Malpractice insurance premiums for doctors have dropped

on average by 22 percent since 2006, according to the Ohio Department of Insurance.

Explanations for that vary. The trial lawyers' lobby says the main reason liability premiums

spiked in the first place was because of a big downturn in the stock market, requiring high

premiums to shore up insurance reserves. The medical industry counters that a wave of

malpractice suits drove up the premiums.

Regardless, tort reform in Ohio has reduced the number and size of malpractice cases. In

2005, 5,051 claims were filed against doctors and hospitals. By 2008, the number dropped by

39 percent, a decline that the Ohio State Medical Association attributes to lawsuit reforms.

Doctors and hospitals have testified in Washington that when they fear being sued, they

practice ""defensive medicine."" They say they order expensive diagnostic tests and

screenings, such as computed tomography or CT scans, when a simple x-ray might do because

they don't want to risk a lawsuit.

So when they no longer have that fear, medical industry spokesmen say, doctors no longer

have to practice defensively.

""No one can argue that tort reform in Ohio hasn't brought down the practice of defensive

medicine,"" said Jason Koma, spokesman for the Ohio State Medical Association, which

represents doctors and other health care providers.

But health care costs nevertheless keep rising. Whether their growth rate has slowed -- and

whether care in Ohio would cost more had it not been for liability reform -- is difficult

for researchers to pinpoint.

""I'm not aware of any analysis or study or anything empirical that does that,"" said Doug

Anderson, chief policy officer for the Ohio Department of Insurance. National organizations

that study health-care spending, including the Kaiser Family Foundation, say the same.

One reason for that is the lack of uniform, up-to-date data on private-sector health

spending in every state. Spending figures for Medicare, the government's insurance program

for seniors, are available for as recently as 2006, and show that Ohio's per-enrollee

reimbursement for medical care was $8,249, barely below the national average of $8,304.

But malpractice suits can take several years before verdicts are reached or judges dismiss

the claims, so the 2006 Medicare figures are believed to show little if any impact from

Ohio's tort reforms.

One of the best examples of why it is so difficult to identify savings from tort reform --

and why blaming lawsuits misses other components of health spending -- was cited by William

Hayes, president of the Health Policy Institute of Ohio. Hayes pointed to data from the

Dartmouth Institute for Health Policy and Clinical Practice, which found that Medicare

spending per-enrollee in 2006 was $8,377 in Cleveland, $8,153 in Akron, $7,930 in Dayton --

and a stunning $9,612 in Elyria.

How to account for that 15 percent difference over the course of the 30 miles separating

Cleveland and Elyria?

One theory cited in the New England Journal of Medicine is that in areas with a lot of

doctors, hospitals and testing equipment, patients are more likely to be referred for

treatment or tests, especially if their diagnoses fall within a gray area. The New York

Times noted earlier that in Elyria, an abnormally high number of angioplasty procedures,

which involve enlarging an artery with a balloon and inserting a stent to keep the artery

open, were being performed. And, said the Times, ""nearly all the procedures at the Elyria

hospital are performed by a group of cardiologists who dominate coronary care in this city

and have an unabashed enthusiasm for angioplasties, the highly profitable procedure in which

they specialize.""

Similar theories for wild health-care spending have been cited in Texas, a state that had

tort reform similar to Ohio's -- and has some of the highest-cost cities in the country when

measured for Medicare spending.

""So states that set limits on suing may only be able to go so far,"" said Hayes.

This is not to discount entirely the relationship between lawsuits and medical costs.

The nonpartisan Congressional Budget Office in October told U.S. Sen. Orrin Hatch, a Utah

Republican who favors tort reform, that if caps on civil damages were imposed nationwide, it

could reduce national health care spending by about $11 billion a year. Because the

government pays a large share of that, nationwide liability reform could cut the federal

deficit by $54 billion over 10 years, the CBO said.

""From our perspective, tort reforms do have an impact on lowering health insurance costs,

and should be a part of the discussion,"" said Tim Maglione, senior director for government

relations at the Ohio State Medical Association. ""And not according to us but according to

the CBO, it can result in savings of $54 billion over 10 years.""

But spending on health care is so much greater than that, and 35 states already limit

lawsuits in some way. So those billions, while substantial, would shave only about 0.5

percent off health-care spending nationwide, the CBO said.

That's not enough to bring down spending anywhere near where economists say it should be.

Health-care spending already accounts for one sixth of the nation's economy.

""Assuming that the CBO is accurate, or even if they're off by 100 percent, it still is less

than 1 percent of the total cost of the health-care system,"" said Dennis Mulvihill, a

Cleveland trial attorney and president-elect of the Ohio Association for Justice.

President Barack Obama, who came to Strongsville last week to promote his health-care reform

package, has already announced that $23 million in grants will be awarded ""in the near

future"" for states that want to work on alternatives to going to court over medical

disputes. Obama told bipartisan congressional leaders on March 2 that he would expand that

to $50 million if Congress will support it.

But he made clear that he does not believe nationwide tort reform will solve the cost

problem. Nor will it automatically make health insurance more affordable for Americans,

experts say.

""And that's why I think tort reform is not a single panacea,"" said Hayes. ""I think it will

help on provider insurance rates more than consumer insurance rates."