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
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
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,
""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."