Texas Tort Reform Doesn't Lower Cost of Healthcare; Does Lower Cost of Medical Malpractice Insurance
side note: Consumer advocacy group Public Citizen recently released a study that analyzed data from Texas, which in 2003 imposed some of the strictest liability caps in the country. While medical malpractice litigation plummeted dramatically since the caps were imposed, residents of Texas are still paying as much for healthcare as any other state in the union. In fact, the study shows that the health care picture in Texas has worsened by almost any measure.
That is a true statement: Healthcare is no cheaper in states with non-economic damage caps than in states without non-economic damage caps. The intellectually honest argument for non-economic damage caps is that non-economic damage caps make medical malpractice insurance cheaper for the state’s healthcare community, making it a more attractive place for physicians to practice medicine. According to a New York Times article, there has been a 17 percent increase in the number of doctors practicing in Texas since 2003.
Non-economic damage caps have been proven to have a deflating effect on medical malpractice insurance premiums. This is due to the nature of the insurance game. When setting premiums, insurance actuaries attempt to predict the number of claims that they will see in a year and how much those claims are going to ultimately cost them. Premiums are set in anticipation of these numbers. When there is a cap on non-economic damages, it takes some of the guess work out of the equation. No longer do insurance companies have to anticipate multi-million dollar non-economic damage awards. In other words, non-economic damage caps improve the predictability of future awards and settlements, decreasing the cost of medical professional liability insurance for the state’s physicians and hospital system.
The more affordable medical malpractice insurance is, the more easy it is to run a profitable medical practice. In this way, caps attract an influx of doctors. The more doctors practicing in a state, the greater its citizens’ access to healthcare.
A common perception among policymakers and pundits is that medical malpractice litigation is significantly, or even chiefly, to blame for skyrocketing health care costs and steadily diminishing access to care. But analysis of data in Texas, which in 2003 imposed some of the strictest liability caps in the country, tells a far different story.