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Trump Administration Fiscal-Year 2020 Budget Proposal Estimates $31.5 Billion in Savings from Hypothetical Medical Liability Reform

In March, the Trump Administration unveiled its Fiscal-Year 2020 budget proposal, outlining the President’s tax and spending priorities for the next decade.

While the president’s budget proposal is simply a request with no binding authority on Congress, it is best understood as a detailed statement by the administration of its fiscal goals and policy preferences. And the Fiscal-Year 2020 budget lays bare the Trump Administration’s continued goal of reshaping the American healthcare delivery system, including medical professional liability reform at the federal level, which it assumes would create a potential savings of more than $31.5 billion between 2020 and 2029.

“There are only a few policies where we have pretty good evidence that they will reduce total healthcare costs — and medical liability reform is one of them,” said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, in an interview with Medical Liability Monitor about the Trump Administration’s Fiscal-Year 2020 budget proposal. “It’s a policy where the evidence-base is sufficiently strong that we think it can have a significant effect on both total healthcare costs and Medicare. It’s one of only a few [policies] you could sort of think of as ‘free lunches,’ the kinds of policies that basically are able to press overall costs down without you being able to point easily to the winners and losers, outside, of course, those who would get less in (medical liability awards) and the lawyers that represent them.

The Trump Healthcare Agenda

Healthcare programs comprise almost 30 percent of federal spending, and the Trump Administration’s Fiscal-Year 2020 budget proposal estimates more than $1.3 billion in total savings would result from a hypothetical repeal and replacement of the Affordable Care Act (ACA) as well as enacting various healthcare reforms.

Specifically, the Trump Administration estimates around $660 billion in savings should Congress repeal the ACA and replace it with something similar to the Graham-Cassidy proposal from 2017, which would supersede the ACA’s premium subsidies and Medicaid expansion with either a state block grant or per-capita cap, while restricting the growth of Medicaid base payments.

The president’s budget proposal appraises another $645 billion in healthcare savings from reforming and reducing Medicare provider payments. Specifically, the budget would equalize payments for similar services offered in hospitals and physician’s offices, while slowing the growth of post-acute care payments and reducing compensation to hospitals for bad debts.

The budget further estimates about $31.5 billion in savings by enacting medical professional liability reforms that include limiting noneconomic damages to $250,000 adjusted for inflation, instituting a three-year statute of limitations, allowing evidence of a claimants’ income from other sources such as workers compensation and auto insurance to be introduced at trial, replacing joint and several liability with a fair-share rule, excluding expressions of regret or apology from evidence and establishing “safe harbors” against claims that have clinical justification. A significant portion of these savings is attributable to the estimated reduction in unnecessary services and curbing the practice of defensive medicine.

“The biggest thing that this budget does with medical malpractice is cap noneconomic damages at $250,000,” Goldwein said. “It also has provisions for creating new safe harbors, changes some statutes of limitations. It has some restrictions on attorney fees as well, but the largest thing it does is cap those noneconomic damages, which in some lawsuits can be in the millions and drive-up premiums that doctors pay.”

The Reality of Divided Government

The United States is currently operating under a politically divided government and the likelihood of the president’s healthcare agenda — as outline in his Fiscal-Year 2020 Budget proposal — being enacted is less than modest. But according to Goldwein and the Committee for a Responsible Federal Budget, the budget proposal’s continued inclusion of medical professional liability reform is significant.

“I don’t think it’s very likely that the president’s [tort reform] proposals will be enacted, in particular the cap on noneconomic damages,” Goldwein said. “I do think there’s room for passing safe harbor rules and things like that, but there’s a very strong community of interest groups that are opposed to things like caps.

“While I don’t think it’s very likely [the president’s budget passes], I don’t think that’s the point of the president’s budget. In reality, very little of the president’s budget will be enacted. The point is to put the proposals out there, and then sort of push them one by one when the window opens. That may happen at some point in the future, but it’s very unlikely in the next two years.”

We will be releasing the full audio of the interview with Marc Goldwein in the next couple of weeks.