Tort Reform Savings Are Mythical, Study Shows

As a part of tort reform efforts, pro-business parties have spent billions of dollars on public relations campaigns to persuade the American public that plaintiff's lawyers and "frivolous" lawsuits are the main drivers behind rising healthcare costs and the cost of other products in the country. The argument goes like this: because plaintiff's lawyers are filing frivolous lawsuits and getting huge jury awards from hospitals and other businesses, those businesses are forced to spend exorbitant amounts of money on insurance and defensive medicine (procedures doctors order only to protect them in the event of a lawsuit).

Defensive Medicine Small Portion of Overall Costs

A recent study done by Michael B. Rothberg of the Cleveland Clinic analyzed exactly how much defensive medicine really costs. His study, published in the American Journal of Medicine, concluded that defensive medicine accounts for about 2.9% of all healthcare spending in the United States.

The United States spends roughly $2.7 trillion each year on healthcare, so 2.9% of that total equals $78 billion. While Rothberg notes that $78 billion dollars is "not chump change….it's still a very small component of overall healthcare spending." The study also notes that even if tort reform removed all of those defensive medicine costs, any tort reform measures stringent enough to do so would surely create other costs such as a rise in medical errors due to the lack of oversight currently exercised through the tort system.

Rothberg's study also found that doctors tend to overestimate the prevalence of defensive medicine because many procedures are ordered partially for defensive purposes, but mostly for legitimate medical reasons. Complete tort reform would only reduce the procedures that are ordered for no other reason than as a defense against future litigation. Those procedures make up a very tiny fraction of the total.

Who Tort Reform Really Benefits

The fact that defensive medicine has minimal impact on the cost of healthcare shows that tort reform and its limits on malpractice lawsuits that doctors and insurance companies champion will not have a meaningful effect on curbing rising healthcare costs in America. Instead, tort reforms mainly benefit insurers who want to protect themselves from compensating victims of medical malpractice. Unfortunately, these caps and other strategies used to discourage lawsuits fall disproportionately on women and families with small children since their economic damages, which are determined by a jury, are generally harder to estimate and are frequently underestimated by jury members.

Frivolous Lawsuits

As for frivolous lawsuits – cases that should not have been filed in the first place – these are not nearly as common as public opinion would suggest. Most of that perception is the result of the public relations campaigns by pro-tort reform lobbyists and organizations such as the Chamber of Commerce.

The truth is that most plaintiffs' lawyers operate on a contingency fee model, meaning they front all of the expenses of the case and are not paid unless they win the case for the client. Any case that doesn't result in a successful jury award is money that the plaintiff lawyer cannot recoup. This model serves as a built-in deterrence for plaintiffs' lawyers to accept cases that are frivolous and have little shot at being worth their investment in time and money.

If you or a loved one has been injured by a third party, you need to contact a personal injury lawyer to discuss your options. The personal injury lawyers at Arnold & Itkin represent clients in all 50 states. Contact us today for a free consultation to learn how we can help you.