Another Big Flaw in Obamacare—Tort Reform

Another Big Flaw in Obamacare—Tort Reform

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What’s left of Obamacare? With all the delays and “fixes,” the misnamed Affordable Care Act looks like downtown Aleppo – a mere shell of its former self.

There are now 14 changes that President Obama has made to his grotesque healthcare bill. These are not “tweaks” but, rather, wholesale changes to the way the law is meant to play out. Many (like the deadline extension for 2015 enrollment) are meant to postpone the pain until after the 2014 elections. Others are in response to the fury felt by millions who believed the president when he assured them they would keep their insurance.  Added together, the delay of the states’ Basic Health Program, the small business postponement, the putting-off of the employer mandate and the most recent decision to let individuals off the hook – you have to say, there’s not much meat left on these bones.

Should we be relieved? No. The country continues to stagger under the uncertainty of this grandiose reordering of our healthcare industries, and 2014 will be no different. Next year, as insurers come to grip with the disappointing enrollment results – too many old and sick, not nearly enough young and healthy – they will begin to propose premium hikes for 2015 that will appall the nation. The White House, in response, will try to jawbone the insurers into airbrushing their plans; insurers, faced with losses, will stand firm. What then? President Obama and his team will make the insurers whole by funneling subsidies to that industry; the Affordable Care Act protects insurance companies from losses. Taxpayers will foot the bill, and they will not be happy.

The president and his anxious supporters hope the problems will go away. They will not. The law demands that money be taken from the vast majority of Americans and given to a smaller pool of formerly uninsured.  It was not sold this way. It was presented as a way to rein in spiraling healthcare costs. President Obama would have the country believe that the healthcare law is already having this impact. Yes, the frightening inflation of healthcare costs of several years ago has subsided, but it is not because of Obamacare. It is because of the recession, and several fortuitous events, such as a number of major drugs, like Lipitor, going generic. (Prescription drugs account for about 14 percent of private medical outlays and have been one of the faster-rising cost ingredients in our healthcare soup.)

If cost control were really the ambition, some ideas favored by Republicans, such as limiting the awards available to patients who sue their doctors – i.e., tort reform – would have been adopted. The Obama White House stood in the way of limiting excessive payments to plaintiffs. Why, after all, would they bite the hand of the tort bar that so generously feeds them? (Lawyers and law firms gave $28 million to Obama’s reelection effort, compared to $14 million to GOP candidate Romney. From 1990 to date, the American Association for Justice, previously called the Association of Trial Lawyers of America, doled out 95 percent of its $25 million in contributions to Democrats.) 

The American Association for Justice cites on its website a 2004 CBO study concluding that malpractice costs only amount to 2 percent of healthcare expenditures. That figure, however, only includes actual settlements made by insurers and doctors. It does not reflect the widespread over-diagnosis of tests and treatments that serve to protect doctors from lawsuits in case anything should go wrong.

It also doesn’t ring true. When general surgeons in Miami pay $190,000 per year for malpractice insurance and internists in Detroit are charged roughly $35,000 per year, my guess is that doctors work to minimize their exposure. Other studies back this up.

For example, a 2008 study by PricewaterhouseCoopers' Health Research Institute estimated the cost of defensive medicine at $210 billion per year, or 10 percent of all healthcare spending. Bolstering that position was a wide-ranging survey of practitioners in 2010 that found some 91 percent of doctors practicing “defensive medicine”, attempting to avoid lawsuits. Harder data emerges from a 2008 survey that was conducted by the Massachusetts Medical Society; they found that 83 percent of their members spend $1.4 billion or more a year trying to protect themselves against lawsuits.

More than 20 percent of procedures like x-rays, magnetic resonance images, and ultrasounds were performed for this reason; some 28 percent of the specialty referrals and 13 percent of the hospital admissions ordered by doctors were for defensive purposesshocking (and probably honest) statistics

Another study, by the Rand Corporation, estimates that an average of 10 percent of a physician’s career (or 4 years over a 40-year span) may be spent fighting malpractice claims. That figure rises for some specialties; for neurosurgeons the average is 27 percent of their career. With a doctor shortage looming, this seems a huge expenditure of our nation’s medical capability. 

Doctors and hospitals must be held accountable, but to allow out-of-control malpractice settlements to inflate our already-high medical costs seems absurd. As with most aspects of Obamacare, there must surely be a better way. 

After more than two decades on Wall Street as a top-ranked research analyst, Liz Peek became a columnist and political analyst. Aside from The Fiscal Times, she writes for, The New York Sun and Women on the Web.