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Tort Reform and Malpractice Premiums 1 (December 29, 2009)

handle is hein.congrec/cbo1085 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Douglas W, Elmendorf, Director U.S. Congress Washington, DC 20515 December 29, 2009 Honorable Bruce L. Braley U.S. House of Representatives Washington, DC 20515 Dear Congressman: This letter responds to questions you posed about the Congressional Budget Office's (CBO's) recent analysis of the budgetary effects of proposals to limit costs related to medical malpractice (tort reform), as described in a letter to Senator Hatch.' In particular, this letter addresses your questions about factors that affect premiums for medical malpractice insurance, the effects of tort reform on patients' health, how recent empirical studies affected CBO's analysis, and why CBO's latest estimates of the budgetary effects of tort reform are larger than the agency's previous estimates. In its letter to Senator Hatch, CBO concluded that tort reform would lower costs for health care both directly, by reducing medical malpractice costs-which consist of malpractice insurance premiums and settlements, awards, and legal and administrative costs not covered by insurance-and indirectly, by reducing the use of health care services through changes in the practice patterns of providers. The agency estimated that enacting a package of proposals outlined in that letter would reduce federal budget deficits by about $54 billion during the 2010-2019 period. Previously, the agency had found that tort reform would lower health care costs only by reducing medical malpractice costs, and it had estimated significantly smaller effects of tort reform on the federal budget. In the letter to Senator Hatch, CBO noted that imposing limits on suits for damages resulting from negligent health care might have a negative impact on health outcomes but concluded that the evidence is less clear about the effects of tort reform on health outcomes than it is about the effects on health care costs. Tort Reform and Malpractice Premiums When setting premiums for malpractice policies, insurers are likely to take into account a number of factors, including: recent payments for awards and settlements; the anticipated cost of future payments and the amount of uncertainty surrounding them (taking into account the legal environment in which the insurer 1 Congressional Budget Office, lecter (o (bhe ! ioorable Orrin G. 1 iatch regarding effec( of irpiosals (o Fiit co related to medical madprac~ice (October 9, 2009). www.cbo.gov

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