Sunday, August 30, 2009

Health Insurance and Tort Reform

Wade Coye, Insurance Lawyer
No question about it, as the the debate on national health insurance continues, we are beginning to see that tort reform as envisioned by business interests will occur and that it will be part of a package on universal care. It does not seem to matter whether people are politically tuned to the right or the left everyone has their own sacred cow in the fight. The left wants universal coverage and doesn't really want to look at the cost nor even consider that the Massachusetts attempt was far more expensive than anyone really imagined. The right thinks that the free market will correct all problems and doesn't want to consider that there is no real effective competition in the health insurance market.

For a deal to emerge in the Congress on a matter that the President views as critical, some old fashioned horse trading will occur. On the left, they will concede on tort reform to pickup some votes on the right. The tort reform will likely consist of some protections for doctors and hospitals who stand to receive less payment for providing care. This will likely satisfy some on the right and will be the basis for the votes necessary to ensure passage of the bill.

In the end who will really benefit? First, there is no question in the short term those who currently do not have health insurance will have an ability to obtain it easier than ever in history. This will be touted as a great achievement in human affairs and will make great campaign rally speeches. Doctors and hospitals will receive less for the care they give and should receive substantial reductions in medical malpractice premiums since with additional protections they will either no longer need the types of coverage or insurance companies will charge substantially less for their premiums.

Unfortunately it will not work. The cost savings touted from medical malpractice reform essentially occurs in two areas. First the lower premiums for insurance. That seems a bit unrealistic to think that an insurance company which makes substantial profits on professional liability insurance is going to suddenly give away a product. Nevertheless there will be some savings. But since it is estimated that medical malpractice insurance and claims is less than 2-3% of total healthcare spending, then likely this will not amount to much if any savings. Still a savings nevertheless.

The second area of savings from medical malpractice tort reform is supposed to come from a reduction in the amount of unnecessary testing. The discussion goes something like this: doctors have patients who will sue them over poor outcomes. So the doctor, in an effort to protect themselves and the hospital, orders unnecessary tests for these patients. The idea being that this is an enormous cost and we will have an incredible savings if you no longer have to give these unnecessary tests. It sounds great, except no one really has any decent numbers about what savings will actually occur. More to the point: is this unnecessary testing? Again, I am not so sure. First, to whom is the testing unnecessary? The doctor or the patient, or perhaps the insurance company? If you go to the doctor and there are a number of tests that can be run on a given condition, who is willing to take the chance? Understanding the logic of the doctor, you would have to think that there was some medical necessity. I cannot imagine any doctor indicating that they were ordering unnecessary tests in any one particular case. In fact, in my professional practice I have never even seen an insurance doctor go so far as to state under oath that another doctor was ordering tests that were medically unnecessary. (That would be insurance fraud.)

Most people will not decline a test especially if they don't have to pay for it out of their bank account. So then who makes the decisions? The doctor? Probably not going to happen. How about the hospital? Again, probably not going to happen. How about the insurance company, or better yet the government? Now you get the idea. The fact is you only get cheaper care when someone either gives the care to you cheaper than they were before or if you get less care than you would have normally. Doctors get paid less, hospitals get paid less, and the quality of the care goes down.

So the reality is that while more people will receive more primary care and more people will receive emergency type procedures that will get paid for, it is far more likely that some will not obtain care that they would have otherwise received (those tests that were "unnecessary.") Sometimes that is not necessarily bad, especially when you consider some of the shocking examples of people receiving outrageously expensive procedures that have little prospect of succeeding. Except and unless you were the one that wanted to have a chance. Sometimes people having choices even when they are not great choices serve everyone better. That is the system we have and I think the system we should keep.