Does Tort Reform Reduce Health Care Costs?
With the U.S. Congress actively debating health reform bills that could extend insurance coverage to millions of Americans, the need to identify strategies to contain health care costs has become an ever more pressing issue. Tort reform has been proposed by leaders of both political parties as one possible strategy to reduce health care costs. In The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums (NBER Working Paper 15371), researchers Ronen Avraham, Leemore Dafny, and Max Schanzenbach exploit state-level differences in tort laws to explore the potential cost savings associated with tort reform. The authors begin by observing that tort reform must have an impact on medical practice – as opposed to solely on medical malpracticein order to yield nontrivial reductions in healthcare costs. Direct costs of malpractice, which include premiums, damage awards in excess of premiums, and associated litigation costs, represent no more than two percent of health care costs.
