Obama Tort Reform Initiative Won't Get Us Far

(MoneyWatch)  When President Obama proposed state demonstration projects to address the high cost of malpractice insurance and defensive medicine, he was not only playing to Republicans who have long advocated it, but also to the AMA, which regards tort reform as one of its top priorities. But after the White House revealed the details of its plan today, some physician leaders were upset. The Washington Post quoted Peter Levine, head of the Medical Society of the District of Columbia, as saying that the $25 million program announced by the President was "smoke and mirrors." Some physicians even suggested that Sen. Majority Leader Harry Reid, who is reportedly close to trial lawyers, had put the fix in to prevent a more robust malpractice initiative from being included in Sen. Max Baucus' reform bill. (Reid denies it.)

Regardless, the White House program is kind of wimpy. First, $25 million is barely a throat-clearing exercise for demonstration projects in other areas of government, such as Medicare. Second, the program has the two-fold aim of improving patient safety and trying out different approaches to tort reform. So it's not even clear what it's trying to accomplish. And third, the amounts of competitive grants being given to individual states--$3 million each over three years for evaluation and $300,000 each for implementation--are little more than seed money that the states would have to supplement to launch the demonstrations. Considering the crisis in the economy and state budgets, that seems far-fetched.

Not all federal initiatives involving states are necessarily doomed. For example, the medical home campaign recently announced by Medicare will also depend on state efforts. But if Medicare weighs in with a decent dollop of funds, many states might be interested, because this demonstration project could lead to cost savings in their own Medicaid programs. But states are unlikely to benefit from a reduction in malpractice costs, except to the extent that high insurance premiums are driving physicians out of their states. Moreover, Democratic state officeholders are less likely than their Republican counterparts to support tort reform.

Ultimately, however, the federal government cannot implement tort reform on its own, as long as the states retain authority over malpractice suits and liability insurance. So Washington and the states will have to find a way to work together to address the inequities of malpractice liability, which is driving up health costs without providing justice to the majority of injured patients.