When there's health reform smoke, there's tort reform fire. Or something like that.

Senator Orrin Hatch (R-Utah) requested that the Congressional Budget Office  update its analysis of how certain (GOP) tort reform proposals could affect annual health care spending. The updated CBO numbers are greater than 2008 estimates (page 21 of that long report) -- when CBO found that lowering premiums for medical liability insurance would reduce annual national health care expenditure by 0.2 percent. The impact tort reform would have on annual health care spending remains a controversial matter. And of course how to define and achieve malpractice reform is also in dispute.

In the updated study, the CBO included not only direct savings from anticipated lower premiums for medical liability insurance but -- this time around -- also included indirect savings from the reduced utilization of health care services (i.e. defensive medicine). Recent research, CBO explains, indicate that tort reform does decrease the use of health care services. (They previously chose not to include the effects of defensive medicine in their analysis as research generated inconsistent results.) It is very difficult to tease out how much of what we can regard as unnecessary care is defensive medicine, versus other financial incentives -- or just how some doctors practice medicine.

The CBO analysis states that enacting medical malpractice reforms would save Medicare, Medicaid and other federal programs $41 billion over the next 10 years while also raising an additional $13 billion in federal income taxes. Total medical malpractice reforms would reduce the federal deficit by $54 billion over the next 10 years and decrease annual expenditure on health care by 0.5 percent -- or $11 billion in 2009. (The 0.5 figure includes the direct reduction in spending due to lower liability premiums plus lower utilization.) The CBO estimate assumes that some potential savings have already been achieved since several states have already applied many of the reforms considered in the analysis.

In response to the CBO analysis, Sen. Hatch stated:

"I think this response from the CBO confirms that there is a growing problem regarding the costs of health care lawsuits. In years past, the CBO mainly focused on the cost [of] doctors' malpractice insurance premiums and did not adequately address the tendency of doctors to use ‘defensive medicine,' which does little to promote patient health and services only to help doctors avoid being sued.  Think that this is an important step in the right direction and these numbers show that this problem deserves more than lip service from policy-makers."

My colleagues at New America -- like President Obama himself -- have argued in the past (here and here) that it's time to think about creative ways of breaking the long political impasse on malpractice. Not because it's a magic bullet for health costs -- it's clearly not, as the CBO shows, although we are in the every-billion-counts stage. Not because we favor arbitrary caps on patients that have been truly injured -- we don't. But we do think there are bipartisan alternatives that will go hand in hand with efforts to make health care more efficient, to improve (rather than impede) patient safety, care, quality -- and also, to encourage physicians to be a partner as we innovate and experiment with ways to change our health care system for the better.