The Congressional Budget Office has responded to a letter from Sen. Jay Rockefeller (D-WV), questioning its earlier estimate that including tort reform provisions in a health care bill would save $54 billion over 10 years. The CBO had made that estimate in an Oct. 9 letter to Sen. Orrin Hatch (R-UT).
CBO’s Updated Estimates of the Budgetary Effects of Tort Reform
In CBO’s December 2008 Budget Options volume, a common package of tort reform proposals was estimated to decrease spending by about $4 billion and to increase revenues by about $1 billion from 2010 to 2019.6 In CBO’s letter to Senator Hatch, those proposals were estimated to decrease spending by roughly $41 billion and increase revenues by roughly $13 billion over that same period.
The latest estimates are substantially larger than the earlier ones for four principal reasons:
- They include a larger estimate of the effect of tort reform on medical malpractice costs;
- They incorporate the effect of a gradual reduction in the utilization of health care services resulting from changes in the practice patterns of providers;
- The estimated effect on federal revenues was substantially smaller in the previous estimate (which reflected only a reduction in malpractice costs) than the estimated effect on revenues in the current estimate (which reflects the combined effects of the reduction in malpractice costs and the change in spending attributable to changes in practice patterns); and
- The reduction in utilization is projected to generate a proportionately larger reduction in federal spending on health care than in other spending on health care.
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