Medical liability and health care reform

We examine the impact of the Affordable Care Act (ACA) on medical liability and the controversy over whether federal medical reform including a damages cap could make a useful contribution to health care reform. By providing guaranteed access to health care insurance at community rates, the ACA could reduce the problem of under-compensation resulting from damages caps. However, it may also exacerbate the problem of under-claiming in the malpractice system, thereby reducing incentives to invest in loss prevention activities. Shifting losses from liability insurers to health insurers could further undermine the already weak deterrent effect of the medical liability system. Republicans in Congress and physician groups both pushed for the adoption of a federal damages cap as part of health care reform. Physician support for damages caps could be explained by concerns about the insurance cycle and the consequent instability of the market. Our own study presented here suggests that there is greater insurance market stability in states with caps on non-economic damages. Republicans in Congress argued that the enactment of damages caps would reduce aggregate health care costs. The Congressional Budget Office included savings from reduced health care utilization in its estimates of cost savings that would result from the enactment of a federal damages cap. But notwithstanding recent opinions offered by the CBO, it is not clear that caps will significantly reduce health care costs or that any savings will be passed on to consumers. The ACA included funding for state level demonstration projects for promising reforms such as offer and disclosure and health courts, but at this time the benefits of these reforms are also uncertain. There is a need for further studies on these issues.