Tort reform leads to more affordable health care in Texas

Drew Thornley:

Basic economics teaches that imposing higher costs and burdensome regulations on businesses leads to fewer businesses and higher costs for consumers.

The opposite is also true: Lower costs and fewer restrictions in a marketplace will lead to more market participants, greater supply, and lower prices for consumers. Texas’ medical malpractice insurance industry provides a clear example of this principle.

In the spring of 2003, the Texas Legislature passed medical liability reforms, subsequently approved by Texans via constitutional amendment. Prior to the reforms, Texas presented a hostile climate for medical practitioners. Frequent lawsuits against physicians and hospitals and escalating jury awards to plaintiffs drove doctors and insurers from the state, leading to physician shortages and higher costs for both doctors and patients.

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Over the last four years, doctors and insurers have returned in droves, premiums are falling, and health care is more available and affordable.

The Pacific Research Institute’s "U.S. Tort Liability Index: 2006 Report," an analysis of the tort systems of all 50 states, found that Texas has the best overall tort climate, ranking highest in categories measuring financial losses linked to frivolous lawsuits. Though the study gave the lowest possible marks for Texas in several categories, including the number of counties characterized as “judicial hellholes,” the overall tort climate in Texas is increasingly favorable to physicians, insurers, and patients.

Pre-reform, medical malpractice rates were rising 15-20 percent per year; post-reform, rates have fallen almost 40 percent. Texas Medical Liability Trust, the state’s largest medical malpractice insurance carrier, has reduced rates the last five years, with a cumulative 31 percent rate reduction and about $200 million in premium savings.

In May 2003, there were 35,723 in-state medical doctors. Today, there are 6,000 more. The number of doctors is up 52 percent in San Antonio, 51 percent in El Paso, and 46 percent in Houston. The backlog of applications at the Texas Board of Medical Examiners exceeds 2,500. Doctors view Texas as an attractive place to practice.

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There is much more. Tort reform has done more for making health care cost affordable than any government program. It demonstrates what the market can accomplish. I think medical savings accounts would also make health care more affordable and avoid the rationed health care that places like Canada and the UK have to endure.

Thornley's article is published by the Texas Public Policy Foundation.