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Lawsuit Abuse: Patients Are Paying The Price

In the last twenty years, personal injury lawyers have found litigation against healthcare providers and pharmaceutical manufacturers to be a lucrative "growth area" in their practices. Litigation that has enriched personal injury lawyers, however, is adversely impacting both the quality and the cost of care for the rest of us. ("The Factors Fueling Rising Healthcare Costs," PriceWaterhouseCoopers, April 2002)

Healthcare at Risk

The increasing number of lawsuits in the healthcare industry and outrageous punitive damage claims result in limited access to healthcare.

  • Nearly 41 million Americans are uninsured and 75 million people were uninsured at one point during 2001 and 2002. Lawsuits raise costs for healthcare and coverage, increasing the number of people without insurance. Companies must invest time, money and other resources fighting these lawsuits. If personal injury lawyers are successful, the additional costs of a damage award or settlement must be factored into the company's cost of doing business, ultimately increasing the cost of premiums. According to a study published in the Journal of Health Economics, every ten percent increase in the cost of insurance creates a three to four percent decrease in the number of people who choose to purchase coverage. (Going without Health Insurance, Families USA, March 10, 2003; "Number of Uninsured Americans On the Rise," Associated Press, March 5, 2003; " Avoiding Health Insurance Crowd-Out," Journal of Health Economics, March 2000)

The Costs

The most visible evidence of our runaway tort system is in the enormous cost it inflicts.

  • The American tort liability system is the most expensive in the world, with total costs more than double the average of other industrialized nations. A 2003 study conducted by Tillinghast-Towers Perrin founds that the U.S. tort system cost $205 billion in 2001, which translates to $721 per U.S. Citizen. (Who Pays for Tort Liability Claims? An economic analysis of the U.S. tort liability system, Council of Economic Advisors, April, 2002; U.S. Tort Costs: 2002 Update, Tillinghast-Towers Perrin, February 2003)

  • Hospitals, nursing homes, and health insurers have seen their costs escalate as a result of lawsuit abuse. According to one recent study, approximately $50 billion per year is spent on defensive medicine - tests, procedures, and paperwork practiced solely for litigation avoidance. ("Do Doctors Practice Defensive Medicine?" Quarterly Journal of Economics, 1996)

  • A recent report in the Quarterly Journal of Economics estimates that limiting unreasonable jury awards could cut healthcare costs by 5-9%, which would save $70-126 billion in healthcare costs per year. Saving this money would lower the cost of healthcare coverage and permit an additional 2.4 - 4.3 million Americans to obtain medical insurance. ("Do Doctors Practice Defensive Medicine?" Quarterly Journal of Economics, 1996, cited in Addressing the New Healthcare Crisis: Reforming the Medical Litigation System to Improve the Quality of Healthcare, U.S. Department of Health and Human Services, March 3, 2003 and Confronting the New Health Care Crisis: Improving Health Care Quality and Lowering Costs By Fixing Our Medical Liability System, July 24, 2002.)

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Lawsuit Abuse Makes Us Sick
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