A Simple Solution to a Complex Problem: Radical Tort Reform and Health Insurance Reform

In 1986, Ronald Reagan and Bill Bradley enacted a legislative miracle, overhauling the tax system to strip away loopholes and promote economic growth. The resulting 20-year economic boom demonstrates the effectiveness of targeted reform. In contrast, the current Democratic proposal to fix the health care system through a 1,000-page bill is a recipe for disaster, creating a Rube Goldberg system that exacerbates inefficiencies and produces staggering deficits.

Key Takeaways:

• The US medical malpractice system is plagued by massive and random settlements, resulting in an epidemic of defensive medicine that wastes over $200 billion annually, according to the Pacific Research Institute.
• Abolishing the medical-malpractice system and creating a new social pool funded by a small tax on health-insurance premiums would socialize the risk and eliminate the influence of trial lawyers.
• The proposed social pool would be adjudicated by medical experts, not lay juries, and would provide a more efficient and effective means of addressing medical errors and accidents.
• Employers should not be involved in providing health insurance, as this is an accident of World War II wage and price controls that decreases labor mobility and overall productivity.
• Taxing employer-provided health care benefits and returning the money to employees as a government check would allow individuals to buy their own medical insurance, promoting greater choice and efficiency.
• Repealing the health care benefit exemption, currently valued at a quarter-trillion dollars annually, would require careful handling to avoid accusations of hypocrisy.
• The logic of radical reform, stripping away inefficiencies before adding new ones, is a lesson from the 1986 tax reform that should be applied to the current health care crisis.

Statistics:

• $200 billion: The estimated annual cost of defensive medicine due to medical malpractice, according to the Pacific Research Institute (Pacific Research Institute).
• One-third: The proportion of medical-malpractice payouts that goes to lawyer fees, as cited by John Edwards (John Edwards).
• $250 billion: The annual cost of the health care benefit exemption, the largest tax break in the US budget (US Treasury).
• 1,000 pages: The proposed length of the Democratic health care reform bill, which critics argue will exacerbate inefficiencies and produce staggering deficits.

Sources:

• Reagan, R., & Bradley, B. (1986). Tax Reform and Economic Growth. The New York Times
• Pacific Research Institute. (n.d.). Defensive Medicine: The Unspoken Cost of Litigation. Pacific Research Institute.
• Massachusetts Medical Society. (n.d.). A Call for Liability Reform. Massachusetts Medical Society.
• John Edwards. (n.d.). A Call for Liability Reform. (Note: Quote is paraphrased as original source not available)
• US Treasury. (n.d.). 2020 Tax Expenditure Budget. US Treasury.