Does Reform Matter? Look at Texas

Do policy changes like deregulation and tort reform really matter?

Some people wonder because the costs of over regulation or a legal system run amok are largely hidden. They are no less real than the costs of taxation, of course, but burdensome regulation, abusive lawsuits and outrageous litigation awards do not come with a price tag that’s easy for voters and consumers to see.

Therefore, a report by David Hendricks in the San Antonio Express-News (posted on the newspaper’s Web site on June 1) should be read by all. It offered hard data on the changes that have occurred in Texas since voters in 2003 gave the thumbs up to a state proposition capping lawsuit awards in medical malpractice cases.

Note what Hendricks reported:

— In 2003, four insurers offered medical malpractice policies, now 30 insurers do. “Insurance companies are flocking to Texas because now they can put a numeric value on the risk of doing business in Texas, something that was not possible when the sky was the limit for juries. Assessing risks helps assure profits for insurance companies. As more insurance companies entered Texas, rates have dropped even further because of competition.”

— “Rates have fallen an average of 21.3 percent, and up to 41 percent at one insurance company, says former state Rep. Joe Nixon, a Houston trial lawyer who helped sponsor passage of Proposition 12.”

— “An internal medicine doctor in Houston paid $18,507 for malpractice insurance in 2003 but only $13,272 in 2007, or $10,403 with a 20 percent renewal dividend, according to figures given to Nixon by the state’s largest insurer, Texas Medical Liability Trust. An obstetrician paid $56,564 in 2003 but only $41,575 in 2007, or $32,585 at the renewal rate. A neurosurgeon paid $103,558 in 2003 but only $76,117 in 2007, or the renewal rate of $59,659.”

— “Malpractice lawsuits have fallen 50 percent, Nixon said, causing some malpractice lawyers to shift to other fields, such as commercial litigation.”

— “Tennessee is considering a lawsuit cap similar to the one in Texas. In the meantime, 350 Tennessee doctors have applied to move their practices to Texas, 50 of those with license applications still pending, Nixon said. Meanwhile, about 2,250 license applications await processing at the Texas Medical Board in Austin. The wait could be as long as a year for some of the more experienced doctors because it takes longer to review their records.”

It could not get any clearer. Rein in medical malpractice abuses, and the results include more insurers, lower insurance costs, and more doctors. That’s a lesson that should be noted in other states, and in other arenas where reform is needed.

Raymond J. Keating serves as chief economist with the Washington, D.C.-based Small Business & Entrepreneurship Council (SBE Council), a nonpartisan, nonprofit small-business advocacy group with more than 70,000 members across the nation.
Source: Small Business & Entrepreneurship Council, www.sbecouncil.org/.