Thursday, February 25, 2010

Tort Reform and Health Care

Dick Durbin (D-Il) is correct in pointing out that the Republican version of tort reform will not dramatically reduce health care costs.

Republican politicians like to punish trial lawyers, who are mostly Democrats. It is not the inherent evilness of the lawyers that cause prices to go up. It is the poisonous relation between insurance and the law which corrupt medicine.

Pooled insurance sets people up in a three party gun fight. There are patients who need care and pay the premiums. There's the insurance company in the middle and the health care provider that provides care.

Insurance companies make their profit as a percentage on top of what the health care provider charges.

If a lawsuit increases the cost of health care, then both the health care provider and insurer will get more money.

The system creates an incentive for both the insurer and medical provider to unload onto the patient.

One of the reasons I became disillusioned with my job in insurance is that I noticed every time the company lost a high profile lawsuit, the company would write a sob newsletter about the terrible loss and everything done to prevent the loss. The insurance company would then raise its prices and make more profit.

I hate tort lawyers as much as the next guy, but I realize that it is the underlying structure of third party pooled insurance, and not the moral defects of lawyers that causes the problems.

If people paid their care directly, then one gets rid of the perverse incentive to lose lawsuits.

In a system of self-funded care, lawsuits would center on direct contract violations between doctors and patients. Doctors would get slammed for any real malpractice.

If the dynamics of the market changed, tort lawyers would play a positive role … despite the fact that tort lawyers are all morally defective slime.

1 comment:

Steve Parker said...

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