April 26, 2012
As approved by the House Committee on the Judiciary on April 25, 2012
H. Con. Res. 112, the Concurrent Budget Resolution for fiscal year 2013, as passed by the House of Representatives on March 29, 2012, instructed several committees of the House to recommend legislative changes that would reduce deficits over the 2012-2022 period. As part of that reconciliation process, the House Committee on the Judiciary has approved legislation that would impose limits on medical malpractice litigation in state and federal courts by capping awards and attorney fees, modifying the statute of limitations, and eliminating joint and several liability.
In total, CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting the legislation would not have any budgetary effect in fiscal year 2012, and would reduce deficits by $0.1 billion over the 2012-2013 period, $13.6 billion over the 2012-2017 period, and $48.6 billion over the 2012-2022 period. (About $1.9 billion of that $48.6 billion total would be off-budget because of effects on revenues from Social Security payroll taxes).
CBO expects that those changes would, on balance, lower costs for health care both directly and indirectly: directly, by lowering premiums for medical liability insurance; and indirectly, by reducing the use of health care services prescribed by providers when faced with less pressure from potential malpractice suits. Those reductions in costs would, in turn, lead to lower spending in federal health programs and to lower private health insurance premiums.
Because employers would pay less for health insurance for employees, more of their employees' compensation would be in the form of taxable wages and other fringe benefits. As discussed below, the bill would also increase revenues because it would result in lower subsidies for health insurance. In total, CBO and JCT estimate that enacting the legislation would increase federal revenues by about $7 billion over the 2012-2022 period.
Enacting the legislation also would reduce direct spending for Medicare, Medicaid, the government's share of premiums for annuitants under the Federal Employees Health Benefits (FEHB) program, subsidies for individuals enrolled in health insurance through health insurance exchanges, and other federal health benefits programs. CBO and JCT estimate that direct spending would decline by about $41 billion over the 2012-2022 period.
Federal spending for active workers participating in the FEHB program is included in the appropriations for federal agencies, and is therefore discretionary. The legislation would also affect discretionary spending for health care services paid by the Departments of Defense (DoD) and Veterans Affairs (VA). CBO estimates that implementing the legislation would reduce discretionary costs by about $1 billion over the 2012-2022 period, assuming appropriation actions consistent with the legislation.
The legislation contains an intergovernmental mandate as defined in the Unfunded Mandates Reform Act (UMRA) because it would preempt state laws that provide less protection for health care providers and organizations from liability, loss, or damages (other than caps on awards for damages). CBO estimates the cost of complying with the mandate would be small and would fall well below the threshold established in UMRA for intergovernmental mandates ($73 million in 2012, adjusted annually for inflation).
The legislation contains several mandates on the private sector, including caps on damages and on attorney fees, the statute of limitations, and the fair share rule. The cost of those mandates would exceed the threshold established in UMRA for private-sector mandates ($146 million in 2012, adjusted annually for inflation) in four of the first five years in which the mandates were effective.