Pharmaceutical and Insurance Reforms Could Save System Billions, Medical Liability Limits Won’t Help

Santa Monica, CA — President Bush will ignore the real causes of skyrocketing healthcare costs, such as high drug prices and unregulated insurance premiums, during his economic summit today because he has received $786,262 from drug companies, $4,790,475 from insurance firms and $764,333 from HMOs and other health insurers, said the Foundation for Taxpayer and Consumer Rights (FTCR).

“Rather than face the facts, President Bush remains obsessed with blaming injured patients while refusing to tackle any issue that would offend the special interests,” said Douglas Heller, Executive Director of the nonprofit, nonpartisan FTCR. “Instead of looking for savings by cutting the fat out of the HMOs, insurance companies and drug firms, it is easier for Bush to attack the constitutional rights of Americans injured by medical malpractice.”

American consumers and employers could save more than $100 billion annually with a federal prescription drug bulk purchasing program, FTCR noted, but it is unlikely to be discussed during the Bush summit. By refusing to stand up to his special interest contributors, President Bush ignores key facts concerning economic costs of the healthcare system:

Insurance companies do not reduce physicians’ premiums when restrictions on medical malpractice lawsuits are enacted, according to formal regulatory filings; footnote [1]

Malpractice costs represent less than 2 percent of overall health care spending; footnote [2]

Pharmaceutical drug spending increased by 15.3% from 2001 to 2002, or about 75% faster than spending on hospital care and physician services; footnote [3]

The Center for Medicare & Medicaid Services predicts that prescription drugs spending will account for more than 14% of total health care spending by 2010.

Health insurance overhead and administrative costs (overhead, profit, executive salaries, surplus, reserves) increased by 16.4 percent in 2002, after a 12.5 percent increase in 2001, making it the fastest growing component of health care spending over the past three years, according to data released by the Centers for Medicare & Medicaid Services.

In California, doctors premiums increased by 450% during the thirteen years after medical liability caps in that state were imposed and only declined after voters enacted comprehensive insurance industry reform and rate regulation of insurance companies, known as Proposition 103.

Proposition 103 rate regulation has blocked over $50 million in premium hikes on California doctors in 2003-04, by companies that wanted to raise rates despite the state’s severe lawsuit caps; (for more info see http://www.consumerwatchdog.org)

The economic summit should consider real reforms, according to FTCR, including:

– Creating a federal drug bulk purchasing program similar to the market-based practice of the Department of Veteran Affairs that could reduce the cost of RX drugs for all Americans by 60% or more;

– The success of regulating insurance premiums as a tool for keeping medical malpractice premiums down;

– Public review of health insurance premiums to control excessive overhead costs and profit.

“To reform our healthcare system and create real savings, Bush would have to confront the fact that the healthcare industry is putting profits ahead of patients and ignoring the economic impact of their price gouging,” said Heller.

The proposed limitations on patients’ legal rights would not just be an economic failure in that it would not create savings to the system, but it would also leave American taxpayers responsible for picking up the tab associated with medical injuries to patients who do not receive full compensation for their injuries. FTCR pointed to recent revelations in the Los Angeles Times regarding massive negligence at the King/Drew hospital in Los Angeles. Because the hospital only had to pay a pittance for its medical negligence, as a result of the state’s severe malpractice caps law, the hospital had no economic incentive to improve its practices. The long-term costs of ignoring medical errors at hospitals will prove a massive burden for taxpayers if the caps law extends nationwide. For more information on King/Drew and malpractice caps read FTCR’s LA Times commentary at: http://consumerwatchdog.org/ftcr/co/co004761.php3

**Data regarding campaign contributions are from the Center for Responsive Politics (http://www.opensecrets.org)
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Footnotes

[1] “Nation’s Largest Medical Malpractice Insurer Declares Caps on Damages Don’t Work, Raises Docs’ Premiums” and GE Medical Protective documents at: http://consumerwatchdog.org/insurance/pr/pr004692.php3

[2] “Limiting Tort Liability for Medical Malpractice,” Congressional Budget Office 1/08/04

[3] Trends and Indicators in the Changing Health Care Marketplace, 2004 Update, Kaiser Family Foundation,

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The Foundation for Taxpayer and Consumer Rights (FTCR) is a non-profit and non-partisan consumer advocacy organization. For more information, visit us on the web at http://www.consumerwatchdog.org