Restructure Medicare & Medicaid: Legal Factors—Possible Solution Tort Reform Could Reduce Incentives of Defensive Medicine Ways to control costs from tort litigation without jeopardizing patient health The CBO listed a package of tort reform proposals (10/09): e Cap of $250,000 on awards for noneconomic damages for malpractice e Cap on awards for punitive damages of $500,000 or twice the award for economic damages, whichever is greater e Modification of the “collateral source” rule to allow evidence of income from such sources as health and life insurance, workers’ compensation, and automobile insurance and subtract it from jury awards e A statute of limitations — one year for adults and three years for children — from the date of discovery of an injury e Replacement of joint-and-several liability with fair-share rule: Defendants would be liable only for the percentage of a final award equal to their share of responsibility Source: Congressional Budget Office, Letter to the Honorable Orrin G. Hatch dated October 9, 2009; Congressional Budget Office, Letter to the Honorable John D. Rockefeller IV dated December 10, 2009 (@)) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 313 Restructure Medicare & Medicaid: Legal Factors—Possible Solution Tort Reform Could Save USA Inc. $54 Billion Over Next 10 Years ¢ CBO estimates that a package of typical tort reform proposals could reduce total US health spending by 0.5% annually: — Direct savings: Roughly 0.2% of this reduction stems from lower national premiums for medical malpractice insurance. — Indirect savings: Another 0.3% stems from slightly lower utilization of services related to defensive medicine. ¢ Over 10 years, CBO estimated tort reform could reduce net healthcare spending by $54 billion: - Spending for Medicare, Medicaid, Children’s Health Insurance Program, and Federal Employees Health Benefits could fall ~$41 billion over the next decade (with the greatest savings in Medicare). - Federal t