Medicare & Medicaid Restructuring Proposal Highlights Tort Reform Savings

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): Cap of $250,000 on awards for noneconomic damages for malpractice Cap on awards for punitive damages of $500,000 or twice the award for economic damages, whichever is greater 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 A statute of limitations — one year for adults and three years for children — from the date of discovery of an injury 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 K P Office, Letter to the Honorable John D. Rockefeller iV dated December 10, 2009 (@)E) 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 tax revenues could rise by ~$13 billion as lower health insurance costs for employers could lead to higher take-home pay for employees and therefore higher income taxes for USA Inc. Source: Congressional Budget Office, Letter to the Honorable Orrin G. Hatch dated October 9, 2009; Congressional Budget Pp Office, Letter to the Honorable John D. Rockefeller iV dated December 10, 2009 (@E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 314 HOUSE_OVERSIGHT_020998