Investor's Business Daily, April 23, 2010

By signing health reform into law, President Obama has launched the most sweeping expansion of federal control of Americans' access to medical services in decades. Republicans charge that the reform package grants the federal government too much power over our health choices.

They're right — but it could have been worse. The president could have adopted the Republican proposal to give Congress authority to pre-empt states' medical liability laws. He was right to deny Congress this power, and he should continue to oppose it if it resurfaces.

First, tort law has traditionally been the domain of states, for good reason. Our understanding of the consequences of liability laws will necessarily be imperfect, and the best way to improve these laws is to learn from the experiences of other states.

While we like to think that medical liability law is informed by the best scholarly research, it is often shaped through competing interest groups. Centralizing their lobbying in Washington, as opposed to dispersing it across the 50 states, is a sure way to "freeze" a national standard that could have unintended negative consequences and be extremely difficult to correct. What's right for New York might be very different from what's right for North Dakota.

Second, while advocates of federal pre-emption of medical liability note correctly that federal taxpayers (through the exploding Medicare and Medicaid programs) have a fiscal interest in reducing medical costs, that premise carries with it the disastrous implication that the federal government may regulate any behavior affecting federal medical spending.

Should Beltway insiders determine treatment protocols now decided between patients and their physicians? How about our dietary choices; or whether to wear a sweater on a cold morning? The fastest way for conservatives to transform the federal government into a virtual nanny is to rely upon the "taxpayer interest" argument.

And the fiscal reward of a federal takeover is not worth the risks. Last October, the Congressional Budget Office concluded that certain medical liability reforms would reduce the federal deficit by $54 billion from 2010 to 2019.

However, Medicare spending alone will be $7.6 trillion from 2009 to 2018, and the health "reform" currently proposed by the congressional majority will increase this spending by around $1 trillion from 2010 to 2019. Conservatives have proposed other health care reforms that promise far greater savings.

Third, a host of factors drive health care costs. One of us (Graham) has measured and ranked a number of these. For example, states regulate the scope of practice of nurse practitioners. If they demand direct, overly stringent supervision by physicians, they artificially increase medical costs.

Some states still enforce Certificate of Need (CON) laws for hospitals and other medical facilities. These allow incumbents to veto new entrants, driving up costs and reducing innovation. These regulations and many more increase Medicare spending. Indeed, state and local regulations that affect federal costs are effectively infinite.

Physicians' office rent is determined partially by zoning regulations. Given the natural growth of government, congressional legislation on medical liability is likely to lead to endless federal interference in any and all state and local regulations that impact the provision of health care. Do Republicans really want to go down this path?

Republicans have been saying that we don't need to fund state "pilot projects," proposed by President Obama, to study if medical liability reforms work: California, Missouri and Texas have already demonstrated it. But this proves our point. With effective political leadership and popular understanding of the problem, states have proved that they can fix their medical liability issues without interference from Washington.

One of us (McQuillan) has concluded that substantial savings can still be achieved with medical liability reform — more than $190 billion — without harming patient safety. But each state should decide for itself if their medical liability costs need trimming and how best to do it.

Cap non-economic damage awards, cap punitive damages, change the burden of proof needed to collect damages, tighten expert witness standards, adopt pre-trial screening or arbitration, modify the statute of limitations, adopt a "loser pays" system, or some combination of these and other reforms.

States should make this call, not Beltway politicians. A federal medical liability takeover is a dangerous idea that deserves bipartisan rejection.



• Graham is director of health care studies, McQuillan is director of business and economic studies, and Zycher is a senior fellow at the Pacific Research Institute.