Jun 21

Alabama Can Solve Medicaid Budget Crisis by Eliminating Wasteful, Defensive Medicine

by Senator Trip Pittman
Originally published AL.com on April 28, 2016

AL sealIt’s likely happened to virtually every one of us. We visit a doctor’s office, an urgent care center or an emergency room with an ailment ranging from a broken bone to stomach ache to chest pains. The medical professionals diagnose the problem and order treatment.

However, due to concerns about being sued for medical malpractice, the physician will order an x-ray, CT scan, blood work or an MRI to reaffirm diagnosis – at times at the prompting of the patient. The common rationale is the physician does this to back up their opinion in case there is a lawsuit.

This practice is known as “defensive medicine,” and BioScience Valuation, an independent healthcare economics firm says the annual cost of defensive medicine exceeds $10 billion annually just in the State of Alabama.

Whether you have private insurance or Medicaid, physicians order such unnecessary tests as they fear litigation as it could jeopardize their entire practice and life savings. That is why several of us in the state Senate have introduced a new proposal that would reduce defensive medicine – and bring savings to the state budget.

The proposed Patient Compensation Act could save Alabama taxpayers as much as $20 million for Medicaid alone in its first year by reducing defensive medicine, according to BioScience Valuation. The proposal would replace the state’s inefficient medical malpractice system and replace it with a no-blame, administrative model that mirrors a worker’s compensation system.

The proposal is more patient-friendly than our current litigation system that only grants awards to patients who have been severely injured and who have the patience to wait through years of endless red tape and litigation.

Under a Patients’ Compensation System or PCS, a panel of healthcare experts would quickly review claims with review by an administrative law judge. If the independent panel of experts found a medical injury had occurred, the patient would be compensated quickly unlike our current legal system which takes years and compensates very few patients.

As we should expect, a recent study in the Vanderbilt Law Review found that a most attorneys will not take a strong case for a patient unless they know that the potential recovery is high enough to justify the high costs to prosecute a medical malpractice matter.

This proposal would not only be good for injured patients but for Alabama taxpayers. BioScience Valuation estimates defensive medicine cost Alabama taxpayers $1.3 billion in Medicaid and $106 million in state health insurance plans in 2015.

Adopting the proposed Patients’ Compensation System would save Alabama taxpayers $2.7 billion over 10 years, according to Bioscience economists. This does not include savings to private health plans.

Medicaid, the state health insurance program for the poor and disabled, consumes more than a third of the Alabama General Fund budget. Despite our resistance to Obamacare and calls to expand Medicaid, enrollment has increased from 756,000 in 2008 to more than 1 million this year as private insurance becomes less affordable for many Alabama residents.

Just like other states, Medicaid is not only breaking the state treasury but causing much of our political gridlock. The Alabama Legislature will move forward in the next few months with hearings to explore free market ideas to bring down costs and improve patient care.

As we hold these joint House-Senate hearings, finding ways to save money instead of spend more should be the top of our priority list.  And a PCS solution is one big idea we should seriously consider that could save us $20 million in General Fund dollars in the first year and many millions more in the years to come. We owe it to the taxpayers of this great State to do this.

Pittman is a Republican state senator from Daphne and chairman of the Senate Finance and General Taxation General Fund.

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