May 23

Toward A Healthier Economy

by Newt Gingrich and Wayne Oliver
Originally published in the Philadelphia Inquirer on April 07, 2009

Civil-justice reform, also known as tort reform, has often been viewed as a battle between the health-care community (physicians and hospitals) and personal-injury lawyers. However, there is another side to tort reform that personal-injury lawyers don’t want to talk about: It can jump-start the economy and create new jobs.

States that have enacted tort-reform measures have significantly improved access to health care, reduced costs, and strengthened economies.

Texas is a prime example. In 2003, Texas enacted comprehensive legal reform, including appropriate limits on noneconomic damages (compensation for such intangibles as emotional distress). As a result, Texas has seen an incredible influx of physicians. According to the Texas Medical Board, more than 10,000 doctors have either returned to the state or decided to move there as a direct result of the legal reforms.

Texas Turnaround

Communities in Texas that were once underserved medically now have access to primary and specialty care that they didn’t have before. Many parts of the state suffered chronic shortages of key specialists, such as obstetrician/gynecologists and neurosurgeons, but now have a full complement of these physicians.

According to a 2008 study by the Perryman Group, A Texas Turnaround: The Impact of Lawsuit Reform on Business Activity in the Lone Star State, tort reform has resulted in “nearly a half-million jobs in the state of Texas” and an increase in annual personal income of almost $32 billion. Additionally, the study found that “annual output in Texas is $51.2 billion higher, while total spending is up $112.5 billion each year as a result of [civil-justice] reforms.” And almost 430,000 previously uninsured Texans now have health insurance.

So, there are significant economic benefits for states that enact litigation reform. Maybe states that have not yet adopted comprehensive civil-justice reforms, such as Pennsylvania, should strongly consider them. Such states should approach civil-justice reform as a way to make the economy grow, create jobs, and reduce the rolls of the uninsured – all while improving access to health care.

Budgetary benefits

These are lean times for state lawmakers. State tax revenues are down significantly. State budgets are being slashed all over the nation. But tort reform offers budgetary help, too.

A study published in the American Journal of Public Health indicates that states could save 3 percent to 4 percent of their total health spending by imposing reasonable limits on noneconomic lawsuit damages.

Let’s translate that into real dollars and cents. If the Pennsylvania legislature were to adopt progressive legal reform, the commonwealth’s taxpayers would save more than $2 billion annually.

We’re sure the Pennsylvania legislature could use an additional $2 billion to spend on education, health care, transportation, or other priorities. However, because of the efforts of personal-injury lawyers and the deteriorating civil-justice system, Pennsylvania continues to see physicians steadily migrate away from the state.

Furthermore, health-care facilities are closing their doors or limiting certain services. In November, for example, Philadelphia saw its 18th closure of a maternity ward.

If Pennsylvania is serious about economic recovery, the General Assembly should enact meaningful civil-justice reforms. Such measures would add new jobs, increase personal wealth, stimulate the economy, decrease the number of citizens without health coverage, reduce health-care costs, stem the exodus of physicians, and improve access to needed medical services. Tort reform would give Pennsylvania a real economic stimulus without using a single taxpayer dollar.

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