Medical groups call to stop tax deduction for trial lawyers

“Changing the tax policy to allow trial lawyers to deduct court costs and other expenses would cost taxpayers $1.5 billion and increase the cost of health care in our nation,” former AMA President J. James Rohack, said in prepared remarks. “This change would encourage trial attorneys to file more lawsuits.” 

The Treasury is looking to change a provision in the tax code that would allow trial lawyers to deduct certain expenses for contingency cases in the year they are paid, which is when most businesses deduct expenses. 

Currently, trial lawyers can only deduct these expenses after their client fails to reimburse them. 

Groups like the American Association for Justice argue that clients are rarely expected to reimburse a law firm for expenses incurred and that attorneys should be able to deduct those costs from their taxes in the year they are paid. 

Rohack argues the tax change will lead to more lawsuits and force doctors to take additional precautions to ensure against being sued.

“Many physicians are forced to practice defensive medicine to protect themselves from meritless lawsuits. The U.S. government estimates the cost of defensive medicine is between $70-126 billion per year,” Rohack said. “Any increase in the number of lawsuits will add unnecessary costs to our health care system.”   

Rohack suggests a cap on lawsuits might be a better way to go in addressing the issue. 

“The Congressional Budget Office found that medical liability reforms that include a quarter-million dollar cap on non-economic damages would reduce the federal budget deficit by about $54 billion over ten years,” he said. “As our nation works to reduce the growth in health care costs, it’s clear that medical liability reform must be part of the solution.”

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