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Chris Nace
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Medical Malpractice Liability System a Small Portion of Health Care System

1 comment

During last summer’s debate over health care reform we heard a lot about the need for tort "reform" and to control the costs associated with medical liability. A recent study appearing in Health Affairs attempts to quantify the cost of the medical liability system. The verdict:

Overall annual medical liability system costs, including defensive medicine, are estimated to be $55.6 billion in 2008 dollars, or 2.4 percent of total health care spending.

So what can we take from this? Well, let’s start with the fact that contrary to what the AMA and insurance lobbies would have you believe, reforming the medical liability system is not the way to control health care spending in the United States. Simply put, it is a relatively tiny portion of health care costs.

But aside from that, it is important to take a closer look at the numbers. As the Pop Tort notes:

Since only $5.72 billion of this number consists of payments to patients and their attorneys (consistent with the insurance industry’s own data ), the authors had to find fully 80 percent of this cost in so-called “defensive medicine”. In other words, according to these authors, doctors spend eight times as much in “defensive medicine” costs as the entire medical malpractice insurance industry pays out in claims and lawsuits (and patients’ attorneys fee) in a year. Ok, looking forward to that backup!

Medical News Today also reports on the interesting myths that the report busts:

  • Myth 1. Too many claims – we all thought too many people were suing, and that claims were becoming rampantly out of control – a study revealed that a mere 1.53% of people who suffered harm as a result of medical treatment filed malpractice claims.
  • Myth 2. Medical malpractice claims bump up medical costs enormously – many of us believe(d) that the medical malpractice system raises the price of health care in the USA considerably. However, a new comprehensive study has revealed that it may bump up health care spending by 2.4% at the most.

Moreover,

However, trying to get perceptions and reality to agree with each other is extremely challenging. According to most studies, doctors’ fears of malpractice risk are considerably greater than they should be, the report describes them as "pervasive and overstated". Put simply, doctors imagine the worst possible outcomes, and unwittingly exaggerate the risk of their chances of occurring.

Rick Ungar, blogging at Forbes.com, states:

Some of the more vocal opponents to health care reform have long argued that doing away with medical malpractice would go a long way towards solving a major cost problem in the system. Given the small percentage of the health care dollar spent on medical malpractice issues, that would hardly appear to be the case.

Of course, as pointed out by the Pop Tort, the study fails to address the benefits of the civil justice system and how this system shifts burdens from wrongdoers to innocent victims:

For example, as the authors readily admit, the countervailing cost benefits of the legal system due to its deterrence function – future injuries and deaths prevented, health care costs not expended, wages not lost – is no where to be found in this figure. But besides that, it’s clearly wrong to count as a liability "cost” the transfer of money from wrongdoers to victims. Transfer payments merely shift money from the injurers or their insurers to the injured. They are not created by the liability system or by those who must resort to it for compensation. They are created by those who cause the losses and damage in the first place.

The point is that we can’t always believe what perception and propaganda tell us. The medical liability system–including so-called defensive medicine–is a small part of the overall cost of health care. The question we must ask then, is whether this small cost is worth the benefit of the civil justice system. My guess is that the Founding Fathers–who included trial by jury in the Constitution–would probably think it is more than worth it.

1 Comment

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  1. james O'Hare RPLU AIC AIS says:
    up arrow

    Why the constant need to connect med mal and the obscene cost of health care? It is like blaming cigarette lighters for lung cancer!

    The high cost of health care is due to the high cost of health care. The real target should be Humana and not med mal.

    Want to fix it- get rid of McCarron -Ferguson and allow countrywide competition. States protect their borders creating a license to steal for CIGNA. There is no incentive to do it cheaper, better or quicker. Why should they? There is a captive audience. Why does an Cat scan cost $2000 dollars? Its just a fancy camera.

    Connecting defensive medicine as a primary reason to high health care costs is silly. Lets see- I sell medical device “X” or Test “X”. Selling more of it is good for me. With volume, prices should decrease. But wait- no incentive to negotiate as the protected borders of the McC- F act, renders it a non issue. That is the big gorilla creating this obscenity.

    If competition brought costs down, defensive medicine would be the gold standard. Now , the diagnosis is just too expensive. If Henry Ford had no competition, we’d still be in the Model T.

    Blue Cross and Aetna are cleaning our clocks and the focus is directed to Med mals affect on HC costs? Lets look at the big fix first.

    RE the 55 billion, and only 5 billion going to injured patients, where are the legal fees measured?

    I think the argument is misdirected.

    Regards to all.
    jim O’Hare RPLU AIC AIS VP med mal claims Physicians Ins Co