Rethinking Healthcare

Real cost of malpractice not as big as advertised

Real cost of malpractice not as big as advertised

Posting in Healthcare

The authors said that the biggest savings in the system won't come from capping awards or eliminating defensive medicine, but from changing the industry's business model.

During the health care reform debate one of the big points made by conservatives was that malpractice costs are a big contributor to health inflation.

Get rid of big jury awards, they said, reduce the fear of defensive medicine, and overall medical costs can fall. One Republican Congressman said malpractice represents 26% of our total medical bill.

(The courtroom illustration is from BNET's Ken Terry, in a March article urging malpractice reform.)

Turns out he's off by a factor of 10. A study from mostly Harvard-based researchers for the journal Health Affairs puts the total annual damages at more like $55.6 billion. Not trivial, but more like 2.4% of total medical costs, not 26%.

Moreover, most of that cost was for defensive medicine rather than jury awards, the authors concluded. Some $45.6 billion went to tests and drugs that may not have been necessary, but were probably done to avoid mistakes and lawsuits later on.

That means the actual cost of all the malpractice litigation going on in the U.S. each year is about $10 billion. This is in line with a 2002 study indicating malpractice premiums were 3.2% of the average physicians' revenues, with rates from 1987-2002 rising at half the rate of other costs.

Trial lawyers trumpeted the report, and the authors said that the biggest savings in the system won't come from capping awards or eliminating defensive medicine, but from changing the industry's business model.

While one Republican Senate aid hit upon the size of the defensive medicine bill, $45.6 billion, the report showed malpractice awards total only $5.72 billion and attorneys share in expenses of just $4.13 billion.
In a $2.5 trillion medical system, that's a rounding error.

Critics may also seek to discredit the report by discrediting its authors:

  • Atul Gawande, a surgeon and New Yorker contributor whose book The Checklist Manifesto urges more procedural support be given experts, who tend to rely too much on on their knowledge and not enough on their understanding.
  • Michelle Mello, a health policy researcher perhaps best known for her support of special "health courts" to replace the current malpractice system.
  • Amitabh Chandra, an economist whose focus is on health care cost drivers and productivity.
  • David Stuttert, an Australian expert on the intersection of the legal and health systems.

You see, since three are from Harvard, one is a foreigner and most of them have foreign-sounding names, they must have a secret liberal bias which makes everything they do or write completely bogus.

That may work, politically, in the short term, but at the cost of diminishing the credibility of all medical and scientific studies, without which no medical progress is possible.

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Dana Blankenhorn

Contributing Editor

Contributing Editor Dana Blankenhorn has written for the Chicago Tribune, Advertising Age's "NetMarketing" supplement and founded the Interactive Age Daily for CMP Media. He holds degrees from Rice and Northwestern universities. He is based in Atlanta. Follow him on Twitter. Disclosure