The Cost of Medical Errors

The Society of Actuaries asked Milliman, a prominent actuarial firm, to examine the costs of medical errors.   (SOA Report) Using information from the Medicare claims databases and a commercial insurance claim database, and building upon earlier work, Milliman identified diagnoses codes which were likely to be associated with medical injuries, including those used for Medicare never events.  It then estimated the percentage of these medical injuries that were due to medical error.  Finally, it compared costs for the group of patients who suffered medical error to a matched control group that did not suffer error.  In most steps, particularly the estimation of cost, it appears that Milliman very much erred on the conservative side, so the end estimate of cost is likely to be low, perhaps very low.

Of an estimated 6.3 million medical injuries in 2008, about 1.5 million were said to be associated with a medical error.  These errors led to 2500 excess deaths and ten million excess missed work days.  Both mortality and lost productivity costs are believed by Milliman to be underestimated.  Milliman found that these errors are responsible for about $17 billion in additional medical expense, $1.4 billion in excess mortality and $1.1 billion in lost productivity.   As Milliman notes, the non-health costs are likely several times what they estimate.  In addition, while they adjusted downward for false positive reporting of medical errors, they made no upward adjustment for false negatives.

The most significant sources of medical error costs were pressure ulcers, which accounted for $3.9 billion of costs; postoperative infections, accounting for $3.7 billion; device implant and other complications, accounting for $1.1 billion and postlaminectomy problems, also accounting for $1.1 billion.  The report demonstrates that substantial reduction in errors would provide some decrease in annual health care spending.  It also would significantly alleviate anxiety and distress among the patients who suffer from these errors.