Medical malpractice is primarily a state law issue, but its effects got entangled in the health reform debate because some studies suggested that physicians engaged in extensive and unnecessary health service delivery out of fear of being sued if they didn’t. Health Affairs has a number of recent articles updating this topic. In one article, researchers attempted to estimate the effect of medical liability on national health spending, finding it was about $55.6 billion in 2008 or 2.4% of all spending. (HA Article)
The primary category of additional spending was defensive medicine costs at about $46 billion, followed by indemnity payments at $5.7 billion, about 40% of which are non-economic, and about $4.1 billion of administrative costs. A second article indicated that the savings would be much lower, less than one percent of national spending. But this analysis keyed off of a modeled reduction in malpractice premiums and its effect on defensive medicine. (HA Article) The logic seems a little faulty. It may be that the greatest effect of potential liability is that it helps a physician internally justify marginal medical practices as necessary to protect against being sued.
Here’s our take on medical malpractice. Like most tort law, plaintiffs’ attorneys are the primary beneficiaries, often taking 40% or more of a settlement. Doctors and other health professionals are human and make mistakes. The solution is better training and a system of independent and objective peer review to identify professionals who repeatedly deliver substandard care, coupled with a state fund, financed by an assessment on health providers, to compensate truly injured patients for their actual economic loss only. No lawsuits against providers would be allowed, just an administrative procedure before a neutral panel. That should remove any incentive, or excuse, for professionals to engage in defensive medicine. Whether the savings are $20 billion or $60 billion, this is not insignificant and we need any source of cost reduction we can find.