More on the Costs of Malpractice

A new paper published at the National Bureau of Economic Research takes a creative look at determining whether there may be some association between the possibility of malpractice suits and unnecessary utilization and spending.   (NBER Paper)    Active-duty military personnel cannot sue for harm inflicted when receiving care at a military health facility or from military health staff, although their dependents and military retirees can sue for such care.  The authors use this immunity to compare utilization and spending patterns for care received at these military sites versus care received at civilian facilities, where providers could face malpractice claims for poor care from both active-duty personnel and their dependents and retirees.  While the actual administrative costs of the malpractice system (defending lawsuits, buying insurance, etc.) and the actual claims payouts are small in comparison to the total cost of health care in the United States, there have been wildly varying claims about how much defensive medicine is practiced by physicians and others to avoid claims, and what that defensive medicine contributes to spending.  The Congressional Budget Office in 2009 suggested that a comprehensive malpractice reform system would only save .3% of spending, which seems ridiculously low to me, given what we know about physician behavior.  The researchers in the current study used the Military Health System, which provides a natural opportunity to study differential practice patterns between provider who can and can’t be sued and populations that can or can’t sue.  They used military health care records but looked solely at the effect on inpatient care.  They could analyze both the patterns of doctors who treated both patients who couldn’t sue them and those who good; and doctors who treated only one or the other.

Consistent with what would seem to be likely to me, these researchers find that liability-immune providers consistently provide less intensive treatment during episodes of inpatient care, particularly less use of diagnostic care.  The total effect is about 4-5% less intensity.  And the effect is greatest in states with no limitations on malpractice liability, where you would expect the strongest contrast.  Not only was overall intensity lower, but specific utilization metrics were, such as length of stay and number of procedures performed.  There was about a 22% reduction in use of diagnostic testing during the hospitalization among patients who couldn’t sue.  And there was no suggestion that outcomes were diminished along with the reductions in intensity of care.  Given that the researchers really were only looking at inpatient care, and a lot of the effect of defensive medicine occurs in the outpatient context, we should expect that the real savings from eliminating or limiting malpractice liability would be much greater.  There are real savings to be had for the health system here.  And let’s be honest about what keeps the current malpractice system going.  Attorneys take around 40% of any award, so they have a strong stake in a system that penalizes doctors for any mistake, real or imagined.  And they use all that money they rake in to make substantial contributions to politicians to ensure that the system doesn’t change.  Just another pathetic example of the lack of any real regard for patients or for what high health costs do to the average citizen.