2010 September 14 Tuesday
Medical Malpractice Costs Only 2.4% Of Health Costs?

If this report is correct then medical malpractice costs are not a major source of increase in overall health care costs.

How much does malpractice cost the medical system? About $55.6 billion a year, or 2.4 percent of annual health care spending, according to a study on medical liability published today in Health Affairs.

As I've stated here in the past: The medical malpractice lawsuit threat probably isn't a major driver of increased health care spending. More technology to enable the diagnosis and treatment of more diseases is one of the biggest causes of rising health care costs. An aging population and government subsidies are other major cost drivers.

Extra tests account for 4/5ths of the cost.

More than 8 of every 10 of those dollars — $45.6 billion — was attributed to defensive medicine by physicians who order unnecessary tests and procedures to protect themselves from malpractice claims.

A reduction in malpractice insurance premiums would likely not cut total health care costs by much.

National tort reform and a resulting decline in malpractice insurance premiums would probably have little impact on costs in terms of reductions in defensive medicine, according to J. William Thomas, visiting professor at the Muskie School of Public Service, University of Southern Maine, and his colleagues.  Their analysis shows that estimated savings from a 10 percent decline in malpractice premiums would translate into reductions in defensive medicine equal to less than 1 percent of total medical care costs in every specialty.

Misdiagnosis of diseases are a substantial fraction of all medical errors. I fully agree with the need for more computerized decision support.

Misdiagnoses account for nearly 20 percent of all medical errors, but the patient safety field has all but ignored this problem, writes Robert M. Wachter, professor and associate chair of the Department of Medicine, University of California, San Francisco. The relative inattention, he argues, is driven by the “human nature” of these mistakes—failures of cognition are less amenable to “systems solutions” such as checklists and standardization.  He recommends a number of ways to improve diagnostic accuracy, including increasing use of computerized decision support and better training of young doctors in the science of diagnostic reasoning. 

More computerization of medical test results fed into expert systems would reduce error rates.

Share |      By Randall Parker at 2010 September 14 10:43 PM  Economics Health

Mike said at September 15, 2010 1:39 PM:

I sent this to a friend of mine who is a doctor. His response was: "That depends on how med mal costs are calculated. If you just count payouts, then it's 2.4%. If you count defensive medical cost, then it's like 30%.

What some lawyers call the standard of care, doctors call defensive medicine. If you get rid of the threat of malpractice, I can save you about $300 billion every year.

So the 2.4% is yet another lie that ambulance chasers spread."

Randall Parker said at September 15, 2010 5:47 PM:


No, the quoted stuff above puts the extra tests at 80% of the 2.4%. Those extra tests are included in the 2.4%.

Actual malpractice awards are pretty small.

Another study I've reported on found that defensive medicine and extra tests cost about $60 billion per year.

Winston Smith said at September 15, 2010 6:32 PM:

Doctors have as much credibility when discussing medical costs as real estate agents discussing home prices.

Mike M said at September 15, 2010 7:39 PM:

Wait a sec! The article actually stated that even a small percent of a big, big number is still very significant. It also stated that the estimate of how much defensive medicine really costs is just a WAG (wild a$$ guess). But, it's like crying that your socks are wet when you've fallen out of a boat - it's not the big problem.

IMHO the biggest factor driving high health care costs is that health care is paid for (or perceived to be paid for) with OPM or other people's money. So, even though gramps is 90 years old and hasn't walked or talked coherently in years, when he gets pneumonia, the family demands that "everything" be done no matter what the cost. If Medicare premiums reflected the true cost of the benefits paid out, the government would either have to severely cut Medicare benefits or drastically raise Medicare premiums (they won't because it would anger seniors who would then vote them out of office). The big lie LBJ told us with his Great Society programs is difficult to undo.

If we want to have a Medicare style program (not my favorite choice) and make it solvent, it should have different categories of benefits corresponding with different levels of premium. One can either choose a low cost plan that gets them very limited services with a high deductible or a "cadillac" plan that delivers all the bells and whistles, but has high premiums. The current concept (aka Ponzi scheme) of shifting the costs to non-users (younger people) with the empty promise that someday they too will get to suck the life out of some future generation has failed.

jim Ohare VP medmal claims said at September 16, 2010 7:37 AM:

Why the constant need to connect med mal and the cost of healthcare? It is like blaming cigarette lighters for lung cancer! There is no incentive to do healthcare- quicker, cheaper or better. Competition will make it cheaper and then nobody will care.

The high cost of healthcare is due to the high cost of healthcare.Period! Want to fix it- get rid of McCarron -Ferguson and allow countrywide competition, States protect their borders creating a license to steal. Another lobby success story.

Connecting defensive medicine to high healthcare costs is also silly. Lets see- I sell medical device or Test "X". Selling more of it is good for me. With volume, price decreases. But wait- no incentive to negotiate as the protected borders of the McC- F act, precludes it.

If henry ford had no competition the model T would still be the gold standard.

Not rocket surgery
jim O'Hare RPLU AIC AIS VP med mal claims Physicians Ins Co

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