Malpractice Premiums: MIA in the Health Care Debate

Twitter icon
Facebook icon
LinkedIn icon
e-mail icon
Google icon

Health reform efforts have developed into a heated and contentious debate. Despite the position of the AMA in favor of HR 3200 (America’s Affordable Health Choices Act of 2009), physicians are, in fact, quite conflicted on the issue of health care reform. Many physicians are supportive of a single-payor system, while others are vehemently opposed. There is, however, one issue on which nearly all physicians are united: the need for medical-malpractice reform.

Medical-malpractice premiums amounted to about $30.4 billion dollars paid by physicians in 2007. 1 When compared with the total cost of medical care in the United States, this number is relatively small. The full effect of the health care liability problem, however, is seen not only in malpractice premiums, but also in the threat of frivolous or unrealistic lawsuits, which results in the practice of defensive medicine. Although estimates of the cost vary widely, numerous studies irrefutably demonstrate that the impact of defensive medicine is real and significant.

In 2003, DHHS estimated that limits on malpractice awards could save between $70 billion and $126 billion per year, 2 which would be enough to pay premiums for all those citizens currently uninsured. A study often quoted on the subject is by Kessler and McClellan. 3 They found that liability reforms could reduce defensive-medicine practices, leading to a 5% to 9% reduction in medical expenditures without any effect on mortality or medical complications.

By applying those percentages to 2005’s total health care expenditures, we find that the estimated cost of defensive medicine was between $100 billion and $178 billion for that year. When the price of defending physicians against lawsuits is added, the cost to the average US family for defensive medicine in 2005 was $1,700 to $2,000 (with no additional health care value). A study 4 published in the New England Journal of Medicine in 2006 analyzed more than 1,400 malpractice claims and found that in almost 40% of cases, no medical error was involved.

Defensive Medicine’s Cost

In a survey 5 of 900 physicians in Massachusetts conducted between November 2007 and April 2008, 83% reported practicing defensive medicine, with an average of between 18% and 28% of tests, procedures, referrals, and consultations and 13% of hospitalizations ordered for defensive reasons. Such practices were estimated to cost a minimum of $1.4 billion per year in Massachusetts alone.

In 2005, JAMA published a study 6 that investigated how often physicians alter their clinical behavior because of the threat of malpractice exposure. A total of 824 physicians completed the survey. Nearly all (93%) reported practicing defensive medicine. Assurance behavior, defined as ordering tests, performing diagnostic procedures, and referring patients for consultation, was very common (92%).

Avoidance of procedures and patients that were perceived to elevate the probability of litigation was also widespread, and 42% of respondents reported that they had taken steps to restrict their practices in the previous three years, including eliminating procedures prone to complications (such as trauma surgery) and avoiding patients who had complex medical problems or were perceived as litigious.

Very recently, a study 7 claimed that only $60 billion a year is a reasonable upper-end estimate of what is spent on defensive medicine. How times have changed; $60 billion per year still seems like a lot of money to me. The author acknowledged, however, that the malpractice system does affect the morale of physicians.

As an example, Hawaii’s largest hospital currently has six attorneys on staff to deal with litigation issues, while 20 years ago, there was just one. At the University of Miami’s school of medicine, 14 cents of every dollar collected in fees for patient services go toward medical-malpractice costs. 1
Sen John Kerry (D–MA) and Sen Orrin Hatch (R–UT) rarely agree on anything. Nonetheless, both have said that Congress needs to find a way to eliminate frivolous malpractice cases.

The Burden on Industry

What of the societal consequences? As you may remember, Dow Corning 8 was a major manufacturer of silicone breast implants. The company was forced into bankruptcy under the burden of litigation judgments and settlements based on accusations of damages due to its product. Scientific research subsequently demonstrated that these claims had no basis. That was no consolation to physicians,