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Medical Malpractice Reform is a Small Contributor to Lower Healthcare Costs

January 22, 2011
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Doctors love to talk about tort reform – states passing laws to put limits on awards such as non-economic damages for harms such as pain and suffering, and on the legal process of suing a doctor for malpractice. They speak of defensive medicine – the practice of ordering extra tests, treatments, and days in a hospital to cover their medical-legal butts.

Texas passed a comprehensive tort reform law in 2003 that has resulted in an approximately 30% decrease in doctors’ malpractice insurance costs. These savings are passed along to Texans because Medicare includes malpractice insurance costs in its formulas on doctors’ fee schedules, and most private insurance companies calculate their rates as a percentage of Medicare. The larger effect in Texas has been to attract more doctors to the state including underserved areas.

It’s amazing how malpractice insurance premiums vary across the U.S. In 2004, annual premiums for OB/Gyns were nearly $200,000 in Florida and less than $20,000 in Nebraska. I can’t believe this reflects 10 times higher quality care in Nebraska vs. Florida. I think it speaks volumes about the cultures and expectations of the citizens of those states.

A study in 2010 estimated that the total cost of defensive medicine is $55.6 billion a year, which is only 2.4% of all healthcare costs. A companion study surveyed physicians and found that physicians’ fears of being sued were not assuaged very much in states with significant tort reform compared to those without.

For most doctors, the threat of lawsuits is more of an emotional issue than a financial one. Being accused of malpractice is tough enough in the first place. The vast majority of doctors do the best they can with uncertain information and difficult situations knowing that no matter what they do, some patients will have disabilities and die from their injuries and diseases. An endless list of hindsight accusations can be made in tragic outcomes. Also for physicians, there is no forgiveness in medical malpractice if there is any kind of settlement. Any doctor who’s been sued has to relive the experience for the rest of his career every time he fills out a hospital or insurance application.

The disconnect between defensive medicine and lower healthcare costs exists because America hasn’t addressed the true underlying healthcare inflation issues: risk and cost. If a 36-year-old female patient sees me for sharp chest pain occurring over the last two days and she has no unusual medical history, the science of medicine tells me her chest pain is very unlikely to be caused by blockage in the arteries of her heart, but it’s still a possibility. A crucial distinction is that low risk doesn’t mean no risk.

What do you want me to do with this patient? I could admit her to the hospital for a series of multi-thousand dollar tests that will probably be normal.  Or I could reassure her she’s probably fine, advise her to take some medicine for comfort, and tell her to come back and see me if she feels worse. In this scenario there is an extremely small, but not zero, chance she will be injured or die in the next few days. And there is no primary care research to tell me what those risks really are.

Therefore, to really bring down the cost of American healthcare, two questions must be answered by the public. What risk is so low is just isn’t worth pursuing? How bad must the bang-for-the-buck become for a test or treatment to become cost prohibitive?

Until these questions are answered, American healthcare costs will continue to outpace the general inflation rate and wage will remain stagnant, doctors will still fear the medical-legal boogeyman, and the great American healthcare irony – we spend the most but get the least, will only get worse.

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5 Responses to Medical Malpractice Reform is a Small Contributor to Lower Healthcare Costs

  1. Mark on January 24, 2011 at 8:13 pm

    Great post. You make some very interesting points here. It’s true, it is amazing how malpractice insurance premiums vary so much across the U.S. With the recent reform talks in Congress, there are sure to be some changes.

    I aspire to be a doctor someday and was looking into medical malpractice insurance the other day. During my search I found eQuoteMD, and I’ve learned a lot about my options. Just thought I’d share for anyone else out there in the same situation.

    Thanks!

  2. J Pahnke on February 13, 2011 at 11:24 pm

    I find the study you cite for the proposition that defensive medicine only represents an ostensible 2.4 percent of all health expenditures extremely suspect. Other studies show expenditures as high as 12.5%, but even if medical liability reform were implemented, perhaps with a system of “full internet disclosure” of doctor and hospital error/ liability rates along with prices charged for common procedures and interstate competition, (rather than with the extremely expensive and complete overhaul of health care favored by Obamacare), why shouldn’t we favor taking actions that might help restrain health care inflation? While increases in health care costs are undoubtedly driven by the demographics of an aging American populace, (read “retiring baby boomers”), we should be encouraing, rather than discouraging, any and all ideas that can help deal with the critical health decisions that face us as a nation.

    J Pahnke, American Center for Law and Policy, http://www.americanlawandpolicy.blogspot.com

    • Richard Young MD on February 14, 2011 at 10:47 pm

      Mr. (or Ms.?) Pahnke,

      I believe tort reform is one piece of a comprehensive effort to lower healthcare costs, but it will only make a small contribution. We should take many actions to restrain healthcare inflation. The fundamental driver of that inflation is the current relationship between doctors and patients — that all services be provided no matter how rare the benefit or expensive the service — which is completely unsustainable. More details of my solutions are on my solutions pages on my website.

  3. Myrta Cumbee on February 18, 2011 at 9:15 pm

    You think I could use some of this article for my site? I am not intending to copy your whole post or anything, I just would like to reference some of it and touch upon it. I will leave a keyword rich link back to your web site as a thank you 😉 Get back with us and let me know.

    • Richard Young MD on February 19, 2011 at 11:43 pm

      Myrta,

      Use as much of the post as you’d like. Thanks for your interest and support.

      Richard Young, MD

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