Medical Malpractice: Not Significant in Health-care Cost Escalation?

Recent data shows how little impact medical malpractice actually has on health-care costs. Yet that doesn’t mean we can’t do better.

Serious consideration of medical malpractice costs reveals that:

1. Malpractice is a very small part of overall health-care costs.  The Centers for Medicare and Medicaid tallied health-care expenditures of $2.15 trillion in 2006 and $2.5 trillion in 2009.  Medical-malpractice payouts are well below 1 percent of these amounts.

2. Payouts awarded to claimants have been steady and their number decreasing.  When inflation is accounted for, payout totals have changed little between 1991 and 2004 (increasing from $2.1 billion to $2.3 billion in 2004 dollars). The National Practitioner Data Bank reports that the number (15,843) of malpractice payments reported in 2006 decreased by 8.3 percent from the number (17,273) reported in 2005. The 2006 total represents a 16.1 percent decrease from 2002.

3. Very few injured people sue.  According to Public Citizen’s Congress Watch, only one-third of malpractice cases in 2004 that resulted in malpractice payouts (4,158) involved patient deaths. The famous Institute of Medicine study, however, estimated between 44,000 to 98,000 patient deaths per year due to preventable medical errors in hospitals.  Compensation is received in fewer than 10 percent of these deaths.

4. The vast majority of claimants who sue do not prevail.  A study just published by the New England Journal of Medicine shows that only one in five claims leads to a payout.  According to the report’s author, Amitabh Chandra, Ph.D., malpractice suits tend to be contingency cases (meaning that lawyers collect if they win but must pay witnesses and court costs regardless), so that only strong cases with high expected payouts are usually pursued.  Those factors—the high sunk cost and 20 percent success rate—are a significant disincentive to prosecute a frivolous case.

While medical malpractice is not a significant cost to the health-care system, we can decrease it even further.

A 1986 Massachusetts study found that 3 percent of the physicians covered by the state’s largest malpractice insurer were responsible for 33 percent of malpractice claims and that 18 percent of insured doctors accounted for all malpractice claims (here meaning the number of doctors sued).

“A few physicians were responsible for a large proportion of malpractice payment dollars paid,” the NPDB reported.

Under the current system of malpractice financing, other physicians (through higher premiums) or taxpayers (through governmental programs) foot the bill for these physicians.

We should acknowledge that, as in every profession, some doctors should change careers.  Then let’s enact legislation to prevent the practice of medicine by physicians who have lost or settled multiple, significant malpractice cases.  Once these higher-risk individuals are out of the pool, quality of care will improve, the number of adverse outcomes will be reduced and malpractice premiums will decrease.

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