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No Correlation

Continued Decrease in Medical Malpractice Payments Debunks Theory That Litigation Is to Blame for Soaring Medical Costs

By Taylor Lincoln

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I. Introduction

Adecade ago, medical malpractice payments reached their highest level since the government began tracking such data in 1990. Critics blamed litigation for soaring health care costs and even for the ongoing problem of millions of Americans lacking health insurance.

President George W. Bush designated overhauling the medical malpractice litigation system as one of his signature issues. Meanwhile, Republican members of Congress elevated legislation to limit injured patients’ avenues of redress (chiefly by capping damages awards) to the top of their agenda, where it has remained ever since.

Rep. John Boehner (R-Ohio), now the Speaker of the House, claimed at the height of thedebate over health care reform in 2010 that “medical malpractice and the defensivemedicine that doctors practice” was the “biggest cost driver” in all of medicine.1 In 2012, Senate Minority Leader Mitch McConnell (R-Ky.) included “lawsuit reform” as one of onlytwo ideas he proffered in his bid to replace the Affordable Care Act, the health care reform bill that Congress passed in 2010.2

Federal legislation imposing restrictions on medical malpractice litigation has not passed, although caps on damages are in place in nearly 30 states.3 But the chief objective of those seeking restrictions—namely reducing litigation and malpractice payments—has been realized.

Since 2003, both the frequency of medical malpractice payments on behalf of doctors and the amount of money paid out have fallen every single year, according to the government’sNational Practitioner Data Bank (NPDB), which tracks such payments. In 2012, the number of payments fell to the lowest level on record, setting a new record low for the sixth consecutive year. After adjusting for inflation, last year marked the third straight year that the cumulative value of malpractice payments fell to their lowest level on record.

If payments are adjusted for inflation using a blend of the consumer price index and the medical services index (a sensible methodology because roughly half of the value of malpractice awards compensates for future medical costs), 2012 marked the sixth consecutive year that payments sunk to a new all-time low. Even if one looks at actual dollars (i.e., with no consideration for inflation), payments in 2012 were the lowest since 1998.

The reduced litigation, most likely caused by state-based tort restrictions, has no doubt prevented many malpractice victims from receiving just compensation.

Meanwhile, the dividends promised by those pushing litigation restrictions, such as cheaper overall health care, have not remotely been realized. Since 2003, medical malpractice payments have fallen 28.8 percent. If medical malpractice litigation were trulythe “biggest cost driver” in medicine, then declining payments should have pulled overall health care costs down. But the nation’s health care bill has risen 58.3 percent since 2003. If health care costs followed the trajectory of litigation trends since 2003, our national health care bill in 2012 would have been $1.3 trillion. Instead, it was $2.8 trillion.

The divergence between health care costs and medical malpractice litigation affirms what critics of imposing malpractice litigation restrictions have said all along: That litigation is not to blame for rising costs or inadequate access to care.

The amount of money paid out in malpractice payments never provided support for the argument that litigation was the culprit. Even at their high water point, actual payments amounted to just 0.25 percent (one-fourth of 1 percent) of overall health care costs. If one considers the cumulative cost of malpractice insurance premiums, which encompass the costs of defending lawsuits and the profits and overhead of liability insurance providers, only 0.62 percent of overall health care costs could be attributed to litigation in 2003, when the dollar value of insurance payments peaked. Liability insurance premiums in 2012 fell to 0.36 percent of national health care costs, the lowest level in the past decade.

Rather than focus on actual expenditures, those who continue to demonize litigation have clung to the theory of defensive medicine, which holds that physicians’ fears of lawsuits prompt them to order rafts of unnecessary tests and procedures.

In a given snapshot of time, the defensive medicine theory defies conclusive evaluation because it ultimately rests on divining the private thoughts underlying doctors’ decisions. But broad trends over time provide convincing evidence that the defensive medicine theory is essentially bogus. If litigation fears truly prompt unnecessary tests and procedures, then the volume of care rendered should be declining in sync with diminished litigation risk. This thinking is at the heart of the argument for imposing caps on malpractice awards. But, as illustrated above, costs have marched upward while litigation risk has declined. Increased volume of care, including testing, is almost certainly a key reason for the increased costs.4

The fallacy of the defensive medicine theory is perhaps most plainly exposed when one examines developments in Texas, which in 2003 enacted one of the most restrictive litigation laws in the country. Between 2003 and 2010, malpractice payments in Texas fell by nearly 65 percent, but health care costs in the state (especially concerning Medicare diagnostic testing expenditures) rose far faster than the national average, as Public Citizen reported in 2011.5 A study published by the Journal of Empirical Legal Studies in June 2012 provided support for Public Citizen’s conclusion that the Texas tort limitations have notsaved money. “In sum, no matter how we slice the data, we find no evidence that the Texas 2003 tort reforms ‘bent the cost curve’ downward,” the authors concluded.6

The leaders of physician groups in Texas now say that they never claimed that litigation restrictions would help corral costs.7 In fact, they did. The group that led the campaign for the restrictions distributed literature promising that they would deliver “lower costs andmore security in our health care system.”8 What’s most significant today is that physicians in Texas—which is often cited as Exhibit A by supporters of tort restrictions—now disagree with the proposition that medical malpractice limitations are key to controlling costs.

Those truly looking to stem health care costs should look elsewhere. This report reviews the 2003 and 2013 pay for physicians in six specialties (Anesthesiology, Cardiology (noninvasive), General Surgery, Internal Medicine, Ob-Gyn and Radiology) as chronicled byModern Healthcare in its annual doctors’ compensation survey. Practitioners of these specialties have seen their pay rise from 24.3 percent (ob-gyn) to 82 percent (radiology) over this time period.9 For all specialties but one, pay raises have exceeded inflation. Likewise, Modern Healthcare reports that compensation for health care system CEOs rose at more than twice the rate of inflation from 2003 to 2012 (to over $1.1 million annually, on average).10 Pay increases for chief medical officers and chief financial officers also far outpaced inflation. These figures suggest that financial incentives, not litigation or the fear of it, provide a far more plausible explanation for soaring costs.

Critics obsessed with medical malpractice litigation always have ignored the underlying problem: the scourge of avoidable medical errors that lead to court cases. Contrary toclaims that the bulk of litigation is “frivolous,” more than 80 percent of money paid out indamages compensates for harms categorized in the government’s database as significant permanent injuries; major permanent injuries; quadriplegia, brain damage or the need for lifelong care; or death.

Moreover, the number of harms caused by medical errors dwarfs the number of medical malpractice payments. In 1999, the prestigious Institute of Medicine (IOM) concluded that between 44,000 and 98,000 patients were dying every year because of avoidable medical errors.11 Several more recent studies have reached conclusions at least as shocking as theIOM’s. There were only 14,942 medical malpractice payments in 1999 for all types of harms, not just those resulting in death. The number of payments fell to 9,379 in 2012.

Litigation is, in itself, an insufficient answer for the epidemic of avoidable medical errors. No damages award can compensate for death or a debilitating lifelong condition, and most victims of negligence do not receive any damages award at all. But awards do provide a semblance of compensation for some victims and, vitally, offer a means for some victims to pay for the future medical care that they are forced to rely upon.

Litigation also imposes accountability and has a record of encouraging beneficial changes. Findings resulting from litigation have prompted authorities to strip dangerous doctors of their licenses to practice, thus protecting patients from future risks. Litigation also has spurred sweeping systemic changes. The field of anesthesiology, for instance, was at one time complicit in rampant fatalities. As a result of litigation and bad publicity, the profession adopted reforms. Between the mid-1980s and 2005, the frequency of deaths involving anesthesiology dropped from about 1 in 5,000 to less than 1 in 200,000.12

Abundant additional opportunities for sensible reforms exist. Public Citizen reported in 2009 on a corpus of proven safe practices that were documented in peer-reviewed journals.13 These methods, as simple as using checklists for surgical procedures and taking common sense steps to prevent bed sores, would save an estimated 85,000 lives and $35 billion a year if implemented nationwide.

Members of Congress who are intent on serving the interests of their constituents should turn their attention to implementing recognized safe practices and marshaling resources to identify others instead of wasting their energy in a quest to prevent victims from obtaining just redress.