The Medical Malpractice Scapegoat

Claims That Litigation Is Responsible for Rising Healthcare Costs Crumble Under Scrutiny

By Taylor Lincoln

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Executive Summary

Limiting medical malpractice liability is likely to be a component of proposals to replace the Affordable Care Act, the healthcare reform law also known as Obamacare. Those promoting replacement legislation will likely blame medical malpractice litigation for the nation’s inexorably rising healthcare costs and will promise significant savings by reducing doctors’ exposure to litigation.

This was the argument used by opponents of the Affordable Care Act, itself. Rep. John Boehner (R- Ohio), who was then the House Republican leader, claimed that the proposed healthcare bill did not do anything about “the biggest cost driver, which is medical malpractice and the defensive medicine that doctors practice.”

An abundance of evidence, however, indicates that the costs of the liability system are tiny in the scope of overall healthcare costs and have steadily declined over the past decade. Costs related to“defensive medicine,” a term for extra healthcare that doctors allegedly administer to protectthemselves against potential legal cases, cannot be precisely quantified. But the vast majority of academic studies that attempt to put a price tag on this phenomenon have found its cost to be small in the scope of overall healthcare costs. Therefore, limiting liability would not yield significant savings, if any at all.

Limiting liability also would amount to a misdiagnosis of the underlying problem, which is the well- documented epidemic of avoidable medical errors that cause severe injuries or death. Authors writing in the prestigious BMJ in 2016 concluded that medical errors are the third-leading cause of death in the United States. The number of patients suffering serious harms due to medical negligence dwarfs those who file medical malpractice legal cases.

Limiting liability also would reduce healthcare providers’ incentives to prevent avoidable errors. Providers’ concerns over litigation have spurred reforms that have reduced both adverse medical outcomes and litigation. The results of these safety initiatives support the conclusion that much room exists to improve healthcare safety. They should point the way forward for policymakers.

         I. Medical Liability Costs Are at or Near the Lowest Levels on Record

The federal government maintains a database of medical malpractice payments made on behalf of doctors since mid-1990. In the life of that database, these payments have never accounted for more than a tiny percentage of healthcare costs, and that percentage is declining.

  • In 2015, the most recent full year for which data are available, medical malpractice payments on behalf of doctors amounted to about 0.2 percent of costs for hospital and physician services and about 0.1 percent of all healthcare costs.
  • The number of payments on behalf of doctors in 2015 was the lowest on record.
  • The value of payments (in actual dollars) in 2015 was lower than at the end of the Clinton administration and lower than in any year during the administration of George W. Bush.

Some critics have said that the federal government’s database of medical malpractice payments is not representative because it does not include payments made on behalf of hospitals. Industry reports on medical liability insurance premiums paid by both doctors and hospitals address this shortcoming. Liability insurance premiums also take into account litigation defense costs and insurance companies’ overhead and profits, thereby providing a broad measure of medical liability costs.

These, too, have fallen.

  • Medical liability insurance premiums paid in 2015 were at their lowest level since (and including) 2003, the earliest year for which such data are provided by information-services company A.M. Best.
  • National medical liability premiums have fallen for nine consecutive years.
  • Medical liability premiums equaled about 0.3 percent of national healthcare costs in 2015, and about 0.5 percent of the portion of healthcare costs consisting of hospital and physician services.
    II. Most Studies Indicate That “Defensive Medicine” Costs Are Relatively SmallThose seeking to blame the legal system for rising healthcare costs invariably turn to the theory of“defensive medicine.” This concept refers to tests and procedures that doctors allegedly provide to protect themselves against potential litigation. Defensive medicine cannot be definitively measured, but studies have used various approaches to gain an insight into its prevalence. Most have found it to be a legitimate phenomenon that is relatively insignificant in the scope of overall healthcare costs.
  • In 2012, Public Citizen reviewed 12 prominent studies on defensive medicine over the previous quarter century. Of those that tried to determine how much the phenomenon adds to healthcare spending, most found its effect to be on the order of 2 percent or less of overall healthcare costs.
  • An oft-cited 1996 study concluded that states with statutory limits on the size of medical malpractice awards experienced 5-to-9 percent slower growth in Medicare spending over five years in the treatment of two high-risk heart conditions. But that study’s finding was likely skewed by the fact that Medicare had recently altered its payment formula in a manner that disproportionately suppressed payments in states with liability caps. A subsequent study using similar methodology by the Congressional Budget Office did not find a discrepancy in Medicare spending between states with and without liability caps.
  • A few surveys of doctors have arrived at conclusions about defensive medicine that are far out of line with consensus findings. The surveys arriving at the most outlandish estimates have relied on leading questions and other highly questionable methods to reach their conclusions.

          III. Two Big-Picture Lenses Discredit Defensive Medicine Theory

Setting aside academic studies, the past decade-and-a-half has provided some excellent real-life cases that test the theories blaming defensive medicine (or medical liability, broadly) for rising healthcare costs. Two, in particular, concern the experiences of the state of Texas and the entire United States. In both universes, litigation costs have plummeted and healthcare costs have soared, contradicting the theory the litigation is a chief driver of healthcare costs.

  • Texas in 2003 imposed some of the strictest medical liability limits in the country. Since then, medical malpractice payments in the state have declined by more than 70 percent (in actual dollars), but Medicare costs have risen faster than the national average.
  • Across the United States, the value of medical malpractice payments declined by 22 percent from 2003 to 2015. Meanwhile, national healthcare costs rose by more than 80 percent.IV. Proposals to Limit Liability Ignore Prevalence of Medical ErrorsCriticisms of the medical liability system usually are founded on an assumption that a high percentage of cases are not merited or, more bluntly, are “frivolous.” But these views are contradicted by well-established evidenced that only a fraction of serious harms caused by medical errors result in medical malpractice claims.
  • In 1999, the prestigious Institute of Medicine (IOM) stunned the nation by reporting that between 44,000 and 98,000 patients were dying every year because of avoidable medical errors. Fewer than 15,000 patients (or survivors) received a medical malpractice payment on behalf of a doctor that year.
  • Numerous studies since 1999 have reached even more shocking conclusions. For instance, the Journal of Patient Safety in September 2013 estimated that as many as 400,000 patients die every year due to preventable harms and that 10-to-20 times as many suffer non-fatal serious harms.
  • In 2016, authors writing in The BMJ, a prestigious British medical journal, concluded that medical errors are the third-leading cause of death in the United States, behind only heart disease and cancer.
  • The consensus view of researchers who have looked closely at this issue is that only “2 to 3percent of patients injured by negligence file malpractice claims and, of these, only about half recover compensation through the litigation process.”V. Medical Liability System Plays an Unheralded Role in Spurring Safety ImprovementsPublic policy debates over the medical liability system tend to include little discussion of potential benefits of the system. But, aside from compensating patients who have been harmed, the system has spurred reforms to prevent adverse medical outcomes. This phenomenon has been particularly profound in the field of obstetrics, which has historically experienced among the highest litigation costs. Public Citizen in 2015 summarized initiatives by several healthcare providers to improve safety in childbirth. Among the results:
  •  Hospital Corporation of America, the nation’s largest obstetrical services provider, reducedits obstetrics-related litigation claims by two-thirds over about a decade after instituting certain safety practices. “We are absolutely confident that adoption of our approach on a national level could, within 5 years, both dramatically reduce adverse perinatal outcomesand to a large extent eliminate the current national obstetric malpractice crisis,” leaders ofthat initiative wrote in a top obstetrics journal.
  • New York Presbyterian Hospital-Weill Cornell Medical Center virtually eliminated obstetrics-related sentinel events after initiating a safety initiative. Sentinel events are unexpected, preventable injuries in a healthcare setting not related to the patient’s illness.
  • New York Presbyterian also reduced its payments for obstetrics-related malpractice claims by 99 percent over the first six years of its safety initiative. “Any hospital could do it – it’s not about money, it’s about changing the culture to make it safer to deliver babies,” a NewYork Presbyterian obstetrician wrote in a journal article summarizing the hospital’sreforms.ConclusionAn abundance of evidence disproves arguments that medical malpractice litigation is to blame for rising healthcare costs. Avoidable tragedies in care, regardless of whether they prompt litigation, however, remain unacceptably high. Policymakers should concentrate on policies to address the epidemic of injuries and fatalities due to medical errors and ignore calls to limit providers’accountability.