In President Obama’s speech on health care delivered to the joint session on Congress on September 9th, he said that he knows enough doctors to know that “defensive medicine may be increasing our health care costs”. President Obama shouldn’t have to guess about how much our tort system increases the costs of medical care – the numbers are out there and are fairly clear.
Medical malpractice lawsuits drive up the costs of medicine in three distinct ways – two of the ways are rather small, and one is more substantial. Firstly, malpractice cases that award huge sums of money to injured patients (more than $100 million dollars in selected cases) create costs that are passed on directly to physicians and hospitals and, ultimately, to patients. But the total cost of malpractice awards is actually pretty small – in 2001 the total of malpractice awards was roughly $4 billion, while the costs of defending these cases was around $6 billion. Added together, these constituted less than 1% of the total health care bill in the US in 2001. Secondly, costs of malpractice insurance for doctors and hospitals have been rising fast, and can top $200,000 per year for some specialties like obstetrics and neurosurgery. However, total insurance costs are still not more than 1% of the total $2.4 trillion spent on health care each year. Thirdly and most significantly, fear of medical malpractice causes doctors and hospitals to practice “defensive medicine”. Rampant defensive medicine is the single most important way that our medical tort system drives up health care costs.
Evidence shows that the costs of defensive medicine are substantial. In a landmark study by Kessler and McClellan in the mid-1980’s, they estimated that malpractice fears drove up hospital costs by 5-9% annually. In Massachusetts, a study published in the Journal of the American Medical Association found that roughly 30% of CT scans and MRI scans are ordered for “defensive” reasons. Even 10-20% of hospital admissions in Massachusetts are “defensive” – a huge drain on precious medical resources.
A study by the Pacific Research Institute published in 2007 found that the contribution of malpractice insurance, settlements and defensive medicine was roughly $130 billion, or 5% of the total health care bill in the US. Added to that, some $40 billion in costs were ascribed to loss of health care availability, because doctors choose not to perform certain procedures or care for certain patients who are viewed as “too risky”.
Indeed, loss of physicians due to high malpractice premiums, and unwillingness of physicians to care for patients or perform procedures based upon malpractice fears, is one of the greatest tragedies of the tort system. The American Academy of Orthopedic surgeons estimates that fully one half of all neurosurgeons, one third of all emergency room physicians, and one third of all trauma surgeons are sued each and every year. Such liability risk is crushing, both financially and professionally, for many doctors in high-risk specialties.
Mississippi, Pennsylvania and Nevada have all suffered significant losses of physicians in high-risk specialties such as obstetrics, neurosurgery and orthopedic surgery, due to skyrocketing rates of malpractice insurance. In many instances, malpractice premiums are more than half of a physician’s income, making their practices unsustainable. A study of defensive medicine in the state of Pennsylvania, which doctors have been fleeing for years, shows that 93% of physicians in “high-risk” specialties practice defensive medicine. Such defensive practices include ordering more imaging studies than would otherwise be indicated purely on medical grounds, unnecessary referrals to specialists, ordering unnecessary biopsies to confirm diagnoses, and prescribing unnecessary antibiotics.
In summary, there is ample objective evidence to show that the current medical malpractice system drives up aggregate health care costs by at least 5% annually. In states that have passed limits on awards for “pain and suffering”, premiums have risen more slowly and award sizes have fallen. However, the system of assigning guilt remains arbitrary, and many malpractice cases are awarded without any evidence of medical wrongdoing. So long as physicians who practice good medicine that is within accepted guidelines can still be hit with malpractice suits, defensive medicine will continue unabated. What is most needed in medical malpractice reform is clear guidelines that both assure that patients will receive the highest standards of care, and that also protect doctors who practice medicine as they should.
Dr. Niklason is a Professor of Anesthesia and Biomedical Engineering at Yale University. She is a world leader in the development of advanced cell therapies for cardiovascular disease.
