In April, I discussed how healthcare costs have added to the high costs of living on Long Island at https://messengerpapers.com/2023/04/healthcare-costs-add-to-long-islands-economic-woes/.
I briefly mentioned medical malpractice as a contributing factor to ever escalating healthcare costs. However, it was too complicated a subject to be included in that segment, so it will be discussed here.
While there is general agreement that the medical malpractice system is costly to the U.S. economy, there is less agreement on whether these costs have a significant impact on overall healthcare costs.
According to the National Center for Health Statistics, in 2019, the U.S. spent $ 3.5 trillion on healthcare, but how much of that is due to medical malpractice? In a comprehensive analysis by the Harvard School of Public Health (HSPH), researchers found that medical liability costs totaled about 2.4% of annual health care spending in the United States, or $55.6 billion per year (www.hsph.harvard.edu).
However, the National Conference of State Legislatures (NCSL) estimates that medical liability costs, including settlements, legal fees and administrative costs, can run as high as $200 billion annually (about 8.5% of total health care spending).
As significant as the costs for medical malpractice are, the high costs cited above may not account for what’s known as the practice of “defensive medicine,” which is defined as physicians over-treating patients as an abundance of caution, so as to protect themselves from lawsuits. These are exactly the kinds of costs that result in higher health insurance premiums for everyone.
Physicians who defend the practice of defensive medicine say it’s the uncertainty of dealing with serious medical conditions that causes them to be overly cautious by ordering extra tests and consultations. If a doctor is worried that he might be missing something, and in his or her mind is anxious about getting sued, that doctor is likely to engage in the practice of defensive medicine. This tendency fuels escalating healthcare costs through unnecessary care.
However, if defensive medicine was exclusively about the fear of being sued for malpractice, then it should be easy to show that, in the states with higher malpractice costs, far more medical tests and procedures are done. So far, that does not seem to be the case. Therefore, the issue is complex, although it is irrefutable that defensive medicine does exist and does add to total healthcare costs.
Jury awards for medical malpractice can be outrageous in states that have no caps on damages. Average annual per capita medical malpractice costs for physicians from 2012 to 2016 were highest in New York, followed by Pennsylvania, New Jersey and Rhode Island. Currently, there are no limits on monetary damages in malpractice cases in New York, although proposals have been debated in the past (www.legalmatch.com), but not enacted.
Due to the costs related to malpractice, several states have taken action by enacting tort reform laws aimed specifically at reducing the costs associated with medical liability (www.forbes.com).
By 2013, thirty-three states had enacted some form of tort reform. Typically, these laws are designed to cap damages – the amount a plaintiff can collect in a suit. Other reforms involve tightening statutes of limitations for filing claims and screening cases before they go to trial. There does appear to be some evidence that medical malpractice costs have dropped over the last fourteen years, and tort reform could be a factor in those reduced costs.
It should also be noted that those who support the patient’s right to sue for unlimited damages are typically plaintiff’s attorneys. Those proponents say that the healthcare system should focus on improving the quality of medical care, not placing caps on damage awards. Unfortunately, evidence indicates the medical malpractice system does not reduce medical errors or improve patient safety.
There is evidence from several studies suggesting tort reforms have the potential to reduce healthcare spending significantly with no adverse impact on quality of care or patient safety.
The current malpractice system in the U.S. is based on a contingency system. Plaintiffs can file a suit without incurring any upfront legal costs. If the suit results in a settlement or jury verdict in their favor, they typically receive one-third of the settlement, minus court costs and expenses. Critics of this system feel plaintiffs should have some “skin in the game” before they file a suit against a physician or hospital. A lawsuit against a health professional can be harmful to his or her reputation, while it also drives up insurance costs. As it stands now, there is no cost to filing a suit, even a case that is weak on its merits.
Those who defend the contingency system say that plaintiffs of lesser financial means should not be denied their right to sue and confront those alleged to have harmed them in court.
Not all countries use the contingency system for filing malpractice claims. In a tort liability system, such as the U.S., patients are compensated when negligence is proven to be the cause of the injury. Plaintiff’s attorneys receive one-third of the award. However, in OECD countries (Organization for Economic Cooperation and Development), most notably in Sweden, a no-fault system is utilized, whereby patients are compensated without proof of the providers’ fault. The U.S.’ tort litigation system has been criticized for being inefficient, unfair, and costly to both patients, health care providers and the health care system in general.
High healthcare costs have an impact on the cost of living, especially in an area as expensive as Long Island. Based on the costs related to medical malpractice, one can easily conclude those costs have a significant impact on overall healthcare spending in the U.S.
If studies support that tort reform can lower medical malpractice costs, and those savings can have a calming effect on healthcare costs and health insurance premiums, then more states should consider reforms to rein in costs. It is possible to maintain a patient’s right to receive compensation for a medical injury, and save costs through common sense policies that protect people from healthcare costs that threaten their financial integrity.
