Do We Need Tort Reform?

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Super Investing

With the cost of reform dominating the minds of those who will sculpt the final bill, in the hopes that the system can become de-gentrified and affordable, every sector of the health care system is being scrutinized so that it might be divested of inefficiency and waste, including the field of medical malpractice. This area, which is the mediation between doctors and lawyers, is cited by some lawmakers as a ripe area for reform, but there is a legitimate debate about how much wasteful malpractice really costs us.

Medical injuries rarely comes to blows – only about 4 to 7 percent of injured patients actually bring a case – and the costs are comparatively small. Tillinghast-Towers Perrin calculated that medical malpractice suits accounted for $30 billion in 2007 – under 1.5 percent of medical costs – and the Congressional Budget Office derived a similar figure of about 2 percent.1 2

However, some estimates have calculated that it could be as high as 10 or 15 percent, a large bulk of which may be accounted for by the practice known as defensive medicine, wherein wasteful tests are ordered at the fear of lawsuits. But calculating the cost of defensive medicine has remained notoriously difficult. Excess in these cases may not be so much waste as caution. A little excess may save lives.

A 1996 study by Daniel Kessler and Mark McClellan, which found that the cost of defensive medicine might be as high as 5 to 9 percent, was widely criticized: while it compared health costs between states with and without malpractice restrictions (as the logic goes, relaxed malpractice laws should obviate defensive medicine and as a corollary healthcare costs, since it loosens the looming threat of malpractice), it focused only on heart patients. Indeed, other studies, such as one that the Journal of Health Economics conducted in 1999, found very little savings when examining Caesarian sections using similar metrics. The CBO also found little causal relation between malpractice policies and the cost of health care.3

But few studies have actually tried to examine the behavior of doctors. And so perhaps the best study on defensive medicine was conducted by the Massachusetts Medical Society and the University of Connecticut Health Center between November of 2007 and April of 2008. Whereas other studies ply the books for excessive or comparative spending, this survey consulted over 900 physicians in the state of Massachusetts across a wide range of specialties. Thus, it is the doctor’s professional opinion that judges the composition of a defensive test that is done because of the threat of litigation. It found:

“About 83 percent reported practicing defensive medicine, with an average of between 18 percent and 28 percent of tests, procedures, referrals, and consultations and 13 percent of hospitalizations ordered for defensive reasons.”4

According to their estimates, these practices cost the state of Massachusetts a minimum of $1.4 billion a year. And yet what can be done to save money? President Bush proposed a nationwide cap on damages (some states, like California, already have them, ranging anywhere from $250,000 to $500,000, which are further withered by ostentatious legal fees). The Department of Health and Human Resources calculated that malpractice reform could save up to $108 billion but based some of their results on the Kessler-McClellan study. It remains dubious whether such control of the system will have the desired effect at all.3

Perhaps it is more prudent to ask where these suits stem from: an Institute of Medicine study reported that out of the 98,000 deaths a year, 90% of them are often due to failed procedures of the system, not negligence. A bill from Hillary Clinton in 2006 proposed a system similar to one instituted by the University of Michigan Health System: acknowledged cases of malpractice are compensated quickly and efficiently, while unwarranted suits are fought aggressively in court. By August 2005, claims had dropped from 260 to 114, annual litigation costs dropped from $3 million to $1 million, and cases took an average of eleven months less.5

It is clear that more ubiquitous and detailed studies still have to be done in order to ascertain the behavior of doctors, the steps needed to address defensive behavior, and the true costs of malpractice suits. Defensive practices may not be the only inefficiencies in the system, but they may be worth looking into.

1. Underwood, Anne (August 31st, 2009) Would Tort Reform Lower Costs? An Interview with Tom Baker, University of Pennsylvania School of Law. New York Times. [http://prescriptions.blogs.nytimes.com/2009/08/31/would-tort-reform-lower-health-care-costs/?hp]

2. Congressional Budget Office (January 8th, 2004) Limiting Tort Liability for Medical Malpractice. [http://www.cbo.gov/doc.cfm?index=4968&type=0]

3. FactCheck.org (January 29th, 2004) President Uses Dubious Statistics on Costs of Malpractice Lawsuits. [http://www.factcheck.org/president_uses_dubious_statistics_on_costs_of.html]

4. Goodnough, Kristina (February 23rd, 2009) Study Shows Defensive Medicine Widespread. University of Connecticut. [http://advance.uconn.edu/2009/090223/09022302.htm]

5. Hillary Clinton and Barack Obama (May 25, 2006) Making Patient Safety the Centerpiece of Medical Liability Reform. The New England Journal of Medicine. [http://content.nejm.org/cgi/content/full/354/21/2205]