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Bloomberg reports cost of medical malpractice claims are "a drop in the bucket"

On June 16, the Bloomberg News Agency responded to President Obama's talk to the American Medical Association by citing figures from a Harvard economist showing that the total cost of medical malpractice claims is about $12 per person in the U.S.  That amounts to about $3.6 billion dollars of a total $2.3 trillion dollars spent on health care (or one in every six dollars of our gross domestic product, by some calculations).  As Bloomberg and Harvard pointed out, this makes the total cost of malpractice claims "a drop in the bucket" when compared to the total cost of health care:  even eliminating malpractice claims entirely would have a negligible impact on the runaway cost of medical care in the U.S.  The U.S.'s largerst health insurer, WellPoint, Inc., conceded the same point last month when it issued a report acknowledging that medical liability was not driving up the cost of health insurance premiums.

The author of the Harvard study told Bloomberg that "medical malpractice dollars are a red herring for the system's failings...No serious economist thinks that saving money in med mal is the way to improve productivity in the system. There's so many other sources of inefficiency."

Bloomberg cited studies by health insurers, the Department of Health and Human Services and the Congressional Budget Office between 2003 and 2004 which pegged the cost of medical malpractice at 2 percent of U.S. health spending and concluded that "even significant reductions" would do little to reduce the growth of health care expenses.  To reach that two percent estimate, these researchers included the estimated cost of unnecessary procedures ordered by doctors who practice "defensive medicine" in an attempt to avoid potential claims.   

Bloomberg also noted that large malpractice awards are becoming more rare and that more than 30 states now have "caps" limiting malpractice awards.  Michigan instituted caps more than twenty years ago, along with substantial "reforms" that reduced the number of annual filings by more than 70 percent.

The WellPoint report by America's largest health insurer concluded that "medical malpractice is not a major driver" of spending trends in healthcare.   A prominent surgeon and author arrived at a similar conclusion in a recent New Yorker article exploring the cost of health care in several Texas cities with disproportionate Medicare spending (despite "caps" and malpractice reforms).  The doctor found that malpractice claims and "defensive medicine" were insignificant problems in comparison with a fee-for-service third-party payor system and culture of "leave no dollar on the table" among some doctors.

In any event, according to the Institute of Medicine, 98,000 people die in the U.S. annually as a result of medical errors, so the foundation problem in medical malpractice will still exist, whether or not legal "reforms" are instituted.  It would be very satisfying to watch politicians make real reforms of the health care system, including rational improvements in all aspects of coverage, payment for services and legal liability for errors.  With so many vested interests and so much money involved, however, don't hold your breath.

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