Medical Malpractice and Health Costs

The President, in an effort to demonstrate his desire for bipartisanship, has repeatedly tried to offer conservatives a deal on the issue of medical malpractice lawsuits since according to conservatives making malpractice litigation more favorable to defendants is key to reducing health care costs:

Politics is about the art of the deal, but it is worth looking at the actual policy issue and wondering if it’s true that malpractice lawsuits are actually driving health costs. As Igor Volsky says “the short answer is no”:

Malpractice costs represent less than half of 1% (0.46 percent of total health care expenditures) and malpractice settlements have grown modestly with inflation. In fact, in states that have adopted caps on jury awards, doctors are prescribing too many aggressive and intensive treatments that increase costs, but don’t improve outcomes.

When Texas capped non economic medical malpractice damages to $250,000 in 2003, most conservatives argued that the reform would free doctors from having to prescribe unnecessary treatment. It didn’t happen. According to the Dartmouth research on disparities in health care spending, many Texan doctors are still prescribing aggressive treatments that don’t improve outcomes. In fact, as of 2006, Texas was still at the top of the list of high-spending states.

There are certain perverse incentives inherent to fee-for-service medicine that can lead health providers to systematically err on the side of ordering tests and treatments whether or not there’s good reason to think they’ll be beneficial. Capping lawsuit awards doesn’t really change that.

To me the main point about malpractice lawsuits in health reform is that the prominence of this issue is one of the perverse consequences of our tattered social safety net. Medical treatment is complicated, and it’s inevitable that things will sometimes go wrong. Sometimes because of bad luck, sometimes because of an error in judgment, and sometimes because of a mistake that’s perhaps so bad as to truly constitute malpractice. But irrespective of the reason the treatment’s gone awry, what the patient needs is medical care to fix the problem and possibly financial support to cope with a disability. In a country where medical treatment is paid for by the state, then it doesn’t really matter why the additional treatment is necessary. If it’s necessary it will be done and paid for. Instead in our system, there needs to be a controversy over who will foot the bill for the extra treatment, and that requires the assigning of blame and culpability in a very specific kind of way and thus lots of essentially negative-sum litigation.

Changing the legal system while leaving the health care financing system intact is basically just a way of pushing costs around—onto the shoulders of patients—without really addressing the underlying topic of equitably financing health care and preventing medical errors.