Doctor Demonstrates How Malpractice ‘Reform’ Won’t Cut Health-Care Costs

Like abortion, gun control and Obamacare, medical malpractice is a hot-button issue that makes people claim crazy things to make a point. People who want the truth about the effect of malpractice “reform” on the cost of health care should listen to Dr. Aaron E. Carroll.

Writing last week in the New York Times, Carroll, a professor of pediatrics at Indiana University School of Medicine, reviewed statistics and studies to reach the conclusion captured in the title of his op-ed: “Malpractice Reform Won’t Do Much to Reduce Health Spending.”

We regularly weigh in on the pressures felt by harmed patients and their advocates when so many interests try to deprive them of their rights by capping the amount a jury can decide they are due. In his commentary, Carroll focuses on one claim these forces make that is demonstrably wrong: that if you “reform” the legal system, the cost of health care will drop.

“The rationale for malpractice reform as cost control is somewhat complex,” Carroll writes. “It assumes the existence of ‘defensive medicine,’ meaning that doctors order additional tests, or perform extra procedures or recommend more visits, all because they think those actions will protect them from being sued. Doctors fear an ‘epidemic’ of lawsuits so much that they practice wasteful medicine to shield themselves from nuisance cases, this theory goes.”

Fear, Carroll shows, should take a back seat in favor of fact.

As he notes, through examining the National Practitioner Data Bank’s statistics about malpractice payments made on behalf of doctors, there’s no “malpractice crisis”; the number of those payments has declined steadily for 10 years.

That doesn’t mean malpractice and protecting against it isn’t costly, but its relative expense pales in comparison to other health-care costs.

Carroll’s review of one study in 2010 showed that the estimated cost of malpractice to be more than $55 billion a year, including about $5.7 billion paid to plaintiffs for damages caused by medical error, and $4.1 billion for expenses such as legal fees and the administration of justice. The rest, about $45.6 billion, was for defensive medicine.

That’s a lot of money, but consider: That study concluded that the cost of the malpractice system was 2.4% of all health-care spending.

Even if you believe that health-care is more expensive because doctors are afraid of being sued, Carroll says, theoretically reform could reduce fear, and waste. It doesn’t.

“In 2003,” Carroll reminds us, “Texas passed a law that capped noneconomic damages at $250,000 per year. The idea was to decrease the number of suits, lowering overall indemnity payments, which would lead insurance companies to decrease premiums for malpractice insurance. This, coupled with reduced claims, would make doctors feel safer, and therefore reduce their practice of defensive medicine.

“Health care spending didn’t go down in Texas, though. In fact, Medicare spending per beneficiary went up more quickly in Texas after the change than it did in the rest of the country.”

As we reported last month, the New England Journal of Medicine published a study about the changes in emergency-room care in Texas, Georgia and South Carolina, which also capped damages in 2005. Compared with neighboring states without similar laws, those states had no significant changes in factors like how often imaging was used to rule out problems and and how many patients were admitted to the hospital.

In other words, “reform” didn’t change anything.

The evidence of how misguided it is to effect positive change through taking away harmed people’s right just mounts. Carroll looked at another study of more than 15 million medical insurance claims in 30 states with varying levels of risk of malpractice suits to compare how the same conditions were treated in states with high malpractice-suit risk and in states with low risk.

The difference wasn’t much. “[E]ven if malpractice premiums fell by as much as 30% (which would be huge),” Carroll summarizes, “overall spending on defensive medicine would drop only 0.4%.”

So, he suggests, even with capped damages and reduced indemnity payments, the cost savings aren’t always passed on to physicians in the form of lower malpractice insurance premiums, and so they don’t change their defensive behavior.

“Sometimes those savings are pocketed by insurance companies, as they appear to have been in Florida since malpractice reform passed there in 2003,” Carroll says. “If that happens, there’s no reason to believe doctors will practice much differently.”

But if fear of being sued does contribute to the practice of defensive medicine, it’s not the only thing that does. As Carroll notes, doctors order tests, procedures and consultations for lots of reasons. “The most glaring one is that usually physicians are paid for doing so. Other times, physicians want to play it safe not only because they might be sued, but also because they think it’s in the best interests of their patients to double- or triple-check some detail.”

He refers to a recent study in JAMA Internal Medicine that analyzed how many orders were defensive in nature, and how much of the decision for that procedure was defensive. The doctor subjects rated their own orders using a “defensiveness score” from 0 (not at all defensive) to 4 (completely defensive).

Defensive orders were not uncommon, but being defensive as the sole reason for ordering a test was, accounting for less than 3% percent of overall treatment cost.

“If we’re being honest,” Carroll says, “this is the waste we might trim by malpractice reform – and while 3 percent of medical spending is nothing to turn up our noses at, a one-time reduction of that amount, even if achievable, won’t do much for the long-term problem.

Meanwhile, other orders may also be “defensive,” but if they’re also being issued for reasons unaffected by legal reform, they would continue to made in the future.”

“… There are many legitimate reasons to reform the malpractice system,” Carroll concludes. “It just doesn’t appear that reducing health care spending is one of them.”

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