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Malpractice in Practice

Reporting from the Aspen Institute's Ideas Festival, Kurt Andersen mentions this portion of Bill Clinton's speech:

He said the Democrats are wrong to deny that malpractice suits don’t drive up medical costs.

No, they're not. Generally, this sort of high-minded concession to conservative talking points gets ignored, or argued via anecdote. Happily, we don't have to do that anymore. The latest issue of Health Affairs published a study assessing the cost of malpractice premiums, litigation, and payments, in addition to potential expenditures from so-called "defensive medicine". The verdict? This stuff doesn't matter. I'm going to bullet point through the study because, to be honest, this stuff pops up too often for the evidence against it to languish in policy journals.

• Are More Malpractice Claims Filed in the US? Yes. The authors compared domestic suits with those in Canada, Australia and Britain (all countries with a similar, British-based legal system), and it turns out litigious Americans sue 50% more than Britain or Australia, and 350% more than Canada. The uncharitable explanation is our private system makes more mistakes, but let's ignore that for a second. Of our high rate of suits, 2/3rds are dropped, dismissed, or found for the defendant. Only 1/3rd of plaintiffs make anything. In Britain, however, 60% of suits are settled, while only 36% are dropped or found for the defense. So while we have more claims being filed, we have much fewer being won.

• Are Claim Payments Higher in the US than Elsewhere? No. Our average payout is much less than Canada or the UK: we give $265,103 vs. their $309,417 and $411,171 respectively, putting us 14% below Canada and 26% behind the UK. Media attention and conservative rhetoric focus on the massive rewards, but they're as rare as they are large.

• What Does Malpractice Cost? This is the big one. What does it add up to? The answer, which you wouldn't guess from Bush's policy papers or Clinton's speeches, is not very much. Legal costs are $27,000 per claim, settlements and judgments are $4.4 billion, and insurance is $700 million. The total cost of malpractice is thus 6.5 billion --.46% of health care costs, or less than one half of one percent. They're just not a significant factor in rising health prices, and those who say different are lying.

• Defensive Medicine? We're not sure it exists, and in any case it's not measurable. The Congressional Budget Office did a study and concluded that the savings from less defensive medicine post-tort reform, if there were any, would be very small.

• Have Claim Payments Been Growing More Rapidly in the US? No. This is fascinating. Payments stateside have been growing at a steady 5% over inflation. In other countries, however, they've been growing at 10-28%. Nevertheless, anecdotal evidence (and maybe statistical too, though I don't have it) says that malpractice insurance is growing rapidly in America. If so, that's the fault of our insurance companies and system, not consumers. British and Canadian physicians are protected from malpractice litigation risks by a single national organization with government subsidized premiums and no incentive to jack up prices on doctors. Australia has a private system more like ours, but the government subsidizes malpractice premiums and reinsures high-cost claims.

That last is more telling than any of the others: the way to insulate doctors from malpractice costs is to remove the profit incentive for insurers to hike premiums on them. Canada, Britain and Australia have all done so by bringing the government in and promising protection to doctors. Under their solutions, consumers and physicians were protected, insurance companies were the ones who ended up hurt.

Domestic proposals are a bit different: consumers will find their ability to file suit proscribed, doctors won't be protected from an insurance industry that's been hiking premiums far beyond the growth in payouts, but insurers will keep their clients, suffer no abrogation in their ability to make profit, and become protected by caps on jury awards. So in Canada, Britain, and Australia, they legislated to protect consumers and their doctors; in America, we're pushing for a solution that'd only protect insurance companies. And that, in his quest to seem reasonable and above politics, is what Bill Clinton is counseling Democrats to endorse. Ouch. Come 2007, his wife is gonna have some 'splaining to do.

Posted by Ezra Klein on July 22, 2005 1:56 PM | Permalink

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COMMENTS (22)

My guess is that Clinton listens to Bob Rubin a lot, and Rubin is a big fan of tort reform. Interestingly, during the Clinton administration, it was Rubin who was pushing tort reform and Clinton pushing back.

Note that this is tort reform in the general sense of providing some sort of certainty to business of their liability, not the medical industry in particular.

Posted by: Nick Beaudrot | July 22, 2005 2:28 PM

Uhh... I've read that four times, and I still can't get past the triple-negative ("wrong / deny / don't"). What are we supposed to say about the connection, again?

Posted by: Tony the Pony | July 22, 2005 6:28 PM

Heh, that's funny. Technically, Clinton's triple-negative puts him in Ezra's camp.

Posted by: Brad Plumer | July 22, 2005 7:20 PM

I think this was on Kos not too long ago. The numbers are very different:

Seems that the problem is the insurers, not the trial lawyers.
Medical malpractice insurers in recent years have reaped a windfall in premiums that have far outstripped their claim payouts, a report issued by consumer groups said Thursday.
The report, written by former Missouri Insurance Commissioner Jay Angoff, contends that the amount of premiums collected by 15 major medical malpractice insurers has more than doubled over the past five years. At the same time, the report found that the companies' claim payouts have remained essentially flat [...]
The report said malpractice insurers as a group raised their net premiums between 2000 and 2004 by 120.2 percent, to about $4.2 billion, even though their net claim payments rose by only 5.7 percent, to about $1.4 billion.
As a result, the amount of claim payments made as a percentage of premiums dropped from 69.9 percent in 2000 to 33.6 percent in 2004.
Those premium increases are then passed on to health care recipients, further fueling skyrocking health care costs.
Republicans would have you believe it's the trial lawyers creating the problem, but it looks like their allies in the insurance industry are the real culprits.

Posted by: Pokey | July 23, 2005 2:21 AM

Defensive Medicine? We're not sure it exists, and in any case it's not measurable. The Congressional Budget Office did a study and concluded that the savings from less defensive medicine post-tort reform, if there were any, would be very small

Ah, but that's the whole issue. We're not sure it exists??? If you can find even a single doctor who agrees with this statement, I'd be impressed.

Posted by: QuietStorm | July 24, 2005 12:51 AM

It appears that you have quoted the linked study selectively if not outright inaccurately:

If the upper estimate of 9 percent were accurate and for some reason little defensive medicine were practiced in other countries, it could explain some of the differential in per capita health spending between the United States and other OECD countries

Furthermore, you've misstated the very purpose of the paper which was not to analyze the contribution of medical malpractice to health care costs in the US but to look at the contribution of all types of medical inputs to the differences in health care costs between countries . This is an important distinction for if malpractice suits and related costs are fifty per cent of US health care costs and the same fifty per cent of French health care costs, this paper would say they are not important in explaining the different health care tabs of the two nations- and they would be right but so would Clinton.

Our malpractice system affects health care costs. Is it the predominant driver of our extremely expensive care? No, it's a minor factor but to pretend that it is nonexistent is a surefire way to lose credibility. The major problem with malpractice isn't the costs, its the ineffectiveness. Most cases of malpractice don't see a court and many cases that do are decided on the sympathetic attributes of the defendant. After all these years of malpractice law, there's no evidence that actual malpractice is declining. It doesn't work, it doesn't serve justice and it runs up costs. Sounds like reform would be a good idea.

Posted by: QuietStorm | July 24, 2005 1:15 AM

Sorry, Brad. This time I don't go along. It's English, not math. Repetition equals emphasis.

Posted by: opit | July 24, 2005 8:27 PM

did anybody do the math on some of the points though? If 6.5 billion is only a half of a percent of health care costs(and where did you get that figure of 1/2 of a percent), then the cost of health care in this country is 1.3 trillion dollars. Am I the only one who think that sounds really high? Unless you include Michael Jackson's plastic surgery....okay, and Liz Taylor's rehab too. Also, I say go back and do the math on the number of suits filed and paid in US/UK/Aus/Can. If we sue 1.5 times as much as UK or Aus, and 3.5 times as much as Can, then the difference between UK/Aus and the US is almost non-existent when you look at the number of claims that pay the patient. And when you look at Canada's numbers...oh wait, forgot to give those, didn't ya. Convenient that. As for the amount paid out on those claims, are you adjusting for the exchange and those numbers are actually in US dollars or were the UK in pounds and Can in Canadian dollars? Cuz that will make a difference.

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