Medical Malpractice Payments Are Not Driving up Healthcare Costs: Study

A new study by Johns Hopkins suggests that the effects of payments made in medical malpractice lawsuits on the cost of healthcare are hugely overblown, highlighting the misguided push to limit awards as part of tort reform efforts in recent years.  

According to a press release issued earlier this month by Johns Hopkins, researchers found that payouts in substantial medical malpractice claims add less than 1% to the cost of health care in the United States.

The study was published in the Journal for Healthcare Quality, examining payments in “catastrophic” medical malpractice claims, involving payments of more than $1 million, which are likely to involve patient deaths, birth injuries, or other claims for problems that result in the need for lifelong medical care as a result of a medical mistake.

Researchers examined data from 2004 to 2010, finding that such substantial malpractice payments totalled only $1.4 billion. Most estimates place the cost of U.S. healthcare at around $2.8 trillion annually.

In recent years, much of the political debate over the high cost of healthcare in the country has tried to lay some of the blame on medical malpractice lawsuit payouts, with politicians claiming that giving state legislatures the power to arbitrarily override jury decisions and cap awards at amounts unrelated to the details of the case would help control costs. However, this study adds to mounting research that has shown payouts for medical malpractice are much lower than is portrayed by tort reform advocates, and that it barely registers as a blip on the radar of healthcare costs.

Defensive Medicine Costs Outstrip Malpractice Payouts

According to the Johns Hopkins researchers, the cost of actual claims pales in comparison to the cost of defensive medicine; unnecessary medical procedures and tests doctors conduct on patients in order to avoid lawsuits. That cost totaled about $60 billion annually, or more than 40 times the cost of actual medical malpractice payouts.

Between 2004 and 2010 there were 77,621 medical malpractice claims paid. Of that, 7.9%, or 6,130, were considered “catastrophic” payouts, meaning they were over $1 million.

“The notion that frivolous claims are routinely resulting in $100 million payouts is not true,” said Dr. Marty Makary, an associate professor of surgery and health policy at Johns Hopkins School of Medicine and the lead researcher. “The real problem is that far too many tests and procedures are being performed in the name of defensive medicine, as physicians fear they could be sued if they don’t order them. It is not the payouts that are bankrupting the system — it’s the fear of them.”

Other Studies Find Little Impact

The study’s findings are similar to other recent studies that suggest the fear of medical malpractice far outweighs the actual threat to the health care system.

A 2011 study published in the New England Medical Journal found that only 7.4% of physicians face the risk of medical malpractice claims each year. Only one out of every five claims result in a settlement or monetary award.

Another study that year by Public Citizen, a consumer watchdog group, found that even defensive medicine’s costs do little to increase the cost of health care. The researchers found that the impact of defensive medicine is minimal and only accounts for 0.13% of overall healthcare costs.

In many cases, doctors who claimed to be conducting defensive medicine are actually receiving financial incentives to order more tests.