Study: Malpractice Liability Costs U.S. $55.6 Billion a Year

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Medical malpractice liability costs the U.S. health care system more than $55 billion a year, most of it in "defensive" medical practices such as extra tests and scans, according to a report released on Tuesday.

These costs, which also include administrative costs, payments to plaintiffs and lawyer fees, account for 2.4 percent of annual U.S. health care spending, Michelle Mello of the Harvard School of Public Health and colleagues reported.

So-called defensive medicine costs alone totaled an estimated $45.6 billion, Mello's team reported in the journal Health Affairs.

The issue of malpractice has repeatedly come up in discussions and debates over health care reform. Doctors often must carry hundreds of thousands of dollars a year in malpractice insurance.

The administration of President Barack Obama has made saving money a centerpiece of healthcare reform, Obama's signature domestic policy.

"We cannot debate the potential for medical liability reform to bring down health care costs in any meaningful way without realistic cost estimates," Mello said in a statement.

"Physician and insurer groups like to collapse all conversations about cost growth in health care to malpractice reform, while their opponents trivialize the role of defensive medicine," added Amitabh Chandra, a professor of public policy at Harvard's Kennedy School of Government who worked on the study.

"Our study demonstrates that both these simplifications are wrong - the amount of defensive medicine is not trivial, but it's unlikely to be a source of significant savings."

Many groups have suggested tort reform as a solution, including caps on damages to be paid in successful malpractice suits, but Mello's team said such reforms would be unlikely to cut overall health care spending much.

Total malpractice indemnity payments were $5.72 billion a year in 2008 dollars, Mello's team found - about $5 billion in actual damages and less than $2 million in punitive damages.

But they noted there is no comprehensive system for tracking such damages, either. "The source that comes closest is the National Practitioner Data Bank of the Health Resources and Services Administration (HRSA)," they wrote.

They used that databank, with estimates from other sources, for their report. They used published studies for other numbers in the report.

"Notably missing from this list are malpractice insurance premiums," Mello's team noted.
"Premiums represent insurers' best estimates of their indemnity costs and defense costs, plus additional amounts to cover other operating expenses, reinsurance costs, and profits or surplus building. It would be double counting to include both malpractice premium costs and indemnity and administrative costs."