Thursday, July 1, 2010

Malpractice Litigation And The Cost Of Health Care

Cross-posted from The Agenda on National Review Online.

The progressive approach to health care reform rests on the premise that health care is increasingly unaffordable because greedy doctors and insurers overcharge us for care, out of a desire for profit. Eliminate the profits, they argue, and the greed will go away.

We’ve spilled plenty of pixels contesting that view. But many have fairly wondered: if greedy doctors are so bad, what about greedy lawyers?

A 2005 study found that doctors (and their insurers) pay out 2 to 3 malpractice claims per year for every 100 physicians in America. That means that, over a 20-year career, many physicians face a 50 percent chance of being successfully sued for malpractice. No wonder that physicians believe that between 26 and 34 percent of overall health expenditures—$650-850 billion per year—is being wasted on defensive medicine (the practice of ordering additional tests and procedures in order to avoid future lawsuits).

This week, Archives of Internal Medicine, an influential medical journal run by the American Medical Association, has published a survey of 1,231 physicians conducted last summer (subscription required). The poll, which queried a broad range of primary care physicians, medical specialists, surgical specialists, and other specialists, were asked to agree or disagree with two statements: (1) “Doctors order more tests and procedures than patients need to protect themselves against malpractice suits”; and (2) “Unnecessary use of diagnostic tests will not decrease without protections for physicians against unwarranted malpractice suits.”

A remarkable 91 percent of physicians agreed with both statements. The authors of the study note that “these views were consistent across a range of physician characteristics, most notably across specialty groups…No significant differences were seen by geographic location, type of practice, or professional society affiliation…Physicians in typically lower liability-risk specialties, such as primary care, expressed as much concern about malpractice as physicians in high-risk surgical specialties.”

It is the second question that is most important, for it gets to the absurdity of President Obama’s claim that “we have now incorporated most of the serious ideas from across the political spectrum about how to contain the rising cost of health care.” The Affordable Care Act contains numerous mandates and pilot projects that allow the government to exert greater control over the practice of physicians. But physicians will refuse to adhere to any directive that puts them in legal jeopardy and threatens them with financial ruin.

The impact of serious tort reform would hearten any supply-side economist: reform would be as good as a tax cut, and would also reduce the deficit. By reducing the cost of health care, American families would pay less for health insurance, and thereby keep more money for themselves, leading to economic growth and more federal revenue. In addition, the government would spend less on Medicare and Medicaid, helping to curb federal entitlement spending.

A few lawyers might be poorer off, but I suspect that they would find other things to do.

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