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Defensive Medicine Costs Less Than Doctors Think, But Still Influences Their Decisions

Some new papers in Health Affairs suggest that, contrary to physician opinion, malpractice-related costs add relatively little to health spending. Moreover, malpractice liability reform of the sort that doctors have long promoted would not significantly reduce the amount of "defensive" medicine that they do to avoid lawsuits. Yet there's also evidence that the fear of being sued distorts physicians' decision-making in ways that make healthcare reform more difficult.

A study principally authored by Harvard researchers calculates that the cost of malpractice suits, settlements, and defensive medicine was $55.6 billion, or 2.4 percent of national health spending, in 2008. Within that amount, defensive medicine accounted for $45.6 billion. The researchers attribute $38.8 billion to defensive medicine in hospitals, and $6.8 billion to physicians' defensive -- i.e., medically unnecessary -- tests and treatments.

To put these numbers in perspective, the Congressional Budget Office concluded in 2004 that malpractice costs -- excluding defensive medicine -- accounted for under 2 percent of national health spending. Later, PriceWaterhouseCoopers estimated that the total cost of malpractice insurance and defensive medicine accounted for 10 percent of U.S. health costs. The AMA cites another government report that found defensive medicine costs $76 billion-$126 billion a year.

Unfortunately, none of these estimates -- including the most recent one -- are based on solid data. In fact, the authors of the Health Affairs article admit that "the quality of evidence supporting our system-wide estimate [of defensive medicine] is best characterized as low."

What is clear is that even if reform of the malpractice liability laws -- aka "tort reform" -- succeeded in lowering liability insurance premiums, it would have a minimal impact on defensive medicine. Two of the Health Affairs studies make this point. The first finds that even if tort reform reduced premiums by 10 percent, the cost of defensive medicine would drop by only 1 percent. Based on an analysis of millions of CIGNA claims, the study concluded that "defensive medicine practices exist and are widespread, but their impact on medical care costs is small."

Another paper indicates that regardless of how high or low a risk of being sued physicians run in particular states, their perception of malpractice liability and their tendency to practice defensively are about the same. Interestingly, whether the surveyed physicians were in fee-for-service practices or in practices with a lot of HMO business, their attitudes on this subject were largely similar. This might have implications for healthcare reform as the basis of physician payments transitions from volume to quality and efficiency.

Based on my own conversations with doctors over the years, I believe that they overestimate the amount of defensive medicine they do and how much it costs. But I also think that their reluctance to use the results of tests that other doctors do or even the vital signs that their staff takes has something to do with their pervasive fear of being sued. And it will be very difficult to persuade most physicians to be responsible stewards of healthcare resources without tort reform that not only cuts malpractice premiums but also greatly reduces their liability.

Image supplied courtesy of Flickr.

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