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July 23, 2005

Malpractice 'Round the World

By Nick Beaudrot

This is Nick Beaudrot of Electoral Math, here. I'll be helping out Ezra this weekend, providing y'all with a numerical look into the current state of the political world. Which is good timing on Ezra's part, since he just brought up the subject of malpractice costs and the insurance industry's bogus claims that costs are on the rise; a few months ago, I took a look at the question of just how far out of line US malpractice costs are by comparing the medicolegal systems of several countries: France, Britain, Germany, Japan, and Sweden.

Ezra is right on two points. As a share of health care spending, malpractice spending  have not really gone up in the last fifteen years. The increase in the number of claims since 1990 almost directly matches the increase in population over that time span, and the cost per claim has risen right along with medical inflation. Also, the CBO study on defensive medicine is almost certainly accurate; as folks like Ezra and Kash have documented, most of the higher spending comes from administrative overhead in the insurance industry, higher salaries for doctors, taking more medicine, and patients visiting the doctor a bit more often, not from the practice of defensive medicine. Capping malpractice premiums would not magically reduce health care spending, nor would it make much of a dent in its growth rate. There are exceptions for particular specialties, mostly ob-gyns and anesthesiologists, who seem to bear a great deal of liability and have very high payouts; for these specialties I've suggested that the US create an "Unlucky Mothers' Childcare Relief Act" to put a generous upper bound on payouts from ob-gyns; it'd also be a great way to make House Republicans look bad.

However, it is true that malpractice spending in the US is higher than it is in most European countries, by somewhere between 50% and 1000%, depending on how you make your measurments. This stems mostly from our lack of loser pays legal system and the constitutional right to sue someone for anything over twenty bucks (no, seriously). But it's been this way for several decades, so the notion that the insurance industry needs protection from some sudden crisis is bunk. Also, the tort system -- roughly, "suing people because they hurt you" -- in the US serves the dual purpose of punishing negligent actors and compensating the victims. In most European countries, these functions are separated; one agency takes your malpractice claim and hands you some money, and a different one polices the hospitals. Finally, American style torts double as a form of workers' compensation and disability insurance, so some of the higher malpractice costs are really cost shifting from the "unemployment/disability/workers compensation" columns to the "tort" column. So as soon as the National Association of Manufacturers is willing to accept making bigger contributions to workers' comp fund in exchange for some tort reform, I'll be all ears.

I've outlined some possible changes to the malpractice system here, most of which take the form of turning malpractice into a technocratic no-fault compensation system, something New Zealand, Sweden, Denmark, and now France have done, and something the US has already done for crime victims. This would probably reduce malpractice spending by at least 20% or more, while also cutting out the middle men in the insurance industry and the trial lawyers. But there are much, much, bigger fish to fry in the department of health care spending. Picking on malpractice victims' ability to recover damages and make their lives a little easier isn't a great place to start.

Update: Fumbling with typepad, folks. Pay no attention to the wizard behind the curtain.

July 23, 2005 in Health Care | Permalink

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Comments

Malresult

A few months ago there was a suggestion that we separate Malpractice from Malresult and reduce costs of Malpractice by this separation. I commented positively on this and linked to the original article in: WeMatter.com/malresult

Posted by: Mike Liveright | Jul 23, 2005 1:08:46 PM

Terrific post, I agree with nearly all of it including your conclusions and suggested reforms. I'd only quibble with:

most of the higher spending comes from administrative overhead in the insurance industry, higher salaries for doctors, taking more medicine, and patients visiting the doctor a bit more often, not from the practice of defensive medicine.

some of that extra medicine and doctor visits are related to defensive strategies themselves.

Posted by: QuietStorm | Jul 24, 2005 1:40:27 AM

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Posted by: peter.w | Sep 17, 2007 2:40:56 AM

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