Malpractice in Practice

Reporting from the Aspen Institute's Ideas Festival, Kurt Andersen mentions this portion of Bill Clinton's speech:

He said the Democrats are wrong to deny that malpractice suits don’t drive up medical costs.

No, they're not. Generally, this sort of high-minded concession to conservative talking points gets ignored, or argued via anecdote. Happily, we don't have to do that anymore. The latest issue of Health Affairs published a study assessing the cost of malpractice premiums, litigation, and payments, in addition to potential expenditures from so-called "defensive medicine". The verdict? This stuff doesn't matter. I'm going to bullet point through the study because, to be honest, this stuff pops up too often for the evidence against it to languish in policy journals.

• Are More Malpractice Claims Filed in the US? Yes. The authors compared domestic suits with those in Canada, Australia and Britain (all countries with a similar, British-based legal system), and it turns out litigious Americans sue 50% more than Britain or Australia, and 350% more than Canada. The uncharitable explanation is our private system makes more mistakes, but let's ignore that for a second. Of our high rate of suits, 2/3rds are dropped, dismissed, or found for the defendant. Only 1/3rd of plaintiffs make anything. In Britain, however, 60% of suits are settled, while only 36% are dropped or found for the defense. So while we have more claims being filed, we have much fewer being won.

• Are Claim Payments Higher in the US than Elsewhere? No. Our average payout is much less than Canada or the UK: we give $265,103 vs. their $309,417 and $411,171 respectively, putting us 14% below Canada and 26% behind the UK. Media attention and conservative rhetoric focus on the massive rewards, but they're as rare as they are large.

• What Does Malpractice Cost? This is the big one. What does it add up to? The answer, which you wouldn't guess from Bush's policy papers or Clinton's speeches, is not very much. Legal costs are $27,000 per claim, settlements and judgments are $4.4 billion, and insurance is $700 million. The total cost of malpractice is thus 6.5 billion --.46% of health care costs, or less than one half of one percent. They're just not a significant factor in rising health prices, and those who say different are lying.

• Defensive Medicine? We're not sure it exists, and in any case it's not measurable. The Congressional Budget Office did a study and concluded that the savings from less defensive medicine post-tort reform, if there were any, would be very small.

• Have Claim Payments Been Growing More Rapidly in the US? No. This is fascinating. Payments stateside have been growing at a steady 5% over inflation. In other countries, however, they've been growing at 10-28%. Nevertheless, anecdotal evidence (and maybe statistical too, though I don't have it) says that malpractice insurance is growing rapidly in America. If so, that's the fault of our insurance companies and system, not consumers. British and Canadian physicians are protected from malpractice litigation risks by a single national organization with government subsidized premiums and no incentive to jack up prices on doctors. Australia has a private system more like ours, but the government subsidizes malpractice premiums and reinsures high-cost claims.

That last is more telling than any of the others: the way to insulate doctors from malpractice costs is to remove the profit incentive for insurers to hike premiums on them. Canada, Britain and Australia have all done so by bringing the government in and promising protection to doctors. Under their solutions, consumers and physicians were protected, insurance companies were the ones who ended up hurt.

Domestic proposals are a bit different: consumers will find their ability to file suit proscribed, doctors won't be protected from an insurance industry that's been hiking premiums far beyond the growth in payouts, but insurers will keep their clients, suffer no abrogation in their ability to make profit, and become protected by caps on jury awards. So in Canada, Britain, and Australia, they legislated to protect consumers and their doctors; in America, we're pushing for a solution that'd only protect insurance companies. And that, in his quest to seem reasonable and above politics, is what Bill Clinton is counseling Democrats to endorse. Ouch. Come 2007, his wife is gonna have some 'splaining to do.