Tort Reform's Impact on Lowering Medical Malpractice Litigation Costs May B

09.14.2010 - Tort Reform

The price tag of malpractice liability and defensive medicine comes to $55.6 billion a year, or 2.4% of healthcare spending, far lower than the HHS estimate of between $70 billion and $126 billion, a Harvard study says.

And while tort reform efforts to reduce malpractice lawsuit threats, such as those suggested in the Affordable Care Act, might reduce that cost, other efforts underway, such as the remodeling of the healthcare delivery system with "alterations to the fee-for-service system and the incentives it provides for overuse, probably provide greater opportunities for savings."

The report, by Harvard law and public health professor Michelle Mello, associate professor of surgery Atul Gawande, MD and others, is published in this month's journal Health Affairs, a themed issue containing several articles exploring controversial topics of medical mistakes, malpractice lawsuits, and their defense, and the patient-provider atmosphere that can provoke them.

The authors included the sums that malpractice defendants and their insurers pay to plaintiffs, administrative expenses, attorneys' fees, insurer overhead, and defensive medicine costs—defined as the price of providing medical services ordered primarily to minimize physician's liability risk.

They excluded malpractice insurance premiums, which they said "would be double counting," since settlement and jury verdict payouts come from those policy payments.

Defensive medicine made up the bulk of that cost, or $45.6 billion per year, they estimated.

On a positive note, they anticipate that universal coverage provisions in the ACA will reduce medical liability costs because if those harmed now have health coverage, they won't need to sue to recoup medical expenses required to treat or correct conditions caused by medical malpractice. They suggest that the concept of "collateral-source offsets"—the policy in some states that precludes plaintiffs from being awarded health costs if those costs have been covered by health insurance plans.

"A farther-reaching reform that merits discussion would be to impose a federal collateral source offset in connection with the move to universal coverage," they wrote. "In these respects, health reform and liability reform may have unexpected synergies in bending our cost curve down."

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