Large Medical Malpractice Payouts Insignificant to U.S. Health Costs

June 7, 2013

When a medical malpractice lawsuit results in a "catastrophic" payout, or an award of over a million dollars, the case often makes headlines in the media and in legal circles. In some of the media coverage, researchers even claim these lawsuits are frivolous and create a heavy financial burden on the healthcare industry. But a new study once again shows that these assertions are not only exaggerated, they are completely incorrect.

A group of researchers from the Johns Hopkins School of Medicine examined the catastrophic payouts by U.S. doctors (through their insurance companies) between 2004 and 2010 listed in a government database of medical malpractice payments. These awards most commonly involved injury to or death of an infant, quadriplegia or brain damage resulting from a procedure, or an anesthesia problem. Their findings showed that though the high-profile cases attracted attention, the actual impact on the nation's healthcare spending was negligible--the cases paid an average of $1.4 billion yearly, which works out to a mere five-hundredths of a percent (.05) of money spent on healthcare in the U.S.

According to the research team, the true financial drain on the healthcare system is the cost of unnecessary services, which can reach up to $60 billion a year. Study leader Marty Makary, an associate professor of surgery and health policy, says, "the real problem is that far too many tests and procedures are being performed in the name of defensive medicine, as physicians fear they could be sued if they don't order them." Makary believes this finding illustrates why efforts to create malpractice caps are misguided and will have little impact on overall healthcare spending. "It's not the payouts that are bankrupting the system--it's the fear of them," Makary says.

Some legal observers believe that a stronger definition of "standard of care" (the conduct a medical professional would exercise in a similar situation) could ease the fears that lead doctors to order unnecessary tests. However, a lesser definition of the standard of care will only make it harder for actual victims of medical malpractice to recover--which is already less than 25%. Dr. Makary sees a need for further research to help prevent catastrophic payouts altogether. Like many in the medical profession, his goal is to improve patient safety while reducing costs--an ambition that should be popular with nearly everyone.

Sources:

Thomson Reuters News and Insight, Medical Malpractice Study Finds High Payouts Not a Huge Drain, 5-17-13

Health News Digest, "Catastrophic" Malpractice Payouts Add Little to Health Care's Rising Costs, 4-30-13