NCPA - National Center for Policy Analysis


October 30, 2009

Earlier this month, the Congressional Budget Office (CBO) said medical-liability reforms could save about $11 billion annually.  This assessment is a gross underestimate of the potential benefits of reform and was intended to give cover to congressional Democrats who say malpractice-liability costs are trifling.  But a full accounting shows the benefits would be a hefty $242 billion a year, more than 10 percent of America's health expenditures, says Lawrence J. McQuillan, director of business and economic studies at the Pacific Research Institute.

For example:

  • Last year alone, damage awards for medical-malpractice claims reached $5.9 billion.
  • Adding in legal costs, underwriting costs, and administrative expenses, total med-mal tort costs were nearly three times higher -- $16 billion. From 1986 through 2002, the average insurance payment for a malpractice claim more than tripled to $320,000.
  • The average jury award for medical liability was $637,134 in 2006.

Getting sued is now part of the job description for physicians, says McQuillan:

  • Each year, up to 25 percent of them face lawsuits.
  • Doctors are found innocent in 90 percent of cases, but they lose even then -- average defense costs per claim approach $100,000.
  • Fear of lawsuits causes most doctors to practice "defensive medicine," meaning they order unnecessary tests, referrals, and procedures to protect themselves against allegations of medical negligence.

To ease the burdens of malpractice lawsuits, jury awards should be capped for impossible-to-quantify "pain and suffering," so-called non-economic damages, says McQuillan:

  • Capping awards in med-mal lawsuits cuts losses an average of 39 percent and annual insurance premiums by 13 percent.
  • But the most important benefit from caps is better access to care; states with caps have 12 percent more physicians per capita than states without caps, according to a study published by the U.S. Department of Health and Human Services.

Effective malpractice reforms would allow doctors to spend more time with patients, not attorneys, increase access to health insurance and local providers, and provide benefits of at least $242 billion a year.  Less spending on wasteful litigation means better patient care and lower costs for all Americans, says McQuillan.

Source: Lawrence J. McQuillan, "CBO Underestimates Benefits of Malpractice Reform," Wall Street Journal, October 23, 2009.

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