In re:tort
Saturday, November 15 2008
(This was originally part of the prior post, but I decided to break it off into a new post.)
After linking to Uwe Reinhardt, Kevin cites a PWC estimate that defensive medicine wastes $210 billion dollars a year (the study is hidden behind onerous registration requirements, but I found it here also). That seems like a lot of money, until you learn the study estimates our system wastes $1.2 trillion dollars – making defensive medicine only 18% of total waste. Still, 18% is a big slice, so where does that number come from?
In the very last endnote to the PWC study, we learn:
18. Defensive medicine costs are calculated at $210 billion based on 10% of all healthcare spending as documented in The Factors Fueling Rising Healthcare Costs 2006, prepared for America’s Health Insurance Plans, January 2006.
AHIP, by the way, is the lobbying group for health insurers, who definitely have a dog in this fight. So we go to the AHIP study, where we find this:
The 10 percent was adapted from Kessler and McClellan as sourced in Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, “Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the Quality of Health Care,” March 2003 and CMS’ Medical Economic Indices. Kessler and McClellan estimate that the cost of defensive medicine was in the range of 5% to 9% of medical costs. The direct cost of medical liability insurance is roughly 2%. This suggests that total medical liability costs are in the 7% to 11% range.
So the number – now 7% to 11% – comes from a 1996 study; that paper is behind a pay-wall at JSTOR, but suffice to say that one of the authors – “McLellan” – is Mark McLellan, who would soon become a Bush Administration appointee. I’ll come back to the Kessler & McLellan study in a later post, but for now let me stay with the DHHS paper. It has a lot of health insurance industry sources, so it’s not surprising AHIP liked it. There are a few academic studies other than Kessler & McClellan, but the paper rather badly distorts at least some of those studies. For example, there’s this claim:
A comprehensive study of the prevalence of medical errors found that most events for which claims were filed in fact did not constitute negligence…
which leads you to endnote 43, where you learn that the information came from a study in the NEJM (no doubt less trustworthy than DHHS, right?). So what does that study say? From the abstract:
Our estimate of the statewide ratio of adverse events caused by negligence (27,179) to malpractice claims (3570) is 7.6 to 1. This relative frequency overstates the chances that a negligent adverse event will produce a claim, however, because most of the events for which claims were made in the sample did not meet our definition of adverse events due to negligence. CONCLUSIONS. Medical-malpractice litigation infrequently compensates patients injured by medical negligence and rarely identifies, and holds providers accountable for, substandard care.
What the DHHS paper fails to mention is that the number of malpractice claims is way, way lower than the number of malpractice events – even when spurious claims are counted with legitimate claims. This means it’s entirely possible to envision a system of malpractice reform that makes it easier to identify and discard frivolous claims, better serves the interests of patients, but still results in more overall malpractice claims against providers.
The DHHS’s report also contains scary-looking tables of “mega-awards”, including a $100 million dollar verdict in Mississippi. Outrageous – no dead baby is worth so much! Turns out it was 10 patients suing Jannsen Pharmaceutica and Johnson & Johnson over Propulsid’s side effects, and appelate court reduced the verdict (as often happens) and Mississippi Supreme Court reversed it entirely (which is not surprising). Cost to doctors: zero. Yes, some lawyers earned a lot of money, but they saved their clients tens of millions in the process.
One last thing: the DHHS is an executive branch agency and at the time the Bush administration was pushing tort reform. The only thing missing here are WMD, and sure enough – not six months after the DHHS report, the non-partisan Government Accountability Office (GAO) issued a report that threw cold water all over the DHHS’s claims. Neither the AHIP report nor the later PWC report cites that report. Nor do they cite a Congressional Budget Office report estimating the total costs associated with malpractice at only 2% of health care spending.
Just to summarize: Kevin is pointing to a PWC report citing its own numbers cooked for the insurance industry based on Bush administration DHHS estimates. If you buy those numbers, malpractice could be 10% of health care costs – but it’s probably closer to 2%. Either way, tort reform isn’t going to fix the problem.
[NB: I had to revise this post a bit, the same day I published it.]
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