Do lawsuits drive health costs?

First Posted: 12/30/2014

In diagnosing medical costs, malpractice insurance often presents as a rampaging rhino trampling care while gouging wallets. But some argue it serves as little more than a bogus bogeyman under the bed, a fear evoked by many but, once light shines, seen by none.

The American Medical Association estimated that some $200 billion could be saved annually by eliminating “defensive medicine,” the idea of ordering tests and procedures to prevent exposure to liability claims.

In 2010, an AMA survey reported that more than 60 percent of doctors over age 55 had been sued at least once, and that an average of 95 medical malpractice lawsuits had been filed for every 100 practicing physicians. While most of the lawsuits were dropped, the AMA has long contended such pervasive litigation hurts patient care and drives up costs.

The Insurance Journal predicted it will get worse as the Affordable Care Act helps millions of people get insurance, and as so-called “accountable care organizations” — networks of providers working together with a patient — eliminate the old practice of one doctor keeping tabs on a patient’s treatment.

There’s little denying health care costs have gone up, from $147 per capita in 1960 to $4,878 in 2000 and $8,402 in 2010. But some argue federal data prove malpractice insurance isn’t the culprit, at least not in the last decade. The National Practitioner’s Data Bank 2012 annual report noted that “between 2003 and 2012, the number of medical malpractice reports decreased 34 percent, declining steadily from 18,535 to 12,152.”

A report from the advocacy group Public Citizen contends the same data show “the inflation-adjusted total value of payments made on behalf of doctors in 2011 was the lowest on record,” and that medical malpractice payments were “just 0.12 percent of national health care costs” in 2011.

David Belk, a California physician who has become an outspoken critic of those who link high costs to malpractice, has gone so far as to post his malpractice insurance bill online, showing he paid $3,459 in 2013.

Belk, who practices internal medicine, concedes he works in a state that capped malpractice payouts, and that other states have substantially higher premium rates. In New York in 2013, for example, Belk would have paid anywhere from $7,185 for insurance in the Rochester area to $37,877 in Long Island.

But he argues that isn’t proof malpractice insurance drives up medical costs. He recounts an email from a surgeon “screaming, asking how I can possibly argue medical malpractice insurance doesn’t have an impact. I asked how much higher his bill is now than it was 20 years ago, and he admitted it hadn’t changed much since 1980.”

Belk also questions the argument that malpractice concerns prompt more defensive tests.

“More and more, insurance companies are scrutinizing every test you order,” he said, adding that most doctors are more concerned with the patient than liability. “I don’t think the threat of malpractice is more important than the threat of being wrong in a very important decision.”

Some limited studies suggest mixed results where malpractice, or tort, reform was enacted. A Rand Corp. study last year looked at three states where malpractice caps were created and determined it had no real impact on the number of tests ordered by emergency room doctors.

Attorneys, including Boston lawyer Jonathan Feigenbaum who serves as chairman of the American Bar Association Health & Disability Insurance Law Committee — though he didn’t comment on the ABA’s behalf — argue the contingency fee system filters frivolous lawsuits: Lawyers only get paid if they win, so they won’t take losing cases.

Feigenbaum conceded the high cost of litigation can discourage law firms from taking on smaller claim lawsuits, but said laws imposing caps on rewards can have a similar effect.

So if malpractice insurance and the fear of lawsuits isn’t behind the constant increases of health care costs, what is? American Health Insurance Plan, an insurance industry trade association that believes defensive medicine is part of the problem, cites a litany of other suspects: Higher prices for services, a system that pays for volume over value, adopting new technology without considering effectiveness, and a lack of transparency that prevents people from understanding how the market is, or isn’t, working.

Belk isn’t sure the blame can be easily set. He created a website and posted research on escalating cots because “that’s the question I set out to answer. And I have yet to answer that question.”

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