Defensive Medicine Adds $45 Billion to the Cost of Healthcare

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One of the biggest issues during the health care reform debate was the practice of so called “defensive medicine,” which the Wall Street Journal recently defined as “doctors ordering tests or procedures (or avoiding others) primarily because they’re afraid of malpractice liability.”

While health care reform legislation eventually passed, it largely avoided addressing the concern of many that defensive medicine was significantly affecting the financial stability of our health care system. Consequently, an analysis just published in Health Affairs confirms that concern.

The study, conducted by authors from Harvard University and the University of Melbourne, estimated that defensive medicine is costing America $45.6 billion annually (in 2008 dollars), accounting for more than 80% of the $55.6 billion total yearly cost of the medical liability system. And this number did not “attempt to estimate social costs or benefits of the malpractice system, such as damage to physicians’ reputations or any deterrent effect it may provide.”

According to Michelle Mello, one of the study authors and a professor of law and public health at the Harvard School of Public Health, the study include estimates of defensive medicine costs both for hospitals ($38.8 billion) and for physicians ($6.8 billion). These estimates were calculated by looking at costs in high- and low-liability environments, and the authors reasoned “that the difference represents spending due to fear of being sued — i.e. defensive medicine.”

Consequently, the analysis did have limitations because it only extrapolated hospital data from a study looking on cardiac care in Medicare patients, and those same patterns may not be generalized to other fields and patient populations. In addition, the study “doesn’t model what would happen to costs if certain measures to reduce liability costs were implemented, nor does it analyze whether any tests or procedures being ordered for defensive purposes help or harm patients.”

Regardless, the study found that “total costs of the medical liability system constitute about 2.4% of total health-care spending.” As a result, the authors noted that “in terms of bringing down overall health-care costs, changes such as alterations to the fee-for-service reimbursement systems and the incentives it provides likely offer bigger opportunities for savings” than tort reform.

In fact, the The Hill reported last week that Michael Burgess, the Republican chairman of the Congressional Healthcare Caucus, recognized from this research that “defensive medicine is a learned methodology” and that malpractice liability reform is not a “silver bullet” for rising costs.

Accordingly, with 2.4% of America’s total health-care spending being directed toward defensive medicine it is clear that Congress needs to address this issue, and failed to do so in the health care legislation passed last March. Some believe that the way to address defensive medicine is to target physician behavior. Other proposals have suggested health courts specializing in medical malpractice, and an apology program.

While some of these ideas are new, some have been around for several years, and were given little attention by Congress during health care reform negotiations. It seems like this 2.4% of health care spending (which is 17% of our GDP) is worth revisiting, especially considering doctors in many states believe tort reform has no effect on rising medical costs.  

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