Annual cost of medical liability in US is $56bn, study estimates

The costs associated with medical liability—including legal costs and payouts associated with medical malpractice cases, malpractice insurance, and the practice of defensive medicine—total $55.6bn (£36.2bn; €43.6bn) a year or 2.4% of annual healthcare spending in the United States, concludes a study aimed at estimating the direct and indirect costs of protecting against medical negligence.
The study analysed the various components of the medical liability system, including payments made by malpractice plaintiffs, the costs associated with defensive medicine, administrative costs, such as lawyers’ fees, and the costs of working time lost by clinicians associated with malpractice suits.
The results showed that most of the cost, an estimated $45.6bn, was due to defensive medicine, including tests or treatments carried out largely to avoid potential lawsuits (Health Affairs, doi:10.1377/hlthaff.2009.0807).
Michelle Mello, a professor of law and public health at the Harvard School of Public Health, Boston, and the study’s lead author, said, “Based on data from New York we believe that only about 2% of patients injured by [medical] negligence file a claim. We would like to see that number higher. Countries that have an easier filing process have a rate of about 10%, which is still low.
“We don’t have any reason to believe that patient safety is a whole lot better in other systems than it is in the US or that the level of negligence is lower.”
However, how different countries deal with medical negligence varies tremendously, she pointed out. “The payouts in those countries [with lower administrative barriers to filing claims of harm] are much lower—often capped at around $1m.”
These countries tend to have more extensive health and social welfare programmes that cover the cost of remedial medical care and compensate for lost income, she said, suggesting that this raises a different set of challenges in accounting for the true cost of medical negligence.
More than $4bn, or about 55% of medical malpractice insurance premiums in the US, are spent on administrative costs and litigation. “If we could figure out ways to encourage more rapid resolution of incidents we could avoid a lot of those costs,” Professor Mello said. She noted that countries that compensate a larger proportion of patients who have experienced medical harm have administrative costs of 10-14% of insurance premiums.
She believes that insurance and tort reform that encourages early resolution of claims might “whittle down” administrative costs, resulting in more money going to injured patients and less to trial lawyers.
Reform of health care itself is “murkier,” Professor Mello said. One component might be “a ‘safe harbour’ for compliance with practice guidelines,” she said. “If we want doctors to practise less defensively, let’s agree on what represents good medicine; and if you comply with it you will have a defence in a malpractice lawsuit.”
She concluded: “Most traditional reform approaches don’t seem to be working and aren’t very promising.” However, she is more encouraged by a number of more innovative federal demonstration projects that are attempting to “give doctors greater certainty around standards of care, that provide mechanisms for resolving the incidence of medical injury without recourse to litigation, and that provide more streamlined processes of claiming.”

Notes Cite this as: BMJ 2010;341:c4905

**Published in BMJ