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Justinian Lane

Medical Malpractice Reform May Cost More Than It Saves

Now that the Democrats don’t have a filibuster-proof majority, medical malpractice reform is back on the table.  Many argue that if we enact some sort of malpractice reform, we’ll save money because doctors will be less likely to practice defensive medicine.  Defensive medicine means different things to different people, but in essence, it occurs when a doctor runs a test or performs a medical procedure out of fear of a malpractice lawsuit.  The most-often used example is that of a doctor who orders an MRI to rule out some rare injury.  The doctor doesn’t order the test because he or she really believes the patient has the injury, but instead because if the patient does have the injury and the test wasn’t run, the doctor could be sued for medical malpractice.  The argument goes something like this: If the doctor isn’t afraid of being sued, he or she won’t run that test.  The taxpayers (through Medicare/Medicaid) won’t pay for that test, so we all save money by enacting malpractice reform.

But there’s a serious flaw in that argument, and it’s called subrogation.  Assume that a doctor makes a medical error during a surgery, and that error necessitates a second surgery.  If the patient files a medical malpractice lawsuit and recovers any money, the insurer who paid for that second surgery will get reimbursed for its expenses.  That right of the insurer to be reimbursed is referred to as the right of subrogation.  If the patient doesn’t file a malpractice lawsuit, the insurer ends up footing the bill for the second surgery.  And if the insurer is Medicare or Medicaid, “the insurer” is actually the taxpayers.

The problem with the current debate over how much money malpractice reform may save is that it doesn’t take into account how much money the government recovers every year through malpractice lawsuits.  Considering that the cost of a second (or third) surgery is generally far more expensive than running an unnecessary test, it’s entirely possible that we’ll lose more money than we save.  If we’re going to justify medical malpractice reform on the ground that it will save us money, we cannot seriously evaluate that justification until we know exactly how much money we’re taking in through subrogation, and until we figure out how much of that money we’ll lose through enacting malpractice reform.

Is it too much to ask that if we’re going to make decisions based on numbers, we base the decision on all of the numbers?

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Posted at 5:23 PM, Feb 12, 2010 in
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Comments

I agree that result of successful tort reform efforts to make it more difficult for injured patients (or their survivors) to collect damages for malpractice simply shift costs from the malpracticing physicians and their insurers to the victims and their insurers.

However, calling these efforts "malpractice reform" rather than tort reform is an error. Malpractice reform would reduce malpractice itself.

We have a malpractice problem -- there is too much of it. The Institute of Medicine estimates there are 100,000 deaths a year from malpractice.

But there were only 3,613 malpractice payments for cases involving death in 2008 according to NPDB data. Thus fewer than one in 25 malpractice deaths result in a malpractice payment. If there is a tort problem it is really that too little malpractice is compensated.

The real problem isn't too many lawsuits; the real problem is too much malpractice.

Calling tort reform "malpractice reform" shifts attention away from the real problem -- malpractice itself.

Posted by: Robert Oshel | February 13, 2010 7:23 AM

Great points, Robert. And in the future I'll try not to fall into the trap of calling these proposed changes to the medical malpractice system a form of "malpractice reform."

Is anyone out there in the medical community working towards reducing malpractice itself?

Posted by: Justinian Lane | February 13, 2010 11:24 PM

Today's medical professional liability system is too adversarial and too expensive. There are alternatives. More at
http://www.healthcaretownhall.com/?p=2127

Posted by: Jeremy Engdahl-Johnson | February 15, 2010 11:51 AM

I agree that parts of our tort system are too expensive, but I don't see any reason to fundamentally change how it operates. Why should doctors not have to take financial responsibility when they make mistakes?

Posted by: Justinian Lane | February 16, 2010 12:30 PM