Study: Malpractice Payouts Not to Blame for High Health Care Costs

The U.S. News & World Report reported in May 2013 that health care costs show no sign of slowing down. The Milliman Medical Index (MMI), a health care consultancy, notes that this year’s expenses for a typical family are up 6.5 percent over 2012, resulting in slightly more than $45/month in higher monthly premiums and out-of-pocket expenses.

Families are paying 8.4 percent more than last year toward insurance premiums, while employers are paying 6.1 percent more. Between 2010 and today, employees have seen yearly increases of 8-9 percent in their average monthly premium. Private-industry wages, meanwhile, have risen less than 2 percent.

In an attempt to get health care costs under control, several states have adopted tort reform, believing that high medical malpractice payouts are contributing significantly to higher premiums and costs in general. A study from Johns Hopkins researchers, however, suggests that such beliefs are based on erroneous thinking.

Researchers Examine Malpractice Data

For the study, researchers reviewed national medical malpractice claims using the National Practitioner Data Bank, an electronic repository of all malpractice settlements or judgments since 1986. They looked at data from 2004 to 2010, which included payments made on behalf of individual providers, not hospitals or corporations.

Over that period, 77,621 claims were paid. Catastrophic claims (defined as payouts over $1 million) made up 7.9 percent of these, with a seven-year nationwide total of $9.8 billion. This figure represented 36.2 percent of the $27 billion worth of total claims paid over that period.

Results of Study

Results of the study showed the following:

  • Common allegations associated with catastrophic payouts included diagnosis
  • Diagnosis errors had twice the odds of a catastrophic payout compared with equipment or product-related errors.
  • Catastrophic payments (over $1 million) added up to roughly $1.4 billion a year, making up far less than one percent of national medical expenditures in the U.S.

Study leader Marty Markay, MD., M.P.H., an associate professor of surgery and health policy at the Johns Hopkins University School of Medicine, stated: “The notion that frivolous claims are routinely resulting in $100 million payouts is not true.”

Defensive Medicine

A recent report in the LA Times echoed these concerns, noting that consumer groups in California have recently unveiled a ballot initiative that would relax the $250,000 malpractice cap considerably. A 2004 study of medical malpractice verdicts in the state compared awards before and after the cap took effect, and found that the law significantly exacerbated gender disparities in damage awards, with women’s median awards dropping to 59 percent of men’s awards. Caps also were found to have a greater impact on those most grievously hurt.