Ask a physician if malpractice premiums affect the cost of health care and you will not only get an affirmative answer but probably an impassioned lecture. Many doctors place the cost of malpractice coverage and defensive medicine at 10%.
But, based on more recent empirical data, the costs involved may be far less. And tort reform, as the holy grail of health care reform, may be vastly overstated. “Jackpot justice” as it is often referred to when discussing large jury awards and frivolous law suits, may actually be contributing less than 1% to the rising cost of health care.
First of all, a very small percentage of malpractice suits result in any payment at all. And in states that actually report such statistics, the average jury award in malpractice cases has actually been going down. In Missouri, in 2005, the average malpractice award was $253,888. In 2008 the average was $202,612 a decline of over 20%! Yet in Missouri health care insurance premiums and per capita health care spending have continued to rise.
It is likely that other factors such as an increasing cost of medical technology and a precipitous drop in investment income for insurance companies may be playing much larger roles. In fact, malpractice costs probably represent less than 2% of the $2.2 trillion in health care costs in this country. The Congressional Budget Office (CBO) recently estimated that “even a reduction of 25 percent to 30 percent in malpractice costs would lower health-care costs by only about 0.4 percent to 0.5 percent.”
States are beginning to understand that tort reform does affect the cost and availability of health care in their states…even if the impact is not as great as once believed. And many are implementing caps on medical malpractice awards. But as in so many aspects of the health care reform debate, over-simplification and extrapolation are two statistical tools that can bend the facts to suit the user.
The CBO in the same study cited above found no significant difference in per-capita health-care spending between states with and without limits on tort liability, even when they took into account the larger costs of defensive medicine.
Mark Twain once pointed out that “there are lies, damned lies and statistics.” Something along those lines may be at work here.
