The Real Cost of Medmal

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In his column today, David Leonhardt makes a point about medical malpractice that doesn’t get enough attention:

The fear of lawsuits among doctors does seem to lead to a noticeable amount of wasteful treatment. Amitabh Chandra — a Harvard economist whose research is cited by both the American Medical Association and the trial lawyers’ association — says $60 billion a year, or about 3 percent of overall medical spending, is a reasonable upper-end estimate. If a new policy could eliminate close to that much waste without causing other problems, it would be a no-brainer.

At the same time, though, the current system appears to treat actual malpractice too lightly. Trials may get a lot of attention, but they are the exception. Far more common are errors that never lead to any action.

After reviewing thousands of patient records, medical researchers have estimated that only 2 to 3 percent of cases of medical negligence lead to a malpractice claim.

This deserves more attention.  We can argue about the costs of defensive medicine forever. But I’m willing to tentatively accept $60 billion as a conversation starter.  It’s never going to be possible to get a precise answer anyway since, as Leonhardt says later, virtually every incentive in our medical system is to do more.  Trying to isolate and quantify the blame for each particular unnecessary test just isn’t possible.

Still, $60 billion is a reasonable enough guess, and trying to reduce that cost is, as Leonhardt says, a no-brainer.  Unfortunately, the real problem with our medical malpractice system isn’t that it costs too much.  The real problem is that it’s a lottery.  Some people get money they don’t deserve because it’s cheaper to settle with them even if their claims are frivolous.  But far more people who are victims of genuine malpractice never sue and never get a dime.  A genuinely fair reform, one that cut frivolous malpractice suits but also did a better job of compensating everyone who was genuinely injured, would almost certainly end up costing us more, not less.

Here’s a little-known fact that helps to make this clearer.  If you’re injured in a hospital, how do you know if you’re the victim of malpractice?  After all, not every surgery has a positive outcome.  If yours didn’t work out, that doesn’t mean the doctor was negligent.

The answer is: you don’t.  Unless you sue.  Most hospitals refuse to release their internal records unless you sue them and force disclosure via discovery or a subpoena.  This means two things.  First, lots of suits that look frivolous (because they’re dropped quickly) aren’t.  They were merely attempts to see the actual records of a case.  If there were an easier way to do that, the suit would never have been filed in the first place.

Second, despite our famously litigous nature, suing is a lot of work.  Most people don’t want to do it just on the chance that there might have been some malpractice.  And most people don’t.  Which means that lots of cases of malpractice are never discovered.

We could fix this pretty easily by making it much easier for patients to see the records of their own cases.  If we did, that would cut down on “frivolous” lawsuits and it would increase the number of justified lawsuits.  That would be fairer for everyone, but it probably wouldn’t cut medical malpractice costs.  It would increase them.  That’s why the medmal warriors never talk about this.  They like the idea of cutting back on frivolous suits, but they’re much less keen on admitting that there’s also a lot of genuine malpractive that goes completely unnoticed.

Even if we eliminated medmal suits entirely, the cost savings would be pretty modest.  Genuine reform, on the other hand, would likely cost us money.  That’s why you never hear much about it.

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