Malpractice Liability Costs U.S. $55.6 Billion a Year

September 8, 2010
Terri Cullen

Medical malpractice liability costs the U.S. healthcare system $55.6 billion a year, according to a new study. The bulk of the cost comes from "defensive medicine," such as running unnecessary tests and prescribing treatments to avoid future litigation.

A new study by the Harvard School of Public Health found that medical malpractice liability costs the U.S. healthcare system $55.6 billion a year, the bulk of it in so-called defensive medicine, such as running unnecessary tests and prescribing treatments to avoid future litigation.

These costs make up an estimated 2.4 percent of the total amount the U.S. spends on healthcare each year, according to the study, published in the policy journal Health Affairs. According to a 2008 study, defensive medicine costs alone total an estimated $45.6 billion.

"We cannot debate the potential for medical liability reform to bring down health care costs in any meaningful way without realistic cost estimates," Mello said in a statement.

A number of surveys have attempted to glean the cost of defensive medicine. One recent study published in the Archives of Internal Medicine estimated that as much as $60 billion is being spent each year, due to worries about malpractice suits.

Physicians have argued that malpractice reform must be part of the overall approach to reducing healthcare costs. The Congressional Budget Office recently concluded that implementing a package of five malpractice reforms would reduce national health spending by 0.5 percent, or roughly $11 billion, according to the Harvard study.

Because state insurance departments typically regulate malpractice insurance rates, state tort reforms can affect the cost and patient compensation funds may influence the total premium. And depending on a physician’s specialty, insurance premium costs can be staggering. For example, obstetricians in Florida and Connecticut paid premiums of between $125,000 and $200,000 a year, according to a 2009 survey by rate-tracking publication Medical Liability Monitor.

Still, the Harvard study argued that tort reform, including caps on damages paid out in malpractice lawsuits, isn’t likely to significantly reduce overall healthcare spending. Total malpractice indemnity payments were $5.72 billion a year in 2008, or about $5 billion in actual damages and less than $2 million in punitive damages, the study found.

In some states tort reform has been shown to lower the cost of insurance. Rates on malpractice insurance premiums in Texas declined in 2009, continuing a trend that began after the state introduced tort reform legislation in 2003 that limited non-economic damages to $750,000. State voters also approved a constitutional amendment that prohibits court challenges to the tort reform law. “Since the 2003 passage of Texas tort reforms, OB/GYN premiums have fallen almost $40,000 in the state’s more expensive territories,” according to Medical Liability Monitor’s 2009 survey.