The core problem of America’s health care

While not offering a relational rise in the quality of health care, it is widely reported that the U.S. spends more per person for individual health care than any other country.

The reason

Doctors are subjected to a high level of medical malpractice lawsuits. It translates to a cost of doing business which is then passed on to the patient’s insurance. In addition to driving up the cost of health care it reflects an initiative by doctors to perform a number of additional tests and procedures which can be later called upon during a legal defense in a court room.

Up to one third of patient health care expenses are attributed to these unnecessary procedures.

(Another one third of the cost is attributed to insurance company bureaucracy.)

To be clear, those procedures and tests are not required by the patient; they are required for the defense of the doctor.

The Remedy

Tort reform.

The U.S. spends a higher percentage of its gross domestic product on health care than any other nation in the industrialized world. Legal expenses contribute to the bill.

According to an estimate from consulting firm Towers Perrin, total spending on medical malpractice, including legal-defense costs and claims payments, was $30.41 billion in 2007. That is a significant figure, but it still amounts to a little more than 1% of total U.S. health-care spending, which the federal government estimates at $2.241 trillion for 2007.

Another source places the costs at an estimated 9 percent of total medical expenses. In order words, concerns over $30 billion in possible legal exposure costs the nation $230 billion a year in unnecessary expenditures.

Indirect costs that stem in part from medical professionals looking for legal protection play a far larger role in health-care spending, doctors and some analysts say. And they are one reason medical liability is bubbling as an issue as Congress reviews whether to pass a health-care overhaul. Sen. John Kerry, a Democrat, and Sen. Orrin Hatch, a Republican, both said earlier this week that Congress needs to find a way to eliminate frivolous malpractice cases.

“There are significant savings that can be achieved in our health-care systems if we have prudent medical malpractice reform in place,” said Sen. Hatch in a statement.

In a 2003 report that called for medical liability reform, the U.S. Department of Health and Human Services estimated that limits on malpractice awards could save between $70 billion and $126 billion a year. But that estimate was based on a study published in 1996 that analyzed data on elderly heart-disease patients from 1984 to 1990. That study, published in the Quarterly Journal of Economics, found that malpractice liability reforms lowered health costs by between 5% and 9%.

“Regardless of anyone’s numbers, no reasonable person would suggest the cost [of malpractice expenses] is insignificant,” says Darren McKinney, a spokesman for the American Tort Reform Association in Washington. “There is no reason in the world why we shouldn’t look to contain that cost.”

There are an estimated 47 million uninsured in America. It has been acknowledged there is a growing shortage of doctors. With the addition of millions of new patients to be added into a health care system, reducing “defensive medicine” and the associated time and resources can only help to bring additional efficiencies in both time and costs.

National Coalition of Health Care
Wall Street Journal