Malpractice Defense Costs Are Real

Whenever I post about the malpractice system, I try to make it clear that while I don’t consider it to be the cause, nor the cure, for the problems in our health care system, that doesn’t mean that the system isn’t broken in many ways. Nuisance cases do exist; cases that have real merit never see the light of day. One additional side effect of portraying the malpractice system as the boogeyman of the entire system is that we lose sight of the fact that it really does impact physicians. Take defense costs.

There’s a new paper in the Journal of Law, Medicine, and Ethics by yours truly and co-authors that looks at this in detail:

The objective of this study was to take a closer look at defense-related expenses for medical malpractice cases over time. We conducted a retrospective review of medical malpractice claims reported to the Physician Insurers Association of America’s Data Sharing Project with a closing date between January 1, 1985 and December 31, 2008. On average a medical malpractice claim costs more than $27,000 to defend. Claims that go to trial are much more costly to defend than are those that are dropped, withdrawn, or dismissed.

However, since the overwhelming majority of claims are dropped, withdrawn, or dismissed, the total amount spent to defend them surpasses that spent on claims that go to trial. Defense attorney expenses account for the majority of defense-related expenses (74%), while expert witness expenses and other expenses split the remaining 26%. A strong association was also found between the average indemnity payment and the amount it costs to defend individual claims by specialty. Our study found that defense-related expenses for medical malpractice claims are not an insignificant cost. As state and federal governments debate how to repair the malpractice system, addressing the high cost of defending claims should not be ignored.

There are some high points that I’d like to hit. The first is what happens to claims that are filed:

Adjudication Status of Claims

The first thing to note is that the majority of claims are dropped, withdrawn, or dismissed. Some look at this and say that it speaks to the fact that so many cases are “nuisances”. Others look at it and feel reassured. Most cases never really go anywhere. Another thing to note is that very, very few cases are won by plaintiff verdict. So very, very few cases wind up with big trial payouts. Focusing on these as a means to change the whole system (tort reform) doesn’t always make a whole lot of sense.

But defending cases is not cheap. Estimates put the costs of the “system” at about $5 billion. And all types of cases cost money to defend:

Average Defense Expenses by Adjudication Status and Year

Not surprisingly, cases which go to court cost more. But even those cases which are dropped, withdrawn, or dismissed now average about $25,000 each to defend. Since they comprise such a large percentage of all claims, the expenses to defend these cases total more than one third of all defense costs.

Those costs may not seem like a lot when we talk about the $2.5 trillion we spend on health care each year. But that’s the point I’m often trying to make. Malpractice costs aren’t “real” to the country, but they are very real to physicians and malpractice lawyers. Those defense costs result in increased premiums, and they’re going up. That’s totally worth talking about.

Aaron E. Carroll, MD, MS is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine, as well as the director of the Center for Health Policy and Professionalism Research. Carroll’s work has been featured in The New York Times, USA Today, The Los Angeles Times, Newsweek, and many other national publications. He blogs at The Incidental Economist, where this post was originally published.

11 replies »

  1. Perhaps the absence of “MD” after one’s name demonstrates, more than anything else, the ability to approach the issue based upon facts and logic as opposed to emotion. Not that you can’t do both – consider, for example, Dr. Carroll.

  2. That sounds great until you realize that things don’t actually work that way in Canada, if you tried to collect $25,000 from the average person who brings a marginal malpractice case you would likely increase your losses by whatever you spend trying to wring blood from a stone, and turnabout is fair play – plaintiffs lawyers will be entitled to have their fees paid on top of the award of damages rather than out of the award or settlement.

    Studies indicate that the principal reason that marginal cases are filed is that until they sue, plaintiffs and their lawyers often don’t have access to the information necessary to evaluate a claim. Plaintiffs’ lawyers have no interest in pursuing claims that won’t result in substantial recovery – their costs are as high or higher than defense costs, and they get paid out of the settlement or verdict.

  3. That’s a relief. The last thing I want to be (or to appear being) is insensitive to the crap that practicing physicians go through, thanks the noxious oversimplifications of the oversimple. I am well aware of the nonsense that shows up in response to the usually rich, thoughtful content on this blog – and I should have recognized your comment for the immunization (or topical anesthesia) it was!

  4. hang out for awhile, you’ll be surprised where a thread might travel. Trust me, we have had tort “discussions” before, and those who have their “perspective” will voice it, depending on who argues otherwise first.

    And I will stick to my guess, 5/6 who will take a tart perspective that there are no real legal concerns for physicians never have put a stethoscope in their ears, or even drawn blood.

    Yet, their expertise is to put those of us with an MD after our names out to pasture. Hey, if I am wrong, then I will be happy.

  5. I do not know who or what you are talking about, because neither the author, nor the three of us who have commented on this blog have “dismiss[ed] concerns of malpractice liability.”

  6. Can’t wait to read who else will dismiss the concerns of malpractice liability.

    Care to guess the percentage who do NOT have MD after their names?

    I’ll start: more than 85% !!!

  7. Good job of “scaling” the direct costs of med-mal. Yes, these costs are not all that large to the overall system (contrary to the beliefs of people with few other ideas about systemic “reform”); but these costs obviously do matter to physicians, as you point out. For an OB/GYN practice, the premiums are roughly 2X the physicians comp costs – no small expense, and a huge revenue pressure on the practice.

    While we’re talking about OBs…the real cost of med-mal to the broader system is the volume and breadth of defensive medicine, inspired by the dread and fear of lawsuits. In obstetrics, “defensive medicine” is not just assumed, but actively evoked as part of a normative explanation for medical decisions. I have heard the phrase “we have to do this to cover ourselves legally” uttered to patients with such frequency, it has gone from appallingly crass, to admirably candid, to nearly superfluous.

    Dr. Val is headed in the right direction: true med-mal reform requires process reform (and loser pays is a good start). The melodrama of a jury trial is the real motivation for people to settle. As anyone who has ever had the pleasure of litigation will tell you, its outcomes have more to do with a gothic mix of technical arcana and emotion than anything resembling fairness or truth. And that is before parading dead or disabled children and devastated families in front of juries without medical training.

    True process reform would take med-mal out of this tormented realm, and hand it over to adjudication via medical boards – for examination of the medical facts by true “peers” who can look past the emotion of dead or diabled patients – and make informed judgments of mal-practice or simply mal-outcomes. This would also allow truly meritorious cases – the ones that don’t promise huge payoffs, and are thus ignored by plaintiffs’ attorneys – to get the airing they deserve.

  8. “On average a medical malpractice claim costs more than $27,000 to defend.”

    Are there data on the monetary distribution of settlements? What impact might a “loser pays” tort system have on settlements? (and dropped/withdrawn?)

    It seems to me that, more broadly, a lot of lawsuits are really intended to coerce settlements.

    Nothing Personal, Just Business.

  9. We have to move towards the Canadian way of doing things: 1) if a case is found to be frivolous, the plaintiff pays all costs 2) judges (not juries) set pay out amounts on judgments. These two changes would probably reduce the direct costs of the entire US med/mal system by 80%.