Trendspotter: Data on Defensive Medicine Costs Don’t Tell the Whole Story

September 7, 2010

A new study by Harvard researchers finds that malpractice-related costs, including defensive medicine, account for a relatively small portion of total health spending. Even if meaningful tort reform were enacted, this paper and another study in the new issue of Health Affairs assert, doctors would cut back little on their defensive tests and treatments. Yet despite this quantitative evidence, the current liability system has a qualitative effect on medicine.

A new study by Harvard researchers finds that malpractice-related costs, including defensive medicine, account for a relatively small portion of total health spending. Even if meaningful tort reform were enacted, this paper and another study in the new issue of Health Affairs assert, doctors would cut back little on their defensive tests and treatments. Yet despite this quantitative evidence, the current liability system has a qualitative effect on medicine: It’s hard to convince physicians to be good stewards of healthcare resources and follow evidence-based medicine guidelines if they believe that doing so could make them more vulnerable to a malpractice suit.

For example, there’s evidence that PSA tests may not be in the best interests of some patients. The U.S. Preventive Services Task Force (USPSTF) recommends that men over 75 years old not be screened, and it says the evidence is insufficient to recommend PSA tests in younger men. A recently published, large-scale study found no long-term difference in mortality from prostate cancer among patients who received PSA tests and those who didn’t. Yet many primary-care doctors continue to order the PSA test anyway, rather than be accused of missing a diagnosis of advanced prostate cancer.

Would physicians act differently if following a guideline such as the USTPF’s on PSA tests would protect them in court? It would depend on the individual doctor and his or her patient. But it might change the nature of the conversation between them.

According to the Harvard study, malpractice-related costs totaled $55.6 billion, or 2.4 percent of national health spending, in 2008. Defensive medicine contributed $45.6 billion to that sum, the researchers said. Breaking that figure down further, they said that defensive medicine by hospitals cost $38.8 billion; physicians’ defensive tests and treatments added up to just $6.8 billion.

The rest of the malpractice-related expenses included payments made to malpractice plaintiffs; administrative costs, such as lawyers’ fees; and lost clinician time. Liability insurance premiums were not included because, the authors said, most of them were paid out in settlements and judgments, which are already accounted for in the total.

The Congressional Budget Office found in 2004 that malpractice costs-excluding defensive medicine-contributed less than two percent to the national healthcare budget. A Health and Human Services study based on the California experience found that the total cost was somewhere between five and nine percent of health spending. PriceWaterHouseCoopers estimated that the cost of malpractice insurance and defensive medicine added up to 10 percent of U.S. health costs. Unfortunately, none of the studies - including the most recent one - offer very robust data on the cost of defensive medicine.

Other Health Affairs papers, however, suggest that doctors’ defensive behavior is based largely on their perceptions. One study finds that if tort reform reduced premiums by 10 percent, the cost of defensive medicine would drop by only one percent. The researchers analyzed millions of CIGNA claims to reach their conclusion. Another paper based on interviews with physicians shows that, regardless of the relative malpractice risk in the state where a doctor practices, he or she is equally likely to practice defensive medicine. The researchers also find that that the probability did not vary with the degree of prepaid business that a physician had. So regardless of whether a doctor is in a predominantly fee for service practice or one that has a lot of HMO volume, that physician is just as likely to order extra tests defensively.

This has significant implications for healthcare reform, especially as the reimbursement model shifts from one based on volume to one based on quality and efficiency. Regardless of how science is enlisted in the service of “quality improvement” and cost control, physicians will tend to disregard it if the evidence points away from the standard of care in their communities. Because someday, they could be on the stand, and a plaintiff’s attorney could be asking them, “Did your medical decisions meet the standard of care?”

As with many other facets of healthcare, facts and figures often don’t tell the whole story when it comes to malpractice liability. Fear looms large in physicians’ minds, and that fear is very hard to measure.