The Real Cost of Medical Care: Malpractice Has Nothing to Do With Rising Costs

Doctors and insurance companies perpetuate the belief that medical malpractice payouts cause healthcare costs to rise. Their rumor mill has been responsible for numerous petitions in the past decade to cap the amount of noneconomic damages that can be awarded to plaintiffs in such cases. Proponents of tort reform argue that implementing such caps will protect society against disastrous losses brought about by runaway verdicts. Such protection, they assert, will help bring down the cost of healthcare. Yet recent studies have proven that on the contrary, there is no correlation between malpractice payouts and healthcare costs.

Although caps don’t work for many reasons, one of their fundamental flaws is the inherent assumption that a one-size-fits-all approach to noneconomic damages can work1. In fact, this is the reason that many states which have implemented damages caps have later determined them to be unconstitutional. Since every case is inherently different and each plaintiff has a right to trial, each case must be tried individually under the judgment of a judge or jury. Damages caps undermine the authority of the jury or judge to deliberate such differences by limiting their power.

In the states that have passed damages caps, there has been no decrease in healthcare costs. If anything such costs have actually gone up. For instance Illinois passed damages caps once in 1995 and again in 2005, later repealing the laws after discovering that they were not only unconstitutional, but that they didn’t help reduce healthcare costs at all.

Unfortunately in the states where caps are implemented, it has become more difficult for victims of medical malpractice to find attorneys to defend them. Lawyers are less willing to risk years of litigation and thousands of dollars in expenses if there is no chance of a significant verdict or settlement. As a result, million-dollar malpractice cases have all but ceased in those states.

Johns Hopkins University recently released a study conclusively showing just how little extreme-malpractice payouts affect the healthcare system. At the worst, they are responsible for less than one percent of national medical expenses.

In a 1994 op-ed former health insurance lobbyist Frank Cornelius discussed his regret at advocating for a damage caps in Indiana in 1975. He found himself a victim of medical malpractice with inadequate compensation and realized just how injurious damages caps are for malpractice victims. He argued that “damage caps are arbitrary, wholly disregarding the nature of the injury and the pain experienced by the plaintiff. They make it harder to seek and recover compensation for medical injuries; extend unwarranted special protection to the medical industry; and remove the only effective deterrent to negligent medical care.”

So why has healthcare grown so expensive, if malpractice payouts aren’t the reason? The leader of the Hopkins study, Marty Makary, M.D., M.P.H., believes that the true cause is “defensive medicine,” a common medical practice of administering unnecessary tests and procedures in order to avoid the possibility of malpractice. According to the report these extra treatments are responsible for around $60 billion annually.

Yet according to doctor and medical researcher Atul Gawande’s 2009 editorial in The New Yorker, the role of defensive medicine in healthcare costs may just be another misconception. True, the discrepancies in healthcare cost are in a fact a result of costly overtreatments, but they don’t fall into the category of defensive procedures per se.

Dr. Gawande’s research centered on McAllen, Texas, one of the most costly cities for healthcare in the United States.  He found that McAllen used more treatments and performed more tests than almost any other city in the country. Yet unlike the Hopkins survey he found that these preventative treatments were not “defensive” steps because they weren’t even related to the potential for malpractice.

When Dr. Gawande interviewed the doctors in McAllen they defended their actions on the basis of defensive medicine, just as the Johns Hopkins study concluded. Yet in Texas there are damages caps which have caused large malpractice payouts to all but cease in the entire state. The most likely conclusion is that overtreatment was caused by doctors hoping to increase income. These extra procedures didn’t even benefit the McAllen patients and according to Dr. Gawande’s finding they “did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse.” Overtreating patients puts them at greater risk by exposing them to the basic risks and complications inevitable to medical science.

While the issue of how to decrease healthcare costs in the United States without diminishing the quality of care is complex and will brook years of debate, it seems clear that damages caps are a solution that has been tried and proven ineffectual. Not only are caps unrelated to cost, they actively deter malpractice cases, which are themselves a natural policer of healthcare quality. Attacking the efficacy of malpractice claims can only put victims at greater risk. We must accept that such restrictions on the judicial system are not only unhelpful but actually detrimental, and move on to test other answers.


1 Noneconomic damages are traditionally the only damages left primarily to the juries’ discretion since lost earnings and medical expenses are calculated mathematically.  In most states, juries are  presented with evidence as to the amount of pain and suffering as well as decreased quality of life that the victim has and will continue to suffer. Their verdict is usually subject to appellate review.

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