The Staggering Costs of Defensive Medicine

The annual cost of defensive medicine, defined as doctors ordering tests or procedures primarily because they are afraid of malpractice liability, is estimated at US$45.6 billion, according to a new study.

Researchers at Harvard University (Boston, MA, USA) and the University of Melbourne (Australia) estimated the costs of the medical liability system as a potential way to reduce the rate of growth of health expenditures by reducing the practice of defensive medicine. The researchers analyzed various components of the medical liability system, including payments made to malpractice plaintiffs; defensive medicine costs; administrative costs, such as lawyer fees; and the costs of lost clinician work time. They found that the medical liability system's annual price tag includes $45.6 billion in defensive medicine costs, $5.7 billion in malpractice claims payments, and more than $4 billion in administrative and other expenses, reaching a total of $55.6 billion, or 2.4% of total annual health care spending in the United States.

Of this sum, defensive medicine was found to account for more than 80% of the total yearly cost of the medical liability system. This includes estimates of defensive medicine costs both for hospitals ($38.8 billion) and for physicians ($6.8 billion) calculated by looking at costs in high- and low-liability environments. The researchers explained that their analysis does not attempt to estimate social costs or benefits of the malpractice system, such as damage to physicians' reputations or any deterrent effect it may provide. The study was published in the September 2010 issue of Health Affairs.

"Medical liability costs have been in the bull's-eye of efforts to bend the health care cost curve down,” said lead author Michelle Mello, J.D., Ph.D., a professor of law and public health at Harvard University. "But we can't have a meaningful debate about the potential effects of liability reform without solid cost estimates. At nearly $56 billion per year, the medical liability system carries heavy costs, and there are good reasons to want to improve it. But we should be realistic about what liability reform can achieve in terms of health care cost control.”

In contrast, a 2007 study by the U.S. National Center for Policy Analysis (NCPA; Dallas, TX, USA) estimated that the annual cost of defensive medicine alone was between $100 billion and $178 billion in 2005, while a 2006 study by PriceWaterhouseCoopers (London, United Kingdom) reported that the cost of malpractice insurance and defensive medicine topped $200 billion.

Related Links:
Harvard University
University of Melbourne
U.S. National Center for Policy Analysis
PriceWaterhouseCoopers