How to reform the broken medical malpractice system.

How to fix health policy.
Nov. 9 2009 12:18 PM

Do We Have a Winner?

How to reform the broken medical malpractice system.

For many doctors, the malpractice case against a family physician named Daniel Merenstein epitomized how the broken medical liability system drives up costs. In 1999, Merenstein, then a resident, saw a 53-year-old man for a routine checkup and discussed with him the dubious value of a blood test to screen for prostate cancer. Since the test leads to many false positives and pointless treatments that can cause impotence and other harm, neither the American Cancer Society nor U.S. Public Health Service support its routine use. Presented with the data, the patient chose not to get the test.

When the man later developed prostate cancer, he sued Merenstein and the residency training program and ultimately won $1 million. According to the plaintiff's attorney, the doctor should have ignored the evidence-based national guidelines and not even have given the patient the choice to refuse the test.

Is there a better way for malpractice compensation to work?
Is there a better way for malpractice compensation to work?
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These kinds of anecdotes fuel a siege mentality among physicians. A study in the Annals of Family Medicine showed that after the verdict, nervous family practitioners nationwide began to order the unproven and potentially harmful test more frequently. In a survey last year, one-quarter of doctors reported that liability concerns affected their practice "a lot." For example, internists reported that 15 percent of their lab tests and hospital admissions were ordered for "defensive reasons." As a result, many authorities consider malpractice reform a key way to reduce medical costs. Using a controversial report from the National Bureau of Economic Research, the U.S. Department of Health and Human Services proclaimed in 2003 that that limiting malpractice damages could save the health system up to $126 billion annually.

Many doctors firmly believe there's an epidemic of frivolous malpractice suits. By limiting the money that patients can win (so-called "damage caps" on pain and suffering), goes the thinking, some bogus suits might go away. There may be some truth to that, since the number of malpractice suits in Texas reportedly dropped by half after damage caps were instituted in 2003 while the number of actual payments remained the same—implying the reform eliminated almost half of the lawsuits without merit. In early October, the Congressional Budget Office gave the nod to damage caps and estimated they'd save tens of billions of dollars.

But there's a major problem with seeing malpractice reform as a quest to reduce bogus lawsuits: Doctors make huge, negligent mistakes quite regularly—and they usually get away with it. In a landmark 1991 study, Harvard researchers reviewed the hospital records of tens of thousands of New Yorkers and estimated that almost 27,000 patients were harmed by negligent medical care—yet only 3,500 actually filed claims. The system, the report concluded, "rarely holds providers accountable for substandard care." In 2006, another Harvard study concluded that only about 15 percent of malpractice litigation costs involved claims without errors—and only 3 percent of all claims involved no patient injury. Further, about four in five claims were adjudicated properly. In 2006, a study in Health Affairs concluded there was no crisis in doctors' malpractice costs, since inflation-adjusted premiums were lower in 2000 than in 1986; another study last year found most doctors in Massachusetts (declared a "crisis state" by the American Medical Association) paid lower premiums in 2005 than in 1990.

And while doctors hate to admit it, lawsuits can save lives. Motivated in part by liability suits, anesthesiologists dropped the risk of death in surgery from one in 5,000 to one in 250,000 over two decades, and their premiums have dropped from being the highest among doctors to some of the lowest. At the hospital where I trained in pediatric cardiology, a publicized malpractice case in which a child died led quickly to critical improvements in patient safety throughout the hospital.

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