Cost Control

Can capping malpractice awards really rein in health care costs?

Not so fast tort-reform fans-according to a legal and medical expert at Case Western Reserve University, there's no evidence that reducing a victim's compensation will put a lid on skyrocketing health care costs.

Maxwell Mehlman is speaking out in light of a bill introduced in Congress in January that would limit malpractice awards to $250,000. He acknowledges that past studies show caps on malpractice payments do reduce insurance premiums and overall health care spending in the short term. But Mehlman points out that one of those studies found that the reduction in spending was associated with a decline in the overall health of the population, and estimated in the long run, the additional spending on health care necessary to treat these sicker people would eat up any savings from the caps.

Mehlman also says that the malpractice system is not the main reason health care costs have been rising in the first place. "It turns out that the direct costs of the malpractice system appear to account for only a tiny percentage of the total costs of health care-less than 1 percent," he says, adding that "those who favor caps on damages and other changes in malpractice laws point to indirect costs, in particular, defensive medicine, as the main way that the malpractice system is driving up health care costs. But these indirect costs have proven much harder to calculate."

In fact, Mehlman points out that researchers at the Harvard School of Public Health published a study last fall in which they estimated that the money spent on defensive medicine added only about another 2 percent to health care spending. Moreover, the researchers pointed out, this figure doesn't take into account any improvement in patient outcomes attributable to defensive medicine. In other words, doctors may order extra tests to reduce the chances they will be sued for malpractice, but some of these tests may actually help patients and lower their health care costs in the long run.

Mehlman says that limiting malpractice awards assumes the current system overcompensates malpractice victims, when, in fact, it undercompensates them. "Most of them are not aware that they have suffered a malpractice injury and never assert a claim," he says.

Mehlman also points out that while malpractice payouts have increased over time, they have kept pace with the increased costs of medical care in general.

"There is no question that doctors would be happier if the malpractice system was less of a burden, and there may be better ways of compensating the victims of medical errors that should not have occurred. But what we know about the malpractice system does not tell us that reducing victims' compensation will save money," Mehlman concludes.