A fraction of malpractice lawsuits result in indemnity payouts.
The U.S. health system is pretty unique in many respects, and our love—hate relationship with medical malpractice is more unique than most amongst civilized nations. Physicians throughout the country pay large sums, depending on their specialty, to insure what is pretty inevitable—that some patient, at some time, will sue their practices for some reason related to malpractice.
A recent article in the New England Journal of Medicine [http://www.nejm.org/doi/full/10.1056/NEJMsa1012370 demonstrated that by age 65 years, 71% of physicians who practice in specialties like neurosurgery or thoracic-cardiovascular surgery will have faced at least one malpractice suit. Neurosurgeons face a 19.1% probability that they will be sued each year. In comparison, psychiatrists, pediatricians, and family physicians face no more than 5% risk of malpractice suits each year. Over the past 15 years, obstetricians/gynecologists have been in the news perhaps most often, because of the high threat of malpractice forcing some insurers in Florida, for example, to stop selling malpractice policies in the state. Indeed, of the nonsurgical specialties, Ob/Gyn ranks number 2 (behind gastroenterology) in terms of annual malpractice rates, at over 11% per year.
Whereas many suits are brought, a fraction result in indemnity payouts. The average annual risk of a malpractice claim against any physician is 7.4%, according to these authors from Harvard University, RAND Corporation, the University of Southern California, and Massachusetts General Hospital; the average risk of a claim leading to payment is 1.6%. The mean payout is $274,887 in these cases.
What are the cost implications in the healthcare system? It is hard to tell. Medical tort reform has been on the discussion table for 25 years, yet the federal legislatures, with a high proportion of attorneys serving as representatives and as senators, has been unable to bring any meaningful proposals into health reform legislation. State capitals have taken action, like Texas and California, by instituting rigid caps on punitive damages (to $250,000), but the health costs in these states have risen just as quickly as in states without damage caps.
Concerns do exist over how medical malpractice influences costs in other ways. For instance, the use of unnecessary, duplicative testing has been blamed on worries over malpractice—i.e., “defensive medicine.” Consider the patient who enters the emergency room (ER) complaining of severe head pain: The ER physician believes strongly that based on the patient’s history and medications, an acute migraine attack is the likely cause. However, he or she prescribes a computed tomography scan to be absolutely sure a more insidious problem is not the cause. The only problem is that by some studies, the practice of defensive medicine—though wasteful—is not all that prevalent.
The real, built-in cost of malpractice is in physician overhead. For the clinician, malpractice insurance is a cost of doing business. A malpractice claim is for some, an unenviable rite of passage into the business of medicine. In specialties with relatively high malpractice rates, it drives up the price that physicians and surgeons need to charge to survive. This can make quite an impact on doctors’ minds when they negotiate their network contracts with health plans.