A study in the September issue of Health Affairs finds the cost of malpractice at approximately $55.6 billion a year, or 2.4 percent of annual healthcare spending.
"We cannot debate the potential for medical liability reform to bring down healthcare costs in any meaningful way without realistic cost estimates," said Michelle Mello, lead study author and professor of law and public health at the Harvard School of Public Health. "Some of the numbers bandied about in policy discussions were quite imaginative and we wanted a more defensible estimate."
In their study, Mello and colleagues at Harvard and Brigham and Women's Hospital in Boston 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.
"Physician and insurer groups like to collapse all conversations about cost growth in healthcare to malpractice reform, while their opponents trivialize the role of defensive medicine," said Amitabh Chandra, a study author and professor of public policy at Harvard's Kennedy School of Government. "Our study demonstrates that both these simplifications are wrong – the amount of defensive medicine is not trivial, but it's unlikely to be a source of significant savings."
Defensive medicine costs alone were estimated at $45.6 billion per year. The study did not assess social costs such as the cost to a physician's reputation and emotional costs for physicians being sued.
The study's authors said tort reforms, such as capping non-economic damages, may reduce liability costs but are likely to have little impact on overall healthcare spending. Other reform proposals, such as moving away from fee-for-service reimbursement, may have a greater effect. Expanded health insurance coverage under federal health reform may reduce medical liability costs if fewer people need to file claims to recoup out-of-pocket medical expenses incurred because of malpractice, they said.