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Sunday, October 10, 2010

"Changing the Malpractice System"

Uwe Reinhardt:

Changing the Malpractice System, by Uwe E. Reinhardt: In last week’s post, I argued that, aside from rationing ever-more health care through price and ability to pay, the structure of the health care system and our political process make it difficult, if not impossible, to lower the differential between the annual growth rates of national health spending and gross domestic product. We are thus destined to devote an ever-larger fraction of our G.D.P. to health care.
The post brought on a lively set of commentaries, among which was the observation that I overlooked the potential of “malpractice reform” as a way to curtail the growth of national health spending...
The current medical malpractice system is part of this nation’s general tort system, whose impact on the economy has led to a similar debate. Critics of the tort system have argued that it imposes an insidious “tort tax” estimated to be close to $10,000 for a family of four...
N. Gregory Mankiw ... in his role as chairman of the president’s Council of Economic Advisers, asserted in 2004 that “in 2002, tort costs amounted to more than $233 billion – over 2 percent of G.D.P.” Other researchers have concluded that “it is hard to find any evidence that increased tort costs have harmed the U.S. economy” and that “the evidence to justify such charges is remarkably weak and exaggerated.” One study, by W. Kip Viscusi and Michael J. Moore, concluded that the tort system actually increased research and development and product innovation.
And the economist Mark Thoma reminds us that studies focused solely on the cost of the tort system, in total abstraction from its many benefits, do not tell us “a whole lot about the net social value (or cost) of the tort system.”
Not surprisingly, the debate over the malpractice system mirrors these arguments. Much of that debate rests on anecdotal evidence and complaints by physicians... More rigorous exploration of the effect of our malpractice system on the economy ... yield a range of estimates among which one can pick and choose. While each such study can be questioned on methodological grounds, in their totality they convey a picture that was ably summarized in the latest survey of such studies by Michelle O. Mello and colleagues.
Asserting that “the medical liability system costs the nation more than $55 billion annually” in 2008 dollars,” they say: “This is less than some imaginative estimates put forward in the health care debate, and it represents a small fraction of total health spending. Yet in absolute dollars, the amount is not trivial.”
They add, ”Reforms that offer the prospect of reducing these costs have modest potential to exert downward pressure on overall health sending. Reforms of the health-care delivery system, such as alterations to the fee-for-service reimbursement system and the incentives it provides for overuse, probably provide greater opportunities for saving.”  ...
It may seem strange that anyone would consider $55 billion ... modest. But no one would suggest that any malpractice changes currently being considered would eliminate the entire $55 billion cost of the system.
Thus, it is reasonable to argue that the costs of the malpractice system are nontrivial, yet the expected reduction in overall health spending from changes to the malpractice system appears to be rather modest. Other recent studies have reached similar conclusions. ...

    Posted by on Sunday, October 10, 2010 at 01:00 AM in Economics, Health Care | Permalink  Comments (33)


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