Defensive medicine isn’t so cut and dry

Amitabh Chandra and colleagues have an op-ed over at the WSJ talking about defensive medicine. I’ll let them set the stage:

Defensive medicine—the ordering of unnecessary tests and procedures to reduce the threat of malpractice litigation—has long been a lightning rod in the debate over health-care spending. Many physicians maintain that fear of lawsuits significantly affects the practice of medicine, and that reform of the malpractice system is crucial for containing costs.

On the other hand, several economic studies (including work by us) have found that states that have enacted malpractice reforms experienced a mere 2%-5% reduction in health-care spending compared to states that have not. This has led to a loose consensus among most economists and policy makers that defensive medicine is not an important contributor to U.S. health-care spending—and therefore that malpractice reform is not of much significance for containing costs.

At this point, I’m roughly in agreement with them. I’ve often talked about the fact that tort reform (ie capping damages) is not health care reform, and it’s not the magic bullet for containing health care costs. Chandra and colleagues seem to agree, citing some of the same studies I do. They offer a different solution, though:

One type of reform that has had some success in reducing defensive medicine is the adoption of national rather than local standards of medicine for juries to judge malpractice claims. The use of local standards of care drove large variation in tests and procedures across the many jurisdictions of the United States. In the 1960s and ’70s, however, the majority of states adopted national standards for judging malpractice. Michael Frakes of Cornell University found that this change has reduced variation in patterns of health care across states by 30% to 50%.

Going forward, physician associations concerned with malpractice reform might do far better by their membership if they focused on things such as “disclosure-and-offer programs.” Here providers voluntarily disclose adverse events to affected patients and, when appropriate, make offers of restitution prior to the filing of any lawsuit. These goal of these offers, like payments from no-fault compensation funds, is to reduce the frequency of claims and avoid costly litigation.

I don’t think this is a bad idea, and it’s likely worth a try. It might fix a lot what’s wrong in the malpractice system. I maintain it will still do little to prevent “defensive medicine”. I think a larger point is being missed.

I do not doubt that one of the reasons that physicians order extra tests, have extra visits, and do extra procedures is because they think it will somehow protect them from lawsuits. There’s almost no evidence that it actually works, but I still accept that many physicians believe it’s true. We have to be honest, though. There’s another reason that physicians do all of these things. They get paid more when they do them.

A lot of the time, when a doctor orders that extra test, or sees the patient that extra time, they (or the system) get paid more money. There’s an economic incentive. But who would want to admit this is true? So – perhaps – some of them justify it by coming up with another reason for ordering the test. It’s to protect them against lawsuits.

I’m not declaring that doctors are committing widespread and conscious fraud. I’m sure the vast majority of them believe that they are “forced” to practice defensive medicine to ward off a litigious society. At some point, though, we have to acknowledge that practicing defensive medicine is also quite lucrative. As long as that remains the case, then all the little fixes to make docs feel safer from lawsuits may have no impact on actual health care spending (which is what research seems to show).

The malpractice system is broken. I have said that many times. I think it needs to be fixed, to protect both patients and physicians. But it’s not the “cause” of our incredibly high health care spending. Economic incentives likely have much more to do with that than lawsuits.


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