The Truth About Health Care Costs

Malpractice costs amounted to “less than 2 percent of overall health care spending. Thus, even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small.” [Congressional Budget Office, “Limiting Tort Liability for Medical Malpractice,” 1/08/04]

Even the Budget submitted by the Bush Administration did not cite savings from caps. Despite the Administration’s claims that severe caps on damages for victims will result in lower health care costs, the Bush-Cheney budget for 2005 does not include any healthcare savings associated with these caps. [Bush-Cheney FY2005 Budget]

Despite claims about “Defensive Medicine,” Americans are not getting the care they need. “Proponents of limiting malpractice liability have argued that much greater savings in health care costs would be possible through reductions in the practice of defensive medicine. However, some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians or by the positive (albeit small) benefits to patients. On the basis of existing studies and its own research, CBO believes that savings from reducing defensive medicine would be very small.” [Congressional Budget Office “Limiting Tort Liability for Malpractice,” 1/8/04]

Medical errors kill as many as 98,000 Americans every year and cost as much as $29 billion, according to the Institute of Medicine. Other research suggests that the human toll may be far higher, with preventable errors and negligence taking the lives of 195,000 people each year. [“To Err is Human: Building a Safer Health System,” Institute of Medicine, 2000; “Patient Safety in American Hospitals,” HealthGrades, July 2004, www.healthgrades.com]

78% of people believe the quality of health care has stayed the same or worsened over the past five years, and 55% say they are dissatisfied with the quality of their health care. [“National Survey on Consumers’ Experiences With Patient Safety and Quality Information”—The Kaiser Family Foundation/Agency for Healthcare Research and Quality/Harvard School of Public Health, November 2004]

High premiums are the direct result of bad insurance industry conduct. A coalition of public interest organizations found that malpractice premiums increase when investment values decrease. “Since 1975, the data shows that in constant dollars, per doctor written premiums—the amount of premiums that doctors have paid to insurers—have gyrated almost precisely with the insurer’s economic cycle, which is driven by such factors as insurer mismanagement and changing interest rates.” [Americans for Insurance Reform, 10/10/02]

Inflation and other insurance industry forces drove up doctors’ insurance premiums more than lawsuits, according to Weiss Ratings, Inc., a non-partisan, independent financial ratings company. These factors “continue to drive—med mal premiums up, evidently overwhelming any reduction in jury awards.” The factors include, among other things, 75 percent inflation in medical costs and dramatic declines in insurers’ investment income as the stock market collapsed. [Weiss Report, 6/3/03]

Updated January 31, 2005