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Does Defensive Medicine Impact the Cost of Healthcare?

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By Paul Giancola

Healthcare in the United States costs at least two to three times as much as healthcare in other developed countries. One of the reasons usually given is defensive medicine – doctors who order unnecessary tests and procedures due to fear of being sued.  Some also argue that such treatments unnecessarily drive up the cost of care and expose patients to the risk of complications.  Surveys vary but a significant majority of physicians surveyed do report practicing some defensive medicine.  The reasons include: to avoid being named in a lawsuit, defensive medicine is the standard of care, patients demand that everything possible be done, fear of missing something, and peer pressure. By way of example, several recent studies showed that in stable patients with the same degree of coronary artery occlusion, stents yielded no benefit over noninvasive treatment, yet most cardiologists would recommend a stent. Common rationales were that they had heard of someone dying suddenly, they could better defend themselves in a lawsuit if the patient did get a stent and then died, and the stent would relieve patient anxiety.

The draft of the original Affordable Care Act (ACA) included several proposals for tort reform, but they were not enacted into law. After initially slowing the growth of healthcare spending by less than three percent in 2013, 2014 and 2015, spending again grew by five percent per year.  Estimates of the cost of defensive medicine per year cited by Medical Economics vary between $46 and $78 billon dollars and in some sources the estimate is as high as $300 billion dollars. This is about 3% of the nation’s $3.2 trillion in health spending.  As the ACA and Medicare transition from fee-for-service to value-based care payment, it is difficult to predict whether such measures will impact the practice of defensive medicine. The challenge is that physicians may be required to choose between mitigating the risk of a lawsuit or following evidence-based guidelines that encourage less testing and intervention.

There is conflicting data on whether perceived defensive medicine results in better patient outcomes, fewer errors, and fewer malpractice suits. However, a recent medical school study found that higher cost physicians had fewer malpractice cases, as did obstetricians with higher cesarean section rates.  The ultimate success of value-based payment systems in reducing the cost of potentially defensive tests and procedures may depend on whether a physician who has a bad patient outcome is protected from malpractice litigation by a “safe-harbor” if the physician followed approved evidence-based protocols.  Tom Price, the Secretary of Health and Human Services, and the Republican Congress have vowed to make “lawsuit abuse reform” part of any healthcare reform package, although it was not contained in the Paul Ryan repeal and replace bill.

The cost of healthcare over the last 10 years has continued to rise despite that fact that there has been a significant drop in malpractice claims and payments. At the same time, physicians are paying less for malpractice insurance (some specialties are at 2001 premium rates). This may be because there has been no reduction in the fear of lawsuits and the reasons given for defensive medicine cited above.  On the other hand, it may be that “defensive medicine” is truly exaggerated and not a significant factor in the cost of care, which many argue is driven by technology and Americans desire to leave no stone unturned when it comes to healthcare. Perhaps the ideal solution to the rising cost of care and  cost of defensive medicine is a combination of a value-based payment system with tort reform safe-harbor protection for those physicians who follow evidence-based protocols but have an adverse patient outcome. Time will tell.