Wednesday, April 14, 2010

More on malpractice

WSJ blog on a study that they say shows that fear of malpractice suits leads doctors to do more test, etc. They note that CBO looked at the savings that would amount from national application of a mix of tort reforms....a $54 Billion reduction in the deficit over 10 years, or around a 0.2% decrease in total health spending due to lower malpractice insurance premiums and a 0.3% decrease in total health spending that would result from reductions in defensive medicine and increases in tax receipts. The tax receipt increase ($13 Billion over 10 years of the $54 Billion deficit reduction that CBO projected) would occur because if health spending slows, then rate of growth of insurance premiums would slow, and wages would rise since employers view compensation in totality [meaning wages and benefits]). An increase in wages is taxable, while an increase in health insurance premiums paid by an employer is tax free income. You can stump your friends at the next cocktail party with that of the ways tort reform would reduce the deficit is via increased tax receipts.

The $54 Billions savings is substantial as compared to what CBO scored as expected 10 year deficit reduction for the health reform bill (~$138 Billion/10 years), but far lower than they estimates often used by proponents of tort of reform, in political discourse. Roughly speaking, add a zero if making a Republican stump speech....

It should be noted that the study on defensive medicine noted by the WSJ blog is based on a survey whereby doctors are asked about the non-medical reasons for doing a given test. They asked doctors** why they did things, and focused on non clincial reasons to order tests, here focused on cardiac catherization procedures. 24% said fear of malpractice was a non clinical reason to order a test, while 27% said belief their colleagues would order a test influenced them (a new take on peer pressure). 5 of the 598 doctors surveyed said they commonly or frequently ordered more cardiac cath procedures to increase 'financial stability' of their practice.

So, there are multiple explanations or motivations for what is termed defensive medicine. I have written that malpractice reform is needed, but as a step 1 toward a patient safety based system. However, more stringent malpractice reform is needed if we will substantially address the rate of health care cost inflation because any attempt to alter the practice of medicine to slow cost inflation will be met with the retort from docs 'what are malpractice?' From a policy stand point, we must do more because: (1) it will result in lots of savings (I suspect CBO is about right here; it is big or small depending on your perspective); (2) because it is a route to more comprehensive patient safety/quality improvements (most definitely); and (3) it will remove an easy cultural out for the medical profession when discussing payment rates and movement toward paying based on quality/value. Note that it is certain that there are both overpaid and underpaid doctors (across speciality, geography, and skill)....the aggregate effect on payment to doctors as class is ambiguous. The distributional effects would likely be huge. Most everyone will say they want to move toward pay being based on quality/value, but I suspect alot of the providers (docs, hospitals, health systems) either don't mean it, or don't understand what it would mean for the revenue.

**If you did a survey of professors, you would find out that we are smarter than you think we are, you should listen to us more, and we are very underpaid.

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