Recently, I wrote a post regarding the inefficiency of the Medical Malpractice system. Both Brennan, Sox and Burstin (1996) and Studdert, Mello and Brennan (2004) found that not only were there many frivolous suits brought to court, but even more prevalent was the phenomenon that individuals who suffered negligent care did not sue (only 3% of those negligently injured sued).
Some of the same researchers have followed up their prior articles with more evidence regarding the problems of the malpractice system. In the New Englad Journal of Medicine, Studdert, et al. (2006) examine a random sample of 1452 closed malpractice claims from five liability insurers (a summary can be found in Forbes). Some interesting findings are:
- For only 3% of claims were there no verifiable medical injuries. For 37% of the claims, however, did not involve medical errors.
- Compensation seemed to be relatively fairly allocated. Seventy-two percent of claims not associated with errors and 84% of claims not associated with injuries received no compensation.
- Seventy-three percent of injuries which were due to iatrogenic injuries did receive some compensation.
- Claims involving errors accounted for 78 percent of total administrative costs.
- Fifty-six percent of the claims received compensation, at an average of $485,348 (median: $206,400) per paid claim.
I believe the major conclusion they find is the following:
In monetary terms, the system’s overhead costs are exorbitant. The combination of defense costs and standard contingency fees charged by plaintiffs’ attorneys (35 percent of the indemnity payment) brought the total costs of litigating the claims in our sample to 54 percent of the compensation paid to plaintiffs. The fact that nearly 80 percent of these administrative expenses were absorbed in the resolution of claims that involved harmful errors suggests that moves to combat frivolous litigation will have a limited effect on total costs. Substantial savings depend on reforms that improve the system’s efficiency in the handling of reasonable claims for compensation.
+ SOURCE: Studdert, Mello, Gawande, Gandhi, Kachalia, Yoon, Puopolo, and Brennan, (2006); “Claims, Errors, and Compensation Payments in Medical Malpractice Litigation,” New England Journal of Medicine, 354 (19), pp. 2024-33