Friday, March 19, 2010

Addendum to Healthcare: An Additional Solution

As was correctly pointed out to me, in my haste to publish my original rant about the cost of healthcare, I failed to address a major contributor to the overall rising cost of healthcare (in America, at least): The effect of malpractice suits. To be more fair to the doctors who render services to the ill and infirm (I may have come across too negatively in the original post), a significant portion of a doctor’s pay goes to pay for malpractice insurance.

On one hand, that cost is justifiable, and really practical, given that something MAY happen. Even if you never get in a car accident in your life, it’s still a good idea to have auto insurance just in case. The same is true for doctors; they may be the best at what they do, but they are still human and may at one time or another make some mistake.

On the other hand, the cost of that insurance is extremely high. This is not necessarily the fault of insurance companies (though they could sacrifice a small portion of the bottom line to help), but rather the ‘victims’ of physician errors who endure ‘pain and suffering’ as a result. These patients are the ones who recoup their lost wages due to incapacitation and the costs to remedy the situation, but then also take additional monies above and beyond those costs at a frivolous and exorbitant level.

There’s nothing wrong with getting back money that was lost, but just taking more because of the hassle involved is a bit much. In many simple civil suits (small claims), a judge will not award more money than what was reasonably made unavailable to a plaintiff. Just watch Judge Judy or The People’s Court and you’ll learn that almost immediately! However, for other cases such as malpractice suits, punitive damages for can be awarded, and that’s where it begins to affect the rest of us.

When a doctor gets sued for millions of dollars (and they lose), where do you suppose that money comes from? Doctors make a lot more than a lot of folks, but not necessarily that much, so that’s not all going to come out of their pocket. Instead, they enlist the help up insurance companies by buying up malpractice insurance up front. In order to be able to afford this insurance, physicians and hospitals will charge a little more for their services. That ends up costing us (or our own insurance) more in the end.

And if doctors don’t lose the suit? They still end up paying! According to a report (pdf) by the American Medical Association, while “more than 60 percent of liability claims against physicians are dropped, withdrawn or dismissed without payment,” it costs “an average of more than $22,000 to defend” that case. And while “physicians are found not negligent in over 90 percent of cases that actually go to trial … more than $110,000 per case is spent on defending those claims.” Wow. Hopefully a doctor facing these numbers personally is decent enough at their job so as to avoid doing this multiple times in a year (ever). So what’s to stop greedy, disgruntled patients from starting the litigation process? Not much, if they can find a lawyer willing to help them get that ball rolling.

Let’s go back for a second to when doctors end up being liable for whatever damage was done. If patient is out of work as a result of some shoddy medical care for a month and is therefore out of a few thousand dollars in pay. The doctor (malpractice insurance) will pay out a few thousand dollars. If this patient is also mentally distraught and decides they want additional punitive damages awarded, how much additional money will that be? According to one report, in 1999 the average payout for medical liability cases was around $1,000,000. Some states have set limits on how much money can be awarded for such a reason, but not all. As that average gets higher and higher, so do the insurance premiums physicians have to pay so the insurance companies will be able to afford it.

In California however, they seem to have gotten it right. In 1975, the Medical Injury Compensation Reform Act (MICRA) was enacted, which limited the total amount of non-monetary damages that can be awarded to $250,000 (1/4 the national average payout). Since then, California has stood out among other states as a leader in this kind of tort reform. According to the previously mentioned AMA report (pdf), the premiums paid by doctors for malpractice insurance increased more than 1,000% (that’s over 11x the original amount) nationwide in the 40 years from 1976 (the year after California’s reform) to 2007. That’s the national average, but in CA alone, the increase was less than 1/3 of that, or roughly 300% (4x original), during the same time frame. Keep in mind that the 1,000% increase also includes the very low California numbers, so if you take them out, the increase nationally is even higher. Remember, those increased costs for the doctors translate to increased costs for patients.

Real national healthcare reform could start just like it did nearly half a century ago in California, and we’d probably all be a lot better off as a result. If the federal government steps in and actually takes over the process, this cost will not be changed or reduced. People will still be able to sue for as much as they can squeeze out.

If anyone else has any good ideas or another point that I missed, please feel free to let me know!

Update: Just saw a commercial released by AHIP. Sound familiar?

4 comments:

  1. The problem is not injured patients suing Dr.s and hospitals. The problem is the entire Health Care System considers themselves God, and wants to be paid accordingly.

    The fact is that more people die each year of Dr. and Hospital related mistakes than ALL cancer patients put together. Dr.s don't need more rope, they need their leashes tightened to the fullest extent of the law. They have out lives in their hands. If they don't fear the punishment for their malpractice, then they will be more inclined to cut corners even more and make even more mistakes. They are only human.

    The only thing that will work would be to cap the amount that Dr.s, Hospitals, Pharmaceutical, Malpractice and Health Insurances can charge. If the lawsuit exceeds the insured amount then thats the price they pay for their neglegance. Its only fair.

    Before anyone says that if Dr.s don't get paid good enough then there won't be any is hogwash. Teachers don't get paid enough to teach our kids properly. Police and Fire Resue don't get paid enough to risk their lives to protect us. Our soldiers don't get paid enough to protect our country, yet there are still all of the above. Dr.s are no more special than any of the above mentioned professions and should not be put on a pedistal.
    In the end, do you want a Dr. that isn't afraid of making fatal mistakes working on you?

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  2. I actually quite agree with you on some of these points. My original post specifically states that I feel doctors are paid too much, especially when compared to other very important career fields.

    The reason for the litigation reform is that if one doctor does a half-ass job, then every other one gets to foot the bill. They are insured as a group, not just as individuals, just like many other forms of insurance. There may be some bad apples out there, but they can't ALL be bad, can they?

    If you think high prices will scare physicians into doing better, the AMA report I linked to in this post goes on to state (about half way down the first page) that instead of doing better, they just limit their services. How's that any better? Perhaps threat of criminal charges for negligence instead? That would cost tax money to put them away, but I see that (personally anyway) as a bigger fear.

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  3. In response to the following quote from your comment: "The reason for the litigation reform is that if one doctor does a half-ass job, then every other one gets to foot the bill. They are insured as a group, not just as individuals, just like many other forms of insurance. There may be some bad apples out there, but they can't ALL be bad, can they?"

    The fact is that we citizens pay a higher cost as a group for health, auto, house, and various other insurances as a result of a minimum number of idiots. We are paying for the mistakes of the Executive Bankers that ran the Savings and Loans to the ground. Is this fair?

    Its time to stop pampering the Dr.s and their "All Mighty" health care system. They are doing more damage as a whole than cancer is. I'd say this is a big problem. Its time to put them in their place as equals and not above us. Its time to stop making excuses for their choice of profession. If they aren't there to help those in need, as their profession demands, then they should find another line of business.
    This health care program that is being created by our government is going to put us on the same level as most third world countries when it comes to caring for our own. It will also bring our ecomomy to a screeching halt within the next 5 years due to the outrageous tax we will incure from its implemntation.
    I still say bring them down to our level, don't try to make us reach up to theirs... who is helping who here?

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  4. Again I have to agree with you. The healthcare plan being rolled out is not the best choice, nor is it one of the top choices, in part because of the cost as you point out, but also because I don't feel it will actually fix the problem. A government guarantee that the bill will be paid just means that those charging for their services may now charge more.

    Those increases may be within acceptable limits, but if the industry continues to push as a whole, then those limits will just be increased. Hopefully you've read the first piece of my healthcare tirade, in which I list some of the other causes. I spent additional time on this malpractice section simply because I missed it altogether the first time 'round.

    To me, the top issue really is the overall cost of not just the services, but also the tools, medicine, and other tangibles for which one is charged. A doctor will make some amount of money from the fees paid. Particularly at a hospital however, these fee also go to benefit a lot more than that. Administration/logistics costs, including administration salaries, get a piece of this pie, and this also has to be looked at. I don't necessarily want to defend or to vilify the individual physicians. Yes, perhaps they make more than is a fair amount, but they're not the only ones.

    I don't know if it's the next highest item for me, but drug companies also have a BIG influence on the cost of care. Take a look at how much is spent on advertising prescriptions each year. It doesn't matter how many times I see the ad, if I don't need the pill, I don't need the pill, so why spend money to push it on individual consumers? If the doctor thinks I need to take the pill, then (and hopefully only then) he'll prescribe it to me.

    My point is that I agree with you about physicians' pay. Maybe not to the same degree as you, which is where some of my defense comes in, but I do agree. The system needs a complete overhaul, but the process being pushed through is not the right option.

    I appreciate your opinion and welcome further discussion on the matter!

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