Are Doctors Selfish? The Defensive Medicine Paradox

Both doctors’ groups and medical malpractice lawyers are preening about a new study that shows that the cost of medical malpractice in the United States is 2.4% of annual health care spending.

Medical malpractice lawyers say the study shows that medical malpractice tort reform would have little impact on our health care costs. Doctors’ groups point to the fact that 2.4% equals $55.6 billion a year, a daunting number even in the post-TARP era when $500 billion is a mere half of a stimulus package.

But here is how the numbers break out:

• Indemnity payments: $5.72 billion, of which $3.15 billion represents payment for economic damages; $2.4 billion for noneconomic damages; and $170 million for punitive damages. This includes the attorneys’ fees of medical malpractice lawyers who represented the plaintiffs.
• Administrative expenses: $4.13 billion, which includes $1.09 billion in fees to defense attorneys; and $3.04 billion in overhead expenses. (Estimated fees to plaintiffs’ attorneys were $2 billion, but that amount is included in indemnity payments.)
• Defensive medicine costs: $45.59 billion, of which $38.79 billion was estimated as the cost of hospital services and $6.80 billion as physician services.

There is something incredible in these numbers that no one is talking about. The researchers said their estimate includes $45.59 billion in defensive medicine care where doctors prescribe treatment and tests that may harm or expose the patient to risks because they want to avoid medical malpractice lawsuits. So health care providers spend $45 billion in additional costs (from which they often profit) to protect themselves from $6 billion in risk? If I hired a team of lawyers to oversee everything, our law firm does to make sure we are not committing legal malpractice and then complained about the cost…this analogy is not working. Let me try another: imagine hand grenade manufacturers swatting flies with hand grenades and then complaining about the rising cost of hand grenades. (That does not entirely work either, but at least it is closer. Because somehow you have to add that flies landing is actually harm that is fully insured. But you get the point without my metaphors.) Don’t these doctors’ groups feel a little odd parading this around? And why is no one pointing this out? This is right up there with Stonehenge on my list of great mysteries.

Another point I alluded to above that also gets little airtime is the fact that defensive medicine is a moneymaker for health care providers. There are rich financial incentives for providing a little extra care.

But I don’t think doctors practice defensive medicine to make extra money or because of the threat of medical malpractice. I think they practice defensive medicine because they want to go the extra mile to make sure they don’t screw up. No one wants to screw up. Lawyers practice “defensive law” all the time, doing things to eliminate risks are beyond unlikely to the point of doing things that really make little sense from a cost-benefit analysis. (Big defense law firms do this to the tenth power. They have teams of people working on issues that are never even going to see the light of day at trial.) Doctors have this same “I don’t want to screw up” gene that lawyers have with the ultimate added kicker: someone’s physical health is on the line.

There is great irony in the argument between medical malpractice lawyers and doctors on why doctors practice defensive medicine. Medical malpractice lawyers say doctors are good people who practice defensive medicine because they love and care about their patients, while doctors argue that doctors would spend 10 times the cost of the risk and subject their patients to tests they know are unnecessary and harmful just to save their own (insured) skin. Doctors are saying we should pass laws to protect people from selfish doctors. But I just don’t think we have that many selfish doctors.

There Is Defensive Medicine But…

According to Harvard University economist Amitabh Chandra, annual jury awards and legal settlements involving doctors amount to $3.6 billion, a drop in the bucket in a country that spends $2.3 trillion annually on health care.

Medical malpractice reform advocates claim that this does not account for defensive medicine. They rely in part on 2005 JAMA study that found that over 90 percent of doctors admit to practicing defensive medicine. President Obama’s speech to the AMA last week led them to believe that he agreed that we need to “scale back the excessive defensive medicine.”

Let us not pretend that there is no defensive medicine. But we have to take out of the medical malpractice equation three kinds of defensive medicine: (1) tests and evaluation that are good for the patients, (2) additional treatment that is motivated, not by fear of lawsuits, but by fear of harm to the patient, and (3) patient induced defensive medicine (i.e. patient seeks tests doctor would not recommend).
Regarding the defensive medicine that is good for the patient, the cost/benefit analysis weighs in favor of some tests not being taken. But there are a lot of tests and other care that carries minor risk, so while they might be ‘defensive,’ they are also an excellent idea. If defensive medicine includes cautious and careful, sign me up for some defensive medicine.

The latter question I think depends on how you think it motivates doctors. I think more doctors engage in defensive medicine because they are motivated by making sure they do not miss something with their patients, not because they fear lawsuits. The argument between medical malpractice lawyers and doctors is paradoxical: malpractice lawyers say doctors practice defensive medicine because they love and care about their patients, while doctors argue that doctors (presumably doctors other than the one making the argument) order- with cold blood – tests that they know are bad for a patient, just to save their own skin. To me, this is more ironic than any of the examples that Alanis Morissette gives in that song. (Note: this is not a high bar to clear. Morissette’s song “Ironic” does not adhere to the etymological definition of “ironic” unless it is modified by the word “cosmic.”)

My view has always been that it takes an immoral person to order medical care they think will, on balance, hurt a patient, just to save themselves from a malpractice lawsuit for which the vast majority of doctors have medical insurance. The vast majority of doctors—including those correctly accused of medical malpractice—are good people who will pick their patients over their own liability risk that malpractice insurance covers.