Health Care Costs and Financing

Over half of compensation for medical malpractice claims goes toward administrative expenses

Moves to curb frivolous medical malpractice lawsuits, such as limits on attorney's fees and caps on damages, will have a relatively limited effect on the caseload and costs of malpractice litigation, concludes a new study. The vast majority of resources go toward resolving and paying claims that have evidence of injury due to medical error or substandard care. For instance, the study found that only one-third of claims were without merit. Only one in four of these claims resulted in financial compensation compared with 73 percent of claims that involved injuries due to medical error.

The study was led by David M. Studdert, L.L.B., Sc.D., M.P.H., of the Harvard School of Public Health, and supported by the Agency for Healthcare Research and Quality (HS11886 and HS11285). Trained physicians reviewed a random sample of 1,452 closed medical malpractice claims from 5 liability insurers to determine whether a medical injury had occurred and, if so, whether it was due to medical error. They found that for 3 percent of the claims, there were no verifiable medical injuries, and 37 percent of claims did not involve medical errors.

The vast majority of expenditures went toward litigation over errors and payment for them. When close calls were excluded, claims without evidence of injury or error accounted for only 13 percent of total litigation costs. When the plaintiffs for these cases received compensation, payments averaged 60 percent of the amount paid for claims due to medical error ($313,205 vs. $521,560). For every dollar spent on compensation, 54 cents went to administrative expenses (including those involving lawyers, experts, and courts). Claims involving errors accounted for 78 percent of total administrative costs.

See "Claims, errors, and compensation payments in medical malpractice litigation," by Dr. Studdert, Michelle M. Mello, J.D., Ph.D., M.Phil., Atul A. Gawande, M.D., M.P.H., and others in the May 11, 2006, New England Journal of Medicine 354(19), pp. 2024-2033.

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