Healthcare, The Reality

Suppose you were ill and went to your family doctor primary care physician. As part of the diagnosis, this doctor took a blood test and had you undergo a chest x-ray. Because of concerns about what he found, the doctor then sent you immediately to a specialist who you saw on the next day. So here's the question: do you think that the specialist needs to redo the blood test and x-ray or can she rely on the results of the previous day? If you practice medicine in the USA, the answer is that the specialist will have all the tests redone just so that her records will show that she covered all the bases. That means that the cost of the blood test and x-ray have to be paid twice, even though there is no difference between the two sets of tests. Indeed, the costs for the tests is paid twice even though there is no medical reason to do the tests twice. This is "defensive medicine", the practice of doctors to order extra medical tests or procedures in order to make their records reflect that they had done everything necessary to avoid any claim of malpractice in the future.

Defensive medicine is a national problem. According to surveys by Jackson Healthcare and Gallup, physicians estimate that defensive medicine practices cost the U.S. between $650 – $850 billion annually. Let's be super clear here; the estimate is that something like 4-6% of our GDP is spent each year on unnecessary medical tests and procedures. To put this into context, we are talking about approximately one-quarter of all the money spent in the USA each year for healthcare. Remember, no one is any healthier because of defensive medicine. The only difference is that doctors do better in malpractice lawsuits.

Some have theorized that not all of this defensive medicine is the result of fear of malpractice. A significant portion of the costs may also be the result of doctors who order the tests in order to increase revenue for their practice. There is no way yet to know the exact breakdown, but it does seem clear that the main reason for defensive medicine is the fear of malpractice lawsuits.

Suppose there were a way to greatly reduce the use of defensive medicine. Imagine what this could do. Right now, the USA spends substantially more on healthcare than any other country, but our results are not much better than the others. Indeed, compared to some countries, our results are not as good. The main reason for the extra cost is not better treatment; it is defensive medicine.

With all of the talk this week about Obamacare, it is important to remember that the president's plan did nothing to reduce the cost of medical care. Obama's plan tries to get more people insurance coverage; it does not try to lower the cost of healthcare. Oh, there is a part of the package that says that it will lower the level of payment to doctors and hospitals that provide services to Medicare patients, but that is unlikely to ever be implemented. A similar plan to cut reimbursements under Medicare was passed years ago, and each year since then Congress has delayed the implementation of that plan. Allowing the plan to go into effect would result in a large portion of the doctors refusing to see Medicare patients with a resulting uproar that no politician would be willing to withstand.

There are a number of plans out there to do away with the costs of defensive medicine. Most of them involve changes that give doctors greater cover in malpractice lawsuits. For example, one plan calls for adoption of keeping patient charts on computer systems that could be accessed by all doctors in a community. As test results come in, they would be entered into the computerize chart. After that, any doctor or hospital would be protected from any claim of malpractice if they relied upon a recent test rather than redoing that test. Just this change could save enormous costs. The Democrats, however, are against the change since it would hurt one of their main interest groups, the trial lawyers.

Another plan for dealing with defensive medicine costs is the adoption of medical arbitration for malpractice claims. Under this plan, claims would be decided by panels consisting of three people including at least one doctor rather than by juries as would be the case in court. In arbitration, there would be no punitive damages; anyone injured could only recover compensation for their actual injuries. Also, with the doctor on the panel, it would be much more likely that no lawyer could sell a jury on an essentially meritless claim in order to get big bucks from an insurance carrier (think John Edwards). Finally, legal fees in the arbitration would be capped at 15% of the total recovery. These changes would greatly reduce malpractice claims, and the hope is that doctors would cut back on defensive medicine as a result. Here, the Democrats are strongly opposed since the effect on the trials lawyers would be severe. America would prosper, but the lawyers would lose big.

Were both of these proposals to be implemented, it could be possible to cut between $200 and $300 billion from annual healthcare costs. This is an extraordinary change, but putting it into effect would require a Republican Congress and president. It has the major benefit as well of making American companies more competitive since they would have lower healthcare costs for their employees. In the long term, it would be a major boon for the American economy.