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You are here: Home / Anderson On Health Insurance / Defensive medicine is 4% or 5%

Defensive medicine is 4% or 5%

by David Anderson|  July 23, 20188:48 am| 13 Comments

This post is in: Anderson On Health Insurance

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One of my Duke Margolis colleagues, the economist Michael Frakes in conjunction with Jonathan Gruber at MIT took advantage of a really interesting identification opportunity to estimate the impact of defensive medicine.  Their results are at NBER. 

A key question surrounding this debate, however, is just how large these costs really are.
Some have argued that defensive medicine is the major driver of excessive health care spending in the U.S. Former Congressman (and former Secretary of the Department of Health and Human Services) Tom Price suggested in 2010 that as much as 26 percent of all money spent on health care is attributable to this phenomenon.
Others have argued that, while it may exist, it has at most a small impact on spending.
The most important arbiter of this debate, the Congressional Budget Office, predicted in 2009 that a proposed aggressive package of liability reforms would lower medical costs by only 0.3% through reduced defensive medicine…
The structure of malpractice protections under the Military Health System (MHS) provides a novel opportunity to answer this policy relevant question. The MHS is a $50 billion program that provides insurance for all active duty military and their dependents. For those who seek care at Military Treatment Facilities (MTFs), this care is provided by government employees or contractors; for those who use purchased care outside of MTFs, the MHS pays for their costs through a contract with a private sector managed care plan.
Most importantly for our purposes, the MHS provides what is missing in previous studies: a true “treatment group” of patients who cannot sue for malpractice. Pursuant to a long-standing and highly controversial federal law, active-duty patients seeking
medical treatment from active duty physicians at military facilities have no recourse under the law—i.e., they can sue neither the physician nor the government—should they suffer harm as a result of negligent medical care.
Malpractice protections are afforded, however, to dependents and retirees treated at military facilities and to all patients—active-duty or not—that receive care from civilian facilities….
Our findings are striking. We consistently estimate that the liability-immunity treatment group—active duty patients treated on the base—receive less intensive health care. Our central estimate is that the intensity of medical care delivered during inpatient episodes measured in various ways—is roughly 4-5% lower for this treatment group.

When I saw this presented in seminar last year**, I updated my priors. This is a big deal. It is a rigorous study with good methods that provides a solid estimate of defensive medicine costing the system an order of magnitude more than than the cost of jury awards.

There are several major questions that have to be asked about this study.

  • Is the effect purely a rational choice cost-accounting exercise or is it more of a behavioral response?
  • What does the presence of liability caps do (this really is a sub-question of the first question)
  • If we move to a no liability system, how does society take care of people who are hurt by the medical system
  • How many more people are we willing to see get harmed by the medical system in a no liability system?
  • How do we screen out and get rid of the docs that repeatedly cause preventable harm without a liability system to flag them as potential trouble?

I have no good answers to any of these questions but this study prompts a these types of policy relevant questions because it gives a good estimate of an effect where the previous estimates ranged from almost nil to ridiculously huge.  I would love to see the behavioralists dig into the first question.  If this is a rational choice response to liability, then the policy solution of liability caps makes some sense while if it is primarily a non-financial response based on fear, then liability caps don’t make as much sense.

For those with NBER access, go read this paper, it is good!

 

 

** The Margolis Center runs a health policy seminar every other Friday.  That 90 minutes is the most amazing part of my job as I get to listen to really smart, passionate people talk about wicked awesome things that I don’t know much about.  I learn every seminar and my brain hurts by the end.

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13Comments

  1. 1.

    PST

    July 23, 2018 at 9:46 am

    Someone who covers the entire expected cost of his or her medical care by a combination of insurance premiums and out-of-pocket expenses might rationally decide that a 5 percent bump is worth it in exchange for extra cautious, defensive medicine. I’d be tempted myself. It all depends on whether the extra intensity improves patient outcomes. The authors — an A Team if ever there was one — conclude that it does not, but they are appropriately cautious about this conclusion and discuss reasons they might be wrong. I’ve been a malpractice defense lawyer for 30 years, and I sincerely believe that improvements in patient safety have been driven in part by liability costs. On the other hand, I also see the negative effects of defensive medicine. They are not merely financial. Unnecessary tests and treatment can be inconvenient, painful, and even risky. In any event, it is useful to have an estimate with data behind it of how much we pay for the extra caution.

  2. 2.

    MomSense

    July 23, 2018 at 10:08 am

    It’s so prohibitively expensive to bring medical malpractice suits and bad outcomes often fall within the standard of care. I’ve always felt the fear of malpractice suits driving up the cost of medicine is overblown.

  3. 3.

    p.a.

    July 23, 2018 at 10:23 am

    @MomSense: Federalism to the rescue: IIRC states who have moved to “control out-of-control” jury awards (conservative framing) have not seen statistically sig. improvements in medical cost/care vis other states (using unbiased studies). Too busy to search the tubes…

  4. 4.

    guachi

    July 23, 2018 at 10:24 am

    As an active duty member of the military, I find this fascinating as well as useful. I’ve got military friends all across the political spectrum and enough of them care about facts that this would actually be useful to them.

  5. 5.

    MomSense

    July 23, 2018 at 10:31 am

    @p.a.:

    Tort reform!!! It’s one of those proposals republicans drag out to pretend they have a plan.

  6. 6.

    Capri

    July 23, 2018 at 10:50 am

    The question I would ask is how well do active duty military personnel reflect the general population, particularly in terms of health care. I would argue that they are probably healthy young adults, so not very much. Severe pre-existing conditions would exclude them from military service, probably a very tiny fraction is over 65, and none are under 18.

    This was brought home 2 weeks ago when my 94-year-old mother took a bad step and broke her foot. As a “precaution” she got a complete cardiac work-up (only cardiovascular issue she’s ever had has been mildly elevated blood pressure) and an ultrasound looking for deep vein thrombosis because her legs swell sometimes. Plus she was admitted and observed in the hospital overnight. One might argue that everything that was done above and beyond a foot radiograph and a boot was to prevent future liability on the part of the doctors and hospital. But they aren’t money-grubbers who saw my mother as a sucker. She was the kind of patient that can develop issues and they wanted to I.D. them before they “declared themselves” through an adverse event. Thus they practiced defensive medicine.
    I’m sure that if an active duty military person (or anybody in generally good health in their 20’s) broke his or her foot there is no way they’d get a cardiac work-up, an ultrasound, or a hospital stay.

  7. 7.

    Scott

    July 23, 2018 at 11:28 am

    @Capri: In the report itself,which I admit I just skimmed, the authors went to a lot of lengths to get apples to apples comparisons. I had the same questions. At the same time, I realize that active duty service people are as a group probably healthier than the dependent population of the same age due to weight and physical requirements.

    I spent 20 years active duty and going on 18 years as a retiree going to the MTF. My family also. As a retiree I wasn’t as diligent about my health as before. Most of the health encounters were not inpatient but out patient which this study didn’t include. I wonder how much defensive medicine was practiced with my requirements for physical therapy or cardio. Overall, however, I found the health care provided by the MTF to be quite satisfactory. My only experience with a civilian hospital was with my son with a sports injury (spleen) where he was hospitalized for 3 days. The experience was OK but overall the interfacing with the business side of the civilian hospital was awful. Everything in the end was covered but it took 5 months to clean everything up.

  8. 8.

    PST

    July 23, 2018 at 11:38 am

    @Scott: I also admit to just skimming. It’s a tough read. But if I understand correctly, in addition to controlling for other variable, the authors used results from base closings as a check on their conclusions. When an MTF is closed, in the course of the prolonged process of closing a base, there are still many active military personnel nearby, and they go from being treated on base to being treated in nearby civilian hospitals where there is no immunity from liability. Again, assuming I understand what the authors are saying, they saw a similar difference in defensive medicine when active military treated on base are compared to active military off base under this scenario.

  9. 9.

    David Anderson

    July 23, 2018 at 11:59 am

    @PST: that is how I understood that sensitivity analysis as explained in seminar as well.

  10. 10.

    Yarrow

    July 23, 2018 at 12:24 pm

    I downloaded the report and searched for “women” “woman” and “female” and didn’t see any of those. There were two instances of “male.” Is this study not looking at women?

    Part of the reason I’m asking is that it’s a well known issue for women to get proper treatment, to even get doctors to take their medical complaints seriously. Women are much more likely than men to be told “it’s all in your head” rather than be sent for tests or prescribed something for their issue. Seems like “not practicing defensive medicine” is already somewhat being done with women.

  11. 11.

    Juice Box

    July 23, 2018 at 12:41 pm

    @MomSense: “Tort reform” laws were signed by Gov. Reagan in California. I’m sure that the cost savings will kick in any day now.

  12. 12.

    Capri

    July 23, 2018 at 2:09 pm

    I have no doubt they did everything they could to eliminate bias.But if one of the groups being studied by its nature does not reflect the majority there is only so much you can extrapolate. This is particularly true when one person’s defensive medicine is another’s prudent management of higher risk cases.

  13. 13.

    Bg

    July 24, 2018 at 10:12 am

    profit motive of private hospitals to do more stuff is absent in the military. Did the study address that?

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