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Tuesday, August 17, 2010

Understanding the Relative Cost of Medical Malpractice Lawsuits and Insurance

This month, the American Medical Association not only published but promoted (with major press releases) a study showing that over 60% of physicians late in their career had been sued in a medical malpractice lawsuit. Furthermore, the report went on to state that many had also been sued multiple times, so that the average number of medical malpractice lawsuits per 100 doctors aged 55 or older was 161. In other words, the average doctor can expect to be sued for medical malpractice 1.6 times over the course of his or her career. This again shows that claims of frivolous medical malpractice lawsuits run amok are false.

First, if we consider that doctors may begin practicing medicine at age 25 or 30, then by the time a doctor reaches age 55, he or she will have been practicing for 25-30 years. If the doctor faces only 1-2 lawsuits over the course of this time, it is a remarkably low rate. If a doctor tells you that, over the course of a career, he or she made less than one mistake that led to serious injury of a patient, that doctor is lying. Doctors have the potential to do great good, but they also have the potential to do great harm, and the evidence shows that they cause great harm with unfortunate frequency. The best evidence shows that, on average, there is one fatal medical error per seven doctors every year in this country. While statistics also show that a relatively small number of doctors is responsible for a large percentage of medical errors, it certainly seems unlikely that any doctor could go an entire career without making a fatal error, let alone any serious error. This is the nature of the medical profession.

The report also explored the cost of these lawsuits. It found that, on average, 65% of lawsuits were dropped, dismissed, or withdrawn; 25.7% were settled out of court, 4.5% were decided using alternate dispute resolution (such as mediation), and 5% went to trial (with the defendant prevailing in 90% of cases). The report noted that the average cost of defending lawsuits was $40,649, with even dropped cases costing $22,163 dollars to defend and trial cases costing over $100,000 each. If we put this in terms of the physician's career, we multiply it by the average of 1.6 lawsuits to show that, on average, a physician will expect to pay over $65,400 defending him or herself from medical malpractice lawsuits over the course of a career. If we assume an average career length of 27.5 years, that breaks down to only $2380 per year, a pretty moderate cost, generally paid not by the doctor, but by the doctor's insurance company.

Now, let's factor in the figures for the 30.5% of lawsuits that actually result in compensation for the injured patient. According to the report, the average cost of a lawsuit settled out of court is about $200,000 while the lawsuit that goes to trial results in an average of $375,000. It doesn't give figures for mediation and other types of resolution, so we'll use an average between the two other figures, $287,500. This gives a weighted average for compensation for victims of medical errors of about $66,000 per lawsuit, a total average lifetime cost per doctor of $106,000, or about $3900 per year. This means that the average cost to defend a lawsuit and compensate victims was just over $6200 per doctor per year. To me, this seems a relatively small cost when we consider that 97% of plaintiffs in lawsuits did suffer actual injury (although not all were due to medical errors).

The above information comes from the Physician Insurers Association of America (PIAA). But what these figures do not include is the relative cost of lawsuits and medical malpractice insurance premiums. Data on this cost is hard to find because the insurers do not like to release it. The most recent good evidence comes from a 2003 General Accounting Office (GAO) study. It showed that a median cost of medical malpractice insurance is about $28,000 per year, more than four times the cost of defending lawsuits and compensating victims. The disparity becomes even more pronounced when you look at it by specialty. On average, an internal medicine specialist will pay only $17,000 per year in medical malpractice insurance, but on average they face about one medical malpractice lawsuit over the course of the career, reducing their total average annual lawsuit cost to less than $4000, still about one-fourth the cost of medical malpractice insurance. Obstetrician-gynecologists (OB/GYNs), on the other hand, face on average over 2 medical malpractice lawsuits over the course of a long career, making their average annual lawsuit cost over $8200, and their medical malpractice insurance costs skyrocket--on average $73,000 per year--nine times the annual cost of lawsuits!

The evidence shows that medical malpractice lawsuits are not unreasonably common--in fact, they are likely unreasonably uncommon due to the high barriers in place to prevent injured patients from filing lawsuits.

If you have been hurt by a doctor's error, you deserve compensation, but it may be a hard fight. The medical malpractice lawyers of The Cochran Firm are ready to help you fight for justice after your injury. To learn more, contact us today for a free case evaluation.


posted by Benjamin A. Irwin at 9:42 AM

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