Patient compensation could reduce malpractice costs, defensive medicine

With defensive medicine making up as much as a quarter (26 percent) of overall healthcare spending, a patient compensation system could be one way to reduce defensive medicine and malpractice costs, according to a new report by the James Madison Institute, released yesterday.

James Madison Institute in its report argues that malpractice results in only a handful of injured patients receiving compensation, cases can take years to resolve, and damage awards are inconsistent. Instead of the traditional malpractice approach, the report calls for a policy approach, particularly in Florida, in which physicians and patients work together outside of the courts.

The alternative works like this: A medical review board, overseen by a special administrative agency, reviews malpractice claims. A patient compensation board awards damages to victims of medical malpractice. Like a quality improvement council, a review entity analyzes the root causes of medical errors and establishes best practices, and Florida's Medical Licensing Board disciplines those who provide substandard care.

"It is important to explore the viability of an administrative system similar to the Workers' Compensation system," said James Madison Institute Policy Director Robert F. Sanchez in a press release. "At present, the practice of defensive medicine inflates the cost of health care to cover the inflated cost of malpractice insurance. This needs to change."

By avoiding the courts, a patient compensation system could resolve malpractice issues sooner, provide victims greater financial settlements, and even encourage continued error reporting, according to the James Madison Institute.

Physicians order $6.8 billion in unnecessary tests for their patients each year, according to Archives of Internal Medicine study last month. Three-quarters of doctors (76 percent) named malpractice lawsuits as the most common driver of aggressive practices.

For more information:
- read the press release

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