I’ve posted many times before about the economic realities of medical malpractice liability. Via The Pop Tort, a new study commissioned by the the Society of Actuaries has revealed the economic cost of medical malpractice in America:

SCHAUMBURG, Ill., (Aug. 9, 2010)–Findings from a new study released today estimate that measurable medical errors cost the U.S. economy $19.5 billion in 2008. Commissioned by the Society of Actuaries (SOA) and completed by consultants with Milliman, Inc., the report used claims data to provide an actuarially sound measurement of costs for avoidable medical injuries. Of the approximately $80 billion in costs associated with medical injuries, around 25 percent were the result of avoidable medical errors.

"This report highlights a singular opportunity for both improving the overall quality of care and reducing healthcare costs in this country," says Jim Toole, FSA, CERA, MAAA and managing director of MBA Actuaries, Inc. "Of the $19.5 billion in total costs, approximately $17 billion was the result of providing inpatient, outpatient and prescription drug services to individuals who were affected by medical errors. While this cost is staggering, it also highlights the need to reduce errors and improve quality and efficiency in American healthcare."

Medical errors are a significant source of lost healthcare funds every year. For example, the study found that $1.1 billion was from lost productivity due to related short-term disability claims, and $1.4 billion was lost from increased death rates among individuals who experienced medical errors. According to a recent SOA survey, which identified ways to bend the national healthcare cost curve, 87 percent of actuaries believe that reducing medical errors is an effective way to control healthcare cost trends for the commercial population, and 88 percent believe this to be true for the Medicare population.

"We used a conservative methodology and still found 1.5 million measureable medical errors occurred in 2008," says Jonathan Shreve, FSA, MAAA, consulting actuary for Milliman and co-author of the report. "This number includes only the errors that we could identify through claims data, so the total economic impact of medical errors is in fact greater than what we have reported."

(Emphases added.)

Compare that nearly $20 billion cost — a conservative estimate limited to the ascertainable economic harm, excluding any pain, suffering, embarrassment, humiliation, or mental anguish, caused by avoidable medical errors — to the mere $4.694 billion paid out to medical malpractice plaintiffs in 2008 (see Exhibit D).

That is to say, payouts to malpractice victims amount to less than one-quarter of the economic damage caused by the malpractice itself.

If someone told you that oil companies only paid twenty-three cents for every dollar of damage they negligently caused through avoidable oil spills, what would you say?

If someone told you that car, airplane or boat companies only paid twenty-three cents for every dollar of damage they negligently caused through defective designs and manufacturing, what would you say?

If someone told you that fast food companies only paid twenty-three cents for every dollar of damage they negligently caused through avoidable food poisoning, what would you say?

If someone told you that consumer appliance companies only paid twenty-three cents for every dollar of damage they negligently caused through electric shorts that caused fires, what would you say?

Would you say there was a liability "crisis" caused by an "explosion" of "frivolous" litigation?

Or would you say those companies weren’t living up to their responsibilities?Continue Reading The Economic Damage Caused By Medical Malpractice Dwarfs The Cost Of Lawsuits