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Defensive Medicine: Are Patient Compensation Systems the Answer?

Tags: , | Comments: 4 | February 13th, 2014

In this series we are looking at defensive medicine, or “the practice of ordering medical tests, procedures, or consultations of doubtful clinical value in order to protect the prescribing physician from malpractice suits.” In our last post we considered the cost of defensive medicine and the most commonly proposed solution, tort reform.

With surveys showing that 70% to upwards of 90% of doctors report practicing defensive medicine and a price tag estimated to be somewhere in the $650 – $850 billion range it’s clearly a major issue for the health care community. But as we saw last time it’s also a complex problem, and while tort reform almost certainly has a role to play in limiting defensive medicine, we also tried to show that tort reform will likely work best if it is one part of a larger strategy. In these next few posts we want to discuss several other proposals that have been made for mitigating the practice of defensive medicine. To be clear, we are not necessarily advocating for any of these proposals. Today’s in particular is a fairly radical suggestion. We are just trying to give you a lay of the land in terms of suggestions that have been made for dealing with defensive medicine.

No Fault Administrative Patient Compensation Systems
One of the more comprehensive proposals for dealing with defensive medicine, as well as a number of other difficulties associated with direct liability, is the implementation of no fault administrative patient compensation systems. That’s a mouthful to be sure, but the basic idea is pretty simple, and not that much different from the way workers’ compensation works. In a nutshell these systems would set up administrative panels of medical experts that would decide on cases where patients claimed to have been harmed. The funding for payments would, in theory, come from current malpractice insurance premiums and thus no taxes or new revenue streams would be required. Direct liability, as such, would be completely taken out of the picture. These types of systems are currently being seriously considered in Florida and Georgia.

So what are the benefits to such a system? Well, in theory there are quite a few. For one thing, this is the one approach that doctors said would actually cause them to change their practice of defensive medicine in the Jackson Healthcare survey discussed in our previous post. In that sense it might seem like a good option for doctors. It could free them from the fear and anxiety associated with the constant threat of a lawsuit.

Additionally, the system could be good for patients, as more of them would have access to compensation for at least two reasons. First trial lawyers are often only willing to take cases with very large potential payouts. This means that people who have experienced real but non-catastrophic harm or negligence are often not able to get compensation. But under a patient compensation system a lawyer is not even needed. The affected party simply files a claim, which is evaluated by the panel. So anyone can file a claim at no expense. But secondly such a system, by removing fault from the equation, allows for compensation in both situations where there was true negligence and situations that ended up in adverse events but were not a result of malpractice. Sometimes an adverse outcome is just a result to bad luck, an unforeseen circumstance, an accident, etc. No one has to be named and blamed for a patient to be compensated for an adverse situation in a patient compensation system. Instead of focusing on blame administrators, doctors, and institutions are freed up to focus on improving systems to reduce the likelihood of mistakes or accidents going forward.

Another major benefit that proponents of these systems point to is the time savings. While malpractice trials often stretch out over years, administrative panels could likely render decisions within the course of a few weeks. And this isn’t all speculation; as with the cost savings there is a certain amount of historical evidence due to the fact that such systems have been in place in countries like Sweeden, New Zealand, and Denmark for some time. New Zealand, for instance, who has had a no fault system since 1974 spends about $29 million per year on patient compensation while the US spends over $122 billion a year on malpractice. Granted New Zealand is a much smaller country, about 71 times smaller by population, but even if you factor that in it only puts their compensation price tag at about $2 billion to our $122 billion. Likewise in the case of time, we know that the average decision in New Zealand is processed in a few weeks and that all decisions are processed in no more than nine months. Also, because these systems are being considered in Florida and Georgia models have been put together by public policy experts that show substantial projected savings. For more on the statistics about New Zealand and a thoughtful consideration of malpractice versus systemic problems see this article.

So what’s the downside? Well, the obvious question that arises is, what about accountability? Is it really reasonable for doctors not to be accountable to those they harm in a situation of true negligence? That’s a complex question, and touches on morality, justice, and all kinds of questions for the ages. But it is worth noting that the U.S. is relatively unique in allowing people to sue physicians directly. Many of the doctors from other countries Jackson Healthcare surveyed didn’t even know what the term defensive medicine meant and those that did overwhelming reported not practicing it.

Further, a system like this would not have to take all accountability away from doctors. Administrative sanctions would likely be used in cases of genuine negligence or malpractice. However, that raises another question: would sanctions just move the goal posts, so to speak, making the threat of sanctions the driving factor in promoting defensive medicine? Proponents say no because sanctions would be less likely to be arbitrary or frivolous than malpractice suits under the current system.

But there are other potential pitfalls. The very same factors that would give patients increased access to compensation could potentially lend the system to being overrun. Do we really want people to be able to file for compensation at no cost or potential risk? Would such a system not lead to abuse? This is a serious consideration, especially in light of the cost of workers compensation fraud and abuse.

Finally there is the legal and political challenge. While such a system may sound more efficient it does involve taking away the right to a trial by jury in cases of malpractice. That makes it a very major reform and one that would have to get a great deal of popular support to ever be implemented. It also means that there is huge potential for such a proposal to become very political; and in some ways it is inherently political. For all it’s supposed savings and efficiency a patient compensation system, as it’s typically proposed, takes another element of the healthcare industry out of the private sector and puts it under government management. Many people these days are not too sanguine about the government’s ability to follow through with promises of savings and efficiency when it comes to questions of healthcare.

So, what do you think about the proposed patient compensation systems? Are they a good idea? Too ambitious? Here’s a video from a group that strongly promotes this approach. It’s obviously not neutral, but proponents always explain their own ideas best.

This post was written by Justin Donathan.
Justin at Google+


4 thoughts on “Defensive Medicine: Are Patient Compensation Systems the Answer?

  1. John Carone

    Defensive medicine implies an attempt to make a more precise diagnosis so the treatment will be appropriate. Diagnosis is the problem. If local practitioners are not confidant about their diagnosis using normal methods of examination, the patient should be referred to a “diagnostic center” and returned to the referring doctor for treatment. This would concentrate liability for mis-diagnosing on the centers which would be much fewer than the number of individual practitioners. These referrals would vary in number from doctor to doctor depending upon the difficulty of the types of cases they treat.

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