Why Are Medical Costs So High? Courtrooms Are a Culprit

from National Center for Public Policy Research

8/15/03

Why do medical costs keep climbing?

Some look to the doctor's office or the hospital or their medicine cabinet, but few think to look to the courtroom.

Increasingly, civil cases - including frivolous lawsuits and massive class actions - are driving up health care costs and making Americans less healthy.

Unfounded lawsuits and excessive malpractice and liability awards not only boost health care costs, but also raise the price of insurance for health care providers and patients. As premiums increase, increasing numbers of people are unable to afford the cost of insurance.

According to Sickoflawsuits.org, nearly 41 million Americans are now uninsured and, a given year, another 30 million will lack coverage for some extended period of time.

People who lack insurance coverage are less likely to seek treatment. Those who do seek treatment while uninsured are much more likely to seek care in emergency rooms, thus driving the cost of medicine even higher. A vicious cycle emerges.

Patients who are wrongly injured or mistreated by health care providers should -- of course -- have recourse to the courts, but even objective observers agree that the situation has gotten out of hand.

As the Washington Post has editorialized: "As to the right to sue, our preference is to keep the practice of medicine as far from the courts and the predatory instincts of some of the trial bar as possible... the threat of a lawsuit should not be what governs health care in this country."

Over the past 20 years, personal injury lawyers have found litigation against health care providers and pharmaceutical manufacturers to be a lucrative "growth area." This has enriched a handful of lawyers, but adversely affected both the quality and cost of care for the rest of us, as the cost of defending against malpractice and liability lawsuits is inevitably passed on to the consumer.

According to a recent study by the U.S. Department of Health and Human Services, simply limiting unreasonable jury awards could cut health care costs by 5-9 percent, saving $70-$126 billion each year. This would help an additional 2.4-4.3 million Americans to afford medical insurance.

Moreover, the impacts go beyond awards and settlements in high-profile cases.

In a survey conducted last year by Harris Interactive, 79 percent of doctors said that, in an effort to prevent possible lawsuits, they had ordered more tests than medically needed. This practice of so-called "defensive medicine" is estimated to cost patients $50 billion per year.

Not only are physicians and hospitals affected, but the cost and availability of prescription drugs and medical devices are also under the gun. Frivolous litigation chills new discoveries and may lead to the withdrawal of beneficial products.

Take the case of Titus Simonini, whose case has been brought to national attention by Orange County Citizens Against Lawsuit Abuse. Titus has hydrocephalus and needs a silicon brain implant just to survive. However, because of lawsuits against silicone manufacturers, fewer and fewer companies are willing to make the shunts that sustain his life.

Each year, over 7.5 million lives are saved or improved by implantable medical devices. Yet, due to the threat of liability, 75 percent of suppliers of biomaterials used to make medical implants banned sales to U.S. manufacturers. Although the Biomaterials Assurance Assistance Act of 2000 attempted to resolve this, many medical device manufacturers have chosen to remain overseas.

These problems, bad as they are, somehow seem worse when once considers that much of the litigation is not being pursued by sick or injured patients. Take the case of the drug Baycol. As Dr. Scott Gottlieb told the New York Times in February: "Bayer is facing more than 8,000 lawsuits after its widely used cholesterol-lowering drug Baycol was withdrawn from the market. At least 6,000 of those suits, however, are being filed by people who did not suffer any side effects whatsoever."

Litigation filed by relatively healthy people is not only driving medical costs through the roof, it is also crowding the courts and making it harder for actual victims of bad care to get the compensation that is due to them.