The University of Texas at Austin
  • Controlling the rising costs of health care

    By Ronen Avraham
    Ronen Avraham
    Published: Oct. 21, 2010
    Controlling

    Ronen Avraham is Thomas Shelton Maxey Professor in Law at the School of Law. His primary research interests are the economic analysis of torts and medical malpractice law, specifically how liability reform can influence health care reform. Avraham also writes about contract theory and theories of justice. He is the author of “Private Regulation,” an article about a new approach to the delivery of health care.

    I have mentioned in two earlier posts that the common Republican fixation when dealing with the health care system is tort reform. In this post I finally deal with it.

    In the previous two posts I addressed two (of the three) major cost drivers of our health care system: underuse (reduced access to care) and misuse (medical errors).

    Tort reform has limited effectiveness in increasing access and may even lower the quality of care. However, tort reform’s main target is neither misuse nor underuse. Instead it is the third cost driver: overuse, specifically defensive medicine.

    Overuse is care that is ineffective because it is more care than is ideal. There are multiple categories of overuse, but the two most commonly referenced are defensive and offensive medicine.

    Defensive medicine occurs when doctors give too much care in order to protect themselves from liability. Defensive medicine is the Republican’s whipping boy. The Democrats, when discussing overuse, focus instead on offensive medicine, the provision of too much care to earn doctors more money.

    An example of defensive medicine would be ordering, to avoid liability, a CT scan for someone who bumped her head even though the scan is not medically necessary. The same CT scan, ordered to increase the reimbursements a doctor receives, would be offensive medicine.

    Republicans argue tort reform, limiting the medical malpractice liability faced by doctors, would decrease the cost of care by taking away the incentives to practice defensive medicine. If doctors are immune, or mostly immune from medical malpractice, they have less reason to perform extra tests and procedures to protect themselves from liability. Thus, there would be a reduction in defensive medicine, reducing the overall cost of the health care system.

    Tort reform might be a valid part of health care reform, but alone it is not the answer. Two negative effects might result from tort reform.

    First, the quality of care would go down. Medical malpractice liability provides incentives for doctors to use adequate caution. If providers face lower liability, then they lose the incentive to use proper caution.

    Second, tort reform might actually encourage offensive medicine. Doctors would have less reason, with less fear of liability, not to prescribe extra treatments and tests that in themselves may carry some risk. There is less reason not to perform excess surgery if a doctor does not have to internalize the costs of any negative effects of that excess surgery.

    Even without tort reform, offensive medicine is still a major driver of medical costs. One FBI investigation discovered up to half of the 1,000 bypass surgeries per year at the Redding Medical Center in California were not medically justified. A 2009 study showed Medicare spending per enrollee in McAllen, Texas, was about twice as much as it was in neighboring and similar El Paso, Texas.

    Both political parties have acknowledged that offensive medicine might contribute to at least some medical waste. The Democrats focus on it more often, yet they have made no concrete proposals to deal with it nor did they include a solution in the Patient Protection and Affordable Care Act (PPACA). Democrats sometimes blame the fee-for-service system, which ties money earned to services performed. In doing so, they also often point to the success of medical systems like the Mayo Clinic which pay their doctors fixed salaries not tied to the number of procedures they prescribe.

    Yet, the only real way to address either the problem of offensive or defensive medicine is comprehensive reform which addresses holistically the various cost drivers. In other words, any real reform must address underuse, misuse and overuse.

    As can be seen in the tort reform context, addressing one problem, defensive medicine, can create bigger problems in the other areas, quality of care and offensive medicine. Thus, tort reform alone will not fix the health care system, just like PPACA will not.

    Instead, we need reform that battles costs, increases care and increases access on all fronts. I will offer one such reform in my next and last post.

    More election posts from Ronen Avraham:

    Visit the mid-term elections blog series home page for a complete lineup of faculty experts’ analyses.

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