Last week, Health Affairs published a new study on how much medical liability costs Americans each year. The answer: $56 billion, or 2.4 percent of all health care spending in America.
The study found that defensive medicine – “the prescription of extra tests and treatments by physicians primarily to reduce the likelihood of malpractice lawsuits” – accounts for 82 percent of that cost.
Before you start feeling vindicated in your belief that Obamacare should have included serious medical malpractice reform, first listen to the spin from the American Association for Justice, the trial lawyers lobby group.
They sent an e-mail to the Hill stating that the study “shows that limiting the rights of injured patients will do practically nothing to lower health care costs.”
In other words, $56 billion per year is just a drop in the bucket. You know, a little droplet … that happens to be the same size as this year's budget for the entire U.S. Department of Education.
For some additional perspective:
* $56 billion is more than the gross domestic product of Bolivia.
* $56 billion is seven times the National Football League's revenue for 2009.
* The Federal Reserve Bank's 2008 bailout of Bear Stearns cost about $30 billion, or a bit more than half of $56 billion.
The trial lawyers' argument that half-a-trillion dollars over 10 years isn't real money hinges mostly on the fact that it's a small percentage of health care costs. If it “only” accounts for 2.4 percent of all medical spending, then it's barely worth touching, right?
Well, actually, it's not an insignificant amount. In fact, it's more money than even the White House thought Obamacare would save in industrywide medical costs by 2018.
In December, the President's Council of Economic Advisers generated estimates of how much the Senate version of Obamacare (the one that passed) would save Americans and their insurers on health care costs. They wrote that their bill would cause the annual growth in private-sector health care costs to slow by half a percentage point each year between 2012 and 2018.
If you can strain for a moment and believe this – that medical inflation rate can fade from the current 6.3 percent to just 3.3 percent by 2018 – then you end up with a mere 31 percent increase in health spending over six years.
Compare that to what happens if you leave medical inflation constant but deduct 2.4 percent of total spending each year – you come up with an increase of just 28 percent over the same six years.
The point here is not that the one idea is preferable to the other, or that either idea is realistic. (Even serious malpractice reforms would not completely eliminate the associated costs.) The point is that 2.4 percent is a big number in this context.
We just got an enormous overhaul of our whole health care system whose expected savings – even by the Obama administration's less-than-realistic assumptions – will amount to less than what our medical malpractice system costs us.
President Obama entered the health care debate claiming he was determined to do something about runaway medical costs. He imposed new mandates on Americans, businesses, insurers and health care providers.
But when it came to the easy part – reforming a medical malpractice system that costs $56 billion annually – he probably just lost the blueprint under a huge pile of trial-lawyer campaign cash. The American Association for Justice PAC alone has already given $2.2 million to candidates in the 2010 cycle, 97 percent of it to Democrats.
So when you hear Obama say that special interests “talk about me like a dog,” think of the trial lawyers. They just said “fetch.”
David Freddoso is The Examiner's online opinion editor. He can be reached at firstname.lastname@example.org.