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Malpractice: A Tiny Percentage of Health Care Costs

One of the principal myths surrounding medical malpractice is its effect on overall health care costs. Medical malpractice is actually a tiny percentage of health care costs, in part because medical malpractice claims are far less frequent than many people believe.

According to the Congressional Budget Office, malpractice costs amount to “less than 2 percent of overall health care spending. Thus, even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small.” i

Limiting Tort Liability for Medical Malpractice, Congressional Budget Office, January 8, 2004; for the purposes of the chart, Personal Health Care Expenditures is taken from the Centers of Medicare and Medicaid Services and is $1.88 trillion (http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf – tables 1 & 2), and total spent on medical malpractice insurance is Tillinghast Towers Perrin (2008 Update on U.S. Tort Cost Trends, Tillinghast Towers Perrin, 2008); The CBO has reaffirmed its earlier findings that tort reform does not lower health care costs. In 2008, the agency found that “the effect [of tort limits] would be relatively small- less than 0.5 percent of total health care spending.”– Budget Options Volume 1 Health Care, Congressional Budget Office, December 2008.

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