Drastic Increase in the Cost of Medical Malpractice

Alarming Statistics

Source: Neilson Marketing Services | Published on January 27, 2020

Stethoscope or phonendoscope on a doctor's white desk on cloudy morning, for treatment of cold or flu.

One of the constant threats hanging over the head of any medical professional is the risk of a medical malpractice suit. Malpractice insurance is one of the largest necessary expenses for doctors and other healthcare providers, and current trends do not seem likely to alleviate the burden any time soon.

Not only has the average cost of malpractice increased, but the number of multi-million-dollar payouts has taken a larger share of the claims. A malpractice suit in the United States now costs an average of 50% more than it did 10 years ago. And the number of suits paying out over $5 million has increased from 1.2% to 1.9% -- that increase may not seem as drastic, but when the subject of discussion is tens of millions of dollars, the costs tend to add up.

Contributing Factors

Researchers have identified two primary factors in the increase of the cost of medical malpractice. First, aggressive plaintiff attorneys are staking out their territories. It seems every other billboard and radio ad has an attorney offering to bring a big payday to his or her client. Such lawyers know the fine details of the law and know how to press the companies to agree to larger and larger payouts.

The second factor is generous jury awards. Juries are, it seems, becoming more sympathetic to the injured parties in these cases, and awarding them more and more as the years go by. A new normal is being created, leading extraordinary cases to require more extravagant payouts to compensate them accordingly.

Effect on the Insurance Industry

This of course has the potential to drive up the cost of malpractice insurance, with a domino effect to the rest of the field. As bigger and bigger payouts become more likely, underwriters will require higher premiums from their clients to ensure they are protected from the risk. This also will impact hospitals and the insurance they provide for themselves for the same reasons.

While one may look on the bright side and consider how this might make hospitals and other medical offices more careful, with a greater emphasis on quality and safety, there are downsides as well. If insurance costs rise, the costs of the healthcare provided by the insured medical professionals will rise at a commensurate rate. Inflation of the cost of healthcare could lead to more desperate people willing to hazard an attempt at a lawsuit, which may give rise to more malpractice payouts, feeding the cycle.

Whether this is borne out of resentment of “greedy” doctors or simple, unavoidable economics, all parties involved have a vested interest in seeing these costs reduced to prevent things from spiraling out of control.