Meritless Claims: Major Expense, Few Benefits

Medical MalpracticeOne of the most common criticisms thrown against America’s medical malpractice system involves lawsuits that clog court proceedings. The rampant accusations across the country consume much of the court’s time and resources.

Costs associated with meritless lawsuits represent the big burden experienced by healthcare providers. These companies are responsible for absorbing higher costs through malpractice insurance premiums. Attorneys and so-called ‘protectors’ of public interest insist that these frivolous lawsuits are the exception and also points out the prevalence of medical errors.

An article from the New England Journal of Medicine (NEJM) offers a fair glimpse at the validity of malpractice claims.

Harvard’s Take

The study conducted by the Harvard School of Public Health focused on a random sample of 1,452 closed malpractice claims from five medical malpractice insurance companies. To determine whether claims were resolved immediately, the researchers assessed their merits.

The related study was a good attempt at maintaining objectivity to the medical malpractice litigation table. The article also points out three important facts:

  • Claims with little evidence are common, but most do not receive compensation
  • Overhead costs of malpractice litigation are too expensive
  • Most of the expenditures go to litigation over errors and paying claims due to these errors
Meritless Claims are Expensive

According to the study, 33% of claims had no medical errors. Despite this, claimants did not receive compensation in any form (e.g. court judgment or settlement). Because of this, defending claims without merit is a nuisance.

All meritless cases should be investigated, which results in allocated loss adjustment expenses (ALAE). The Physicians Insurers Association of America (PIAA) reports that out of the 10,000 claims in 2005, only 24% received insurance payment. The ALAE paid more than $172 million, which is an average of $21,000 per claim.

Driving Forces behind the Cost

According to insurance professionals like GraceyBacker.com, administrative costs for malpractice insurers are lower than the insurance industry average. The most recent insurance crisis gathers strength from 60% of commercial medical malpractice insurance markets.

Most of the fees go directly to administrative expenses (e.g. experts, lawyers, and court fees). Other major contributors to overhead costs include the plaintiff attorneys’ contingency fees.

An increase in expert affidavits will bear the greatest impact on fighting meritless lawsuits. It pays to support limitations in order to provide compensation for the injured.