We reviewed these studies to determine whether their estimates included all types of medical liability costs. The study estimated self-insurance costs at 20 percent to 30 percent of premiums, which would mean that purchased insurance and self-insurance amounted to between $5.8 billion and $6.3 billion in 1991, less than 1 percent of national health care expenditures. Table 1 summarizes the estimates of malpractice insurance costs in 1990 and 1991. The costs of defensive medicine cannot be easily estimated because of difficulties in defining it and distinguishing it from clinically justified medical care. While hospitals perform some risk management activities specifically to reduce liability-related costs, they do not segregate the costs of these activities from the cost of practices designed to promote quality assurance or to satisfy accreditation standards. Medical Device and Pharmaceutical Liability Costs Were Not Measured

Hospitals and physicians incur the following types of medical device and pharmaceutical liability costs in the prices that they pay for their products: manufacturers’ liability insurance and costs associated with product design and marketing that would not be incurred in the absence of the threat of suit. Their liability costs include insurance and liability-related production and marketing costs. Conclusion

Hospitals and physicians incur a variety of medical liability costs. Other hospital and physician liability costs, however, are impractical, if not methodologically difficult to measure with any precision. Such costs include defensive medicine, liability-related administrative expenses, and medical device and pharmaceutical manufacturers’ liability expenses that they pass on to hospitals and physicians in the prices of their products. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the types of medical liability costs that affect hospitals and physicians, and whether existing studies include these costs in their estimates of hospital and physician liability expenses.

What GAO Found

GAO found that: (1) in general, hospitals' and physicians' medical liability costs account for about 1 percent of national health care expenditures; (2) estimates of malpractice premiums do not take into account direct and indirect liability costs other than some self-insurance costs; (3) these nonpremium liability costs include self-insurance costs and uninsured losses, defensive medical costs, liability-related administrative costs, and medical device and pharmaceutical liability costs; (4) it is difficult to quantify hospitals' and physicians' nonpremium liability costs because data on these costs are not usually collected, defensive medical practices are not clearly defined and are hard to distinguish from reasonable care, and administrative costs intended to minimize medical liability are included in efforts to improve service or adhere to accreditation standards; (5) medical device and pharmaceutical manufacuturers include in the cost of their products liability insurance and litigation costs and product design and marketing costs incurred to reduce the threat of law suits; and (6) it is difficult to obtain information on manufacturers' liability costs because of sealed court records and proprietary and competitive concerns.