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Medical Costs: Malpractice vs. Fraud

Talk of the government shutdown dominates headlines this week. As many know, the root of the problem is the House Republicans’ refusal to pass a bill funding the government unless funding for the Affordable Care Act is pulled. The Act (colloquially referred to as Obamacare) was passed into law several years ago and upheld as constitutional by the U.S. Supreme Court last year. In other words, this latest move is a nearly-unprecedented attempt by one branch of Congress to hold all government funding hostage to neuter implementation of a law.

Unfortunately, there is much confusion regarding what the Affordable Care Act does or does not do. There is a good chance that your Facebook feeds are filled with arguments on both sides, with one common complaint: that medical costs and insurance costs) will go up as a result. There is a wide-range of data which suggests these fears to be unfounded.

Regardless, considering the topic is now being debated, it is a good time to share information on the complexity of medical costs and the misplaced priorities of many seeking to lower the bill
Tackling Medicare & Medicaid Fraud
As we often discuss, some misguided lawmakers, when asked about medical costs, go immediately to “tort reform” as some catch-all solution. They claim that eliminating the rights of a certain group of injured medical patient will magically lower healthcare costs for everyone and solve the problem. This argument is so divorced from reality that it is hard to imagine anyone with a basic understanding of how medical costs accrue to believe it.

A colleague recently shared a comparison that helpfully puts the issue into context. Consider this: according to estimates from the National Association of Insurance Commissioners (NAIC), about $5.8 billion is spent annually on medical malpractice defense costs. Keep in mind that this data comes from an insurance group–not plaintiff’s attorneys. At the same time, in the United States, about $2.6 trillion is spent on health care every year. That means that malpractice defense cost–in total—account for .3 percent of the overall cost….one-third of one percent. That is a tiny fraction. In other words, even if it was made impossible for any patient to ever hold their doctor accountable at any time, the effect on health care costs would be negligible.

On the other hand, consider annual fraud costs. U.S. Attorney General Eric Holder recently suggested in a USA Today story that anywhere from $120 to $160 billion in Medicare Fraud occurs each and every year. The fraud takes different forms but essentially refers to doctors and medical institutions billing the government for care in contrivance of federal law.

Fraud costs nearly 20x more every year that all malpractice defenses together. Anyone serious about reducing medical costs is simply wasting time by dwelling on tort reform laws that would do next to nothing to fix the problem. Instead, all attention should be on providing quality care devoid of fraud. it is entirely disingenuous for policymakers to tell constituents that eliminating patient rights will solve any health care cost problems.

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