Study by Beth Ann Fiedler, Ph.D., JMI Adjunct Scholar Foreword by Robert F. Sanchez, JMI Policy Director

For many years the cost of health care in the United States has been rising faster than the rate of inflation. This trend affects families, employers, and governments at all levels — federal, state, and local. The rising cost of care — and of the insurance to pay for it is a major drag on a struggling economy.

Indeed, a new Kaiser Family Foundation report says the annual cost of an average family’s health insurance now exceeds $15,000. For employers who subsidize their workers’ coverage, it’s a cost that inevitably depresses wage growth. Moreover, when a firm’s workload increases, the cost of healthcare coverage is an incentive to cope by extending the hours of existing workers rather than adding new hires.

Some economists argue that inflation in health care is symptomatic of the fact that it’s immune to the market forces — the tug of supply and demand, competition as a moderator of pricing — that typically guide a free economy. Others diagnose the ailment differently, arguing that market forces could work in health care, as in other sectors of a free economy, but government policies have snuffed out the chance.

Whatever chance may have existed for market forces to apply to health care was probably lost with the shift to a system in which “other people” pay the bills. With rare exceptions, medical bills are sent to a third party — a traditional health insurance company, an HMO, or a government program such as Medicare or Medicaid. These entities may use their size to bargain for lower prices, but reducing the revenue derived from patients in some groups often results in cost-shifting and higher prices for others.

Given this assessment, can anything be done to rein in the rising cost of health care? Yes, quite possibly. As this study suggests, there may well be creative steps that states can take to moderate some of the costs that providers must pass along to their patients. Among those costs: malpractice insurance, together with the related costs of “defensive medicine” — the use of diagnostic tests and medical procedures that arguably are not necessary except to mount a defense against being sued for negligence.

States have repeatedly attempted various remedies to address problems related to medical malpractice and defensive medicine — particularly when confronted by crises in which malpractice insurance was said to be in danger of becoming unavailable or unaffordable. The challenge now is to act before another crisis arises.

One factor that must be considered is that Florida’s courts, in general, have frowned upon proposed solutions that infringe on the right of injured patients to seek redress through the tort system. As this study suggests, however, there are alternatives that better serve the interests of aggrieved patients than a tort system utilizing civil courts that are currently burdened by a high volume of other matters, including property foreclosures.

These alternatives, including a “patient compensation system,” could conceivably take less time than the courts to reach a decision and could ultimately direct a greater share of any financial settlement to the aggrieved patient and less to court costs, attorney fees, and other litigation expenses. This study suggests that these alternatives are worth exploring.

View Press Release (PDF) View Executive Summary (PDF) View Full Study: Alternative Solutions to Florida's Medical Malpractice System (PDF)