Sebelius Offers $25 Million for Malpractice Projects (Update1)

Sept. 17 (Bloomberg) -- Health and Human Services Secretary Kathleen Sebelius said her department will distribute $25 million in grants for projects to improve patient safety and cut down on “frivolous lawsuits” against doctors in the U.S.

The money will go to states and hospital systems for demonstration projects as part of President Barack Obama’s efforts to cut costs in the health-care system, Sebelius said today at a White House news conference. Applicants may get as much as $3.3 million to plan and carry out projects.

Obama said Sept. 9 in a speech to Congress that he recognizes Republican concerns about medical lawsuits as Democrats seek support for a broader health-care overhaul. Legislation to cover the uninsured and regulate insurers has passed four congressional committees so far this year with no GOP votes.

“Though malpractice premiums themselves count for only a small percentage of total medical costs, many doctors report that they practice costly defensive medicine because they are fearful of lawsuits,” Sebelius said today.

A March 2003 study by the department estimated the direct cost of medical malpractice, including insurance premiums and lawsuit expenses, amounted to 2 percent of U.S. spending on health care. “Defensive medicine” -- tests and procedures ordered to protect against potential liability -- account for 5 percent to 9 percent of the overall expense, the study found.

2 Percent

While a 2004 report by the Congressional Budget Office also pegged direct malpractice costs at 2 percent of health spending, it found “even significant reductions” would do little to reduce growth in health-care spending.

Changing the malpractice system “in and of itself won’t solve our problems” with rising medical costs, said Stuart Altman, a health economist at Brandeis University in Waltham, Massachusetts, in a Sept. 14 speech in Washington. The aging U.S. population and the development of more expensive treatments are bigger drivers, he said at an insurance industry conference.

“Defensive medicine generates income” for doctors, Altman said at the meeting sponsored by America’s Health Insurance Plans, an industry trade group. “And most physicians would just as soon do best for their patient, and if there’s something that can be done, they’re going to order it.”

To contact the reporters on this story: John McCormick in Chicago at jmccormick16@bloomberg.net; Alex Nussbaum in New York at anussbaum1@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net