Malpractice Reform and Health Care Costs

Nobody know how much fear of malpractice contributes to health care costs. We know that the direct effect is not very big -- that is, things done by doctors specifically to avoid a lawsuit -- but there may be a more subtle effect that is very large. Malpractice lawyers look for places where doctors deviate from "customary practice," that is, what most doctors in the area do. And there are large, unexplained discrepancies between the cost of medical areas in different parts of the country. Could it be that malpractice law is one reason why all doctors in one area order tests or use expensive procedures that doctors in another part of the same state don't bother with?

Peter Orszag has a plan to test this: have medical bodies issue guidelines for treating certain conditions, based on scientific evidence, and immunize from malpractice lawsuits any doctor who follows the guidelines. The new health care law provides for some small experiments with this approach, but as Orszag points out they have small budgets and probably won't accomplish much. Orszag wants to spend the money necessary (hundreds of millions, anyway) to produce these guidelines for many areas of medicine, and keep them updated, with the hope that this will produce billions of savings down the line, as well as improvements in care. Seems like a good idea to me.