The Cost of Medical Professional Liability

The high cost of medical professional liability is a source of growing concern among policymakers, health care consumers, and the medical profession. While the concern is widespread, to date there has been little quantitative evidence on the overall economic impact of the problem. Utilizing data from the American Medical Association’s Socioeconomic Monitoring System, the impact of medical professional liability (PL) on the cost of physicians’ services has been estimated employing two different methods. Both estimates indicate that the costs of PL are substantial. In particular, the two methods yield estimates of the total cost of PL in 1984 of $13.7 and $12.1 billion, respectively—or approximately 15% of the total expenditures on physicians’ services. Furthermore, increased costs associated with PL from 1983 to 1984 alone are estimated under the two methods to have accounted for 63% and 57%, respectively, of the increase in expenditures on physicians’ services. These costs include PL insurance premiums, costs of practice changes made in response to increasing PL risk, and costs of incurring claims that are not covered by PL insurance.