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Study Finds New Medical Liability System Would Save Florida $16 Billion in Healthcare Costs

The BioScience Valuation study estimates that defensive medicine costs in Florida run more than $30 billion annually. 

Replacing the Florida medical liability system with a no-fault, Patients' Compensation System would exceed $16 billion in annual savings, according to a new study released by the international healthcare economics firm BioScience Valuation.

The BioScience Valuation study estimates that defensive medicine costs in Florida run more than $30 billion annually. Defensive medicine occurs when physicians avoid begin sued by ordering more tests and procedures than are medically necessary.

The actuarial study, commissioned for Patients for Fair Compensation, found that doctors would scale back the practice of defensive medicine if the medical tort system were replaced with the proposed Patients' Compensation System -- a no-fault state-driven approach that is legally patterned after the workers' compensation system.

Without the constant fear of being sued, physicians would choose the best healthcare for their patients resulting in fewer unnecessary tests and procedures. As a result, there would be a first-year health savings of $1.5 billion and an increase to $16 billion annually after five years, according to the study.

Under a Patients' Compensation System, similar to the one found in Sweden, a patient who was medically harmed could file a claim for review by a panel of experts. If that panel deemed the injury was "avoidable," the claim would be forwarded to a Compensation Department to recommend appropriate compensation.

This would create a predictable model where patients are assured their cases would be heard. Injured patients would have access to justice. And unlike the current tort system, low-value claims would be heard. The system would provide more injured patients compensation. They would receive predictable settlements in much faster time. Doctors would know they wouldn't be hauled into court for frivolous reasons.

Among highlights of the BioScience Valuation report:

  • Annual cost of defensive medicine in Florida is estimated at $30 billion, an estimated 15 to 35 percent of total Florida health care costs (based on a survey by Gallup). 
  • Annual cost of defensive medicine is almost $9 billion for Medicare, and about $7.5 billion for Medicaid.
  • With an effective no-fault, Patients' Compensation System, first year savings for payors could be $1.5 billion; that number may grow to annual savings exceeding $16 billion.
  • Yearly savings for Medicare and Medicaid are each expected to be in the order of $450 million in the first year and more than $5 billion annually after five years.
  • Long-term, Florida could achieve savings exceeding $166 billion over a ten-year period.

 "Florida has the opportunity to embrace this model and bring enormous healthcare savings to taxpayers, employers and the state government," said Richard L. Jackson, chairman of Patients for Fair Compensation. "There is no single effort that could reduce the cost of healthcare as quickly as eliminating the practice of defensive medicine without any cost to taxpayers."

For more information about the report from BioScience Valuation, click here.