What is an “unnecessary” medical test?

The Healthcare Economist cites a Progressive Policy Institute study:

“Peter Orszag, director of the Congressional Budget Office, estimates that 5 percent of the nation’s gross domestic product–$700 billion per year -goes to tests and procedures that do not actually improve health outcomes.”

So why would doctors order so many “unnecessary” tests?  Dr. Robert Centor has the answer:

We cannot control costs without malpractice reform. We can write articles about unnecessary CT scanning or MRIs, but there are always lawyers lurking to sue physicians who do not overtest. The use of CT scanning in the emergency department is almost scandalous, but ER docs live in fear of suits, so they test.

There is a straightforward solution to all this.  It’s called “Loser Pays“:

America differs from all other Western democracies (indeed, from virtually all nations of any sort) in its refusal to recognize the principle that the losing side in litigation should contribute toward “making whole” its prevailing opponent. It’s long past time this country joined the world in adopting that principle; unfortunately, any steps toward doing so must contend with deeply entrenched resistance from the organized bar, which likes the system the way it is.

We are constantly told that it is unconscionable that the United States is the only modern nation-state without some form of universal health care.  But we are also the only modern nation-state without a loser pays or so-called “English rule“.  A physician can be the target of a totally baseless lawsuit, defend himself or herself successfully, and still have to pay exorbitant legal fees.  As journalist John Stossel in his book Give Me a Break put it, “The lawyers fight, then shake hands on their way to the bank.”

Physicians tend to be methodical.  We do things for a reason.  The reason we order a test, procedure, referral, or intervention should be limited to helping our patients get better.  We cannot avoid moral hazard completely: fee-for-service incentivizes physicians to do more to make more money; capitation incentivizes physicians to do less to make more money.  But we can remove most of the incentive to order tests and procedures related to avoiding a lawsuit by doing what the rest of the civilized world figured out a long time ago: have loser pays.


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