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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 59087  
Subject: Re: Health Care: We're missing the big picture, Date: 7/12/2007 9:43 AM
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>> Malpractice insurance premiums accounted for 0.58% of the nation's healthcare spending in 2002, while the actual claims paid out to patients (and their lawyers) were 0.38% of national healthcare spending. The total is less than 1%. <<

But the problem is, this all comes directly from their bottom line.

Think about a retailer with (say) a 10% margin on their sales after all expenses are paid (cost of goods, building rent, salaries, utilities, et cetera). They may have a million dollars in sales, but after all expenses they have $100,000 in profit.

Let's say there's some rising expense that comes to 1% of all sales. Yes, it sounds trivial, but in this case, 1% of sales turns out to be 10% of profits, as they pay the expense not only on profits, but all sales. So they wind up paying $10,000.

This "puny" 1% expense takes 1% of their income.

Also, health care spending includes a lot more than just payments to doctors. It includes spending on prescription medications, among other things, which is a pretty significant chunk of health care spending not related to activities needing malpractice insurance. So in reality, I don't think the 0.96% combined number you quote is that trivial. It still comes to about $20 billion based on 2005 health care spending. There were about 853,000 physicians in the U.S. in 2004 (source: AMA), which equates to a cost of about $23,000 per doctor. A 21.3% decline means about a $3,000 savings in malpractice insurance per doctor.

Seems significant to me.

I'm certainly not saying this is the biggest problem facing American health care affordability, but I think a lot of people who tend to side with the trial lawyers over the "evil insurance companies" downplay it more than they should (just as tort reforms overplay the impact). It's a significant impact, but not the main problem we have.

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