The 800-Pound Gorilla Crushing "Healthcare": Malpractice
  (August 6, 2009)

I have characterized the American legal system as an induced state of destructively profitable mental illness. Malpractice is a perfect example of this fundamental nature.

The entire U.S. legal system is a form of induced mental illness, an insane asylum in which simulacra of "justice" mask the most blatant chicanery, fraud and injustice. To see this clearly, it is instructive to compare the way medical malpractice is handled in Canada and the U.S. For that, we turn once again to frequent contributor "Ishabaka" M.D. who has practiced medicine in both the U.S. and Canada.

But first let's look at a conventional comparison of the two healthcare systems: A Canadian doctor diagnoses U.S. healthcare (L.A. Times)

On costs, Canada spends 10% of its economy on healthcare; the U.S. spends 16%. The extra 6% of GDP amounts to more than $800 billion per year. The spending gap between the two nations is almost entirely because of higher overhead. Canadians don't need thousands of actuaries to set premiums or thousands of lawyers to deny care. Even the U.S. Medicare program has 80% to 90% lower administrative costs than private Medicare Advantage policies. And providers and suppliers can't charge as much when they have to deal with a single payer.

Yes, it's obvious to all that the U.S. system carries an extremely high overhead of paperwork churn. But it's simply wrong to consider Medicare a low-cost edifice--studies have suggested about 50% of Medicare costs are waste/fraud/needless.

The conventional MSM critique of the U.S. system mentions malpractice as a side issue or as item 10 on a long list of problems. But malpractice and the sick U.S. legal system are central to healthcare's coming implosion. Let's turn to one of our correspondents in the front lines of the healthcare field:

"Ishabaka" M.D.

Here's an interesting fact for you: in Canada, lawyers are not allowed to take contingency fees - you get disbarred if you do. Consequently, when I practiced there in back in 1978 - 1981, malpractice insurance was $200 a year for ALL specialities, including the highest risk ones. Every year, the (single, run by doctors) insurance company would publish the details of every settled claim, and any doctor who read them would go "Man! - That's really malpractice!".

There's a neurosurgeon in town (here in the U.S.) who was a superb surgeon, a scholar, and a gentleman, very nice with patients and families, who was paying over $100,000 a year in malpractice payments. He finally got fed up and opened his own malpractice company and quit doing surgery. I referred a friend who was getting a paralyzed arm from a herniated disk in his neck and this surgeon fixed him up 100%. He is the person I would want to operate on me or my family - but he no longer operates.

Canada has had a relatively small malpractice increase compared to the U.S., and it is now a few thousand dollars, and the specialties are risk-stratified, but still way cheaper than then U.S.

It helps to know the two reasons why doctors are sued - the first is real malpractice. I'll give you an example of the worst case I ever heard - and it was a multi-million dollar settlemnt in Canada, in, I believe, 1979:

A fourteen year old girl was having emotional problems, and the family brought her to a gynecologist for counseling. He initiated a sexual relationship with her. He got her pregnant, told her to tell no one, and did an abortion in his office. A few days later she called him to say she had fever and abdominal pain - he told her to do nothing. She had a septic abortion (an infection, the type of which used to be caused by the old coathanger in a back alley). She would up in an E.R. where she was admitted to the ICU. She had to have a complete hysterectomy - meaning that at 14 she could never have children, and had all kinds of complications and spent about 2 months in the ICU.

Now that's not rocket science. I'm sure anyone you asked would call that malpractice.

In the U.S. we have malpractice suits too, but way too many "bad outcome" suits. The masters of this are the Miami based law firm of Montgomery, Searcy and Denny, who were trying to sue a doctor for causing cerebral palsy in a baby by not doing a Caesarian section (it has been proven that most cases of cerebral palsy are caused by problems early on in utero and have nothing to do with the timing or method of birth). When I finished my medical training the C-section rate in the U.S. was 20%, and everyone was saying that was way too high. Now it is 35%. Caesarian sections are more dangerous than vaginal births for the baby and mother. And more expensive. This is all malpractice given.

If the "system" is running, we may be graduating new obstetricians who have never done a vaginal birth in their life! Anyways, MSD had this case, and came up with the brilliant idea of making a film of this tragic child called "A Day In The Life of _______" This had the jury in tears, and they were ready to award whatever was needed to care for the child.

Neurosurgeons have such high malpractice because they have many imperfect outcomes, many of which are unavoidable. For example, digging a tumour out of a brain my leave some deficits. Also, neurosurgeons get called, day and night, for all bad head and brain injuries. These are usually caused by people driving drunk, often AFTER they have lost their license due to DUI and have no insurance - or are driving a stolen car (It is not uncommon here for the Rescue Squad to be called to a car wreck to find everyone from the wreck has fled into the bushes!)

So the neurosurgeon is doing a multi-hour operation at 2:00 am Saturday morning, knowing he will get paid zero, but if anything goes wrong, he can and most likely will be sued. This was one of the good things in Canada - at least the surgeon would be paid for his work.

Well, we can discuss these issues till the cows come home, but I have been predicting a total breakdown for some time now.

Can anyone read this account (and hundreds more along the same lines) and conclude "the U.S. has the finest healthcare system in the world"? More like the worst in the developed world, and a system made infinitely worse by the induced state of destructively profitable mental illness known as the U.S. legal system.

Let's list what our wondrous malpractice system creates on its very own, with no help from the other ills of the system:

1. "Defensive medicine" in which doctors and other caregivers administer worthless/needless tests and medications by the boatload lest they be dragged into court for not following every item of a cookie-cutter protocol--and since the tests and drugs are "free" to those with gold-plated insurance and to recipients of Medicare and Medicaid, there is literally no possible reason not to over-test and over-medicate and every incentive to do so.

At a friend's dinner party we met a young medical student visiting the U.S. from Europe for postgraduate studies as U.C.S.F., one of the finest medicial teaching universities in the world. He told us the procedure doctor are told to follow is simple: patient has high blood pressure, prescribe these three medications; patient is at risk of heart disease, these three medications, and so on. Meanwhile, he observed that no one knows how these 6, 9, 12, 15 or 20 medications interact within the patient.

In other words, the pressure from malpractice is all about following protocols as "defensive medicine," even if the results are unhelpful or even dangerous for the patient. If you follow the established protocols then you have constructed a legal defense: and in our sick, deranged system, that has become as important and pressing as caring for patients.

2. Randomized "justice." The U.S. system guarantees that true malpractice can be dodged (just move to another state) while "bad outcome" suits can win millions for drunks who climb into tiger cages or wreck their cars, etc. Is a lottery wheel actually a form of "justice"? Only if you're insane--and the U.S. legal system is clinically insane.

3. Doctors are pressured to avoid the seriously ill because the "outcome" has a higher probability of being "bad" and hence the probabilities of being sued are higher. So in this insane asylum of a system we call "the finest healthcare system in the world," caregivers are punished for attempting to aid those who are gravely ill.

4. It is safer, less worrisome and more profitable to stop practicing medicine and start pushing paper or buy some testing machines.

5. Lawyers have huge incentives to take cases on contingency: that is, if you hit the jackpot (the lottery form of "justice" again) then you win up to 30% of the jackpot (some states have limited the take and amazingly enough, these states aren't facing shortages of doctors like states with freewheeling malpractice roulette wheel "justice".)

The truly pernicious part of the malpractice madness is that it drives up costs in largely hidden ways. Nobody gets a bill which compares the cost of what treatment would have been in a system free from "defensive medicine" designed to create legal defenses against "bad outcome" malpractice lawsuits.

Ironically, this deranged system of malpractice does nothing to weed out those caregivers who are actually practicing poor medicine and harming patients. Rigorous national regulation is what's needed, not more roulette-wheel-"justice" lawsuits.

Readers contributed a number of cogent healthcare-related links and ideas. Correspondent Rod C. recommended this article from the

The only way any sanity and humanity may be restored to this situation is for individuals to take control of their own destiny by regaining control of their own healthcare dollars. The tax free Healthcare Savings Accounts (HSAs) established during the Bush administration are a step in the right direction. But these should be more strongly supported by allowing contributions to HSAs tax credit status instead of mere tax deduction status.

Since a virtuous society cares for its needy members, those requiring assistance (including Medicare and Medicaid) should receive it in the form of publicly funded vouchers to spend on the healthcare services of their choosing in a truly free healthcare market. This would relieve most of the hordes of government and insurance corporation bureaucrats from their task of micromanaging healthcare decisions that are not theirs to manage, so they can seek more productive, useful employment elsewhere.

J.B. Maverick

I am, in fact, a "cash only" purchaser of healthcare, and sure enough, my doctor works with me and charges me substantially less for services than he charges patients who have insurance.

Personally, I think the line to draw in the current healthcare battle is to tell Congress that we will cheerfully accept any plan they devise, PROVIDED that they and every other government employee have the exact same plan. I think that'd be pretty much "game over". :)

Frequent contributor Cheryl A. submitted this telling article on the powerful forces working to maintain the status quo at all costs, and the few lonely voices speaking the truth about the coming collapse of the status quo:

Senate Includes Re-Employed Federal Annuitant Amendment in Defense Bill.

Sen. Tom Coburn, R-OK, filibustered against the measure for one hour and 20 minutes. “By the way, if you are a federal employee and unhappy with me trying to defeat this amendment, you should pay attention to something. There is no guarantee to your federal pension based on the economics we face today in this country. If you think it is guaranteed, you have another thought coming because the world economic system is going to determine whether we can honor that pension. That is what is coming. We are very close,” Coburn said.

Mike M.

I think the greatest scam going is the AMA, with its "prestigious profession," the gilt-edged life style and the aura of God that doctors so readily assume. Yet it is at bottom a trade, no different than being a plumber or a carpenter. Any reasonably bright kid coming out of high school could enter a technical school and emerge in two or three years at least as competent as most doctors. As to surgeons, that's just a more advanced skill set. As anyone who's been around doctors and hospitals a reasonable amount of time will surely tell you, it is the experienced RNs who do the yeoman's work with patients, with less error than the MDs generally. This has been done for eons in the US military, with corpsment and Special Operations personnel, who are rapidly and very effectively trained to do what doctors do, and to do it under the most stressful situations. This training includes surgery.

One of the areas I follow for investing is technology. I feel confident in saying that it is just a matter of time before there are software programs that will do the work of diagnosis as well as recommendation of treatment, with life-long follow up on the patient. The software will also have the added benefit of being on call 24/7, no golf days, no vacations, and will not be suffering fatigue from overwork and stress.

Dennis B.

There is a simple way to solve the Health care problem using a combination of free market and governmental policies.

First make all hospitals non profit. Second cut out the profits going to the health insurance companies "investors" by having the Hospitals become the insurer.

Everyone picks a Hospital in their location and arranges to insure with the Hospital. Monthly payments go to the hospital and the hospital issues a health card. Different levels of "insurance" can be offered at different prices.

This would cut out billions of dollars in profits going to investors and corporate executives and it would lower costs. The Hospitals would have no incentive to overbill for procedures or charge $100.00 for an aspirin. Health care dollars would be going right to the individuals who provide the health care, doctors, nurses, orderlies and everyone who worked at the hospital. Why should investors make a profit off me having cancer or needing surgery?

The govermnent could provide low cost medical malpractice insurance to the doctors and hospitals which would lower the cost for this protection.

I believe cost's could come down to $50.00 or $100.00 a month at the low end for catastophic coverage. If costs could be brought down that low, health insurance would be affordable by everyone and it would be each individual's or family's responsibility to sign up and make the payments. columnist John Lounsbury picked up on my entry The "Impossible" Healthcare Solution: Go Back to Cash (July 29, 2009) and wrote an isightful outline of a practical healthcare reform: Patient Needs Larger Role in Health Care.

The good folks at were kind enough to post that entry and send it out to their extensive email list.

Thank you, readers, Mr. Lounsbury and for your promotion of real reform of a doomed, insane system.

How doomed is it? I have covered this topic many times--please read these previous entries for full statistics and links to further data:

Social Welfare, Socialism and Healthcare (May 19, 2009)

Yes, There Will Be Armageddon: Government Goes Bankrupt (July 24, 2008)

Recipe for National Insolvency (June 9, 2008)

The End of Entitlements (July 27, 2007)

If you want more troubling/revolutionary/annoying analysis, please read Free eBook now available: HTML version: Survival+: Structuring Prosperity for Yourself and the Nation     (PDF version (111 pages): Survival+)

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