Diagnosing the System: Reforming the American Medical Malpractice System with a No-Fault Approach

By: Mhyank Sekhar

Photo by THE BALL STATE DAILY

Introduction 

The landmark 1999 Institute of Medicine Report, "To Err is Human," led to a renewed focus on medical error and medical malpractice with its radical claim that roughly 98,000 Americans die in hospitals annually from factors attributed to medical errors (Kohn et al., 2000). By modern standards, this is a highly conservative figure; other studies estimate that more than 400,000 patients in the U.S. die every year as a result of preventable errors (James, 2013). Regardless of the specific statistics cited, it is undeniable that medical malpractice remains a persistent and significant issue in healthcare systems today. The current system's failure to register and resolve medical malpractice in the United States is primarily associated with four crucial issues: litigation challenges, high costs, defensive medicine, and the impact on providers. These issues could be largely avoided by the adoption of a standardized national program based on the Danish No-Fault Model and current statewide schemes in Florida, Virginia, and Michigan. 

Challenges of Litigation 

The United States uses a tort regime to resolve cases of medical malpractice. While there are differences across states, in general, a patient must demonstrate four legal elements to receive compensation for medical error: (1) there was a duty owed to the patient, (2) there was a breach of such duty, (3) there was injury caused by the breach, and (4) there were resulting damages (Bal, 2008). Under this litigatory system the chances of a patient receiving compensation for malpractice damages is tremendously low. Only 1-2% of victims file a claim, of which an even smaller margin receives compensation (Justpoint, 2024). This phenomenon is driven by several significant barriers. First, the high cost of litigation discourages many patients, as pursuing a case requires substantial financial resources including fees for expert witnesses and legal representation. Second, the process is emotionally and mentally exhausting; victims must endure the stress of recounting traumatic medical experiences and navigating a lengthy, adversarial legal system (Ofri, 2020). Finally, proving negligence is inherently difficult; roughly 80-90% of defensible claims are dismissed without a settlement (NPDB, 2024). Medical outcomes are often unpredictable, and establishing a direct link between a healthcare provider's action and patient harm demands extensive evidence, making many cases unlikely to succeed. 

High Costs and Defensive Medicine 

Claims that result in favorable patient outcomes can lead to substantial awards. In instances of severe gross negligence, damages can soar into the hundreds of millions of dollars. The substantial payouts from extreme cases have skewed overall figures, contributing to more than $40 billion in total damages awarded in medical malpractice cases over the past decade (Nabity, 2024). Due to the unsustainable nature of these payouts, healthcare systems have adjusted to protect their economic stability. The first of these methods used to protect the economic stability of healthcare systems is medical malpractice insurance. U.S. providers, cumulatively, spend $55.6 billion annually on medical liability insurance (Commonwealth Fund). It is important to note that the cost of these payouts are ultimately passed onto the patients, as providers raise costs for patients to fund the high cost of malpractice insurance. Second, physicians practice defensive medicine in order to protect themselves and their institutions from lawsuits. Defensive medicine involves unnecessary tests, scans, and procedures to reduce the provider's potential liability if an accusation of medical error were to be leveled. These unnecessary defensive actions increased medical costs for patients from $84 billion to $151 billion annually (AMA). Yet again, the patient loses out. 

Impact on Providers

Even though medical institutions utilize certain protections, the reality of medical malpractice in the United States is ultimately faced by individual providers. As it is, medical professionals face high rates of burnout and professional attrition, leading to a systemic shortage of doctors. The adjacent issues of medical malpractice and the rising doctor shortage involve a larger debate around the implied individualist premise surrounding the medical malpractice legal system. The U.S. medical malpractice system traditionally approaches error through the lens of individual blame. This perspective places accountability solely on healthcare providers accused of failing to meet the accepted standard of care. Thus, legal cases revolve around proving that a professional deviated from this accepted standard of care, leading to patient harm (Oyebode, 2013). Viewing medical malpractice as individual error fails to acknowledge the systemic factors contributing to mistakes (Ganguli, 2011). 

No-Fault System

Given the above, it is clear that the medical malpractice system in the U.S. is flawed. Specifically, medical malpractice continues to be a leading cause of death, patients do not have access to equitable recourse mechanisms, providers rely on malpractice insurance and defensive medicine (raising costs for patients), and physicians are victims of professional attrition and systematic error. 

The Danish no-fault model is a possible solution that protects both patients and providers. This program does not require proof of negligence; instead, it only requires proof of causation. This is crucial, as the model intentionally focuses on reporting and resolving systemic medical errors rather than assigning blame to individual providers. The Danish no-fault regime, formally the Patient Compensation System, is an out-of-court process that involves appealing to an administrative board of legal and medical experts. Appealing is simple, as it involves a single form, is free of charge, and can even be filled out by providers on the patient's behalf. The administrative panel awards compensation on average of $30,000 to roughly a third of patients who appeal. The framework creates a structured, standardized, and sustainable procedure for awarding compensation to patients. However, it is necessary to note that a large part of the system's success is due to single-payer healthcare, as patients generally do not require extensive compensation to mitigate substantial medical fees (Ofri, 2020). 

A more practical solution that applies certain aspects of this Scandinavian model would be the nationalization of no-fault programs in Virginia and Florida. These states use a no-fault system for a limited scope of medical issues, such as birth-related neurological injuries, that were previously associated with the awarding of substantial damages. The logical reasoning behind these systems is that in taking out the costliest cases from the courts, a small slice of the largest damages would not artificially inflate insurance premiums, and more patients could receive access to compensatory mechanisms (Ofri, 2020). Another solution would be the national standardization of the Michigan model, which provides amnesty to physicians to increase the reporting of errors and improve patient-provider communication. The impact of this model was twofold. First, increased reporting of errors allowed medical experts to analyze and resolve systematic causes of errors. Second, open communication with patients decreased medical malpractice claims, as the number one cause of claims—breakdown in patient-provider communication—was resolved (U-M Health).

Lastly, administrative costs vary drastically between no-fault and fault systems of medical malpractice. In the U.S., approximately 57% of spending associated with legal costs of medical liability goes toward administration costs. In contrast, the Danish No-Fault system spent only 18% on administrative costs (Orr, 2022). Thus, no-fault systems, as a result of direct patient access to compensation schemes, are more cost efficient. 

Conclusion

The system for litigating medical malpractice is innately problematic. Not only does it fail to resolve real systematic error, but it provides an inequitable experience for patients seeking recourse, increases healthcare costs for patients due to high malpractice insurance premiums and increased utilization of defensive medicine, and worsens the doctor shortage. Selective implementation of a no-fault model, using the Danish Patient Compensation System as a reference, would provide more sustainable compensation for victims, leading to greater rates of reporting and decreased number of cases of medical malpractice. By implementing these practices, the United States could replicate the successes already achieved at the state level in Florida, Virginia, and Michigan. 

The views expressed in this publication are the authors' own and do not necessarily reflect the position of The Rice Journal of Public Policy, its staff, or its Editorial Board.

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