Study: Medical errors cost U.S. economy almost $20 billion in '08

A new study estimates that measurable medical errors cost the U.S. economy $19.5 billion in 2008.

Commissioned by the Society of Actuaries and completed by Milliman, Inc., the study used claims data to project a measurement of costs for avoidable medical injuries. Of the approximately $80 billion in costs associated with medical injuries, around 25 percent were found to be the result of avoidable medical errors.

"This report highlights a singular opportunity for both improving the overall quality of care and reducing healthcare costs in this country," said Jim Toole, managing director of MBA Actuaries, Inc. "Of the $19.5 billion in total costs, approximately $17 billion was the result of providing inpatient, outpatient and prescription drug services to individuals who were affected by medical errors.”

“While this cost is staggering, it also highlights the need to reduce errors and improve quality and efficiency in American healthcare,” he added.

Officials say Medical errors are a significant source of lost healthcare funds every year. For example, the study found that $1.1 billion was the result of lost productivity due to related short-term disability claims, and $1.4 billion was lost through increased death rates among individuals who experienced medical errors.

A recent SOA survey, which identified ways to bend the national healthcare cost curve, found that 87 percent of actuaries believe that reducing medical errors is an effective way to control healthcare cost trends for the commercial population, while 88 percent believe this to be true for the Medicare population.

"We used a conservative methodology and still found 1.5 million measurable medical errors occurred in 2008," said Jonathan Shreve, consulting actuary for Milliman and co-author of the report. "This number includes only the errors that we could identify through claims data, so the total economic impact of medical errors is in fact greater than what we have reported."

Key findings from the study include:

  • There were 6.3 million measurable medical injuries in the United States in 2008; of those injuries, the SOA and Milliman estimate that 1.5 million were associated with a medical error.
  • The average total cost per error was approximately $13,000.
  • In an inpatient setting, 7 percent of admissions are estimated to result in some type of medical injury.
  • The measurable medical errors resulted in more than 2,500 avoidable deaths and more than 10 million excess days missed from work due to short-term disability.

"In the past, the insurance industry had low visibility in its involvement in quality-improving initiatives," said Toole. "Now is the time for the industry to assume an active role by helping healthcare systems implement an actuarial approach, which can more systematically identify potential causes of medical errors than alternative approaches."

Approximately 55 percent of the total error costs were the result of five common errors:

  • Pressure ulcers;
  • Postoperative infections;
  • Mechanical complications of devices, implants or grafts;
  • Postlaminectomy syndrome; and
  • Hemorrhages complicating a procedure.

The SOA and Milliman findings were based upon an analysis of an extensive claims database. Measurable costs of medical errors included increased medical costs, costs related to increased mortality rates and costs related to lost productivity of an error.