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The Society of Actuaries  |  08/13/2010

Study: Nationwide Medical Errors Cost $19.5 Billion Annually

Among the findings were 2,500 avoidable deaths and 10 million excess days of missed work

(SOA: Schaumburg, IL) -- Findings from a new study commissioned by the Society of Actuaries (SOA) and completed by consultants with Milliman Inc. estimate that measurable medical errors cost the U.S. economy $19.5 billion in 2008. The report used claims data to provide an actuarially sound measurement of costs for avoidable medical injuries. Of the approximately $80 billion in costs associated with medical injuries, about 25 percent were the result of avoidable medical errors.

“This report highlights a singular opportunity for both improving the overall quality of care and reducing health care costs in this country,” says 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. Although this cost is staggering, it also highlights the need to reduce errors and improve quality and efficiency in American health care.”

Medical errors are a significant source of lost health care funds every year. For example, the study found that $1.1 billion was from lost productivity due to related short-term disability claims, and $1.4 billion was lost from increased death rates among individuals who experienced medical errors. According to a recent SOA survey that identified ways to bend the national health care cost curve, 87 percent of actuaries believe that reducing medical errors is an effective way to control health care cost trends for the commercial population, and 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,” says 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 the 6.3 million 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,” says Toole. “Now is the time for the industry to assume an active role by helping health care systems implement an actuarial approach, which can more systematically identify potential causes of medical errors than alternative approaches.”

The study also identifies the 10 medical errors that are most costly to the U.S. economy each year. 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
• Hemorrhages complicating a procedure

The SOA and Milliman findings were based on 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.

For a full copy of the “The Economic Measurement of Medical Errors” report, click here.

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The Society of Actuaries

The Society of Actuaries is an educational, research and professional organization dedicated to serving the public, its members, and its candidates. The SOA’s mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business, and societal problems. The SOA’s vision is for actuaries to be the leading professionals in the measurement and management of risk.