Administrative Compensation for Medical Injuries: Lessons from Three Foreign Systems

By Michelle M. Mello, Allen Kachalia, and David M. Studdert
The Commonwealth Fund, July 2011

Medical malpractice reform is a perennial issue for state legislatures and, more recently, for the U.S. Congress. The American medical liability system is widely acknowledged to perform poorly in several important respects. Few patients with injuries due to negligence file claims, in part because of the difficulty of obtaining attorney representation and the arduousness of the litigation process. Many meritorious cases do not result in compensation to the patient, while many non-meritorious cases do lead to settlements or jury awards. The amounts awarded are highly variable across similar injuries, inadequate in some cases and excessive in others. The highly adversarial litigation process destroys physician–patient relationships and involves considerable emotional strain for both plaintiffs and defendants. Fear of litigation chills open discussion about medical errors, resulting in missed opportunities for learning and patient safety improvement, and leads physicians to order extra tests, referrals, and other services primarily for the purpose of reducing their liability exposure. Such defensive medicine, together with the high cost of malpractice insurance premiums that increases providers’ overhead costs and the prices they charge, contributes to the upward growth of health care expenditures.


The United States requires patients injured by medical negligence to seek compensation through lawsuits, an approach that has drawbacks related to fairness, cost, and impact on medical care. Several countries, including New Zealand, Sweden, and Denmark, have replaced litigation with administrative compensation systems for patients who experience an avoidable medical injury. Sometimes called “no-fault” systems, such schemes enable patients to file claims for compensation without using an attorney. A governmental or private adjudicating organization uses neutral medical experts to evaluate claims of injury and does not require patients to prove that health care providers were negligent in order to receive compensation. Information from claims is used to analyze opportunities for patient safety improvement. The systems have successfully limited liability costs while improving injured patients’ access to compensation. American policymakers may find many of the elements of these countries’ systems to be transferable to demonstration projects in the U.S.

Our medical liability system is very expensive, highly inefficient, extremely adversarial thereby inflicting much emotional pain on all involved, and leaves most individuals with medical injury uncompensated. It is a very lousy system. This report describes far better systems in three other nations, providing very valuable lessons for the United States.

There are two important stumbling blocks if we were to decide to adopt a more rational liability system based on these models. First, these nations demonstrate greater social solidarity than the United States, such as having other social insurance programs (health care, disability, unemployment) obviating the need for for filing as many medical injury claims.

Second, just as we seem to be incapable of displacing our wasteful, inefficient, highly expensive private insurance industry, we would likely find similar resistance in displacing our wasteful, inefficient, highly expensive legal system. Health insurers and tort attorneys have the ear of Congress.

What can we do? Citizen activism. It’s empowering.