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Calculating Medical Malpractice Settlement Damages

Published February 23, 2022

Medical malpractice occurs when a medical professional (or facility) causes preventable patient injury. Such deviations from clinical protocol have irreversible consequences, often including wrongful death cases.

Once a victim begins the legal process, their primary concern is knowing what their case is worth. On top of a life-changing injury, they potentially now face the financial pressure of medical bills and lost wages. The event and possible financial pressure can impact the claimant’s mental health. Knowing the potential compensation of this arduous process often helps to ease concerns.

As professional forensic economists, the Knowles Group can help determine the value of malpractice special damages and provide expert witness testimony to support your case. In this article, we’ll outline how we calculate medical malpractice economic damages.

Is there a formula for calculating economic damages in medical malpractice settlements?

Every medical malpractice claim is unique. The same injury can affect two people in drastically different ways. Their health, career, and fringe benefit resources affect the claim’s final value. Due to these differences, there’s no exact formula for calculating medical malpractice claims.

Yet, there are general guidelines that most medical malpractice claims follow. Lawyers usually separate damages into two categories. The first is economic damages (often referred to as special damages), and the second is non-economic damages (often referred to as general damages).

Based on this information, an inexact formula would be as follows:

Settlement Value = Economic Damages (Past & Future) + Non-Economic Damages (Past & Future)

Economic damages are calculated utilizing assumptions and generally accepted methodologies. Examples include medical expenses and future earnings capacity. Non-economic damages are less precise. They involve elements such as pain and suffering, which are hard to assign a financial value. One method for determining them is investigating comparable cases from the past. Even so, determining the exact value of a claim requires thorough analysis.

Average award of medical malpractice lawsuits

The average medical malpractice settlement in the United States awards $242,000. Those that go to trial average around $1,000,000. Minor settlements only pay out-of-pocket expenses. In contrast, US history’s largest medical malpractice settlement was $229,000,000.

Examples of Malpractice Settlement Amounts

  • $0 – $10,000: minor cases, such as resolved allergic reactions or misplaced shots and IVs.
  • $10,000 – $30,000: short-term disabilities (six months or less). Causes can include missed diagnosis, minor prenatal errors, and minor surgical mistakes.
  • $30,000 – $100,000: cases that need minor surgeries or rehab to correct.
  • $100,000 – $500,000: more severe malpractice situations that cause injury, infection, illness, along with pain and suffering (mistakes leading to miscarriage, fertility struggles, chronic pain, amputation, nursing home abuse, etc.).
  • $1,000,000+: permanent injuries due to severe professional negligence. These cases involve permanent disability and wrongful death. Often the guilty provider loses their license as a result.

A Hypothetical Case

John Doe is a long-haul truck driver who experienced a severe road accident. While driving behind a dump truck, a large piece of concrete and rebar fell out of the bed. Debris came crashing through John’s windshield, and a rebar punctured his lower abdomen.

Paramedics rushed him to a local hospital for emergency surgery. On the way, they confirmed that John had full use of his arms and legs.

John’s surgeon made a critical mistake that damaged his spinal cord during surgery. Despite efforts to repair the damage, John permanently lost the use of his legs. John has now hired a medical malpractice lawyer and is suing for medical negligence.

We’ll use John’s case to demonstrate the breakdown of damages in his medical malpractice case.

Types of Economic Damages

Economic damages are lost cash flows (past, present, and future) due to medical malpractice. These damages can include the cost of past and future medical services and lost earnings. The following examples are economic damages that merit compensation.

Medical Bills & Expenses

This includes any medical service (past, present, and future) required due to medical negligence. The victim must prove these expenses relate to the medical malpractice.

In John’s case, his past medical costs are $273,300 and $42,000 each year moving forward. John is now 43 years old, so the damage analysis estimates 35 years of future medical expenses, totaling $1,470,000. This brings his lifetime medical bills and expenses related to the malpractice to $1,743,000.

Lost Wages & Ability to Work

Lost wages & the ability to work are proven lost wages (past, present, or future) caused by medical malpractice. These can include base pay, bonuses, commissions, benefits, pay raises, pension, and retirement fund contributions. To learn more, read our article about calculating lost wages.

After reading about paraplegic truckers around the nation, John insisted on returning to work after two years of recovery. It’s determined John will lose $88,712 in wages per year or $177,424 over the two-year recovery period.

Assistive & Adaptive Devices

If the patient needs assistive & adaptive devices, the life care plan will reflect their cost. Assistive & adaptive devices are products that help patients with disabilities complete daily tasks. These include wheelchairs, stairlifts, communication devices, modified vehicles, and more.

John will need assistive & adaptive equipment. Wheelchairs and home modifications will cost $163,400 the year following his injury. Then, $18,000 per year over the next 35 years, totaling $630,000. Because John has chosen to work again, his settlement will include $245,000 for a truck with hand controls. The total assisted & adaptive device compensation will be $1,038,400.

Medication & Rehabilitation

Medication & rehabilitation damages include any prescriptions or therapy (occupational, physical, speech, psychological, etc.) related to medical malpractice.

John needs rehabilitation therapy and medication during the first year, estimating $81,670. Continued rehab treatment will total $9,000 per year over 35 years, calculating $315,000. The total medication & rehabilitation costs Jim’s lawyers expect is $396,670.

Types of Non-Economic Damages

Malpractice victims are also entitled to compensation for frustration, pain, and mental suffering, referred to as non-economic damages. These damages often cause the most controversy in settlement negotiations because they are more challenging to define.

Non-economic damages are often determined using a seriousness factor. This factor is also referred to as a “non-economic multiplier” and usually ranges between 2 and 5. The victim’s legal team will usually use a multiplier of 4 or 5. In contrast, the insurance company or insurance adjuster will usually multiply by 2 or 3. The seriousness factor is then multiplied by the total value of economic damages.

In John’s case, he has experienced every form of non-economic damage in the most strict sense. By all rights, the seriousness factor of his case is 5/5. However, John’s desire to return to work changes this. In the end, his law firm chose to calculate with a multiplier of 4.

Pain & Suffering

Pain and suffering are the stresses caused by medical malpractice injuries. These damages fall into two categories: physical and mental pain and suffering. Physical pain and suffering are the bodily pain or disability resulting from malpractice. Mental pain and suffering include emotional and psychological distress reducing the patient’s quality of life.

Mental Anguish

Mental anguish is the emotional and psychological pain caused by negligent malpractice. Significant emotional distress can cause post-traumatic stress disorder, suicidal depression, intense anger, sleep disturbance, and much more.

Disfigurement

Disfigurement is a permanent change to the victim’s body like amputation and scarring. Disfigurement has severe emotional and psychological consequences that can ruin a victim’s self-image. It can also impede the victim’s ability to maintain healthy relationships.

Loss of Quality of Life

Loss of quality of life decreases a victim’s ability to enjoy and participate in life as they did before their injury. This includes the inability to exercise, function sexually, sleep comfortably, perform simple daily tasks, and more.

Medical Malpractice Settlement Formula

The total settlement value is the sum of all past, present, and future damages. Here is a breakdown of the formula considering both damages in detail.

Economic Damages:

Medical Expenses + Lost Wages & Diminished Future Earnings Capacity + Assistive & Adaptive Devices + Medication & Rehabilitation = Total Economic Damages

John’s Economic Damages:

($1,743,000) + ($177,424) + ($1,038,400) + ($396,670) = $3,355,494 

Non-Economic Damages:

Total Economic Damages x Non-Economic Multiplier = Total Non-Economic Damages

John’s Non-Economic Damages:

($3,355,494) x (4) = $13,421,976

Total Settlement Value:

Total Economic Damages + Total Non-Economic Damages = Total Settlement Value

John’s Total Settlement Value:

($3,355,494) + ($13,421,976) = $16,777,470

The total compensation John’s medical malpractice claim will demand is $16,777,470 in the settlement negotiations. If the defendant’s insurance entity doesn’t offer a reasonable amount, John and his attorney may possibly take the case to trial.

More than 93% of medical malpractice cases end in some form of settlement. While < href=”https://www.physicianleaders.org/news/the-verdict-surviving-medical-malpractice-trial” target=”_blank” rel=”noopener”>only 7% of medical malpractice lawsuits end with a jury verdict. The reason is a jury verdict is far less predictable than settlement negotiations. The judge will instruct jurors to use their good sense and similar past cases to evaluate the case during the trial. This process creates a margin of error that could lead to victims walking away with less or more than they deserve. Another way to determine the value of a settlement is to multiply the trial value by the chance of winning in court.Settlement Damages vs. Winning a Trial

Trial Value x Chance of Winning (%) = Settlement Value

Forensic Economists Will Accurately Calculate Damages

The Knowles Group will provide accurate calculations of the economic damages for the medical malpractice claim. If an expert economic witness is needed, we’ll testify in court to the damage calculations for your medical malpractice claim. We work with both plaintiffs and defendants alike. We can critique opposing analyses and give testimony to ensure reasonable damages (if any) on behalf of the defendant. When hired by the plaintiff, we calculate the estimate of damages and provide expert testimony to ensure a fair settlement or jury verdict.

If you’ve suffered a medical malpractice incident or find yourself in need of expert defense, have your medical malpractice attorney give us a call today.

Eric Knowles, MBA

The Knowles Group has been providing professional economic services to the legal community since 1979. The firm has worked on behalf of thousands of attorneys in a dozen states and Canada. Testimony has been provided in both federal and state venues.