Ezra Klein argues against defensive medicine – but I think he makes some good points here:
DM exists, to be sure, but it’s not caused by lawsuits. It’s caused by patients. If you define DM as procedures that wouldn’t be ordered in a perfectly logical world, there’s plenty of it. But the reason most of these tests are run has little to do with the abstract possibility of a lawsuit that the doctor is insured against anyway. They’re done in order convert probabilistic diagnoses into virtual certainties . . .
. . . We have a medical system largely run off physician say-so, and physicians are human. Since they’re not responsible for the macro (the medical budget) but the micro (the individual), they treat for certainty, not savings. Treatments a computer program would, on the merits, deny, they approve. If conservatives want to kill DM, the way to do so is easy: rationing, bureaucracy, spending caps . . .
I also think that increased high-deductible HSA use will help decrease defensive tests that patients will be unwilling to pay for. Just make sure you document well.