Defensive medicine has been highlighted as a major driver of health care costs here and elsewhere.  It probably is when you consider the indirect costs (how it changes the way we practice).

This subject was discussed on my blog, "Healthcare Reform & Managed Care" on MDNG.com, Monday, December 1, 2008.  

Please refer to: "The Cost or Benefit from Practicing Defensively; Managed Care 101 in 2010 (Part V)"