The authors present an economic analysis of the consequences to patients of iatrogenic illness and disability. Using data from a random sample of 794 patients who suffered iatrogenic injury in New York hospitals in 1984, the authors estimate the economic value of lost earnings and household productivity due to disability, the fraction of disability attributable to the iatrogenic event, and the cost of increased medical expenditures. Extrapolating their results to the entire population of New York, the authors find a total cost of $3.8 billion (in 1984) attributable to iatrogenic injuries. The authors describe a hypothetical, no-fault medical insurance system and, through cost analysis, demonstrate that it would be no more expensive, and perhaps cheaper and more economically efficient, than existing tort-based medical liability.