It doesn't include all the costs of un-necessary tests doctors do because they fear getting sued. No matter how big or small the payout in a lawsuit, that's not a good place to be and is going to leave a black mark on a dr's record no matter the outcome.
The theme for the article was that doctors need to slow down and spend more time listening to patients. If anything that should reduce the legal risks of inadequate or inappropriate care.
And yes, I'm sure doctors and patients would both agree that docs need to slow down and spend more time listening to patients. As a solution, Dr. Gawande proposes compensation based on quality of care (rather than production). In theory, this seems to make most sense - but I have yet to see a practical way of assessing "quality." What stops doctors from refusing to see sicker patients? Is a doctor at fault if the patient doesn't follow his advice?
It's not just doctors that remember that one patient that didn't get scanned. Lawyers do, too.