This work evaluates policy recommendations on medical error reporting systems presented in, To err is human, a report published by the Institute of Medicine. Here mandatory reporting should be applied for adverse events, while voluntary reporting is recommended for near misses. This analysis shows that an error reporting scheme of this type is not an optimal one since both near misses and adverse events may remain unreported. This work makes evident that penalising health care providers for not reporting errors, independent of error category, is crucial for reaching the first-best solution.