The real problem, as "Big" John McCarthy pointed out, is time. An MMA referee often doesn't have it on his side. A fighter gets hit, goes down, and his opponent is on top of him immediately. It's a referee's job to determine whether the fighter is momentarily stunned, perhaps hurt, or already on his way into unconsciousness. And the official has to make this decision in a hurry, because the other fighter is already cocking his fist back to deliver another blow.
There's no knockdown rule to give the ref a chance to assess the situation, so he has to make a split-second decision. And sometimes it's going to be the wrong decision. That's part of the sport, and it always will be. Unless we want sweeping rules changes to make MMA more like boxing (and we don't), this is something we're going to have to live with.
It doesn't mean our world is coming to an end. It doesn't mean there are no qualified refs. It just means that this is a difficult job, and it's not getting any easier. The best we can ask for is refs who are experienced, educated -- on all aspects of MMA, not just the stand-up portion -- and decisive.
There are a few already who fit that description -- most of the time. But even they aren't going to get it right all the time. They can't. The best they can do is learn from their own mistakes and try not to repeat them. And if they can't do that, then they should find a new line of work. But let's not lose our heads over this just yet. There are still enough good refs in MMA to get us through the night.
Looking for completeness or tidiness in the execution or efficiency of MMA refereeing will always prove illusory. Even if the process by which referees are educated and trained systemically improves, MMA is systemically going to create situations where individual subjective judgment fails to cohere with the prevailing wisdom of the majority. To what extent error can be shaved off is debatable and an important topic to revisit early and often, but the reality is that referees will continue to make poor decisions that affect health and wealth.
But how ineffective is the current refereeing arrangement? The current balance of improper judgments has produced some admittedly costly errors, but the existing crop of referees is by no means some sort of dramatic failure either.
The far more important issue to the sport is not incompetent refereeing, but poor judging. A referee is prone to error, but is also performing several functions at once. He must not only monitor the health of the fighters and when they are or aren't capable of fighting, they must enforce the rules of unarmed combat as well. Throw in intense moments that require snap judgment and of course we've created a problematic situation. But judges have one real function: evaluate who is winning or won the fight. They have the opportunity to sit without obstruction, observe the contest, think about each fighters' performance between rounds and cerebrally evaluate performace. Their job is fraught with difficulties, to be fair. But the incidence of poor judging is far too high given the opportunity to get matters right and when combined with poor refereeing, creates a toxic mess.