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Tort Reform and the Demand for Medical Care: Evidence from State-by-State Variation in Non-Economic Damages Caps

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Author Info
Anca Cotet () (Department of Economics, Ball State University)
Abstract

Non-economic damages caps are meant to improve access to medical care by decreasing the operational costs of medical practices and encouraging entry in medical field. The literature indicates they are successful in increasing the number of physicians; however, by reducing the cost of malpractice noneconomic damages caps also affect physicians’ incentives to provide high quality care. A lower expected quality of care could reduce the demand for medical services. In this case changes in the number of physicians can not pick up the entire impact of non-economic damages caps on medical care delivery. This paper uses state level panel data to obtain estimates of the impact of non-economic damages caps on medical care utilization rates. The empirical results suggest that non-economic damages caps have a negative impact on admissions and surgeries in community hospitals, and on prenatal care. Since these results may be affected by selection, this paper uses the timing of adoption of term limits for legislators as an instrumental variable to isolate the causal effect of non-economic damages caps. In this specification the estimates are larger but statistically significant only in the case of surgeries. Specifically, I find that non-economic damages caps are associated with 14 fewer surgeries per 1000 individuals.

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File URL: http://web.bsu.edu/cob/econ/research/papers/bsuecwp200901cotet.pdf
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Paper provided by Ball State University, Department of Economics in its series Working Papers with number 200901.

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Length: 39 pages
Date of creation: Jan 2009
Date of revision: Jan 2009
Handle: RePEc:bsu:wpaper:200901

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  1. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law & Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  2. Katherine Baicker & Amitabh Chandra, 2004. "The Effect of Malpractice Liability on the Delivery of Health Care," NBER Working Papers 10709, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Browne, Mark J & Puelz, Robert, 1999. "The Effect of Legal Rules on the Value of Economic and Non-economic Damages and the Decision to File," Journal of Risk and Uncertainty, Springer, vol. 18(2), pages 189-213, August. [Downloadable!] (restricted)
  4. Janet Currie & W. Bentley MacLeod, 2006. "First Do No Harm?: Tort Reform and Birth Outcomes," NBER Working Papers 12478, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr. [Downloadable!] (restricted)
  6. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Besley, Timothy & Case, Anne, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 769-98, August. [Downloadable!] (restricted)
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  8. Paul H. Rubin & Joanna M. Shepherd, 2007. "Tort Reform and Accidental Deaths," Journal of Law & Economics, University of Chicago Press, vol. 50, pages 221-238. [Downloadable!]
  9. Daniel Diermeier & Michael Keane & Antonio Merlo, 2002. "A Political Economy Model of Congressional Careers," PIER Working Paper Archive 04-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2004. [Downloadable!]
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  10. W. Kip Viscusi & Patricia H. Born, 2005. "Damages Caps, Insurability, and the Performance of Medical Malpractice Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(1), pages 23-43. [Downloadable!] (restricted)
  11. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June. [Downloadable!] (restricted)
  12. Kessler, Daniel & McClellan, Mark, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 353-90, May. [Downloadable!] (restricted)
  13. Sloan, Frank A, 1990. "Experience Rating: Does It Make Sense for Medical Malpractice Insurance," American Economic Review, American Economic Association, vol. 80(2), pages 128-33, May. [Downloadable!] (restricted)
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