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The Effect of Malpractice Liability on the Delivery of Health Care

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  • Katherine Baicker
  • Amitabh Chandra

Abstract

The growth of medical malpractice liability costs has the potential to affect the delivery of health care in the U.S. along two dimensions. If growth in malpractice payments results in higher malpractice insurance premiums for physicians, these premiums may affect the size and composition of the physician workforce. The growth of potential losses from malpractice liability might also encourage physicians to practice 'defensive medicine.' We use rich new data to examine the relationship between the growth of malpractice costs and the delivery of health care along both of these dimensions. We pose three questions. First, are increases in payments responsible for increases in medical malpractice premiums? Second, do increases in malpractice liability drive physicians to close their practices or not move to areas with high payments? Third, do increases in malpractice liability change the way medicine is practiced by increasing the use of certain procedures? First, we find that increases in malpractice payments made on behalf of physicians do not seem to be the driving force behind increases in premiums. Second, increases in malpractice costs (both premiums overall and the subcomponent factors) do not seem to affect the overall size of the physician workforce, although they may deter marginal entry, increase marginal exit, and reduce the rural physician workforce. Third, there is little evidence of increased use of many treatments in response to malpractice liability at the state level, although there may be some increase in screening procedures such as mammography.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10709.

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Date of creation: Aug 2004
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Publication status: published as Baicker, Katherine, and Amitabh Chandra. "The Effect Of Malpractice On The Delivery Of Health Care," Forum for Health Economics and Policy, 2005, v8, Article 4, (Berkeley Electronic Press)
Handle: RePEc:nbr:nberwo:10709

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  1. Dubay, Lisa & Kaestner, Robert & Waidmann, Timothy, 1999. "The impact of malpractice fears on cesarean section rates," Journal of Health Economics, Elsevier, vol. 18(4), pages 491-522, August.
  2. Kessler, Daniel P. & McClellan, Mark B., 2002. "How liability law affects medical productivity," Journal of Health Economics, Elsevier, vol. 21(6), pages 931-955, November.
  3. Frank A. Sloan & Lindsey M. Chepke, 2008. "Medical Malpractice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195720, December.
  4. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc.
  5. Kessler, Daniel & McClellan, Mark, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 353-90, May.
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Cited by:
  1. James Prieger, 2007. "The Impact of Cost Changes on Industry Entry and Exit," Journal of Economics, Springer, vol. 91(3), pages 211-243, July.
  2. A. Spithoven, 2009. "Why U.S. health care expenditure and ranking on health care indicators are so different from Canada’s," International Journal of Health Care Finance and Economics, Springer, vol. 9(1), pages 1-24, March.
  3. Katherine Baicker & Amitabh Chandra, 2005. "The Consequences of the Growth of Health Insurance Premiums," American Economic Review, American Economic Association, vol. 95(2), pages 214-218, May.
  4. Eberhard Feess, 2012. "Malpractice liability, technology choice and negative defensive medicine," The European Journal of Health Economics, Springer, vol. 13(2), pages 157-167, April.
  5. Katherine Baicker & Amitabh Chandra, 2005. "The Labor Market Effects of Rising Health Insurance Premiums," NBER Working Papers 11160, National Bureau of Economic Research, Inc.
  6. James E. Prieger, 2005. "The Impact of Cost Changes on Industry Dynamics," Working Papers 51, University of California, Davis, Department of Economics.
  7. Darius N. Lakdawalla & Seth A. Seabury, 2009. "The Welfare Effects of Medical Malpractice Liability," NBER Working Papers 15383, National Bureau of Economic Research, Inc.
  8. Jonathan T. Kolstad & Amanda E. Kowalski, 2012. "Mandate-Based Health Reform and the Labor Market: Evidence from the Massachusetts Reform," Cowles Foundation Discussion Papers 1855, Cowles Foundation for Research in Economics, Yale University.
  9. Harrington, Scott E. & Danzon, Patricia M. & Epstein, Andrew J., 2008. ""Crises" in medical malpractice insurance: Evidence of excessive price-cutting in the preceding soft market," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 157-169, January.
  10. Anca Cotet, 2009. "Tort Reform and the Demand for Medical Care: Evidence from State-by-State Variation in Non-Economic Damages Caps," Working Papers 200901, Ball State University, Department of Economics, revised Mar 2010.
  11. Anja Olbrich, 2008. "The optimal negligence standard in health care under supply-side cost sharing," International Journal of Health Care Finance and Economics, Springer, vol. 8(2), pages 73-85, June.

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