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The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums

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  • Ronen Avraham
  • Leemore S. Dafny
  • Max M. Schanzenbach
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    Abstract

    We evaluate the effect of tort reform on employer-sponsored health insurance premiums by exploiting state-level variation in the timing of reforms. Using a dataset of healthplans representing over 10 million Americans annually between 1998 and 2006, we find that caps on non-economic damages, collateral source reform, and joint and several liability reform reduce premiums by 1 to 2 percent each. These reductions are concentrated in PPOs rather than HMOs, suggesting that can HMOs can reduce “defensive” healthcare costs even absent tort reform. The results are the first direct evidence that tort reform reduces healthcare costs in aggregate; prior research has focused on particular medical conditions.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15371.

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    Date of creation: Sep 2009
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    Publication status: published as “The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums,” with Ronen Avraham and Max Schanzenbach, Journal of Law, Economics, and Organizations, October 2012, 28(4).
    Handle: RePEc:nbr:nberwo:15371

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    1. Blomqvist, Ake, 1991. "The doctor as double agent: Information asymmetry, health insurance, and medical care," Journal of Health Economics, Elsevier, vol. 10(4), pages 411-432.
    2. Leemore Dafny, 2008. "Are Health Insurance Markets Competitive?," NBER Working Papers 14572, National Bureau of Economic Research, Inc.
    3. Daniel Altman & David M. Cutler & Richard Zeckhauser, 2000. "Enrollee Mix, Treatment Intensity, and Cost in Competing Indemnity and HMO Plans," NBER Working Papers 7832, National Bureau of Economic Research, Inc.
    4. Sherry Glied, 2003. "Health Care Costs: On the Rise Again," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 125-148, Spring.
    5. Gruber, Jon & Kim, John & Mayzlin, Dina, 1999. "Physician fees and procedure intensity: the case of cesarean delivery," Journal of Health Economics, Elsevier, vol. 18(4), pages 473-490, August.
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    7. Danzon, Patricia M & Pauly, Mark V & Kington, Raynard S, 1990. "The Effects of Malpractice Litigation on Physicians' Fees and Incomes," American Economic Review, American Economic Association, vol. 80(2), pages 122-27, May.
    8. Dubay, Lisa & Kaestner, Robert & Waidmann, Timothy, 2001. "Medical malpractice liability and its effect on prenatal care utilization and infant health," Journal of Health Economics, Elsevier, vol. 20(4), pages 591-611, July.
    9. Danzon, Patricia, 1984. "The Frequency and Severity of Medical Malpractice Claims," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 115-48, April.
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    11. Glied, Sherry, 2000. "Managed care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 13, pages 707-753 Elsevier.
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    Cited by:
    1. Arab Naz & Umar Daraz & Waseem Khan & Qaisar Khan & Tariq Khan & Anwar Alam & Irum Mughal, 2013. "Human’s Complexity and Man’s Atrocity: Causes Of Medical Malpractices among Pakhtuns of Pakistan," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(3), pages 286-297, March.

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