Medical Liability, Managed Care, and Defensive Medicine
AbstractBecause the optimal level of medical malpractice liability depends on the incentives provided by the health insurance system, the rise of managed care in the 1990s may affect the relationship between liability reform and defensive medicine. In this paper, we assess empirically the extent to which managed care and liability reform interact to affect the cost of care and health outcomes of elderly Medicare beneficiaries with cardiac illness. Malpractice reforms that directly reduce liability pressure -- such as caps on damages -- reduce defensive practices both in areas with low and with high levels of managed care enrollment. In addition, managed care and direct reforms do not have long-run interaction effects that are harmful to patient health. However, at least for patients with less severe cardiac illness, managed care and direct reforms are substitutes, so the reduction in defensive practices that can be achieved with direct reforms is smaller in areas with high managed care enrollment. We consider some implications of these results for the current debate over the appropriateness of extending malpractice liability to managed care organizations.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7537.
Date of creation: Feb 2000
Date of revision:
Publication status: published as Kessler, Daniel and Mark McClellan. "Malpractice Law And Health Care Reform: Optimal Liability Policy In An Era Of Managed Care," Journal of Public Economics, 2002, v84(2,May), 175-197.
Note: AG HC LE
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-14 (All new papers)
- NEP-HEA-2000-02-14 (Health Economics)
- NEP-IAS-2000-02-14 (Insurance Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Managed Care and the Growth of Medical Expenditures,"
NBER Working Papers
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