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Evaluating the Medical Malpractice System and Options for Reform

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  • Daniel P. Kessler

Abstract

The U.S. medical malpractice liability system has two principal objectives: to compensate patients who are injured through the negligence of healthcare providers and to deter providers from practicing negligently. In practice, however, the system is slow and costly to administer. It both fails to compensate patients who have suffered from bad medical care and compensates those who haven't. According to opinion surveys of physicians, the system creates incentives to undertake cost-ineffective treatments based on fear of legal liability—to practice "defensive medicine." The failures of the liability system and the high cost of health care in the United States have led to an important debate over tort policy. How well does malpractice law achieve its intended goals? How large of a problem is defensive medicine and can reforms to malpractice law reduce its impact on healthcare spending? The flaws of the existing system have led a number of states to change their laws in a way that would reduce malpractice liability—to adopt "tort reforms." Evidence from several studies suggests that wisely chosen reforms have the potential to reduce healthcare spending significantly with no adverse impact on patient health outcomes.

Suggested Citation

  • Daniel P. Kessler, 2011. "Evaluating the Medical Malpractice System and Options for Reform," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 93-110, Spring.
  • Handle: RePEc:aea:jecper:v:25:y:2011:i:2:p:93-110
    Note: DOI: 10.1257/jep.25.2.93
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.25.2.93
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    References listed on IDEAS

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    1. Janet Currie & W. Bentley MacLeod, 2008. "First Do No Harm? Tort Reform and Birth Outcomes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 795-830.
    2. Sloan, Frank A. & Shadle, John H., 2009. "Is there empirical evidence for "Defensive Medicine"? A reassessment," Journal of Health Economics, Elsevier, vol. 28(2), pages 481-491, March.
    3. Kessler, Daniel & McClellan, Mark, 2002. "Malpractice law and health care reform: optimal liability policy in an era of managed care," Journal of Public Economics, Elsevier, vol. 84(2), pages 175-197, May.
    4. 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.
    5. 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.
    6. Beomsoo Kim, 2007. "The Impact of Malpractice Risk on the Use of Obstetrics Procedures," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages 79-119, June.
    7. Jonathan Klick & Thomas Stratmann, 2007. "Medical Malpractice Reform and Physicians in High-Risk Specialties," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages 121-142, June.
    8. Henry S. Farber & Michelle J. White, 1991. "Medical Malpractice: An Empirical Examination of the Litigation Process," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 199-217, Summer.
    9. Frank A. Sloan & Lindsey M. Chepke, 2008. "Medical Malpractice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195720, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. T. Renee Bowen & David M. Kreps & Andrzej Skrzypacz, 2013. "Rules with Discretion and Local Information," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1273-1320.
    2. Michael Osti & Johannes Steyrer, 2017. "A perspective on the health care expenditures for defensive medicine," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(4), pages 399-404, May.
    3. Andrew Friedson & Thomas Kniesner, 2012. "Losers and losers: Some demographics of medical malpractice tort reforms," Journal of Risk and Uncertainty, Springer, vol. 45(2), pages 115-133, October.
    4. Laurence C. Baker & Kate Bundorf & Daniel Kessler, 2014. "Expanding Patients' Property Rights In Their Medical Records," NBER Working Papers 20565, National Bureau of Economic Research, Inc.
    5. Ian A. MacKenzie & Markus Ohndorf, 2016. "Caps on Coasean transfers," Oxford Economic Papers, Oxford University Press, vol. 68(2), pages 566-584.
    6. Alberto Galasso & Hong Luo, 2016. "Tort Reform and Innovation," NBER Working Papers 22712, National Bureau of Economic Research, Inc.
    7. Bertoli, P.; Grembi, V.;, 2017. "Medical Malpractice: How legal liability affects medical decisions," Health, Econometrics and Data Group (HEDG) Working Papers 17/14, HEDG, c/o Department of Economics, University of York.
    8. Jing Hua Zhang, 2015. "Bend the healthcare cost curve without pain? The health outcome after the Medicare reimbursement cut in 1997," International Journal of Health Planning and Management, Wiley Blackwell, vol. 30(2), pages 164-172, April.
    9. Daniel Montanera, 2016. "The importance of negative defensive medicine in the effects of malpractice reform," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(3), pages 355-369, April.
    10. Laurence C. Baker & M. Kate Bundorf & Daniel P. Kessler, 2015. "Expanding Patients' Property Rights in Their Medical Records," American Journal of Health Economics, MIT Press, vol. 1(1), pages 82-100, Winter.
    11. Sofia, AmaralGarcia & Veronica, Grembi, 2011. "Curb your premium! evaluating state intervention in medical malpractice insurance," MPRA Paper 32301, University Library of Munich, Germany.
    12. Pinka Chatterji & Siyang Li & Gerald R. Marschke, 2018. "Medical Malpractice Reforms and the Location Decisions of New Physicians," NBER Working Papers 24401, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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