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Patient Welfare under the Legal Standard of Care

Author

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  • Olbrich Anja

    (Institute of Social Medicine and Health Economics, Otto-von-Guericke University)

Abstract

Presuming that the standard of care reflected in the physician reimbursement scheme harms patients, German and US courts enforce their traditional legal standard of care in malpractice lawsuits. This paper summarizes the literature, evaluates the legal standard in microeconomic terms and determines the insurers' and courts' impact on patient welfare. The legal standard proves to be inefficiently high. By contrast, patient welfare is maximized when insurers apply a two-part reimbursement scheme that induces physicians not to comply with the legal standard. If this is infeasible, another reimbursement scheme is suggested.

Suggested Citation

  • Olbrich Anja, 2008. "Patient Welfare under the Legal Standard of Care," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(2), pages 1-19, July.
    • Handle: RePEc:bpj:bejeap:v:8:y:2008:i:2:n:9
    DOI: 10.2202/1935-1682.1827
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    References listed on IDEAS

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    1. Mark McClellan, 1997. "Hospital Reimbursement Incentives: An Empirical Analysis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 91-128, March.
    2. Steven Shavell, 1982. "On Liability and Insurance," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 120-132, Spring.
    3. Danzon, Patricia M., 2000. "Liability for medical malpractice," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 26, pages 1339-1404, Elsevier.
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    Cited by:

    1. Anja Olbrich, 2008. "The optimal negligence standard in health care under supply-side cost sharing," International Journal of Health Economics and Management, Springer, vol. 8(2), pages 73-85, June.

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