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Tort Reform and the Demand for Medical Care: Evidence from State-by-State Variation in Non-Economic Damages Caps

  • Anca Cotet

    ()

    (Department of Economics, Ball State University)

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    Previous literature indicates that non-economic damages caps increase the number of physicians but finds no significant effect on health. A potential explanation is that, by reducing the cost of malpractice, caps affect physicians’ incentives to provide high quality care, an important determinant of the demand of medical care. Using county level panel data this paper finds that caps adoption leads to a 4 percents decrease in surgeries, a 2 percent decrease in hospital admissions but has no significant effect on emergency care, outpatient visits, birth rates, or prenatal care conditional on births. There is also evidence of increase use of physicians located across the border. Taken together these results provide suggestive evidence of a decrease in demand leading to a net negative effect on utilization rates.

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    File URL: http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp200901r1cotet.pdf
    File Function: Second version, March 2010
    Download Restriction: no

    Paper provided by Ball State University, Department of Economics in its series Working Papers with number 200901.

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    Length: 46 pages
    Date of creation: Jan 2009
    Date of revision: Mar 2010
    Handle: RePEc:bsu:wpaper:200901
    Contact details of provider: Postal: Muncie, Indiana 47306
    Phone: (765) 285-5360
    Fax: (765) 285-8024
    Web page: http://www.bsu.edu/econ

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    1. Frank A. Sloan & Lindsey M. Chepke, 2008. "Medical Malpractice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195720, June.
    2. Daniel Diermeier & Michael Keane & Antonio Merlo, 2002. "A Political Economy Model of Congressional Careers," PIER Working Paper Archive 04-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2004.
    3. Katherine Baicker & Amitabh Chandra, 2005. "The Effect of Malpractice Liability on the Delivery of Health Care," NBER Chapters, in: Frontiers in Health Policy Research, Volume 8 National Bureau of Economic Research, Inc.
    4. Browne, Mark J & Puelz, Robert, 1999. "The Effect of Legal Rules on the Value of Economic and Non-economic Damages and the Decision to File," Journal of Risk and Uncertainty, Springer, vol. 18(2), pages 189-213, August.
    5. Eric Helland & Mark H. Showalter, 2009. "The Impact of Liability on the Physician Labor Market," Journal of Law and Economics, University of Chicago Press, vol. 52(4), pages 635-663, November.
    6. W. Kip Viscusi & Patricia H. Born, 2005. "Damages Caps, Insurability, and the Performance of Medical Malpractice Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(1), pages 23-43.
    7. Janet Currie & W. Bentley MacLeod, 2008. "First Do No Harm? Tort Reform and Birth Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 795-830, 05.
    8. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
    9. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
    10. Kessler, Daniel & McClellan, Mark, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 353-90, May.
    11. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc.
    12. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
    13. Besley, Timothy & Case, Anne, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 769-98, August.
    14. Paul H. Rubin & Joanna M. Shepherd, 2007. "Tort Reform and Accidental Deaths," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 221-238.
    15. Sloan, Frank A, 1990. "Experience Rating: Does It Make Sense for Medical Malpractice Insurance," American Economic Review, American Economic Association, vol. 80(2), pages 128-33, May.
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