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The Welfare Effects of Medical Malpractice Liability

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  • Darius N. Lakdawalla
  • Seth A. Seabury

Abstract

Policymakers and the public are concerned about the role of medical malpractice liability in the rising cost of medical care. We use variation in the generosity of local juries to identify the causal impact of malpractice liability on medical costs, mortality, and social welfare. The effect of malpractice on medical costs is large relative to its share of medical expenditures, but relatively modest in absolute terms--growth in malpractice payments over the last decade and a half contributed at most 5.0% to the total real growth in medical expenditures, which topped 33% over this period. On the other side of the ledger, malpractice liability leads to modest reductions in patient mortality; the value of these more than likely exceeds the cost impacts of malpractice liability. Therefore, policies that reduce expected malpractice costs are unlikely to have a major impact on health care spending for the average patient, and are also unlikely to be cost-effective over conventionally accepted ranges for the value of a statistical life.

Suggested Citation

  • Darius N. Lakdawalla & Seth A. Seabury, 2009. "The Welfare Effects of Medical Malpractice Liability," NBER Working Papers 15383, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15383
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    Cited by:

    1. 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.
    2. 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.
    3. Scott Barkowski, 2017. "Does Regulation of Physicians Reduce Health Care Spending?," Southern Economic Journal, John Wiley & Sons, vol. 83(4), pages 1074-1097, April.
    4. Congressional Budget Office, 2010. "Selected CBO Publications Related to Health Care Legislation, 2009-2010," Reports 21993, Congressional Budget Office.
    5. Bertoli, Paola & Grembi, Veronica, 2019. "Malpractice risk and medical treatment selection," Journal of Public Economics, Elsevier, vol. 174(C), pages 22-35.
    6. Helland, Eric & Seabury, Seth A., 2015. "Tort reform and physician labor supply: A review of the evidence," International Review of Law and Economics, Elsevier, vol. 42(C), pages 192-202.
    7. Michael Frakes & Jonathan Gruber, 2020. "Defensive Medicine and Obstetric Practices: Evidence from the Military Health System," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 17(1), pages 4-37, March.
    8. Frakes, Michael & Jena, Anupam B., 2016. "Does medical malpractice law improve health care quality?," Journal of Public Economics, Elsevier, vol. 143(C), pages 142-158.
    9. Myungho Paik & Bernard S. Black & David A. Hyman & Charles Silver, 2012. "Will Tort Reform Bend the Cost Curve? Evidence from Texas," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 9(2), pages 173-216, June.
    10. Eric Helland & Anupam B. Jena & Dan P. Ly & Seth A. Seabury, 2016. "Self-insuring against Liability Risk: Evidence from Physician Home Values in States with Unlimited Homestead Exemptions," NBER Working Papers 22031, National Bureau of Economic Research, Inc.
    11. Buzzacchi, Luigi & Scellato, Giuseppe & Ughetto, Elisa, 2016. "Frequency of medical malpractice claims: The effects of volumes and specialties," Social Science & Medicine, Elsevier, vol. 170(C), pages 152-160.
    12. Andrew I. Friedson, 2017. "Medical Malpractice Damage Caps and Provider Reimbursement," Health Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 118-135, January.
    13. Congressional Budget Office, 2010. "Selected CBO Publications Related to Health Care Legislation, 2009-2010," Reports 21993, Congressional Budget Office.

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