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The Effect of Malpractice Law on Physician Supply: Evidence from Negligence-Standard Reforms

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  • Michael D. Frakes
  • Matthew B. Frank
  • Seth A. Seabury

Abstract

We explore whether the composition of the physician work force is impacted by the clinical standards imposed on physicians under medical liability rules. We theorize that physicians of particular backgrounds will be attracted to regions when the malpractice laws of those regions favor the type of medicine characteristic of those backgrounds. To test this prediction, we rely on a quasi-experiment made possible by states shifting from local to national customs as the basis for setting standards at court, a distinction that captures meaningful differences in the clinical expectations of the law in light of the well documented phenomenon of regional variations in medical practices. Using data from the Area Health Resource File from 1977 to 2005, we find that the rate of surgeons among practicing physicians increases by 2-2.4 log points following the adoption of national-standard laws in initially low surgery-rate regions—i.e., following a change in the law that effectively expects physicians to increase practice intensities. We find that this response is nearly three times greater in rural counties. We also find that this supply effect is unidirectional, with no evidence to suggest that surgeons retreat when initially high-surgery-rate regions change their laws so as to expect less intensive practice styles.

Suggested Citation

  • Michael D. Frakes & Matthew B. Frank & Seth A. Seabury, 2017. "The Effect of Malpractice Law on Physician Supply: Evidence from Negligence-Standard Reforms," NBER Working Papers 23446, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23446
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    1. repec:oup:alecon:v:18:y:2016:i:2:p:463-505. is not listed on IDEAS
    2. Amitabh Chandra & Douglas O. Staiger, 2007. "Productivity Spillovers in Health Care: Evidence from the Treatment of Heart Attacks," Journal of Political Economy, University of Chicago Press, vol. 115, pages 103-140.
    3. Michael Frakes, 2013. "The Impact of Medical Liability Standards on Regional Variations in Physician Behavior: Evidence from the Adoption of National-Standard Rules," American Economic Review, American Economic Association, vol. 103(1), pages 257-276, February.
    4. Sloan, Frank A, 1990. "Experience Rating: Does It Make Sense for Medical Malpractice Insurance," American Economic Review, American Economic Association, vol. 80(2), pages 128-133, May.
    5. Craig L. Garthwaite, 2012. "The Doctor Might See You Now: The Supply Side Effects of Public Health Insurance Expansions," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 190-215, August.
    6. Kathryn Zeiler & Charles Silver & Bernard Black & David A. Hyman & William M. Sage, 2007. "Physicians' Insurance Limits and Malpractice Payments: Evidence from Texas Closed Claims, 1990-2003," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages 9-45, June.
    7. Amy Finkelstein & Matthew Gentzkow & Heidi Williams, 2016. "Sources of Geographic Variation in Health Care: Evidence From PatientMigration," The Quarterly Journal of Economics, Oxford University Press, vol. 131(4), pages 1681-1726.
    8. 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.
    9. Michael Frakes & Matthew B. Frank & Seth Seabury, 2015. "Do Physicians Respond to Liability Standards?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(1), pages 58-77, March.
    10. Skinner, Jonathan, 2011. "Causes and Consequences of Regional Variations in Health Care," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 45-93, Elsevier.
    11. 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.
    12. 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.
    13. David A. Matsa, 2007. "Does Malpractice Liability Keep the Doctor Away? Evidence from Tort Reform Damage Caps," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages 143-182, June.
    14. repec:oup:amlawe:v:18:y:2016:i:2:p:463-505. is not listed on IDEAS
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    More about this item

    JEL classification:

    • 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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