Optimality of no-fault medical liability systems

Tina Kao and Rhema Vaithianathan

No 480, PIE/CIS Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: This paper considers a model of defensive medicine where doctors are imperfect agents of insured patients. A national insurer subsidises both curative and preventive medical care consumed by risk averse patients. We show that in such an environment, the optimal liability regime is similar to the no-fault systems of Sweden and New Zealand where the doctor faces zero liability. The reason is that the subsidy on preventive medicine is a better instrument to induce the optimal level of care than the malpractice regime.

Keywords: no-fault liability systems; malpractice liability; defensive medicine; copayment ratio (search for similar items in EconPapers)
JEL-codes: D60 I11 I18 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2010-07
New Economics Papers: this item is included in nep-hea
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