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The Effect of Malpractice Liability on the Delivery of Health Care

Author

Listed:
  • Katherine Baicker
  • Amitabh Chandra
Abstract
The growth of medical malpractice liability costs has the potential to affect the delivery of health care in the U.S. along two dimensions. If growth in malpractice payments results in higher malpractice insurance premiums for physicians, these premiums may affect the size and composition of the physician workforce. The growth of potential losses from malpractice liability might also encourage physicians to practice 'defensive medicine.' We use rich new data to examine the relationship between the growth of malpractice costs and the delivery of health care along both of these dimensions. We pose three questions. First, are increases in payments responsible for increases in medical malpractice premiums? Second, do increases in malpractice liability drive physicians to close their practices or not move to areas with high payments? Third, do increases in malpractice liability change the way medicine is practiced by increasing the use of certain procedures? First, we find that increases in malpractice payments made on behalf of physicians do not seem to be the driving force behind increases in premiums. Second, increases in malpractice costs (both premiums overall and the subcomponent factors) do not seem to affect the overall size of the physician workforce, although they may deter marginal entry, increase marginal exit, and reduce the rural physician workforce. Third, there is little evidence of increased use of many treatments in response to malpractice liability at the state level, although there may be some increase in screening procedures such as mammography.

Suggested Citation

  • Katherine Baicker & Amitabh Chandra, 2004. "The Effect of Malpractice Liability on the Delivery of Health Care," NBER Working Papers 10709, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10709
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    References listed on IDEAS

    as
    1. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc.
    2. Kessler, Daniel P. & McClellan, Mark B., 2002. "How liability law affects medical productivity," Journal of Health Economics, Elsevier, vol. 21(6), pages 931-955, November.
    3. Dubay, Lisa & Kaestner, Robert & Waidmann, Timothy, 1999. "The impact of malpractice fears on cesarean section rates," Journal of Health Economics, Elsevier, vol. 18(4), pages 491-522, August.
    4. Daniel Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 353-390.
    5. Frank A. Sloan & Lindsey M. Chepke, 2008. "Medical Malpractice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195720, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • K1 - Law and Economics - - Basic Areas of Law

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