By Raj Singh
This paper evaluates the impact of malpractice reforms on average malpractice payment awards, frequency of malpractice claims, and malpractice premiums for internists, surgeons, and OB/GYNS. We also empirically test the physician-induced demand (PID) hypothesis in the context of the medical malpractice environment. Our results suggest that caps on noneconomic damages and total damages as well as patient compensation funds are successful in reducing average payments, while damage caps and collateral source rule reform were found to lower malpractice claim incidence. When grouping claims by severity level, we find that noneconomic damage caps and patient compensation funds are more effective at reducing average payment with increasing severity level, while total damage caps induce the greatest reductions in payments for cases of medium severity. Also, non-economic damage caps were found to only significantly decrease the incidence of medium severity claims. With regards to malpractice premiums, we found that implementation of total damage caps as well as modification of joint-and-several liability were associated with lower premiums for all specialists. Finally, we evaluate the notion of ‘defensive medicine’ by studying whether higher malpractice premiums result in greater Medicare payments. Based on our model, increases of $10,000 in OB/GYN premiums are estimated to result in a 0.81% rise in total spending. Of the reforms studied, modification of joint-and-several liability had the most significant and consistent effects in reducing Medicare reimbursements for all categories of spending analyzed, and total damage caps were also estimated to effectively slow the growth of spending in specifications without premiums.
Advisor: Tracy Falba | JEL Codes: I1, I18, I19 | Tagged: