Courts, Scheduled Damages, and Medical Malpractice Insurance
University of Economics, Prague; Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)
Copenhagen Business School
Baffi Center Research Paper No. 2013-145
We assess the impact of the introduction of schedules of non-economic damages (i.e. tiered caps systems) on the behavior of insurers operating in the medical liability market for hospitals while controlling the performance of the judicial system, measured as court backlog. Using a difference-in-differences strategy on Italian data, we find that the introduction of schedules increases the presence of insurers (i.e. medical liability market attractiveness) only in inefficient judicial districts. In the same way, court inefficiency is attractive to insurers for average values of schedules penetration of the market, with an increasing positive impact of inefficiency as the territorial coverage of schedules increases. Finally, no significant impact is registered on paid premiums. Our analysis sheds light on a complex set of elements affecting the decisions of insurers in malpractice markets. The analysis questions whether schedules of non-economic damages, as well as other limitations on compensations to medical malpractice victims, are an effective way to improve the payoff of health care providers.
Number of Pages in PDF File: 41
Keywords: Schedules of Non-Economic Damages, Courts, Medical Malpractice Insurance, Difference-in-Differences
JEL Classification: I10, K32, K40
Date posted: December 14, 2013
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