Impact of Tort Reform on Private Health Insurance Coverage

Abstract:     
This study evaluates the impact of tort reform on health insurance coverage using the Current Population Survey's March Demographic Files. Proponents of tort reform argue that reform will reduce medical malpractice insurance costs, damage awards, and costs associated with defensive medicine. If proponents are correct, these cost reductions should lower the price of healthcare and increase health insurance coverage. On the other hand, if the prior tort law was functioning well, reform may increase medical costs by reducing doctors' care-taking or increasing the number of unnecessary procedures. In this case, tort reform could actually decrease insurance coverage by raising the price of health care. We evaluate the effect of eight common tort reforms on private health insurance coverage between 1981 and 2004. In triple-difference specifications, we find that reform generally increased health insurance coverage for the most price-sensitive groups (the young, the self-employed, and the single). We also find that those uninsured around the time of reform were more likely to obtain private insurance after reform. Given the multicollinearity of many reforms, it is difficult to gauge the impact of individual reforms. However, the evidence suggests that limitations on punitive and non-economic damages do not affect private insurance coverage, while caps on total damages, collateral source reform, and reforms to liability and payment structure are associated with increased private insurance coverage for price-sensitive groups. Accordingly, we conclude that some tort reforms are effective in reducing healthcare costs. The magnitude of the effects on price sensitive groups suggests that some tort reforms can reduce health care costs by as much as two percent.

Keywords: tort law, health law, health economics, insurance

Working Paper Series