Estimating the Effect of Damages Caps in Medical Malpractice Cases: Evidence from Texas

56 Pages Posted: 26 Feb 2009 Last revised: 24 Dec 2009

David A. Hyman

Georgetown University

Bernard S. Black

Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

Charles Silver

University of Texas at Austin - School of Law

William M. Sage

University of Texas at Austin School of Law; University of Texas at Austin - Dell Medical School

Date Written: February 26, 2009

Abstract

Using claim-level data, we estimate the effect of Texas's 2003 cap on non-economic damages on jury verdicts, post-verdict payouts, and settlements in medical malpractice cases closed during 1988-2004. For pro-plaintiff jury verdicts, the cap affects 47 percent of verdicts, and reduces mean allowed non-economic damages, mean allowed verdict, and mean total payout by 73 percent, 38 percent, and 27 percent, respectively. In total, the non-econ cap reduces adjusted verdicts by $156M, but predicted payouts by only $60M. The impact on payouts is smaller because a substantial portion of the above-cap damage awards were not being paid to begin with. In cases settled without trial, the non-econ cap affects 18 percent of cases and reduces predicted mean total payout) by 18 percent. The non-econ cap has a smaller impact on settled cases than tried cases because settled cases tend to involve smaller payouts. The impact of the non-econ cap varies across plaintiff categories. Deceased, unemployed, and (likely) elderly plaintiffs suffer a larger percentage reduction in payouts than living, employed, and non-elderly plaintiffs. We also simulate the effects of different caps, and find substantial differences in cap stringency across states. Different caps reduce aggregate payouts in tried cases (all cases) by between 16 percent and 65 percent (7 percent and 42 percent). Caps on total damages have especially large effects.

Keywords: damages caps, medical malpractice, texas, settlements

JEL Classification: K13

Suggested Citation

Hyman, David A. and Black, Bernard S. and Silver, Charles and Sage, William M., Estimating the Effect of Damages Caps in Medical Malpractice Cases: Evidence from Texas (February 26, 2009). The Journal of Legal Analysis, Vol. 1, No. 1, pp. 355-409, 2009; U Illinois Law & Economics Research Paper No. 07-16; U of Texas Law, Law and Econ Research Paper No. 106; 2nd Annual Conference on Empirical Legal Studies Paper. Available at SSRN: https://ssrn.com/abstract=1349829

David A. Hyman

Georgetown University ( email )

Washington, DC 20057
United States

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)

Brussels
Belgium

Charles M. Silver

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
512-232-1337 (Phone)
512-232-1372 (Fax)

William Matthew Sage

University of Texas at Austin School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

University of Texas at Austin - Dell Medical School ( email )

Austin, TX 78712

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