The Impact of Tort Reform on Intensity of Treatment: Evidence from the Heart Patients

Journal of Health and Economics Volume 39, pp 273-288 (January 2015)

49 Pages Posted: 2 Aug 2009 Last revised: 25 Jul 2019

See all articles by Ronen Avraham

Ronen Avraham

Tel Aviv University - Buchmann Faculty of Law; University of Texas at Austin - School of Law

Max M. Schanzenbach

Northwestern University - Pritzker School of Law

Date Written: December 1, 2013

Abstract

This paper employs a unique data set comprised of a large sample of hospital inpatients to analyze the effect of non-economic damage caps on treatment intensity. We consider whether damage caps affect several measures of treatment intensity, including the cost of treatment and whether a patient receives a major intervention in the form of a coronary artery by-pass or angioplasty. We find strong evidence treatment intensity declines after a cap on non-economic damages. The probability of receiving a major intervention declines by 1.5 to 2 percentage points after non-economic damage caps are enacted. The effect on costs is not always statistically significant, but in models with state-specific trends, costs decline by as much as four percent. Using the Center for Disease Control’s Vital Statistics data, we find that tort reform is not associated with an increase in mortality from coronary heart disease; if anything, mortality declines. These results provide evidence that damage limitations can reduce defensive medicine without detriment to patient care. However, we also find evidence that when doctors have discretion to perform a by-pass, caps on non-economic damages increase the probability that a by-pass is performed. Because by-pass is more profitable than angioplasty, this result is consistent with increased induced-demand (so-called offensive medicine) after damage caps even if on net costs decreased.

Keywords: defensive medicine, induced demand, offensive medicine, tort reform

Suggested Citation

Avraham, Ronen and Schanzenbach, Max Matthew, The Impact of Tort Reform on Intensity of Treatment: Evidence from the Heart Patients (December 1, 2013). Journal of Health and Economics Volume 39, pp 273-288 (January 2015) , Available at SSRN: https://ssrn.com/abstract=1441957 or http://dx.doi.org/10.2139/ssrn.1441957

Ronen Avraham (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv, 69978
Israel

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

727 East Dean Keeton Street
Austin, TX 78705
United States
(512) 232-1357 (Phone)

HOME PAGE: http://www.utexas.edu/law/faculty/profile.php?id=ra22397

Max Matthew Schanzenbach

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

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