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Will Tort Reform Bend the Cost Curve? Evidence from Texas

46 Pages Posted: 17 Jul 2010 Last revised: 9 Nov 2013

Myungho Paik

Hanyang University - College of Policy Science

Bernard S. Black

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

David A. Hyman

Georgetown University

Charles Silver

University of Texas at Austin - School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: May 9, 2012

Abstract

Will tort reform “bend the cost curve?” Health-care providers and tort reform advocates insist the answer is “yes.” They claim that defensive medicine is responsible for hundreds of billions of dollars in health-care spending every year. If providers and reform advocates are right, once damages are capped and lawsuits are otherwise restricted, defensive medicine, and thus overall health-care spending, will fall substantially. We study how Medicare spending changed after Texas adopted comprehensive tort reform in 2003, including a strict damages cap. We compare Medicare spending in Texas counties with high claim rates (high risk) to spending in Texas counties with low claim rates (low risk), since tort reform should have a greater impact on physician incentives in high-risk counties. Pre-reform, Medicare spending levels and trends were similar in high- and low-risk counties. Post-reform, we find no evidence that spending levels or trends in high-risk counties declined relative to low-risk counties and some evidence of increased physician spending in high-risk counties. We also compare spending trends in Texas to national trends, and find no evidence of reduced spending in Texas post-reform, and some evidence that physician spending rose in Texas relative to control states. In sum, we find no evidence that Texas’s tort reforms bent the cost curve downward.

Keywords: defensive medicine, medical malpractice risk, tort reform

JEL Classification: I11, I18, K13, K23, K32

Suggested Citation

Paik, Myungho and Black, Bernard S. and Hyman, David A. and Silver, Charles, Will Tort Reform Bend the Cost Curve? Evidence from Texas (May 9, 2012). Northwestern Law & Econ Research Paper No. 10-17; as published in Journal of Empirical Legal Studies, vol. 9, pp. 173-216 (2012); Northwestern Law & Econ Research Paper No. 10-17; University of Illinois Law & Economics Research Paper No. LE10-013; U of Texas Law, Law and Econ Research Paper No. 188. Available at SSRN: https://ssrn.com/abstract=1635882 or http://dx.doi.org/10.2139/ssrn.1635882

Myungho Paik

Hanyang University - College of Policy Science ( email )

222 Wangsimni-ro Seongdong-gu
Seoul, 04763
Korea, Republic of (South Korea)

Bernard Black

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

David Hyman (Contact Author)

Georgetown University ( email )

Washington, DC 20057
United States

Charles 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)

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