Damage Caps and Defensive Medicine, Revisited

33 Pages Posted: 18 Jul 2012 Last revised: 20 Jan 2017

Date Written: November 8, 2016


Does tort reform reduce defensive medicine and thus healthcare spending? Several (though not all) prior studies, using a difference-in-differences (DiD) approach, find lower Medicare spending for hospital care after states adopt caps on non-economic or total damages (“damage caps”), during the “second” reform wave of the mid-1980s. We re-examine this issue in several ways. We study the nine states that adopted caps during the “third reform wave,” from 2002-2005. We find that damage caps have no significant impact on Medicare Part A spending, but predict roughly 4% higher Medicare Part B spending. We then revisit the 1980s caps, and find no evidence of a post-adoption drop (or rise) in spending for these caps.

The online appendix can be found at http://ssrn.com/abstract=2830255.

Keywords: medical malpractice, tort reform, defensive medicine, Medicare, healthcare spending

JEL Classification: I11, I18, K23, K32

Suggested Citation

Paik, Myungho and Black, Bernard S. and Hyman, David A., Damage Caps and Defensive Medicine, Revisited (November 8, 2016). Journal of Health Economics, 2017, vol. 51, pp. 84-97, Northwestern Law & Econ Research Paper No. 13-20, Illinois Program in Law, Behavior and Social Science Paper No. LBSS14-21, Available at SSRN: https://ssrn.com/abstract=2110656 or http://dx.doi.org/10.2139/ssrn.2110656

Myungho Paik (Contact Author)

Hanyang University - College of Policy Science ( email )

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

Bernard S. Black

Northwestern University - Pritzker School of Law ( email )

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

David A. Hyman

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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