How Liability Law Affects Medical Productivity

45 Pages Posted: 18 Apr 2000 Last revised: 16 Oct 2010

See all articles by Daniel P. Kessler

Daniel P. Kessler

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Mark B. McClellan

Brookings Institution; Council of Economic Advisors; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2000

Abstract

Previous research suggests that "direct" reforms to the liability system -- reforms designed to reduce the level of compensation to potential claimants -- reduce medical expenditures without important consequences for patient health outcomes. We extend this research by identifying the mechanisms through which reforms affect the behavior of health care providers. Although we find that direct reforms improve medical productivity primarily by reducing malpractice claims rates and compensation conditional on a claim, our results suggest that other policies that reduce the time spent and the amount of conflict involved in defending against a claim can also reduce defensive practices substantially. In addition, we find that "malpractice pressure" has a larger impact on diagnostic rather than therapeutic treatment decisions. Our results provide an empirical foundation for simulating the effects of untried malpractice reforms on health care costs and outcomes, based on their predicted effects on the malpractice pressure facing medical providers.

Suggested Citation

Kessler, Daniel Philip and McClellan, Mark B., How Liability Law Affects Medical Productivity (February 2000). NBER Working Paper No. w7533. Available at SSRN: https://ssrn.com/abstract=215856

Daniel Philip Kessler (Contact Author)

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Mark B. McClellan

Brookings Institution ( email )

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Council of Economic Advisors ( email )

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