The Deterrent Effect of Tort Law: Evidence from Medical Malpractice Reform
46 Pages Posted: 4 Feb 2019 Last revised: 3 Mar 2020
Date Written: March 1, 2020
Appendix is available at: https://ssrn.com/abstract=3319933
We examine whether caps on non-economic damages in medical malpractice cases affect in-hospital patient safety. We use Patient Safety Indicators (PSIs)—measures of adverse events—as proxies for safety. In difference-in-differences (DiD) analyses of five states that adopt caps during 2003-2005, we find that patient safety gradually worsens after cap adoption, relative to control states. Standard DiD inference can be unreliable with a small number of treated units. We therefore develop a randomization inference-based test for DiD statistical inference with few treated units but multiple, potentially correlated outcomes, and confirm statistical strength with this nonparametric approach. We also provide evidence that the decline in patient safety is unlikely to be driven by patient selection.
Keywords: medical malpractice, torts, healthcare quality, patient safety
JEL Classification: I13, I18, K13
Suggested Citation: Suggested Citation