The Deterrent Effect of Tort Law: Evidence from Medical Malpractice Reform
46 Pages Posted: 11 Nov 2013 Last revised: 15 Nov 2018
Date Written: November 14, 2018
A principal goal of tort law is to deter negligent behavior, but there is little empirical evidence on whether it does so. We study that question for medical malpractice liability, where prior studies have found weak, often null results. We examine whether state adoption of caps on non-economic damages—a central legal reform that reduces liability risk for providers—affects in-hospital patient safety. We use Patient Safety Indicators (PSIs)—measures of adverse events developed by the Agency for Healthcare Research and Quality—as proxies for overall safety. In difference-in-differences (DiD) analyses of five states that adopt caps on non-economic damages during 2003-2005, we find strong evidence that patient safety gradually worsens after the reforms, relative to control states. We also develop a nonparametric, randomization inference-based test for statistical inference in DiD designs with a small number of treated units, for which parametric methods can be unreliable. Our method takes advantage of the availability of multiple, potentially correlated outcomes.
Keywords: medical malpractice, torts, healthcare quality, patient safety
JEL Classification: I13, I18, K13
Suggested Citation: Suggested Citation