An Economic Model of Costing ‘Early Offers’ Medical Malpractice Reform
The John M. Olin Program in Law and Economics Working Paper No. 10
43 Pages Posted: 27 Jul 2017 Last revised: 12 Aug 2020
Date Written: September 30, 2003
Today the key to the unworkability of tort liability as applied to personal injury is the complexity of the insured event. Tort liability insurance calls for payment of economic and noneconomic (i.e., mostly pain and suffering) damages in lawsuits based on fault. The determination of both fault and the value of pain and suffering is especially complex in medical malpractice litigation. Consequently, the liability insurance system is fraught for both sides with uncertainty that causes long delays and huge costs, including huge transaction costs. The result is not an insurance system for promptly paying needy injury victims, but an insurance system for prolonged and hugely expensive fighting about payments to both deserving and undeserving claimants — to the great detriment of both patients and health care providers.
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