Do Doctors Practice Defensive Medicine?
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)
THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE (May 1996)
"Defensive medicine" is a potentially serious social problem: if fear of liability drives health care providers to administer treatments that do not have worthwhile medical benefits, then the current liability system may generate inefficiencies many times greater than the costs of compensating malpractice claimants. To obtain direct empirical evidence on this question, we analyze the effects of malpractice liability reforms using data on all elderly Medicare beneficiaries treated for serious heart disease in 1984, 1987, and 1990. We find that malpractice reforms that directly reduce provider liability pressure lead to reductions of 5 to 9 percent in medical expenditures without substantial effects on mortality or medical complications. We conclude that liability reforms can reduce defensive medical practices.
JEL Classification: I11, I18, I38, K32
Date posted: October 26, 1999