The Welfare Effects of Medical Malpractice Liability

Darius Lakdawalla and Seth Seabury

No 15383, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Policymakers and the public are concerned about the role of medical malpractice liability in the rising cost of medical care. We use variation in the generosity of local juries to identify the causal impact of malpractice liability on medical costs, mortality, and social welfare. The effect of malpractice on medical costs is large relative to its share of medical expenditures, but relatively modest in absolute terms--growth in malpractice payments over the last decade and a half contributed at most 5.0% to the total real growth in medical expenditures, which topped 33% over this period. On the other side of the ledger, malpractice liability leads to modest reductions in patient mortality; the value of these more than likely exceeds the cost impacts of malpractice liability. Therefore, policies that reduce expected malpractice costs are unlikely to have a major impact on health care spending for the average patient, and are also unlikely to be cost-effective over conventionally accepted ranges for the value of a statistical life.

JEL-codes: I1 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-hea
Note: EH PE
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Citations: View citations in EconPapers (7)

Published as Lakdawalla, Darius N. & Seabury, Seth A., 2012. "The welfare effects of medical malpractice liability," International Review of Law and Economics, Elsevier, vol. 32(4), pages 356-369.

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Journal Article: The welfare effects of medical malpractice liability (2012)
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