TY - JOUR
T1 - Malpractice law, physicians’ financial incentives, and medical treatment
T2 - How do they interact?
AU - Shurtz, Ity
N1 - Publisher Copyright:
© 2014 by The University of Chicago. All rights reserved.
PY - 2014/1/1
Y1 - 2014/1/1
N2 - The effects of malpractice law and financial incentives on physicians are typically studied independently. This paper shows that to make both positive and normative statements about medical malpractice liability, one must consider physicians’ legal and financial incentives jointly. I develop a simple model to show that when treatment is unprofitable at the margin, mitigation of liability lowers treatment levels; conversely, when treatment is profitable, mitigation of liability raises them. Motivated by this simple theoretical framework, I analyze the impact of a tort reform in Texas that mitigated malpractice liability. Consistent with the theory, the rate of cesarean sections among commercially insured mothers, for whom the procedure is considered profitable, increased by 2 percentage points relative to the rate of cesarean sections among mothers covered by Medicaid, for whom the procedure is thought to be unprofitable.
AB - The effects of malpractice law and financial incentives on physicians are typically studied independently. This paper shows that to make both positive and normative statements about medical malpractice liability, one must consider physicians’ legal and financial incentives jointly. I develop a simple model to show that when treatment is unprofitable at the margin, mitigation of liability lowers treatment levels; conversely, when treatment is profitable, mitigation of liability raises them. Motivated by this simple theoretical framework, I analyze the impact of a tort reform in Texas that mitigated malpractice liability. Consistent with the theory, the rate of cesarean sections among commercially insured mothers, for whom the procedure is considered profitable, increased by 2 percentage points relative to the rate of cesarean sections among mothers covered by Medicaid, for whom the procedure is thought to be unprofitable.
UR - http://www.scopus.com/inward/record.url?scp=84920926877&partnerID=8YFLogxK
U2 - 10.1086/674408
DO - 10.1086/674408
M3 - Article
AN - SCOPUS:84920926877
SN - 0022-2186
VL - 57
SP - 1
EP - 29
JO - Journal of Law and Economics
JF - Journal of Law and Economics
IS - 1
ER -