Katherine Baicker and Amitabh Chandra: Malpractice reform would only have a limited effect on medical costs

Professors Katherine Baicker and Amitabh Chandra, of Harvard's School of Health Policy and Management and Kennedy School of Government respectively, speak about the effects of malpractice and malpractice insurance premiums on health care costs. They conclude that while the effect is not zero, the Republicans may be overstating their case:


There is a great deal of public debate about potential reforms of the malpractice system. A closer look at available data sug- gests that some of the rhetoric surrounding this debate may be misleading. First, increases in malpractice payments do not seem to be the driving force behind increases in premiums. Second, increases in malpractice costs do not seem to affect the overall size of the physician workforce, although they may affect some subsets of the physician population more severe- ly. Furthermore, no research has linked the decline in physi- cian supply to worse health outcomes or reduced patient sat- isfaction. Third, we find evidence that the strongest effect of greater malpractice pressure is in increased use of imaging services, with somewhat smaller effects on the use of other discretionary, generally low-risk services such as physician visits and consultations, use of diagnostic tests, and minor procedures. We find little evidence of increased utilization of major surgical procedures.

While our study does not speak directly to the effect of malpractice reforms, it does provide insight into the mecha- nisms through which those reforms are likely (and unlikely) to operate. Our analysis suggests that state-level tort reform is unlikely to affect the practice of medicine by averting local physician shortages. We also find no relationship between the level of malpractice premiums and the presence of traditional tort reform measures such as damage caps. This evidence does not imply that traditional tort reform measures are inef- fective, for they may have reduced the growth of (perhaps unusually high) premiums in the states where they were enacted. However, our results do call into question the view that states with traditional tort reforms have lower levels of premiums or defensive medicine than states that have not implemented such reforms. Last, while increasing malprac- tice liability pressures do seem to substantially increase expenditures on diagnostic procedures, we find little evidence that malpractice payments are driving the dramatic increase in overall health care expenditures.