2014/02/01 by Ity Shurtz · 1 citation
Economics, Econometrics and Finance · Health Professions · #Healthcare Policy and Management #Healthcare cost, quality, practices #Medical Malpractice and Liability Issues
paper · doi:10.1086/674408
crossref issued 2014/02/01 · crossref published 2014/02/01 · crossref published-print 2014/02/01 · openalex publication_date 2014/02/01 · crossref created 2014/06/04 · crossref deposited 2018/04/07 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/26 · crossref indexed 2026/07/26
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.