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The Receding Tide of Medical Malpractice Litigation: Part 2—Effect of Damage Caps

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  • Myungho Paik
  • Bernard Black
  • David Hyman

Abstract

We study the effect of damage caps adopted in the 1990s and 2000s on medical malpractice claim rates and payouts. Prior studies found some evidence that caps reduce payout per claim, but mixed and weak evidence on whether caps reduce paid claim rates and payout per physician. However, most prior studies do not allow for the gradual phase‐in of damage caps, which usually apply only to lawsuits filed after the reform's effective date, or only to injuries after the effective date. Once we allow for phase‐in, we find strong evidence that damage caps reduce both claim rates and payout per claim, with a large combined impact on payout per physician. The drop in claim rates is concentrated in claims with larger payouts—the ones that we expect to be most affected by a damages cap. Stricter caps have larger effects. Some prior studies also find a large impact of tort reforms other than damage caps. Once we allow for phase‐in, we find that these other reforms have no significant impact on either claim rates or payout per claim.

Suggested Citation

  • Myungho Paik & Bernard Black & David Hyman, 2013. "The Receding Tide of Medical Malpractice Litigation: Part 2—Effect of Damage Caps," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 10(4), pages 639-669, December.
    • Handle: RePEc:wly:empleg:v:10:y:2013:i:4:p:639-669
    DOI: 10.1111/jels.12022
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    References listed on IDEAS

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    1. Hao Yu & Olesya Baker, 2022. "Do noneconomic damage caps reduce medical malpractice insurance premiums? Evidence from North Carolina," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(2), pages 201-218, June.
    2. Sebastian Panthöfer, 2022. "Do doctors prescribe antibiotics out of fear of malpractice?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(2), pages 340-381, June.
    3. Bernard S. Black & Amy R. Wagner & Zenon Zabinski, 2017. "The Association between Patient Safety Indicators and Medical Malpractice Risk: Evidence from Florida and Texas," American Journal of Health Economics, MIT Press, vol. 3(2), pages 109-139, Spring.
    4. Kowsar Yousefi & Bernard Black & David A. Hyman, 2023. "Paid medical malpractice claims: How strongly does the past predict the future?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 20(4), pages 818-851, December.
    5. Panthöfer, Sebastian, 2016. "Tort Reform and the Length of Physician Office Visits," UC3M Working papers. Economics 23861, Universidad Carlos III de Madrid. Departamento de Economía.
    6. Matter, Ulrich & Stutzer, Alois, 2015. "Politico-economic determinants of tort reforms in medical malpractice," Working papers 2015/02, Faculty of Business and Economics - University of Basel.
    7. Michael D. Frakes & Matthew B. Frank & Seth A. Seabury, 2017. "The Effect of Malpractice Law on Physician Supply: Evidence from Negligence-Standard Reforms," NBER Working Papers 23446, National Bureau of Economic Research, Inc.
    8. Frakes, Michael & Jena, Anupam B., 2016. "Does medical malpractice law improve health care quality?," Journal of Public Economics, Elsevier, vol. 143(C), pages 142-158.
    9. Zabinski, Zenon & Black, Bernard S., 2022. "The deterrent effect of tort law: Evidence from medical malpractice reform," Journal of Health Economics, Elsevier, vol. 84(C).
    10. Michael D. Frakes & Jonathan Gruber, 2018. "Defensive Medicine: Evidence from Military Immunity," NBER Working Papers 24846, National Bureau of Economic Research, Inc.
    11. Avraham, Ronen & Schanzenbach, Max, 2015. "The impact of tort reform on intensity of treatment: Evidence from heart patients," Journal of Health Economics, Elsevier, vol. 39(C), pages 273-288.
    12. Frakes, Michael D. & Frank, Matthew B. & Seabury, Seth A., 2020. "The effect of malpractice law on physician supply: Evidence from negligence-standard reforms," Journal of Health Economics, Elsevier, vol. 70(C).
    13. Black, Bernard & Traczynski, Jeffrey & Udalova, Victoria, 2022. "How Do Insurers Price Medical Malpractice Insurance?," IZA Discussion Papers 15392, Institute of Labor Economics (IZA).
    14. Matter, Ulrich & Stutzer, Alois, 2016. "The role of party politics in medical malpractice tort reforms," European Journal of Political Economy, Elsevier, vol. 42(C), pages 17-35.

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