Medical Malpractice Liability and Physicians’ Behavior:Experimental Evidence

Medical liability systems have been accused of increasing health expenditure insofar as they induce the practice of defensive medicine. Despite the large evidence on the role of medical malpractice liability, the identification of its causal effect on physicians’ treatment decisions is a difficult task. In this paper we study for the first time in a controlled laboratory setting the effect of introducing the risk of being sued for medical malpractice on the provision of physicians’ medical services. In our experimental sessions both medical and non-medical students choose how many medical services to provide for heterogeneous patients. We implement exogenous variations in the presence of medical malpractice liability and expected probability of being sued, and thus we exploit the within-subject variation in the provision of medical services to infer the causal effect of malpractice liability. Furthermore, we analyze the impact of malpractice liability under different physicians’ payment methods, which allows us to discuss the interplay between medical liability and payment systems. Our behavioral data show that introducing malpractice liability pressure does lead physicians to choose a higher amount of medical services, regardless of the physicians’ payment system. However, we also find that the payment system in which malpractice liability is implemented makes the difference under the societal perspective, with relevant implications for health policy.