Doctors' medical malpractice liability insurance
premiums are at an all-time high. As has been
widely reported in the press, escalating med-mal
premiums have driven doctors to retire early,
shut down their businesses, or reduce the scope
of their practices. In areas of the country
with particularly high premiums, there is concern
that patients' access to care has been compromised.
Insurance companies and most doctors conclude
that the root cause of higher insurance costs
is higher tort awards. The American Medical
Association, for example, says that medical
liability reform is their top priority because
"rapidly increasing medical liability insurance
premiums caused by escalating jury awards are
seriously threatening patient access to care."
On the other side of this debate are plaintiffs'
attorneys and their allied consumer groups who
attribute the boom and bust "insurance
cycle" to investment returns and, alternatively,
accuse insurance companies of "price gouging."
Such claims are often picked up, uncritically,
by the mainstream press.
Our study makes four contributions to this debate:
- We show that medical malpractice premiums
are closely related to medical malpractice
tort awards. Over the long run, premiums
closely track awards, and premiums adjust
to short-run award variation as well. Indeed,
insurance companies' short-run reaction to
award levels is the primary driver of the
so-called insurance cycle. In addition, med-mal
premiums are closely related to tort awards
across states. The correlation in premiums
and awards across the states suggests strongly
that tort award levels, not investment returns,
are the primary explanatory factor for changes
in insurance premiums, since investment returns
are unlikely to vary markedly across states.
- We show that medical malpractice premiums
are not explained by insurance industry price
gouging. For the price-gouging hypothesis
to make sense, insurance industries must be
exercising monopoly power. Looking at insurance
industry 4-firm concentration ratiosa
measure of market powerwe find that
states with more concentrated insurance industries
actually have lower premiums, even when controlling
for other explanatory factors.
- We show that medical malpractice tort awards
are related to some factors not rationally
related to injuries. For instance, states
judicial electoral systems have predictive
value on the expected level of tort award.
- We show that malpractice tort awards
and thus insurance premiums can vary dramatically
for reasons having little or nothing to do
with negligence. We reach this conclusion
through a novel test of the tort system, in
which we compare awards and rates of determination
of negligence in the tort system with rates
determined by the independent medical board
review system. Although board review outcomes
are imperfect, they are biased, if at all,
against findings of negligence, because physicians
will not allow frivolous complaints to result
in disciplinary actions. The tort system shows
no or even a slight negative correlation with
the board review systems negligence
determinations, suggesting that the system
is influenced by factors not related to negligence.
ALEXANDER TABARROK is associate professor
of economics at George Mason University and
director of research for The Independent Institute.
His recent book (with Eric Helland), Judge
and Jury: American Tort Law on Trial, examines
issues such as how race and poverty impact trial
decisions by juries, how judges compare to juries
when awarding damages, and the influence of
judicial electoral systems on the decisions
of judges. Professor Tabarrok is also the editor
of the books Entrepreneurial Economics: Bright
Ideas from the Dismal Science, The Voluntary
City: Choice, Community, and Civil Society
(with David Beito and Peter Gordon), and Changing
the Guard: Private Prisons and the Control of
Crime. His papers have appeared in the Journal
of Law and Economics, Public Choice,
Economic Inquiry, the Journal of Health
Economics, the Journal of Theoretical
Politics, The American Law and Economics
Review, Kyklos, and many other journals.
Popular articles by Professor Tabarrok have
appeared in magazines and newspapers throughout
the United States. He writes regularly for the
blog, Marginal Revolution.
AMANDA AGAN conducts research on law,
crime, housing, and other topics at George Mason
University, where she also studies economics.
Medical malpractice premiums are
at an all-time high.
The American Medical Association (AMA) says
that at least twenty states are experiencing
full-blown liability crises, with twenty-two
more showing signs of serious problems.
Under pressure from the tort system some doctors
have retired early, shut down their businesses,
or reduced the scope of their practices.
The U.S. Department of Health and Human Services
says that the liability crisis is threatening
access to care and jeopardizing patient safety.
What is behind the recent increase
in premiums? On one side of the debate are insurers
and doctors, who attribute the increase to higher
malpractice tort awards. On the other side are
attorneys and their allied consumer groups,
who typically claim that insurers are exercising
monopoly power to make up for investment losses
due to poor planning in the boom of the 1990s.
Such claims are often picked up, uncritically,
by the mainstream press. For example, writing
last year in The New York Times, Joseph
Treaster and Joel Brinkley argued that "legal
costs do not seem to be at the root of the recent
increase in malpractice insurance premiums,"which
they attributed instead to the "nature
of competition in the industry".
We make four contributions to this
debate. First, we show that medical malpractice
premiums are closely related to medical malpractice
awards through time and across the states. Second,
we show that premiums are not explained by insurance
industry monopoly power. Third, given our findings
that malpractice insurance premiums are determined
by tort awards, and that such awards vary substantially
across the states, we ask what factors determine
award variation. For example, are states with
high awards and premiums like teenagers who
face high auto insurance premiums because of
high accident rates, or are awards and premiums
high because of factors not rationally related
to underlying risks? We show that awards are
related to some factors (such as judicial electoral
systems) not rationally related to injuries.
Finally, in a novel test of the tort system,
we compare awards and rates of determination
of negligence in the tort system with rates
determined by the independent board review system.
The test results suggest that awards and thus
insurance premiums can vary dramatically for
reasons having little or nothing to do with
Malpractice Premiums and Awards
In their New York Times article,
Treaster and Brinkley (2005) use a graph, shown
as the left graph in Figure One, that they claim
supports their position that medical malpractice
premiums have "outpaced the rise in payments
for claims." The graph does indeed show
that premiums are more variable than
awards/payouts and thus may increase (or decrease)
in some periods faster than awards. But this
fact is not inconsistent with the idea that
awards drive premiums. We can demonstrate the
latter point most easily by rescaling the axes
to overlay the two lines, as shown in the right
graph. The rescaling
has two virtues. First, the graph used in The
New York Times encourages a naïve
interpretation that the distance between the
premiums and awards line represents profits.
In fact, the graph does not show the administrative
and legal costs of settling claims and defending
cases that do not win, so one cannot draw any
conclusions about profits from the graph. Second,
and more important, the rescaled graph makes
it easier to see that premiums oscillate around
awards: sometimes the premium line is above
the award line and sometimes it is below; but
over time, the two lines move in tandem.
To test the proposition that malpractice premiums
followed awards over time, we performed a "cointegration
test" on the data used to create the New
York Times graph, which came from the insurance
rating agency A.M. Best.This statistical analysis
demonstrated that premiums and awards are "cointegrated,"
that is, linked in a stable long-run relationship.
We also note that the data confirm that variations
in awards drive premiums. The reason is that
whenever two variables are cointegrated, there
is an associated error-correction mechanism
that determines what happens when the two variables
depart from their long-run relationship. In
this case, the theoretical error-correction
mechanism is easy to see: if premiums in the
insurance industry long exceed awards (plus
will drive premiums down; and if premiums long
fall below awards (plus expenses), bankruptcy,
exit, and survival behavior will drive premiums
up. Thus, premiums should adjust to awards.
And because awards are determined by tort law
and judge and jury behavior, there is little
reason to believe that
awards will adjust to premiums. Looking at the
data, we see exactly this result in the error-correction
mechanism: premiums respond rapidly to changes
in awards but awards do not respond to changesin
Premiums track awards in the long run but may
depart from awards in the short run. This variation
does not necessarily imply that factors other
than awards are important determinants of premiums
in the short run. Today's premiums must cover
future awards, which are unknown. As a result,
insurance firms set today's premiums based upon
their forecast of future awards. The cointegration
test mentioned above showed that there is no
tendency for medical malpractice awards to fluctuate
around a fixed
mean, so past awards are not very useful for
predicting future awards. Awards from a decade
ago, for example, probably tell us very little
about awards in the next decade. The most useful
awards for predicting future awards are the
most recent ones, especially if these suggest
a permanent change in the level of awards. By
definition, there aren't many recent awards.
Thus, insurance companies have a very difficult
job: they must forecast future awards using
only a few data points. Forecasts under these
conditions can be highly variable, even more
variable than the series being forecast.
Short-term departures of premiums from awards,
therefore, should be expected even when awards
Plaintiffs' lawyers and "consumer advocacy"
groups often blame periodic liability crises
on the "insurance cycle" rather than
on changes in tort awards. A group called Americans
for Insurance Reform (AIR) is representative
of this line of thinking:
Not only has there been no real increase
[in] lawsuits, jury awards or any tort system
costs at any time during the last three decades,
but the astronomical premium increases that
some doctors have been charged during periodic
insurance "crises" over this time
period are in exact sync with the economic cycle
of the insurance industry, driven by interest
rates and investments. In other words, insurance
companies raise rates when they are seeking
ways to make up for declining interest rates
and market-based investment
But tort awards and the insurance cycle are
not competing explanations for increases in
premiums. As described above, the insurance
cycle itself is a consequence of the unpredictability
of tort awards. Thus,
trying to dampen premiums by regulating other
thingsJ. Robert Hunter, director of Insurance
for the Consumer Federation of America, urges
state regulators to "enforce the ratings
laws in order to end the boom and bust swing"is
likely to be futile.
The best way to reduce the volatility of premiums
is to reduce the volatility of awards. The more
predictable future tort awards are, the more
predictable insurance premiums will be.
Medical Malpractice Awards and
Premiums Across the States
We can factor out much of the short-run
variability in premiums and awards across time
by looking at the relationship across the states
at a single point in time. Figure Two is a map
of mean malpractice awards per doctor per year
(averaged over 1999-2001). States with high
mean awards are in green,
and states with low awards are in gray. The
variation in the average award per doctor is
surprisingly large: mean awards range from a
low of $1,688 in Wisconsin to a high of $10,025
in Pennsylvania. It
is highly doubtful that medical errors and malpractice
are six times more common and egregious in
Pennyslvania than in Wisconsin. Later we examine
whether factors related to patients or physicians
can explain these striking differences.
The large variation in awards lets
us test whether variation in awards is associated
with variation in premiums. Figure Three graphs
awards per doctor against premiums and finds
a strong positive association.
States with higher awards per doctor,
simply put, have higher insurance premiums.
This positive relationship remains even after
we control for other variables that may affect
insurance premiums in a given state, such as
the 4-firm concentration ratio, the number of
medical malpractice cases per doctor,
and whether a state has a patient compensation
fund (see Regression Appendix, Table A ).
Profiteering, Greed, and Gouging?
In addition to blaming recent spikes
in medical malpractice premiums on the "insurance
cycle," trial lawyers and their advocates
are wont to accuse medical malpractice insurers
of "illegal pricing." Connecticut
attorney general Richard Blumenthal calls for
"more aggressive oversight to prevent and
Federal and state regulators should
thoroughly scrutinize recent rate increases
and take appropriate corrective action. Affordable
medical malpractice insurance is critical to
public health. Expensive insurance rates become
a matter of life and death when they drive doctors
out of businessas is happening in Connecticut
Insurance company greed can be hazardous
to our health.
Echoing Blumenthal, AIR's J. Robert Hunter
argues that "insurance companies are price-gouging
A necessary condition for so-called price gouging
is lack of competition.
If price gouging is a problem, therefore, we
should find that prices are higher when there
is less competition. To test the price-gouging
hypothesis, we calculated a measure of competition
by state, the "4-firm concentration
ratio." A 4-firm concentration ratio of
60 percent, for example, means that together
the largest four firms have a 60 percent market
share. If lack of competition is driving up
rates, we should find a positive relationship
between medical malpractice premiums and the
Figure Four on the following page shows that,
in contrast to the prediction of the price-gouging
hypothesis, medical malpractice premiums decrease
as the concentration ratio increases. Although
the negative relationship is not strong, we
certainly do not find the positive relationship
that we would
expect from the price-gouging hypothesis. Again,
this negative relationship between medical malpractice
premiums and the insurance industry concentration
ratio holds, even after controlling for awards
and patient compensation funds (see Regression
Appendix, Table A).
What's Driving Awards?
If medical malpractice awards are the major
source of changes in insurance premiums, it
is important to understand the factors that
drive awards. If awards are primarily driven
by factors that bear a rational relationship
to medical malpractice, the fact that awards
are higher in some states than in others may
simply show that the tort system is functioning
properly. But if awards are higher in some states
than in others for reasons having little to
do with medical malpractice, we may question
whether the tort system is doing its job. If
awards vary for reasons other than malpractice,
for example, they cannot be acting as a deterrent,
nor can they be providing just compensation.
We test whether awards vary due to variations
in true malpractice rates in two ways. First,
we look directly at whether variation can be
explained by variables such as income per capita
or infant mortality, variables that might plausibly
be related to malpractice awards or rates, or
whether awards are more affected by factors
that are less plausibly related to true malpractice.
Second, we conduct a novel test of the tort
system by comparing it with the medical review
Medical malpractice awards per doctor can be
high for two reasons: either the average award
per claim is very high; or there are many claims
per doctor (or both). Breaking medical malpractice
awards per doctor into two components, the award
per claim and the number of claims per doctor,
is useful: some variables may affect awards
and others the number of claims.
With only fifty states, the number of variables
that we can examine is limited (because the
number of data points limits what statisticians
call "degrees of freedom"). Thus,
we focus on the few that we think are most likely
to be important or that have previously been
shown to be important in the literature. We
include the death rate and the infant mortality
rate in our data. Although deaths are not necessarily
indicative of malpractice, it is likely that
awards will be higher in cases involving deathand
deaths may, in themselves, encourage litigation.
We include the percentage of people below the
poverty level because Helland and Tabarrok (2003,
2006) find that awards increase dramatically
in relation to county poverty rates. As county
poverty rates increase from 0-5 percent to 20-25
percent, for example, Helland and Tabarrok find
that the average award triples from $400,000
to $1.2 million. Similarly,
Helland and Tabarrok (2002, 2006) find that
awards are higher against out-of-state defendants
in states using partisan judicial elections,
so we include partisan elections as a potentially
(Both of the latter effects will be harder to
pick up in state data than in the more disaggregated
data used in the cited papers.) Finally, awards
are likely to be higher in states with higher
per-capita income, for
the simple reason that economic damages will
by definition be higher, all else being equal.
The results are presented in Table 1.
Variation in Awards and Claims Per
Rate per 1,000
Mortality (Deaths Per 1,000 Live
Below Poverty Level
Electoral System for Judges
Income Per Capita
errors in parentheses
* significant at 10%
** significant at 5%
*** significant at 1%
Focusing first on the mean award per claim,
we find that an increase in the death rate of
one per 1,000 (slightly smaller than one standard
deviation) increases the mean award by $10,000.
The infant mortality rate appears to have no
effect on the mean award per claim, nor does
the percentage of the
population living below the poverty level. States
that use partisan elections to select their
judges, however, have awards per claim on average
$ 5,000 higher (about 18 percent) than states
using other methods to select their judges.
As expected, awards also increase in relation
to per-capita income. An increase of $ 4,000
in per-capita income (just over one standard
deviation) increases awards by approximately
Turning to claims per doctor, we
find that the only statistically significant
relationship is that increases in the percentage
of the population living below the poverty level
are correlated with increases in the number
of claims per doctor. The effect is surprisingly
large: an increase of one percentage point
in the poverty rate (one-third of one standard
deviation) increases the number of claims per
doctor by approximately 6 percent.
The regression results are a mixed
bag for our perspective on the tort system.
Some of the variation in awards per claim can
be explained by factors that rationally relate
to awards, such as income per capita and the
death rate. But factors bearing little relationship
to malpracticesuch as whether a state
uses partisan elections to select its judgesappear
to be at least as important. The R-squared statistic indicates
that the variables in the regression can explain only 43 percent of the
variation in awards per claim, so a majority of the variation in awards
remains unexplained, which is even more the case in the claims per doctor
regression, where we can explain only 16 percent of the variation.
An Alternative Method for Determining
To further test the efficacy of
the tort system, we examine a parallel, independent,
much less studied system for determining whether
medical malpractice has been committed. Every
state has a medical review board that investigates
and disciplines physicians who have allegedly
violated professional codes of conduct or the
law. Patients and others can make a complaint
to the board alleging medical negligence or
conduct potentially leading to negligence (such
as being under the influence of alcohol or drugs).
Patients and others, including coworkers and
employees, can also report physicians to the
board for sexual misconduct, excessive or improper
drug prescriptions, and billing fraud.
After a complaint is filed to the
medical review board, it is investigated; the
exact procedure varies by state, but most follow
a similar process. Complaints are assigned to
a trained professional who investigates the
case, determines the facts, and (for cases with
sufficient merit) prepares material for a panel
to judge. Medical board investigators, unlike
attorneys in medical malpractice lawsuits, do
not represent the patient or the physician but
are intended to be impartial. Should the case
pass the initial review, it is forwarded to
a committee made up of physicians and laypeople
for a decision regarding disciplinary action.
The medical board has significant
authority to discipline physicians, including
the authority to suspend, revoke, or limit a
physicians license to practice medicine.
Under threat of revocation, the board can require
physicians to submit to a competency exam that
may lead to probation, monitoring, and mandatory
retraining. Medical boards can also issue fines.
In extreme cases, a medical board will refer
cases to the local district attorney for criminal
Complaints to medical review boards
that lead to disciplinary action must be reported
to the National Practitioner Data Bank, where
these types of reports are known as "adverse
actions." Between 1999 and 2001, almost
12,000 adverse actions were reported to the
NPDB. Censure, probation, suspension,
and revocation of license or clinical privileges
constituted just over 50 percent of the disciplinary
actions taken. We will use these data to compare
the review system with the tort system.
The medical review board system
for determining negligence differs in a number
of ways from the tort system. In two respects,
the medical review system may be an inferior
method of determining negligence:
- Even if investigators are trained to be
independent, the medical review system is
dominated by physicians, who may be reluctant
to penalize other physicians.
- Medical boards do not have the authority
to award damages to the victim. They can only
discipline physicians. As a result, injured
patients have fewer monetary incentives to
complain than to sue.
These potential problems, however,
must be evaluated alongside several advantages
of the review system:
- Complaints are cheap, and lawsuits are expensive.
As a result, the review system may capture
more negligent actions than the tort system.
- It's difficult to sue if there is no injury.
Complaints, however, can occur without injuries.
A physician who abuses alcohol, for example,
may have his license revoked even if no injury
has yet occurred.
- Medical boards can take very serious disciplinary
action, such as revoking a physician's license.
Such actions can be more serious than even
a multimillion-dollar tort award, especially
given that physicians can insure against a
tort award but not license revocation.
- Since suits are expensive, they are only
brought for the most serious injuries. The
medical review system may be especially likely,
therefore, to discover problems before they
lead to serious injury.
- In the tort system, only the affected parties
may sue, but complaints against physicians
can come from parties other than the patient,
including concerned citizens, employers and
employees, and other health-care professionals.
In fact, health-care professionals are usually
required to report physicians whom they suspect
to be guilty of misconduct.
When the above factors are balanced, it is
not obvious that the medical review system will
understate malpractice. Further research on
that issue would be valuable. For our purposes,
we do not need to make this determination; what
we are interested in is how well the review
system correlates with true malpractice.
The medical review system might, in theory,
understate malpractice. But, by the same reasoning,
when a physician is disciplined by a review
board, we can be confident that the offending
action was serious. As a result, malpractice
as determined by the medical review system ought
to correlate well with true malpracticeeven
if it understates the level of malpractice.
Assume, for example, that the medical review
system uncovers only one out of every three
serious cases of malpractice. Nevertheless,
states with a great deal of malpractice as determined
by review boards will also be states with a
great deal of true malpracticejust at
a higher absolute level.
This argument suggests a test of the tort system.
The review system is likely to correlate well
with true malpractice (because physicians will
not allow frivolous complaints to result in
disciplinary actions); if the tort system works
well, it will also correlate with true malpractice
and thus with the review system. If the tort
system works poorly, however, it will not correlate
with true malpractice or with the review system.
Thus, we can test the quality of the tort system
by examining whether states with high levels
of review-board-determined malpractice also
play host to large numbers of malpractice torts.
Our test finds that the tort system and review
system do not correlate. Figure Five shows that
adverse actions per doctor in the medical review
board system do not correlate with the number
of medical malpractice cases per doctor in the
tort system, nor do they correlate with the
average award per
doctor. Because not all adverse actions necessarily
imply substandard carebilling fraud, for
example, is not directly causative of poor care,
even if one suspects that there might be a behavioral
linkwe conduct separate analyses for all
review board adverse actions and those most
likely to be associated with malpractice.
Column 1 of Figure Five looks at the correlation
between all adverse actions and medical malpractice
cases (row 1) and awards (row 2); and column
2 looks at the correlation between
those adverse actions most likely to affect
actual medical performance and malpractice claims
(row 1) and awards (row 2).
In no case is the correlation large; in some
cases, it is actually slightly negative. What
these results indicate is that the two systems
we have for determining malpractice, the tort
system and the medical review system, result
in very different determinations of malpractice.
Surely, one of them is wrong!
One suggestive finding comparing the two systems
is that adverse actions per doctor do not correlate
at all with any of the political factors such
as partisan elections or the percent of persons
living below the poverty level that do correlate
with tort awards. Determining
in greater detail the relative errors and faults
of the two systems, however, is an important
area for future research.
The recent spike in medical malpractice premiums
has generated many claims about the cause, ranging
from insurance cycles to price gouging. A common
theme seems to pervade these claims: the idea
that premiums are reacting to something other
than awards. Our results, in contrast, support
the common sense idea that premiums are driven
primarily by awards. The cointegration test
shows that premiums track awards in the long
run. Premiums also track tort awards across
the states; premiums are higher in states that
have higher awards. Other theories do not fit
the facts: medical malpractice premiums, for
example, are actually slightly lower in states
with higher concentration ratios, which would
not hold true if price gouging were the problem.
If awards are a major influence on premiums,
it is important to understand what drives awards.
Our analysis showed that some factors plausibly
related to the incidence, extent, or cost of
medical malpractice are related to awardsawards
increase in states with higher income per capita
death rates, for example. But awards also appear
to be related to factors not plausibly related
to malpractice, such as partisan judicial elections.
Even accounting for all these variables leaves
a large amount of unexplained variation across
states in average medical malpractice awards.
As a further test of the medical liability
systems effectiveness, we also compared
the tort system with the medical review board
system for determining medical malpractice.
While both systems help determine medical malpractice,
they have different methods of doing so. Regardless
of their differences, if the tort system were
working well, we would expect that the number
of adverse actions would be correlated with
the number of medical malpractice claims. We
find, quite to the contrary, that there is
little correlation between the two, and what
correlation exists is slightly negative. Whether
the medical review board system could or should
substitute for the tort system is a question
for further research.
Regression Appendix >>
- See Congressional Budget Office (2004);
Medical Liability Monitor (2004).
- See American Medical Association
- For some anecdotal evidence, see U.S. Dept.
of Health and Human Services (2002). Baker
(2005) offers a contrary but balanced discussion.
Kessler et al. (2005), Encinosa and
Hellinger (2005), Helland and Showalter (2006),
and Klick and Stratmann (2005) estimate the
effect of liability on physician entry and
- See U.S. Dept. of Health and Human
Services (2002), pp. 2-4.
- Treaster and Brinkley (2005); see also
Americans for Insurance Reform (2002). Baicker
and Chandra (2005) say, "[I]ncreases
in malpractice payments do not seem to be
the driving force behind increases in premiums"(p.
- The cointegration test formally demonstrates
the stable long-run relationship between premiums
and awards, which exists although neither
premiums nor awards show any tendency to return
to their own means over time.
- See the Regression Appendix for details.
- For a formal proof of this proposition,
see Kleidon (1986). Industry forecasts of
losses are often incorrect, illustrating the
difficulty in forecasting.
- AIR (2002). For a critique of AIRs
statements and studies, see Frank and Grace
- Other factors, such as changes in interest
rates and the long time lag between premiums
and payouts, amplify the cycle, but it is
the underlying uncertainty in awards that
is the driver of the cycle.
- J. Robert Hunter, quoted in AIR (2006).
- The effect of interest rates on the so-called
insurance cycle is a national-level phenomenon,
so the fact that awards vary significantly
across the states is strong evidence that
the insurance cycle alone, as interpreted
by consumer groups, leaves much variation
in awards to be explained.
- Data on medical malpractice premiums are
usually calculated on a state level. In some
states, the Medical Liability Monitor
breaks the data down into somewhat finer geographic
regions. Where this is done, one also often
finds a strong relationship between awards
and rates. Bovbjerg and Bartow (200 ) take
a detailed look at Pennsylvania, for example,
and note: "The highest Pennsylvania rates
(usually in Philadelphia) are about double
the lowest rates for any given insurer"
(p.1 ). They also examine tort awards and
note "the special case of Philadelphia,"
where "2 % of verdicts awarded [are]
in excess of $1 million." (p. 2). Note
also that Philadelphia has the highest poverty
rate of any county in Pennsylvania; see Helland
and Tabarrok (2003) and below for the importance
of this fact.
- Quoted in Center for Justice and Democracy
- In a competitive market, sellers have no
pricing power but must accept the market price,
which equals longrun average cost. If prices
exceed long-run average cost, new entrants
will compete away excess profits until prices
are driven back to that level.
- Let MMPerDoc denote the mean malpractice
award per doctor then MMPerDoc=Awards/Doctors=Awards/Claims*Claims/Doctors.
- One can see the same effect within states.
See note 11 and Bovbjerg and Bartow (200 ),
- Helland and Tabarrok argue that elected
judges are likely to be biased towards plaintiffs
when the defendant is an out-of-state corporation
because the plaintiff is a constituent while
the defendant is not.
- An increase of .0014 claims per doctor compared
to the mean claims per doctor of .024 is approximately
6 percent. (Running claims per doctor in logs
produces a coefficient of 6.6 percent.)
- In Virginia, for example, the most common
allegations include "substandard care,
diversion of prescription drugs for illegal
purposes, improper prescribing, sexual misconduct,
improper advertising, inadequate record keeping,
unsanitary conditions and unprofessional conduct."
For more information, see the website for
the medical board of Virginia: http://www.dhp.state.va.us/Enforcement/enf_DisciplineProcess;
for New York: http://www.health.state.ny.us/nysdoh/opmc/understd2.htm;
and for California: http://www.medbd.ca.gov/Complaint_Info.htm.
- We acknowledge that states may vary in the
vigor with which they enforce review board
claims. As such, high malpractice levels as
measured by review boards may reflect different
enforcement levels and, over time, lower actual
malpractice. To capture fully the interplay
between malpractice levels and board outcomes
would require further study, such as a cross-sectional,
time-series look at review board outcomes.
For our present purposes, it is sufficient
to note that at any given point in time, we
would expect that high levels of malpractice
actions enforced by state review boards should
correlate with higher tort claims or awards,
particularly for the most serious malpractice
findings, if the tort system's outcomes are
consistent with true malpractice.
- Adverse actions most likely to be associated
with malpractice include alcohol abuse, narcotics
violations, unprofessional conduct, incompetence,
negligence, patient abuse or neglect, and
allowing unlicensed persons to practice.
- See the Regression Appendix for details.
- 25. Another potential explanation is that
we have underestimated average PCF fees. In
the MLM price data, rates are broken
down into internal medicine, general surgery,
and OB/Gyn. PCF fee charges are broken down
much more specifically, with many more specialties.
We chose the fee rate that best matched either
internal medicine, general surgery, or OB/Gyn,
and made sure that these fees would follow
the trend that internists pay the least and
OB/Gyns the most.
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