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Description
5.1 Background and Context
Medical malpractice litigation in the United States, in the form it exists today, was in place by the mid 19th century (DeVille, 1990; Olsen, 1996). On the other hand, the development of malpractice insurance as a distinct type of insurance did not occur until over a century later. Public discussions of medical malpractice as a major public policy issue began when medical malpractice insurance became a separate line of property-casualty insurance in the mid-1970s. Since this time, there have been three major medical malpractice crises in the United States: the mid 1970s; the mid-1980s; and the early-2000s (Mello et al., 2003b). Throughout the crises, which have been characterized as periods of substantially rising premiums and in some crises, lack of availability of medical malpractice insurance coverage, much attention has been devoted to medical malpractice, diagnosing deficiencies, and proposing short-term policy solutions (Baker, 2005; Sloan and Chepke, 2008). While crises have characterized products liability, they have not attracted as much media and legislative interest as has medical liability. The reason is perhaps that no group is as well organized politically as physicians.
There are many quality assurance mechanisms in the medical field, including licensure, certification, accreditation, peer review by hospitals' medical staffs, and by organizations external to suppliers of care such as Peer Review Organizations, which are authorized by federal legislation. There has been some use of "deport cards," which have the ability to inform consumers about quality differences among providers (Dranove et al., 2003; Weinstein et al., 2005). Then we have medical malpractice. A cynical view is that medical liability continues to exist because of the political influence of the plaintiffs' attorneys. An alternative view, however, is that medical liability is justified because the other regulatory mechanisms are also subject to political influence, e.g., by physicians and hospitals.
5.2 Four Markets
As in the previous two sections, we provide a framework for explaining the controversies of medical malpractice by dividing the determinants of medical malpractice outcomes into four conceptually distinct markets. The first market is for medical care where consumers are patients, and physicians are suppliers, analogous to the injury precaution market in the applications of tort law previously discussed. Second, there is the legal market, where both injury victims and physicians as defendants demand legal services, supplied by lawyers and the courts. Third is the market for medical malpractice insurance (Sloan et al., 1991). In this market, the consumers are physicians and other health professionals, and the suppliers are medical malpractice insurers. Finally, there is the market for government activity in which the law-as-market view asserts legislation and government activity is a good demanded and supplied much like other goods (see, e.g., Persson and Tabillini, 2002).
5.2.1 Medical Care Market
Individuals may select physicians, hospital, and other health care providers based on perceived quality and other factors. Furthermore, following a medical encounter, patients may follow or not follow medical advice. Patient compliance with medical recommendations is sometimes an issue in litigation. In general, the unilateral care rather than the bilateral care model is the more appropriate one in the medical field. That is, the health care provider is the potential injurer and the patient in the potential victim.
Conceptually, providers take account of downstream liability cost in deciding on their professional care standards. Ideally, providers could be sure that they could escape liability by exercising the due standard of care set at the socially optimal care level. At least three impediments stand in the way.
First, courts are likely not to set the care standard at socially optimal levels and/or they may be inconsistent in the standards they set. Realistically, medical care is so multifaceted that there is no way that courts could set standards for every medical situation.
Second, as explained below, the number of lawsuits against health care providers falls far short of the number of medical errors that are committed by these individuals and organizations. This is not unique to medical malpractice. Citations of drivers who exceed the speed limit are far rarer than is the number of drivers who exceed statutory speed limits. Underclaiming or too few citations can lead to excessively careless behavior.
Third, the vast majority of physicians have complete insurance for their medical malpractice losses (Danzon, 1985). Consequently, physicians do not bear a financial cost for the negligent injuries that they cause. Nor, in contrast to motor vehicle liability insurance, are medical malpractice premiums experience-rated (Sloan, 1990). Although complete non-experience rated insurance may be expected to blunt any deterrent effect that imposing medical liability might otherwise have, being sued does exact a price in terms of psychological distress and possibly loss of reputation as well. Furthermore, the time and earnings loss associated with being involved as a defendant in a lawsuit are not covered by medical malpractice insurance.
A distinction is often made between "0positive" and "negative defensive medicine" in discussions of medical malpractice. Positive defensive medicine refers to increases in the cost of personal health care services attributable to the threat of being sued. Confronted with the threat of suits, physicians may order more tests, perform more surgical procedures, and undertake other medical interventions than they might in absence of this type of threat.
Negative defensive medicine applies to a physician's withdrawal of care due to retirements, location changes, and the dropping of procedures that often lead to lawsuits, such as those associated with obstetrical care. That the threat of liability may affect the activity level that potentially exposes an agent to litigation is not unique to medical malpractice. For example, the cost of dram shop liability might cause some bars to close.
For an economist, a test or procedure or other intervention becomes "defensive" when, in the view of an informed decision maker, the marginal benefit is less than its marginal cost. Using this definition, to the extent that the threat of medical malpractice litigation increases provision of care for which marginal benefit exceeds marginal cost, then such litigation serves its desired purpose, and conversely.
Several other definitions have been used in the literature. For example, the U.S. Congress Office of Technology Assessment (1994, p. 13) defined defensive medicine as:
Defensive medicine occurs when doctors order tests, procedures, or visits, or avoid high-risk patients or procedures, primarily (but not necessarily solely) to reduce their exposure to malpractice liability. When physicians do extra tests or procedures primarily to reduce malpractice liability, they are practicing positive defensive medicine. When they avoid certain patients or... |
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