The Firon & Co. Economic Analysis of Law Workshop hosts Prof. Bernard Black, Northwestern University School of Law and Kellogg School of Management

Article

ABSTRACT:  

Physicians often claim that they practice “defensive medicine,” including ordering extra imaging and laboratory tests, due to fear of malpractice liability. Caps on non-economic damages are the principal proposed remedy. Do these caps in fact reduce testing, overall healthcare spending, or both? Do they affect healthcare outcomes? We study the effects of “third-wave” damage caps, adopted in the 2000s, on specific areas that are expected to be sensitive to med mal risk: imaging rates, cardiac interventions, and lab and radiology spending, using patient-level data, with extensive fixed effects and patient level covariates. We find heterogeneous effects. Cardiac stress testing rates rise, as does spending on laboratory and radiology tests; these results are robust across a variety of specifications. CT scan rates also rise in most specifications. In contrast, cardiac intervention rates (catheterization, stenting, and bypass surgery) do not rise (and likely fall). We find some evidence that Medicare Part B rises, but variable results for Part A spending. We find no evidence that caps affect mortality.