Impact of Malpractice Reforms on the Supply of Physician Services

Abstract

Context Proponents of restrictions on malpractice lawsuits claim that tort reform will improve access to medical care. Objective To estimate the effects of changes in state malpractice law on the supply of physicians. Design Differences-indifferences regression analysis that matched data on the number of physicians in each state between 1985 and 2001 from the American Medical Association's Physician Masterfile with data on state tort laws and state demographic, political, population, and health care market characteristics. Main Outcome Measure Effect on physician supply of "direct" malpractice reforms that reduce the size of awards (eg, caps on damages). Results The adoption of "direct" malpractice reforms led to greater growth in the overall supply of physicians. Three years after adoption, direct reforms increased physician supply by 3.3%, controlling for fixed differences across states, population, states' health care market and political characteristics, and other differences in malpractice law. Direct reforms had a larger effect on the supply of nongroup vs group physicians, on the supply of most (but not all) specialties with high malpractice insurance premiums, on states with high levels of managed care, and on supply through retirements and entries than through the propensity of physicians to move between states. Direct reforms had similar effects on less experienced and more experienced physicians. Conclusion Tort reform increased physician supply. Further research is needed to determine whether reform-induced increases in physician supply benefited patients.

Medical Malpractice Reform and Physicians in High‐Risk Specialties

“…In fact, if we borrow a calculation from Kessler, Sage, and Becker (2005), it would take a 22 percent increase in doctors' wages to generate a supply response comparable to the response generated by the passage of a cap on noneconomic damages. 13 Furthermore, since this result represents only the effect on the extensive (entry/exit) margin, it is likely to be the lower bound of the true total effect of caps, given Helland and Showalter's (2006) results regarding the intensive (hours worked) margin.…”

“…We include controls for personal income per capita in the state, a measure of the percentage of the state population with a secondary education, the percentage of the state population without insurance, per capita governmental transfer payments, medical-specific 13. Kessler, Sage, and Becker (2005) use estimates from Rizzo and Blumenthal (1994) that suggest that a 1 percent increase in physician wages leads to a .3 percent increase in hours worked by a physician.…”

“…If the other reforms affect physicians' location decisions, the estimated effect of noneconomic damage caps will be biased. Further, the Kessler, Sage, and Becker (2005) approach of grouping reforms as direct and indirect is potentially problematic if some reforms have a negative effect on doctors' location decisions. 10 Summary statistics are presented in Table 1.…”

“…In an attempt to control for the endogeneity of reform, we implemented an instrumental variables technique, finding that only the effect of noneconomic damage caps survived after controlling for endogeneity. Kessler, Sage, and Becker (2005) collapsed medical malpractice reforms into two categories: direct (reforms that directly affect how much a defendant will have to pay in the event of a judgment) and indirect (limitations on whom/when a plaintiff can sue). In a difference-indifference regression framework, they found that direct reforms increase physician supply by about 3 percent and that the effect is concentrated among physicians in high-risk specialties.…”

Tort Reform and Accidental Deaths

“…They also find those physicians not leaving the state are less likely to practice high-risk specialties, including trauma care. Kessler et al (2005) find an increase in the number of physicians in states that have adopted tort reform. In the specific case of emergency physicians, they find that "direct reforms led to increased growth in the supply of emergency medicine physicians of approximately 11.5%, almost 3 times the magnitude of the average nongroup effect of 3.9%."…”