Medical Malpractice, Health Care Costs, and Technology Adoption

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DESCRIPTION (provided by applicant): Members of the research and policy communities have pointed to rising malpractice costs as a key driver of medical cost growth over the last ten to fifteen years. However, most of the existing research on malpractice fails to estimate its impact on overall costs, and relies on empirical identification strategies that have recently been called into question. To fill this gap, we propose to study the impacts of malpractice risk by developing a new empirical strategy. Specifically, we propose to rely on changes in the propensities of juries to award high "pain and suffering" awards, and the effect these changes have on malpractice costs. We present an array of direct and indirect empirical evidence in favor of both the power and validity of this identification strategy. For example, variation in non-economic damages significantly predicts future medical costs, but the reverse is not true. We propose to link information on county-level jury verdicts to: data on Medicare claims, inpatient hospital admissions data from the National Inpatient Sample (NIS), individual-level data from the Medicare Current Beneficiary Survey (MCBS), hospital-level data from the American Hospital Association (AHA) database of member hospitals, and county-level data on Medicare costs. These data sources will allow us to study: (1) The net social benefits of malpractice risk, in terms of its impacts on medical costs and health; (2) The impact of malpractice risk on long-run technology adoption; and (3) The mechanisms underlying the impacts of malpractice, particularly its impacts on the medical output, along with the nature and intensity of medical care. This research informs public policy regarding tort reform and malpractice reform, both of which have considerable impacts on public health, along with medical spending in the private and public sector. PUBLIC HEALTH RELEVANCE: There is an enormous amount of controversy over whether and how the malpractice system affects medical costs and health care delivery. We will explore the net social benefits of the malpractice regime, along with the causal impact of malpractice risk on medical costs, health outcomes, medical output and intensity, and the adoption of new medical technologies.