Does Defensive Medicine Reduce Health Care Spending?

Barkowski, Scott (2015): Does Defensive Medicine Reduce Health Care Spending?

Abstract

The medical community often argues that physician fear of legal liability increases health care spending. Theoretically, though, the effect could be positive or negative, and empirical evidence has supported both cases. Previous empirical work, however, has ignored the fact that physicians face risk from industry oversight groups like state-level medical licensing boards in addition to civil litigation risk. This paper addresses this omission by incorporating previously unused data on punishments by oversight groups against physicians, known as adverse actions, along with malpractice payments data to study state-level health care spending. My analysis suggests that health care spending does not rise in response to higher levels of risk. An increase in adverse actions equal to 16 (the mean, absolute value of year-to-year changes within a state) is found to be associated with statistically significant average annual spending decreases in hospital care and prescription drugs of as much as 0.25% (nearly $29 million) and 0.29% (almost $9.3 million). Malpractice payments were generally estimated to have smaller, statistically insignificant effects.

• Item Type: MPRA Paper
• Language: English
• Keywords: defensive medicine; medical malpractice; health care spending; medical licensing
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H75 - State and Local Government: Health ; Education ; Welfare ; Public Pensions; I - Health, Education, and Welfare > I1 - Health > I11 - Analysis of Health Care Markets; I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; K - Law and Economics > K2 - Regulation and Business Law > K23 - Regulated Industries and Administrative Law; K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law

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