Research Handbooks in Law and Economics series
Edited by Jennifer H. Arlen
Chapter 21: Do damages caps reduce medical malpractice insurance premiums? A systematic review of estimates and the methods used to produce them
The medical malpractice liability system is designed to compensate victims of medical malpractice both for economic damages and non-economic damages, such as pain and suffering, and loss of consortium. A second major function of the system is to provide incentives for health care professionals to provide reasonable care. By internalizing the cost of patients’ injuries to physicians, the hope is that the threat of malpractice liability will encourage physicians to provide care that will reduce the likelihood of iatrogenic injuries. Most providers purchase malpractice insurance to protect themselves against the risk of claims. Over the last several decades, insurance prices have fluctuated wildly, and the liability system, and large damage awards in particular, is most often pointed to as the culprit. The U.S. has faced three distinct medical malpractice insurance crises since the mid 1970s. These crises are characterized by sharp increases in premiums followed by market exit of some insurers, which reduces supply, putting additional upward pressure on prices.
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