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Could Mandatory Caps on Medical Malpractice Damages Harm Consumers?

October 20, 2011
By Shirley Svorny

In this Policy Analysis, Svorny states that supporters of capping court awards for medical malpractice argue that caps will make health care more affordable. But, will it?

svorny

In this Policy Analysis, Svorny states that supporters of capping court awards for medical malpractice argue that caps will make health care more affordable. But, will it? There are two things of note:

  1. caps on awards may result in some patients not receiving adequate compensation for injuries they suffer as a result of physician negligence.
  2. because caps limit physician liability, they can also mute incentives for physicians to reduce the risk of negligent injuries. Supporters of caps counter that this deterrent function of medical malpractice liability is not working anyway—that awards do not track actual damages, and medical malpractice insurance carriers do not translate the threat of liability into incentives that reward high-quality care or penalize errant physicians.

 

The author notes that medical malpractice awards do track actual damages. Furthermore, medical malpractice insurance carriers use various tools to reduce the risk of patient injury.Carriers also offer incentives for physicians to reduce the risk of negligent care. On rare occasions, carriers will even deny coverage, which cuts the physician off from an affiliation with most hospitals and health maintenance organizations, and precludes practice entirely in some states. If the medical malpractice liability insurance industry does indeed protect consumers, then policies that reduce liability or shield physicians from oversight by carriers may harm consumers. In particular, caps on damages would reduce physicians’ and carriers’ incentives to keep track of and reduce practice risk. Laws that shield government-employed physicians from malpractice liability eliminate insurance company oversight of physicians working for government agencies. State-run insurance pools that insure risky practitioners at subsidized prices protect substandard physicians from the discipline that medical malpractice insurers otherwise would impose.

Shirley Svorny is an adjunct scholar at the Cato Institute and professor of economics at California State University, Northridge.

Article Tags
Health Care Law
Sub-topic
Law: Tort Reform