TY  - JOUR
AU  - Kessler,Daniel P.
AU  - McClellan,Mark B.
TI  - Medical Liability, Managed Care, and Defensive Medicine
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7537
PY  - 2000
Y2  - February 2000
UR  - http://www.nber.org/papers/w7537
L1  - http://www.nber.org/papers/w7537.pdf
N1  - Author contact info:
Daniel Kessler
Hoover Institution
Stanford University
434 Galvez Mall
Stanford, CA  94305
Tel: 650/723-0596
E-Mail: fkessler@stanford.edu

Mark B. McClellan
Director, Engelberg Center for Health Care Reform
Senior Fellow, Economic Studies
Leonard .D. Schaeffer Director's Chair in
Health Policy ,The Brookings Institution
1775 Massachusetts avenue, N.W.
Washington, DC 20036
Tel: (202) 741-6567
Fax: NA
E-Mail: mmcclellan@brookings.edu
AB  - Because the optimal level of medical malpractice liability depends on the incentives provided by the health insurance system, the rise of managed care in the 1990s may affect the relationship between liability reform and defensive medicine.  In this paper, we assess empirically the extent to which managed care and liability reform interact to affect the cost of care and health outcomes of elderly Medicare beneficiaries with cardiac illness.  Malpractice reforms that directly reduce liability pressure -- such as caps on damages -- reduce defensive practices both in areas with low and with high levels of managed care enrollment.  In addition, managed care and direct reforms do not have long-run interaction effects that are harmful to patient health.  However, at least for patients with less severe cardiac illness, managed care and direct reforms are substitutes, so the reduction in defensive practices that can be achieved with direct reforms is smaller in areas with high managed care enrollment. We consider some implications of these results for the current debate over the appropriateness of extending malpractice liability to managed care organizations.
ER  -