...caps on damages do not seem to affect observable health care quality...
Medical malpractice laws are often promoted as deterrents to poor patient care. In Does Medical Malpractice Law Improve Health Care Quality? (NBER Working Paper No. 19841), Michael Frakes and Anupam Jena explore the relationship between caps on awards of non-economic damages in malpractice lawsuits and a variety of health care quality indicators. They find that although caps on damages do not seem to affect observable health care quality, shifting state malpractice liability standards from the customary practices of physicians in local areas to national standards of care is associated with higher scores on several quality metrics.
The researchers use data from the National Hospital Discharge Survey (NHDS) from 1979 to 2005 along with information from the Behavioral Risk Factor Surveillance System from 1987 to 2008 to create quality measures for health care delivery. Their indicators parallel metrics developed by the U.S. Agency for Healthcare Research and Quality. They construct a composite inpatient mortality rate measure for each state in each year; this variable averages 8 percent per year. They also develop a measure of avoidable hospitalizations; there appear to be about 1,000 of these per state per year in the NHDS records. They create a proxy variable for the quality of outpatient care based on the prevalence of cancer screening, which varies from 40 to 73 percent across states in their sample. They also construct an indicator for patient safety using a composite obstetric trauma indicator.
To explore how these quality measures respond to the malpractice policy environment, the authors first study how health care quality changes when states adopt caps on malpractice damage awards. They find no substantial effects, a result that is inconsistent with claims that uncapped awards affect physician practice. However, when they investigate how their quality measures respond to changes in state standards for clinical malpractice, in particular the adoption of rules holding physicians to national standards of care, they find important effects. On average, the quality measures in a state converge toward average national rates after that state adopts national standard rules. Eleven states adopted national standards between 1980 and 1988; three states did so between 1992 and 1998. In states where the measured quality of care was high before adopting these standards, the adoption of national standard laws did not appear to be associated with a change in observable quality. However, in initially low-quality states, adopting a national standard of care was associated with an improvement in all of the quality measures. The authors conclude that structural reforms in the way in which malpractice law evaluates physicians may substantially alter health care delivery practices and improve quality.