Malpractice Reform and the Sorting of New Physicians by Medical Human Capital

We test whether state malpractice reforms differentially attract new physicians along dimensions of medical human capital plausibly related to malpractice exposure and patient outcomes. Using an exit survey of physicians completing residencies between 1998 and 2016, we estimate physicians’ willingness-to-pay (WTP) to locate their first practice in a reform state. We find physicians are willing to forego, on average, about $11 per hour in wages to locate in a reform state. International medical school graduates (IMGs) and physicians trained outside high-ranked teaching hospitals exhibit approximately $27–$28 higher relative WTP to locate in a reform state, relative to U.S. medical graduates and physicians trained in high-ranked hospitals, respectively. As an illustrative exercise, we map these estimated entry-margin compositional shifts into first-year spending scenarios for reforming states under additional assumptions, using Texas as an example. These results suggest that human-capital–biased sorting at the entry margin in response to litigation reform may contribute to geographic variation in healthcare utilization and spending.