Tort Reform, Physician Behavior and Health Outcomes: Experience in Pennsylvania and New Jersey
Yi Lu, Shin-Yi Chou, Jason Hockenberry, Muzhe Yang
Department of Economics
College: College of Business and Economics
Abstract
This study focuses on the effects of Caps on Punitive Damages (PD) and modification of Joint and Several Liability (JSL) rules on physician behavior in New Jersey (NJ) and Pennsylvania (PA) respectively. Tort reforms affect physicians' malpractice liability by limiting the claims. In the case of obstetricians (OBs), this could lead to changes in use of procedures, including cesarean sections (C-sections), and reporting of complications justifying the need for such, as there are incentives for the OB to do so. In theory, modification of JSL exposes physicians to higher levels of malpractice risk while Caps on PD gives them some degree of relief. We explore the effect of such legislative change using records from the inpatient data collected by the Pennsylvania Health Care Cost Containment Council (PHC4) and New Jersey birth records from Healthcare Cost and Utilization Project (HCUP) inpatient data from 1994 to 2006. In a Differences-in-Differences framework, we analyze obstetricians' response to Caps on PD and modification of JSL in both PA and NJ controlling county, year fixed-effect as well as patient characteristics such as admission types, age, race, insurance type, and previous cesarean section (C-section) records and birth complications.
Preliminary empirical results show Caps on PD relieve physicians from heavier malpractice risk, thus leave more space for them to use risky but economically lucrative procedure in their practice. However modification of JSL exposes them under a more severe malpractice environment, which limits their incentives to perform such procedure. We also examine whether the effect of tort reforms on the C-section rates amongst the population of mothers insured by Medicaid differs from the general population of births. We perform several misspecification checks to test whether it is indeed the law changes which had an impact or if there was some systematic change we are unaware of in each of these states at each point in time, and find the results are robust to these checks.
Bio
Yi Lu is a third year doctoral student in Economics under the guidance of Shin-Yi Chou. His research interests focus on health economics and applied micro-econometrics.
