The Differential Effects of Malpractice Reform: Defensive Medicine in Obstetrics

Despite widespread reports of defensive medicine in surveys of physicians, empirical investigations have produced conflicting evidence. This paper models the interactions in a health insurance market, predicting that rises in medical malpractice pressure have non-monotonic effects on health care spending. Spending rises with malpractice pressure until reaching a threshold, and decreases thereafter. This theory is tested by estimating the effects of various tort reforms between 1987 and 2001 on the incidence of birth by cesarean section. The findings support the predictions of the model. Caps on noneconomic damages decrease C-section rates by 3% for mothers with good access to care, but increase them by 5% for mothers with poor access. This, as well as a lower incidence of late prenatal care and reduced prevalence of birth abnormalities, suggests malpractice reform primarily improves access to health care for vulnerable populations, and reduces utilization among well-served populations as a secondary effect.