Physician Asset Protection , Malpractice Insurance , and Defensive Medicine ∗

Malpractice insurance provides for payments to patients so that a physician need not compensate harmed patients from personal assets. The bankruptcy system also protects a debtor's assets from seizure by creditors. In this paper, we estimate the e ect of personal asset protection on physician practice decisions. Variation in bankruptcy law provides exogenous variation in risk to physician personal assets. In preliminary results, we nd that malpractice premiums and total charges to patients decrease when bankruptcy exemptions increase with no corresponding change in mortality risk, indicating that increases in exemptions decrease malpractice pressure and the practice of defensive medicine. Our results suggest an imperfect substitutability between malpractice insurance, bankruptcy exemptions, and the insurance against lawsuits provided by defensive medicine. ∗We thank John Woodill for research assistance. All remaining errors are our own. †Je rey Traczynski: Department of Economics, University of Hawaii at Manoa, Honolulu, HI 96822; [email protected]. Victoria Udalova: Department of Economics, University of Wisconsin-Madison, Madison, WI 53706; [email protected].