Abstract
This paper elaborates on the optimal negligence standard in a world where physicians choose their level of care subject to erroneous court judgements and to the degree of supply-side cost sharing. Uncertain liability in malpractice lawsuits leads physicians to provide excessive and insufficient care, which results in a loss of social welfare. The standard that maximizes welfare depends on the cost share: Under traditional, close to full cost reimbursement it is lower than the first-best level of care, while under substantial supply-side cost sharing it increases and may even exceed the first best.
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Olbrich, A. The optimal negligence standard in health care under supply-side cost sharing. Int J Health Care Finance Econ 8, 73–85 (2008). https://doi.org/10.1007/s10754-008-9034-2
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DOI: https://doi.org/10.1007/s10754-008-9034-2