International Journal of Health Care Finance and Economics

, Volume 8, Issue 2, pp 73–85

The optimal negligence standard in health care under supply-side cost sharing


DOI: 10.1007/s10754-008-9034-2

Cite this article as:
Olbrich, A. Int J Health Care Finance Econ (2008) 8: 73. doi:10.1007/s10754-008-9034-2


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.


Medical malpracticeNegligence ruleCourt errorsDefensive medicine

JEL Classifications


Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Institute of Social Medicine and Health Economics (ISMHE)Otto-von-Guericke UniversityMagdeburgGermany