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

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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.

Keywords

Medical malpractice Negligence rule Court errors Defensive medicine 

JEL Classifications

I11 K13 

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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

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