The state of New York is considering a cap on noneconomic damages (“pain and suffering”) for malpractice in order to save money. The New York Times story asks
“… who benefits from caps — doctors or insurers — and whether the measures inflict unintended negative consequences upon victims of medical errors, including plaintiffs’ inability to find lawyers to take their cases.”
But in fact the evidence is that consumers actually benefit from such a cap. In a paper published in the Journal of Law and Economics in 2007 Joanna Shepherd and I examined the effect of various tort reforms on accidental death rates in states for the period 1981-2000. We found that overall states that had passed tort reforms had lower accidental death rates, probably because of the increased availability of physicians in emergency rooms and other settings. For the particular case of damage caps, we found that overall these caps led to a total of 5000 fewer deaths. So we can have our cake and eat it too — caps will save money and also make New Yorkers safer.
We had no direct evidence on physicians — only on death rates. Did not consider the moral hazard issue, but damage awards are sufficiently rare that I would be very surprised if it is an issue.
Very interesting causation. I never thought of that. Did you confirm empirically that the tort reform states had greater availability of physician in ERs and other settings? Did you reject the moral hazard hypothesis that people were more careful and so had fewer accidents in tort reform states?