Ronen Avraham

An Empirical Study of the Impact of Tort Reforms on Medical Malpractice Settlement Payments

This paper evaluates the impact of six different types of tort reforms on the frequency, size, and number of total annual settlements in medical malpractice cases between 1991 and 1998. Medical malpractice data come from the National Practitioner Data Bank, which contains more than 100,000 malpractice settlement payments in the study time frame. Of the six tort reforms examined, two reforms (caps on pain and suffering damages and limitations on joint and several liability) reduced the number of annual payments, and two reforms (caps on pain and suffering damages and the periodic‐payment reform) reduced average awards. Caps on noneconomic damages had an effect on total annual payments, although the statistical significance of that effect was weak. The joint effect of enacting all six reforms was statistically significant for reducing the number of cases but not the state‐level average award or total payments.

The Impact of Tort Reform on Private Health Insurance Coverage

This study evaluates the impact of tort reform on private health insurance coverage using the Current Population Survey’s March Demographic Files. Proponents of tort reform argue that reform will reduce medical malpractice insurance costs, damage awards, and costs associated with defensive medicine. If proponents are correct, these cost reductions should increase health insurance coverage. On the other hand, if the prior tort law was functioning well, reform may increase medical costs by reducing doctors’ care-taking or increasing of the use of aggressive treatments. In this case, tort reform could actually decrease insurance coverage by raising healthcare costs. We evaluate the effect of eight common tort reforms on private health insurance coverage between 1981 and 2007. We find that damage caps, collateral source reform, and joint and several liability reform increased health insurance coverage for the most price-sensitive groups (the single-young and the self-employed) between one-half and one percentage point each. Accordingly, we conclude that tort reform may increase insurance coverage rates for price-sensitive groups, but its overall effect on coverage will be small.

The impact of tort reform on intensity of treatment: Evidence from heart patients☆

This paper analyzes the effect of non-economic damage caps on the treatment intensity of heart attack victims. We focus on whether a patient receives a major intervention in the form of either a coronary artery by-pass or angioplasty. We find strong evidence that treatment intensity declines after a cap on non-economic damages. The probability of receiving a major intervention in the form of either an angioplasty or bypass declines by 1.25-2 percentage points after non-economic damage caps are enacted, and this effect is larger a year or two after reform. However, we also find clear evidence of substitution between major interventions. When doctors have discretion to perform a by-pass and patients have insurance coverage, caps on non-economic damages increase the probability that a by-pass is performed. The effect of non-economic damage caps on costs is not always statistically significant, but in models with state-specific trends, total costs decline by as much as four percent. We conclude that tort reform reduces treatment intensity overall, even though it changes the mix of treatments. Using the Center for Disease Controls Vital Statistics data, we find that tort reform is not associated with an increase in mortality from coronary heart disease; if anything, mortality declines.

Modular Liability Rules

Recent work has discussed and formalized the conditions under which liability rules are superior to property rules in a world with “one-sided” incomplete information. These studies demonstrated how liability rules achieve higher social welfare by harnessing one party’s private information about its own valuation to the process of optimally allocating the entitlement between the parties. This article introduces a new family of liability rules hitherto neglected by courts and legal scholars. A regime of modular liability rules is one in which the court applies legal rules for which the traditional liability rules are building blocks; these rules harness both parties’ private information. Whereas in an efficient liability rule 2 (for example) a polluter is granted a call-option to purchase the right to the air (so to speak) with an exercise price that equals the resident’s harm, in modular liability rule 6 + 5 (for example) a pair of options, rather than a single one, is allocated; the resident gets a put option to force a transfer of the entitlement (as under rule 6), but the polluter has a consecutive put option to sell the entitlement back to the resident, if he wishes (as under rule 5). Interestingly, the maximizing joint welfare exercise-price equals, in general and for uniform distributions, an amount that is the average of one party’s maximum estimated valuation and the other party’s minimum estimated valuation. Two paradigmatic worlds of two-sided incomplete information are studied: a symmetric world, in which the court’s best estimate of the parties’ private valuations is that they are identically distributed, and an asymmetric world. In the symmetric world, modular liability rules are in some respects more efficient and more fair (exact definitions are discussed in the article) than the conventional liability rules. In the two-sided and asymmetric world, modular liability rules yield higher joint payoffs than regular liability rules if, and only if, the difference between the parties’ means is larger than the difference between their amount of private information (represented by the distribution’s support). A practical way to implement these insights in real life situations is offered.

Accident Law for Egalitarians

This paper questions the fairness of our current tort-law regime and the philosophical underpinnings advanced in its defense, a theory known as corrective justice. Fairness requires that the moral equality and responsibility of persons be respected in social interactions and institutions. The concept of luck has been used by many egalitarians as a way of giving content to fairness by differentiating between those benefits and burdens that result from informed choice and those that result from fate or fortune. We argue that the theory of corrective justice, along with its institutional embodiment of tort law, is at odds with an egalitarian commitment to fairness because it allows luck an unjustifiable role in determining dissimilar liability for similar wrongs and dissimilar compensation for similar losses to bodily integrity. Many egalitarian political theorists have also recognized, if not defended, the notion of distinct forms of justice, namely corrective, retributive, and distributive. Although theorists of these different forms of justice have been concerned with negating unfair luck inside the operations of each form of justice, there has been little attention to the way in which luck operates to sort cases into each form of justice. We claim that there is a significant way in which luck operates to subject different people to principles of corrective, retributive, and distributive justice - thereby assessing dissimilar liability for similar wrongs and disparate compensation for similar losses - which flies in the face of the egalitarian value of fairness. After surveying the arguments put forward by theorists defending a categorical distinction between corrective justice and retributive and distributive principles, we argue that although analytical distinctions can be made between different forms of justice (although, we also suggest that the distinctions are not as sharp as some commentators suggest), there is no good reason to defend an acoustic separation between these forms of justice when doing so creates unfair outcomes.

Does the Theory of Insurance Support Awarding Pain and Suffering Damages in Torts

This chapter asks whether THE THEORY OF INSURANCE SUPPORTS AWARDING PAIN AND SUFFERING DAMAGES IN TORTS. The answer is an unequivocal “Yes.” Many commentators have argued that individuals do not (and should not) demand insurance for losses that do not lower their marginal utility of wealth. From this perspective, tort laws that provide victims with compensation for pain and suffering harms effectively force them to purchase insurance that they don’t value. This chapter disputes this logic on several levels. First, it suggests that so-called “pure non-monetary losses” are exceedingly rare in practice, and are difficult to define even in theory. Moreover, non-monetary losses are likely to be correlated with monetary losses, and this correlation generates a demand for insurance covering both types of losses under the traditional model used by law and economics scholars. Coverage of non-monetary losses can also be demanded under many plausible alternatives to expected utility theory. The chapter also takes issue with the empirical evidence that some have interpreted as suggesting a lack of demand for coverage of non-monetary losses. Finally, the chapter suggest that future advances in neuroscience may make it possible to accurately measure mental states associated with pain and suffering, obviating the need for the subjective testimony that introduces so much noise into the assessment of these damages.

Ex Ante versus Ex Post Expectation Damages

What information should courts utilize when assessing contract damages? Should they award damages that were rationally foreseeable at the ex ante stage (ex ante expected damages)? Or should they award damages at the ex post level, incorporating new information revealed after contracting (ex post actual damages)? In practice courts have varied between the two approaches, awarding damages equal to the lower, or the higher, of the two measures of damages. This article shows that ex ante expectation damages are more efficient than ex post actual damages through a simple model of costly litigation for contract breach, where there are either costs of verifying the breach victim’s ex post damages, or general litigation costs such as attorneys’ fees. Courts should award foreseeable flat damages, rather than seeking ex post accuracy and awarding actual damages, because actual damages lead to distortions in breach incentives once we take parties’ litigation decisions as endogenous. With costly litigation, ex post expectation damages may cause over-performance or under-performance depending on whether the American or the English rule applies and on the size of the litigation cost. We find that regardless of the direction of the distortion, actual damages induce inefficiency. Ex ante damages are more efficient because of the insensitivity of parties’ litigation decisions to their ex post private information under fixed damages. Our results are robust when accounting for renegotiation.

Regulating pharmaceutical companies’ financial largesse

Nissanholtz-Gannot and Yenkellevich (NGY) explore the impact of a 2010 amendment to the Israeli National Health Insurance Law that requires annual reporting of payments from pharmaceutical companies (PCs) to doctors and healthcare organizations. The amendment was adopted to ensure transparency and to facilitate appropriate regulation of interest conflicts. To learn whether the amendment was having the desired effects, NGY interviewed multiple representatives of an assortment of stakeholders. They found broad agreement among the respondents that financial relationships between PCs and physicians should be transparent. But they also discovered that ignorance of the 2010 amendment was widespread, especially among physicians, and that knowledgeable respondents thought loopholes rendered the law ineffective. Lastly, NGY found that the improvement in the transparency culture has more to do with pressure put by international and non-Israeli national actors on the multi-national PCs operating in Israel than with the Israeli new law.In this short paper we critically review NGY’s study. We are much less optimistic than they are about the situation in Israel. For example, we show that the new law has not increased transparency vis-à-vis the patients as virtually all reports to the government specify only the institutions receiving them and not individual physicians’ names. We are skeptical of the effectiveness of self-regulation or government regulation. Instead, we propose some ways to increase patients’ oversight, such as facilitation of class actions to enforce fiduciary duties and disclosures, as well as structuring co-payments for drugs in ways which will signal to the patients their relative efficacy.

Economics of health law

For this two-volume collection, Professors Avraham, Hyman and Silver have selected seminal contributions by eminent scholars in the fields of law, economics and medicine. The first volume explores the effects of access to healthcare on mortality and clinical outcomes, the financing of healthcare (including payment to providers, expanding costs, health insurance and the provision of long-term care), distribution of spending and expansion of provision. The second volume covers the regulation of healthcare practice, medical malpractice and liability, public health and ethical issues.

More on the Comparative Nature of Desert: Can a Deserved Punishment Be Unjust?

Utilitas / Volume 25 / Issue 03 / September 2013, pp 316 333 DOI: 10.1017/S0953820812000532, Published online: 08 July 2013 Link to this article: http://journals.cambridge.org/abstract_S0953820812000532 How to cite this article: RONEN AVRAHAM and DANIEL STATMAN (2013). More on the Comparative Nature of Desert: Can a Deserved Punishment Be Unjust?. Utilitas, 25, pp 316-333 doi:10.1017/S0953820812000532 Request Permissions : Click here