Impact of Malpractice Reforms on the Supply of Physician Services

Abstract

Context  Proponents of restrictions on malpractice lawsuits claim that tort reform will improve access to medical care.

Objective  To estimate the effects of changes in state malpractice law on the supply of physicians.

Design  Differences-in-differences regression analysis that matched data on the number of physicians in each state between 1985 and 2001 from the American Medical Association’s Physician Masterfile with data on state tort laws and state demographic, political, population, and health care market characteristics.

Main Outcome Measure  Effect on physician supply of “direct” malpractice reforms that reduce the size of awards (eg, caps on damages).

Results  The adoption of “direct” malpractice reforms led to greater growth in the overall supply of physicians. Three years after adoption, direct reforms increased physician supply by 3.3%, controlling for fixed differences across states, population, states’ health care market and political characteristics, and other differences in malpractice law. Direct reforms had a larger effect on the supply of nongroup vs group physicians, on the supply of most (but not all) specialties with high malpractice insurance premiums, on states with high levels of managed care, and on supply through retirements and entries than through the propensity of physicians to move between states. Direct reforms had similar effects on less experienced and more experienced physicians.

Conclusion  Tort reform increased physician supply. Further research is needed to determine whether reform-induced increases in physician supply benefited patients.