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Medical Malpractice Awards, Insurance, and Negligence: Which Are Related

Thursday May 2006


Professor Alexander Tabarrok Department of Economics, George Mason University
Amanda Agan Department of Economics, George Mason University

Medical malpractice premiums are at an all-time high. The American Medical Association says that at least 20 states are experiencing full-blown liability crises, with 22 more showing signs of serious problems. Under pressure from the tort system some doctors have retired early, shut down their businesses, or reduced the scope of their practices. The U.S. Department of Health and Human Services says that the liability crisis is threatening access to care and jeopardizing patient safety.

What is behind the increase in premiums? While insurers, doctors, and most academics attribute the malpractice insurance crisis to higher malpractice tort awards, plaintiffs’ attorneys and consumer groups often claim that insurers are just exercising monopoly power and “price gouging” consumers. Such assertions are regularly picked up uncritically by the mainstream media.

Professor Alexander Tabarrok, an economist at George Mason University, has emerged in recent years as one of the foremost scholars conducting empirical research on the American tort system. In this new study for the Manhattan Institute, coauthored with Amanda Agan, Professor Tabarrok analyzes the available data and provides answers to questions about the relationship among medical malpractice awards, insurance premiums, and doctor negligence.