The Impact Of the Liability System on Medical Care .
The medical malpractice liability system has two main purposes(1). First, it seeks to .
provide compensation to patients who suffer negligent medical injury and secondly, it .
seeks to penalize physicians whose negligence causes patient injury, thereby inducing .
physicians to take appropriate precautions in medical treatment(2). In theory , the .
existing medical malpractice liability may or may not provide physicians with the .
incentive to take the optimal level of precautions. On one hand, malpractice penalties .
may deter physicians and other providers from putting patients at excessive risk of .
adverse health outcomes(3). .
While managed care encourages physicians to reduce treatment intensity, the malpractice .
system may be an important counterweight for preserving patient access to necessary .
care(4). On the other hand , these penalties may drive physicians to be "too careful" - to .
practice defensive medicine. Because of third party payers, such as patients" health care .
plans and insurance, neither patient nor physicians bear a substantial share of the costs of .
medical care associated with precaution in any particular case. Accordingly, very small .
increases in expected "hassle" from a malpractice claim or lawsuit may result in large .
increases in medical treatment intensity, increases that at the margin generate only .
minimal health benefits(5). The existing liability system provides physicians with the .
incentive to practice defensive medicine(6). Many physicians and policy makers agree .
that the incentive costs of the malpractice system, due to the extra tests and procedures .
ordered in response to the perceived threat of a medical malpractice claim may account .
for a substantial portion of the explosive growth in health care costs. The practice of .
defensive medicine may even have adverse effects on patient health outcomes, if liability .
