Medical Malpractice Liability and Physicians’ Behavior: Experimental Evidence

Medical liability has been suspected of increasing health expenditure insofar as it induces the practice of defensive medicine. Despite the large evidence on the role of medical malpractice liability, the identification of its causal effect on physicians’ treatment decisions is a difficult task. In this paper we study for the first time in a controlled laboratory setting the effect of introducing the risk of being sued for medical malpractice on the provision of physicians’ medical services. Our behavioral data show that introducing malpractice liability pressure does lead physicians to choose a higher amount of medical services, regardless of the physicians’ payment system. However, we also find that the payment system in which malpractice liability is implemented makes the difference under the societal perspective, with relevant implications for health policy.