Liability and liability insurance for medical malpractice.
Physicians typically carry virtually complete malpractice insurance coverage. This contradicts standard theoretical predictions that under a negligence rule of liability there should be no demand for insurance, and insurance policies under moral hazard will contain co-payment provisions. It is argued that judicial 'errors' in defining negligence generate a demand for liability and legal defense insurance. Physician co-payment undermines the insurer's incentives for legal defense and thus induces a trade-off between loss reduction by injury prevention and by legal defense. Fee-for-service reimbursement further distorts the physician's choice between injury prevention and insurance. Implications for the deterrent function of the tort system are discussed.
D000206:Actuarial Analysis; D003669:Deductibles and Coinsurance; D005251:Fees, Medical; D007351:Insurance, Liability / Q000191:economics*; D008318:Malpractice / Q000331:legislation & jurisprudence*; D008962:Models, Theoretical; D010820:Physicians; D014481:United States