BUSI 429 Week 7 Discussion Board Forum 7 Example

Discussion Board Forum 7: Malpractice Reform and Health Care Spending

BUSI 429 Healthcare Economics, Discussion Board Forum 7

Thread by [Student Name]

The state debate, the hospital and the classmates are composites; the textbook, Scripture and the peer-reviewed sources cited are real.

A bill in our state would cap noneconomic damages in malpractice lawsuits at $350,000. Supporters say the cap would lower health care costs for everyone because physicians, less afraid of large verdicts, would order fewer unnecessary tests and procedures, a practice known as defensive medicine. Our hospital's lobbying group supports the bill, and I was asked to summarize the evidence for our management team. Because the hospital's own physicians and its injured patients would both feel the effects, the question deserved more than the talking points each side was circulating.

Feldstein (2015) explains that the malpractice system has two economic purposes: to compensate patients injured by negligence and to deter negligent care by making providers bear its costs. He also discusses evidence that the system performs both poorly, since many injured patients never file claims while some claims involve no negligence, and legal costs consume a large share of payments. Defensive medicine is a plausible side effect of this uncertainty, and if caps reduced it, savings could be meaningful, since even small changes in testing across millions of visits add up.

The evidence, however, suggests caps change premiums more than practice. Ellenbogen et al. (2025) studied caps on noneconomic damages adopted in North Carolina and Tennessee in 2011 and compared Medicare spending on tests, imaging and procedures with similar states. They found no economically significant change in either state, apart from a small increase in procedure costs in Tennessee, and concluded that caps alone may not change physicians' ordering habits. On the other side, Mizushima et al. (2025) found that when courts repealed existing caps, malpractice insurance premiums rose, with larger increases for obstetricians and general surgeons. Together, these findings suggest caps lower physicians' insurance costs but do little to reduce the overall volume of care, which is where the promised savings were supposed to come from.

For our management team, the conclusion is that the bill would mainly shift costs from physicians to seriously injured patients, whose compensation would be limited, without producing the system-wide savings promised. A more promising approach is to address errors and claims directly through communication and resolution programs, which disclose errors, apologize and offer fair compensation early. Capping what injured patients can recover lowers premiums; it does not, by itself, lower the cost of care. Jesus advised coming to terms quickly with an accuser while still on the way (English Standard Version Bible, 2001/2016, Matthew 5:25), counsel that fits a system in which early honesty can spare both sides years of conflict.

Reply to Gabriela

Gabriela, you raised the fairness question that damage caps fall hardest on the most seriously injured patients, especially those without large lost wages, such as children, retirees and people who stay home to raise families. That concern follows directly from how caps work, and it is often missing from public debate. Noneconomic damages compensate for pain, disability and loss of normal life, and for patients with little income, they may be most of what a court can award. A cap therefore reduces compensation most for the people whose economic losses are smallest on paper. Feldstein (2015) frames the malpractice system as having to balance compensation and deterrence, and caps tilt that balance away from compensation. Ellenbogen et al. (2025) found that caps in two states did not measurably reduce spending on tests and procedures, so the main justification for asking injured patients to accept less does not seem to hold. Mizushima et al. (2025) did find effects on premiums, which suggests physicians, especially in high-risk specialties, do gain from caps. Policy makers should weigh that gain honestly against the losses borne by injured patients. Would you support caps if they were paired with a fund that guaranteed basic compensation for injured patients, such as covering future care costs, regardless of income? Some states have tried similar funds for birth injuries, and their experience could show whether such a guarantee makes caps fairer without giving up the premium relief physicians seek. It would also shift part of the cost from individual patients to the broader system that benefits from lower premiums.

Reply to Terrence

Terrence, you asked whether communication and resolution programs actually reduce costs or simply encourage more patients to file claims once they learn about errors. That was a reasonable fear when such programs began, and many hospital lawyers shared it, but the experience of the University of Michigan Health System suggests otherwise. Kachalia et al. (2010) compared claims before and after the system began fully disclosing errors and offering compensation in 2001. New claims fell from about seven to about four and a half per 100,000 patient encounters each month, lawsuits fell by roughly two thirds, the time to resolve claims shortened and total liability costs dropped substantially. The authors cautioned that the design could not prove cause, since claims were also falling statewide during those years. Feldstein (2015) notes that much of the money in the traditional malpractice system goes to legal costs rather than to patients, which is why resolving claims early can save money for both sides. Ellenbogen et al. (2025) found that damage caps did not change practice patterns, so programs that change how hospitals respond to errors may offer a better path to lower costs and safer care. Would your hospital's risk management team be open to piloting disclosure for a single service line first? Starting with one department, such as obstetrics or emergency care, would let the team build skills in difficult conversations, measure claims and costs against prior years and decide whether to expand before committing the whole organization. Physicians' trust in the process would also grow if they saw it work with colleagues first.

References

Ellenbogen, M. I., Kaplan, S., Niknam, B. A., Kachalia, A. B., & Brotman, D. J. (2025). Evaluating the impact of 2011 tort reform limiting noneconomic damages in North Carolina and Tennessee on testing, imaging, and procedure utilization. Health Services Research, 60(2), e14424. https://doi.org/10.1111/1475-6773.14424

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Feldstein, P. J. (2015). Health policy issues: An economic perspective (6th ed.). Health Administration Press.

Kachalia, A., Kaufman, S. R., Boothman, R., Anderson, S., Welch, K., Saint, S., & Rogers, M. A. M. (2010). Liability claims and costs before and after implementation of a medical error disclosure program. Annals of Internal Medicine, 153(4), 213-221. https://doi.org/10.7326/0003-4819-153-4-201008170-00002

Mizushima, Y., Whaley, C., & Yu, H. (2025). The repeal of noneconomic damage caps and medical malpractice insurance premiums. Health Economics, 34(12), 2223-2237. https://doi.org/10.1002/hec.70032