In Bloomberg News earlier in the week, Peter Orszag praises a paper that Cornell Law Professor Michael Frakes wrote when he was a fellow at the Petrie-Flom Center. As Orszag writes
“Most of the costs in the U.S. health-care system are incurred in a small number of expensive cases. The top 25 percent of Medicare beneficiaries ranked by cost, for example, account for 85 percent of total spending. And the expenses in those cases are driven significantly by the recommendations that doctors make to pursue one treatment path and not another.
In making these choices, doctors are influenced by various things, including medical-school training, traditions among their peers, financial incentives (which are distorted by fee- for-service payments) and, yes, the medical-malpractice system. Improving the criteria for what constitutes appropriate care could significantly change doctors’ behavior and also save money, recent research by Michael Frakes of Cornell Law School suggests.”
The paper “The Impact of Medical Liability Standards on Regional Variations in Physician Behavior: Evidence from the Adoption of National-Standard Rules” in the American Economic Review can be found here.
