The Value of Liability in Medical Malpractice

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Abstract
In this paper I estimate the strength of medical providers' incentive to avoid negligent medical care, taking account of the facts that many victims of medical malpractice do not file claims, many nonvictims do file claims, legal costs are high, and the legal system makes errors. Despite these problems, the negligence system creates a strong financial incentive for medical providers to avoid substandard care: The average cost of negligence is $135,000 per malpractice claim involving negligence and $3,500 per occurrence of negligent medical care. These substantial penalties suggest that if liability were abolished without adopting effective alternative sanctions for negligent medical care, the number and cost of medically caused injuries and deaths could rise sharply.

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