How Do Changes in Medical Malpractice Liability Laws Affect Health Care Spending and the Federal Budget? Working Paper 2019-03

By Karen Stockley (CBO)

Changes to malpractice liability laws intended to decrease the liability of physicians and other medical providers have an ambiguous potential effect on overall health care spending (and the federal budget). Some providers may respond by performing fewer procedures that were undertaken mainly to avoid liability, whereas other providers may pursue more risky procedures and patients. This paper reviews the recent literature on the effect of changes in traditional liability laws on health care spending and presents new analyses of how such changes affect Medicare, Medicaid, and other spending. The available evidence indicates that such changes have an uncertain effect on Medicare spending, and they decrease by a small amount the spending of privately insured patients and some Medicaid patients. The Congressional Budget Office is incorporating those assessments into its updated modeling of the budgetary effects of changes in traditional liability laws.