Abstract 18: Impact of Malpractice Damage Caps on Cardiac Stress Testing and Medicare Spending
Objective: Physicians report that they often order tests to reduce medical malpractice liability risk. We test the hypothesis that caps on non-economic damages (the most stringent commonly adopted reform) will decrease cardiac testing rates, or healthcare spending more generally, using patient-level data for the Medicare population. Methods: We fit a difference-in-differences model on a 5% random sample of Medicare claims between 1999 and 2012. Treatment states (n=9) were those that introduced damage caps during the “third wave” of medical malpractice reform between 2002 and 2005. The remaining states were controls. We compared rates of cardiovascular stress testing and overall spending per enrollee before and after damage caps were adopted. Our model incorporates extensive covariates: individual and zip-code fixed effects; calendar quarter dummies; patient age; the 17 elements of the Charlson comorbidity index, and county-level demographic, socioeconomic, and health care characteristics. Results: Damage caps did not significantly affect total Medicare spending per enrollee (coefficient +0.31%, 95% confidence interval [CI] [-0.44%, 1.06%]); part A (Inpatient) spending (coefficient +0.79%, 95% CI [-0.05%, 1.64%]) or part B (Outpatient) spending (coefficient +0.02%, 95% CI [-0.64%, 0.67%]). Damage caps predict a statistically significant but clinically modest rise in stress testing rates (annual increase = 0.31%, 95% CI [0.04%, 0.58 %]). This is a 2.5% increase in the likelihood that an individual will receive a cardiac test in a given year. Conclusions: We find no evidence that introduction of damage caps in 9 states in the 2000s decreased either cardiac testing or overall healthcare spending when compared with states without these reforms. Indeed, we find a modest increase in cardiac testing rates, and point estimates for overall spending are also positive. We thus provide evidence against the hypothesis that damage caps reduce overtesting or overall spending.