Business Economics

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CASE 1

Economics and Medical Malpractice
The cost of medical malpractice insurance has been increasing dramatically. This has had direct implications on the supply of both medical practitioners and of certain "high risk" medical procedures. In this exercise, Web sites are used to investigate the relationship between health care quality and cost and medical malpractice insurance. We begin by reading a press release from the Stanford Graduate School of Business which outlines the major economic and legal issues involved. When you have finished reading the release, go to the National Association of Health Underwriters Web site, which discusses the issues (and statistics) from the perspective of the insurance companies. Some of the questions below will ask you to locate and read specific areas of this Web site, but feel free to examine the Web site on your own. When you are ready, answer the questions below.

1. Summarize the positive results of medical malpractice laws, according to the press release from the Stanford Graduate School of Business.

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Medical malpractice liability laws compensate patients who suffer harm at the hands of negligent doctors, and they provide appropriate incentives for doctors to be responsible. Reducing malpractice pressure brought down hospital expenditures for elderly people with heart disease by approximately 5 percent, yet didn't leave the patients significantly sicker

2. What are some of the negative (unintended) consequences of the laws?

Sometimes they don't work as well as they should. For instance, one 1990 Harvard study showed that 16 times as many patients suffered injury from negligent medical care as received ...