Case Scenario: 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.
Question 1. Summarize the positive results of medical malpractice laws, according to the press release from the Stanford Graduate School of Business.
Question 2. What are some of the negative (unintended) consequences of the laws?
Question 3. The goal of this press release is to publicize research done by a doctor/economist at Stanford University. Discuss the research questions of this study and summarize the results.
Question 4. How would you characterize the researcher's view on reforms for medical malpractice?
Question 5. Draw a supply/demand diagram for "health care services." If malpractice insurance increases "supply costs," what is the impact on your graph? How does it affect equilibrium price and quantity?
Question 6. Consider the interpretation that some consumers will now be "crowded out" of the health care market. What consumers might be crowded out? (Draw on your answer to question 5.)
Question 7. Access the National Association of Health Underwriters Web site. Explain who the NAHU are and what perspective they represent. Use the information contained in the pages "About NAHU."
Question 8. Now access the section of the Web site called "Legislative and Government Affairs" and find the issue dealing with legislation concerning managed care plans. How does the Web site describe the managed care and the benefits of insurance companies increasing the use of managed care plans? Give an example of this.
Question 9. Scroll down and access the file "Medical Malpractice Statistics." The statistics are used to create a link between (1) legal settlements and jury awards for malpractice lawsuits, (2) increasing insurance premiums for malpractice insurance, and (3) the decrease in the supply of medical services. Describe how statistics are used to do this. Use at least one quoted statistic for each "chain" in the link.
Question 10. Return to the text on managed care. What is the Web site's response to the rising costs? Does it agree with your supply/demand analysis?