From Stanford Law: Options for medical malpractice reform

http://www.ncbi.nlm.nih.gov/pubmed/21595327

J Econ Perspect. 2011 Spring;25(2):93-110.
Evaluating the medical malpractice system and options for reform.
Kessler DP.
Source
Stanford Law School, Graduate School of Business, and Hoover Institution, Stanford University, Stanford, California, and National Bureau of Economic Research, Cambridge, Massachusetts, USA. fkessler@stanford.edu
Abstract
The U.S. medical malpractice liability system has two principal objectives: to compensate patients who are injured through the negligence of healthcare providers and to deter providers from practicing negligently. In practice, however, the system is slow and costly to administer. It both fails to compensate patients who have suffered from bad medical care and compensates those who haven't. According to opinion surveys of physicians, the system creates incentives to undertake cost-ineffective treatments based on fear of legal liability--to practice "defensive medicine." The failures of the liability system and the high cost of health care in the United States have led to an important debate over tort policy. How well does malpractice law achieve its intended goals? How large of a problem is defensive medicine and can reforms to malpractice law reduce its impact on healthcare spending? The flaws of the existing system have led a number of states to change their laws in a way that would reduce malpractice liability--to adopt "tort reforms." Evidence from several studies suggests that wisely chosen reforms have the potential to reduce healthcare spending significantly with no adverse impact on patient health outcomes.