"Defensive medicine" is a potentially serious social problem: if fear of liability drives health care providers to administer treatments that do not have worthwhile medical benefits, then the current liability system may generate inefficiencies many times greater than the costs of compensating malpractice claimants. To obtain direct empirical evidence on this question, we analyze the effects of malpractice liability reforms using data on all elderly Medicare beneficiaries treated for serious heart disease in 1984, 1987, and 1990. We find that malpractice reforms that directly reduce provider liability pressure lead to reductions of 5 to 9 percent in medical expenditures without substantial effects on mortality or medical complications. We conclude that liability reforms can reduce defensive medical practices.

There is evidence in California of a broad decline in health care costs to employment groups adopting managed care and managed competition--premium reductions up to 10 percent. National comparisons and utilization data generally confirm the beginning of lower costs. Large California medical groups and health systems have responded to pressure by finding ways to reduce costs and improve quality. While examples are encouraging, there is room for improvement. Two levels of competition have emerged and continue to evolve: carrier competition and delivery system competition. Each model has strengths and limitations, but the existing mix is driving down costs.

Studies of hospital demand and choice of hospital have used straight line distance from a patient's home to hospitals as a measure of geographic access, but there is the potential for bias if straight line distance does not accurately reflect travel time. Travel times for unimpeded travel between major intersections in upstate New York were compared with distances between these points. The correlation between distance and travel time was 0.987 for all observations and 0.826 for distances less than 15 miles. These very high correlations indicate that straight line distance is a reasonable proxy for travel time in most hospital demand or choice models, especially those with large numbers of hospitals. The authors' outlier analyses show some exceptions, however, so this relationship may not hold for studies focusing on specific hospitals, very small numbers of hospitals, or studies in dense urban areas with high congestion and reliance on surface streets.

Published simultaneously in J Am Coll Cardiol 1995;26:292-294, and reprinted in Cardiovasc Nurs 1996;32(4):26-28.