Tort Reform, Physician Behavior, and Health Outcomes: Evidence in Pennsylvania and New Jersey

This study focuses on the effects of changes in Joint and Several Liability (JSL) rules on the cesarean rates in New Jersey and Pennsylvania respectively. Prior to the JSL, “deep pockets” rule allowed plaintiffs to collect the damages in the full amount awarded in a malpractice case from the defendant with the highest ability to pay. In the case of obstetricians, this could lead to more intensive use of procedures, including cesarean sections, and reporting of complications justifying the need for such. In each state pressure on the state legislature led to changes in the JSL regime, with NJ removing their “deep pockets” rule in 1995 and PA doing so in 2002.

Using records from the inpatient data from the Pennsylvania Health Care Cost Containment Council (PHC4) and New Jersey birth records from Healthcare Cost and Utilization Project (HCUP) inpatient data from 1994 to 2006, we apply a differences-in-differences model to analyze obstetricians' response to JSL reform in both PA and NJ. Additionally, we examine the health outcomes of infants before and after reform to estimate whether the change in tort reform has an impact on these outcomes.

Preliminary empirical results show the JSL reform in PA had a negative effect on cesarean section rates. We also examine whether the effect of JSL reform on the C-section rates amongst the population of mothers insured by Medicaid was different than in the general population of births. We also performed several sensitivity tests, and found the results are quite robust.