Managed care has become the dominant mode through which citizens in the U.S. obtain their health care. However, as managing costs becomes the primary focus of the health delivery system, possible patient injury associated with the managed care incentive to limit care has become of paramount concern. Generally, it has been assumed that the tort system will provide medical decisionmakers with a strong incentive to provide medically appropriate care that limits patient injury. However, there are grave, legally-based doubts regarding this assumption. First, the federal Employee Retirement Income Security Act of 1974 (ERISA) represents a powerful shield which precludes patients from recovering for injuries incurred due to denial of care by managed care organizations (MCOs). Further, in one area where ERISA has not provided total MCO protection, vicarious liability, most courts have inappropriately exercised jurisdiction over these cases. Importantly, this includes the only federal Court of Appeals decision which held that ERISA does not protect MCOs in these causes of action. These legal improprieties make all of these decisions void and/or renders them without precedential value. It also leaves only one Court of Appeals decision on this matter valid?a decision which held that ERISA preempts vicarious liability claims against MCOs. It bears noting that ERISA does not provide similar liability protection to physicians. Second, independent contractor law also provides a shield against patient injury liability for MCOs. Since the vast majority of physicians enter into legal agreements with MCOs as independent contractors, the standard common law of tort dictates that physicians alone are responsible for all resulting patient injury, regardless of whether the MCO sets up payment structures, imposes practice limitations, and retains the authority to make final treatment authorization or denial decisions. In addition, MCOs contract with physicians using standard termination without cause clauses. These clauses allow MCOs to terminate physician employment for any or no reason at all, i.e., the specter of deselection. Because these clauses are virtually unchallengeable both at the bargaining table and under the standard common law of contract, physicians will be reticent to object to policies and procedures that have potential adverse effects upon patient care due to justified concerns regarding employment. Thus, MCOs are provided with strong incentives to limit costs and deny care due to legal rules that shield them from virtually all liability for these actions. Patients, who require additional and more intensive care as the population ages, have the incentive to seek out this care from the physician with the viable threat of malpractice litigation against the physician if patient injury results, regardless of MCO remuneration and service delivery constraints. Physicians, the actual providers of care, have their incentives torn asunder under the current leg
{"title":"Patient Injury Incentives in Law","authors":"B. Liang","doi":"10.2139/SSRN.141862","DOIUrl":"https://doi.org/10.2139/SSRN.141862","url":null,"abstract":"Managed care has become the dominant mode through which citizens in the U.S. obtain their health care. However, as managing costs becomes the primary focus of the health delivery system, possible patient injury associated with the managed care incentive to limit care has become of paramount concern. Generally, it has been assumed that the tort system will provide medical decisionmakers with a strong incentive to provide medically appropriate care that limits patient injury. However, there are grave, legally-based doubts regarding this assumption. First, the federal Employee Retirement Income Security Act of 1974 (ERISA) represents a powerful shield which precludes patients from recovering for injuries incurred due to denial of care by managed care organizations (MCOs). Further, in one area where ERISA has not provided total MCO protection, vicarious liability, most courts have inappropriately exercised jurisdiction over these cases. Importantly, this includes the only federal Court of Appeals decision which held that ERISA does not protect MCOs in these causes of action. These legal improprieties make all of these decisions void and/or renders them without precedential value. It also leaves only one Court of Appeals decision on this matter valid?a decision which held that ERISA preempts vicarious liability claims against MCOs. It bears noting that ERISA does not provide similar liability protection to physicians. Second, independent contractor law also provides a shield against patient injury liability for MCOs. Since the vast majority of physicians enter into legal agreements with MCOs as independent contractors, the standard common law of tort dictates that physicians alone are responsible for all resulting patient injury, regardless of whether the MCO sets up payment structures, imposes practice limitations, and retains the authority to make final treatment authorization or denial decisions. In addition, MCOs contract with physicians using standard termination without cause clauses. These clauses allow MCOs to terminate physician employment for any or no reason at all, i.e., the specter of deselection. Because these clauses are virtually unchallengeable both at the bargaining table and under the standard common law of contract, physicians will be reticent to object to policies and procedures that have potential adverse effects upon patient care due to justified concerns regarding employment. Thus, MCOs are provided with strong incentives to limit costs and deny care due to legal rules that shield them from virtually all liability for these actions. Patients, who require additional and more intensive care as the population ages, have the incentive to seek out this care from the physician with the viable threat of malpractice litigation against the physician if patient injury results, regardless of MCO remuneration and service delivery constraints. Physicians, the actual providers of care, have their incentives torn asunder under the current leg","PeriodicalId":168354,"journal":{"name":"Torts & Products Liability Law","volume":"60 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1998-12-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126288905","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The current system of paying for auto injuries suffers from two fundamental problems: premiums are too high and victims with serious injuries rarely receive full compensation. Of particular concern is how the shortcomings of the present tort liability system adversely impact low-income and urban households. This paper reviews the causes and consequences of a costly and inefficient auto insurance system, and discusses the benefits and savings that the Auto Choice reform would produce. All of the shortcomings that characterize the auto insurance system are worse for urban drivers and low-income families. Although accidents in cities are less severe than accidents elsewhere, they are much more likely to result in an injury claim. As a result, it costs 47 to 57 percent more to pay injury claims in cities than in other areas. Moreover, because high premiums make it more difficult to own a car, many low-income, inner-city workers are unable to access better-paying suburban jobs. Families earning less than half of the poverty line spend an average of one-third (31.6 percent) of their income on premiums when they buy auto insurance. The regressivity of the current system is heightened by that fact that the typical low-income household spends more on auto insurance in two years than the value of their car. This analysis finds that Auto Choice would reduce overall premiums by 24 percent nationwide, averaging $184 per car. Auto Choice would make over $35 billion in savings available to consumers in 1998, and up to $193 billion over 1998-2002. Since low-income families often forgo the optional collision and comprehensive property damage coverage, their personal injury savings represent a larger share of their overall premium - 36 percent on average. Lower auto insurance premiums will make owning a car more affordable for the poor, thereby allowing them to find and hold down better-paying jobs that require a longer commute.
{"title":"Auto Choice: Impact on Cities and the Poor","authors":"D. Miller","doi":"10.2139/ssrn.650245","DOIUrl":"https://doi.org/10.2139/ssrn.650245","url":null,"abstract":"The current system of paying for auto injuries suffers from two fundamental problems: premiums are too high and victims with serious injuries rarely receive full compensation. Of particular concern is how the shortcomings of the present tort liability system adversely impact low-income and urban households. This paper reviews the causes and consequences of a costly and inefficient auto insurance system, and discusses the benefits and savings that the Auto Choice reform would produce. All of the shortcomings that characterize the auto insurance system are worse for urban drivers and low-income families. Although accidents in cities are less severe than accidents elsewhere, they are much more likely to result in an injury claim. As a result, it costs 47 to 57 percent more to pay injury claims in cities than in other areas. Moreover, because high premiums make it more difficult to own a car, many low-income, inner-city workers are unable to access better-paying suburban jobs. Families earning less than half of the poverty line spend an average of one-third (31.6 percent) of their income on premiums when they buy auto insurance. The regressivity of the current system is heightened by that fact that the typical low-income household spends more on auto insurance in two years than the value of their car. This analysis finds that Auto Choice would reduce overall premiums by 24 percent nationwide, averaging $184 per car. Auto Choice would make over $35 billion in savings available to consumers in 1998, and up to $193 billion over 1998-2002. Since low-income families often forgo the optional collision and comprehensive property damage coverage, their personal injury savings represent a larger share of their overall premium - 36 percent on average. Lower auto insurance premiums will make owning a car more affordable for the poor, thereby allowing them to find and hold down better-paying jobs that require a longer commute.","PeriodicalId":168354,"journal":{"name":"Torts & Products Liability Law","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1998-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130585250","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In nuisance-type cases, legal commentators generally recommend -- and the courts seem to increasingly use -- the award of damages rather than the granting of an injunction of the harmed party. This essay compares the economic consequences of injunctive and damage remedies under a variety of circumstances. The discussion focuses on the ability of the remedies to deal with the strategic behavior of the litigants, the cost of redistributing income among the litigants (or classes of litigants), and the im-perfect information of the courts. In ideal circumstances -- cooperative behavior, costless redistribution, and perfect information -- injunctive and damage remedies are equivalent. The presence of strategic behavior alone does not change this conclusion. However, if it is also costly to redistribute income, the remedies are no longer equivalent. When there are a small number of litigants in these circumstances, neither remedy is generally more effective. When there are a large number of litigants, the damage remedy is superior. Finally, and most realistically, if the courts also have imperfect information, neither remedy dominates the other. Thus, the general presumption in favor of damage remedies is not supported.
{"title":"Resolving Nuisance Disputes: The Simple Economics of Injunctive and Damage Remedies","authors":"A. Polinsky","doi":"10.3386/W0463","DOIUrl":"https://doi.org/10.3386/W0463","url":null,"abstract":"In nuisance-type cases, legal commentators generally recommend -- and the courts seem to increasingly use -- the award of damages rather than the granting of an injunction of the harmed party. This essay compares the economic consequences of injunctive and damage remedies under a variety of circumstances. The discussion focuses on the ability of the remedies to deal with the strategic behavior of the litigants, the cost of redistributing income among the litigants (or classes of litigants), and the im-perfect information of the courts. In ideal circumstances -- cooperative behavior, costless redistribution, and perfect information -- injunctive and damage remedies are equivalent. The presence of strategic behavior alone does not change this conclusion. However, if it is also costly to redistribute income, the remedies are no longer equivalent. When there are a small number of litigants in these circumstances, neither remedy is generally more effective. When there are a large number of litigants, the damage remedy is superior. Finally, and most realistically, if the courts also have imperfect information, neither remedy dominates the other. Thus, the general presumption in favor of damage remedies is not supported.","PeriodicalId":168354,"journal":{"name":"Torts & Products Liability Law","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1980-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129613543","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the impact of post-9/11 airport security measures on air travel in the U.S. Using five years of data on passenger volume, we evaluate the effects of the implementation of baggage screening and the federalization of passenger screening on the demand for air travel. These two congressionally mandated measures are the most visible changes in airport security following the 9/11 attacks. Exploiting the phased introduction of security measures across airports, we find that baggage screening reduced passenger volume by about five percent on all flights, and by about eight percent on flights departing from the nations fifty busiest airports. In contrast, federalizing passenger screening had little effect on passenger volume. We provide evidence that the reduction in demand was an unintended consequence of baggage screening and not the result of contemporaneous price changes, airport-specific shocks, or other factors. Moreover, this decline in air travel has substantial welfare implications. Back-of-the-envelope calculations indicate that the airline industry lost about $1.1 billion, a tenth of the projected revenue lost because of 9/11 itself. Similar calculations show that the substitution of driving for flying by those seeking to avoid security inconvenience likely lead to over 100 road fatalities.
{"title":"The Impact of Post 9/11 Airport Security Measures on the Demand for Air Travel","authors":"Garrick Blalock, Vrinda Kadiyali, Daniel H. Simon","doi":"10.2139/ssrn.677563","DOIUrl":"https://doi.org/10.2139/ssrn.677563","url":null,"abstract":"We examine the impact of post-9/11 airport security measures on air travel in the U.S. Using five years of data on passenger volume, we evaluate the effects of the implementation of baggage screening and the federalization of passenger screening on the demand for air travel. These two congressionally mandated measures are the most visible changes in airport security following the 9/11 attacks. Exploiting the phased introduction of security measures across airports, we find that baggage screening reduced passenger volume by about five percent on all flights, and by about eight percent on flights departing from the nations fifty busiest airports. In contrast, federalizing passenger screening had little effect on passenger volume. We provide evidence that the reduction in demand was an unintended consequence of baggage screening and not the result of contemporaneous price changes, airport-specific shocks, or other factors. Moreover, this decline in air travel has substantial welfare implications. Back-of-the-envelope calculations indicate that the airline industry lost about $1.1 billion, a tenth of the projected revenue lost because of 9/11 itself. Similar calculations show that the substitution of driving for flying by those seeking to avoid security inconvenience likely lead to over 100 road fatalities.","PeriodicalId":168354,"journal":{"name":"Torts & Products Liability Law","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116133379","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.1007/978-3-211-77988-0_33
M. Faure, A. Wibisana
{"title":"Liability in Cases of Damage Resulting from GMO's: An Economic Perspective","authors":"M. Faure, A. Wibisana","doi":"10.1007/978-3-211-77988-0_33","DOIUrl":"https://doi.org/10.1007/978-3-211-77988-0_33","url":null,"abstract":"","PeriodicalId":168354,"journal":{"name":"Torts & Products Liability Law","volume":"196 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116473671","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Whenever the use of an asset by one party imposes an externality on another party’s use of an asset, entitlements must be allocated. Does an upstream firm have a right to use a river’s water or does a downstream firm have a right not to have the water used? And if the downstream firm is to be protected, should the protection come in the form of a property right or a liability rule? This paper focuses on how the allocation of entitlements affects ex ante investments and actions. Even when ex post bargaining is easy, the ex post allocation of entitlements, by affecting the distribution of ex post value, can have significant efficiency effects ex ante. By identifying the ex ante effects of alternative rules, the analysis provides a framework for determining allocations of entitlement that would perform best from the perspective of ex ante efficiency. As far as ex ante effects are concerned, liability rules are not generally superior to property rights. The analysis has implications for a broad range of legal and policy questions.
{"title":"Ex Ante Investments and Ex Post Externalities","authors":"L. Bebchuk","doi":"10.2139/ssrn.297091","DOIUrl":"https://doi.org/10.2139/ssrn.297091","url":null,"abstract":"Whenever the use of an asset by one party imposes an externality on another party’s use of an asset, entitlements must be allocated. Does an upstream firm have a right to use a river’s water or does a downstream firm have a right not to have the water used? And if the downstream firm is to be protected, should the protection come in the form of a property right or a liability rule? This paper focuses on how the allocation of entitlements affects ex ante investments and actions. Even when ex post bargaining is easy, the ex post allocation of entitlements, by affecting the distribution of ex post value, can have significant efficiency effects ex ante. By identifying the ex ante effects of alternative rules, the analysis provides a framework for determining allocations of entitlement that would perform best from the perspective of ex ante efficiency. As far as ex ante effects are concerned, liability rules are not generally superior to property rights. The analysis has implications for a broad range of legal and policy questions.","PeriodicalId":168354,"journal":{"name":"Torts & Products Liability Law","volume":"1989-2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130266274","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this piece, I take issue with one of the fundamental tenets of law and economics as it has been used to justify gender discrimination in the pricing of life insurance and annuities, namely, that individuals should bear their own identifiable costs so as to avoid misallocation of society's resources. Most scholars of the law and economics persuasion have argued that unisex pricing of life insurance products is a bad idea because on the average women live longer than men. They argue that it costs more to insure the life of a man because the payoff comes sooner and the present value is greater. Thus, to charge men and women the same price for life insurance would constitute a subsidy running from women (who would pay too much) to men (who would pay too little). As a result, men would buy too much insurance and women would buy too little. Using a simple example, I show here that gender-based pricing results in radically different outcomes for male and female consumers if one focuses on income rather than present value. Gender-based pricing means that a man must set aside more from his pay during life in order to secure the same insurance benefits as a woman. And a woman who uses the proceeds to buy an annuity must suffer lower benefits for a longer time than a man. In short, if one looks either at the periodic outlay by the insured or at the income available to the beneficiary under an annuity, gender-based pricing appears to be quite at odds with the reasons why people buy insurance and how much they buy. Perhaps more important, in the absence of market failure, men and women would bargain around gender-based rates (and in many cases they effectively do so), which suggests that it is gender-based rates that result in the misallocation of resources. The problem with gender-based rates lies in two unstated premises: (1) that the present value of lump sum insurance benefits is an accurate measure of value to a consumer, and (2) that unisex pricing will cause consumers to buy more or less insurance or annuities than under gender-based pricing. Most people buy insurance with a view to the income it will generate for the beneficiary. Clearly, people buy annuities to provide themselves income. In both cases, the value of the product inheres in the periodic income it generates and not the length of time over which that income will be received. Indeed, the very existence of annuities proves the point. Annuities exist only because many people are willing to trade a lump sum for an assured income. In other words, the essential idea behind an annuity is that people care more about income than about lump sum values. Thus, even though the present value of a man's death benefit is higher than a woman's death benefit because it will likely be paid sooner, what matters most to the consumer is the income it will generate for the beneficiary. This difference in perspectives is critical. Insurance companies live forever. People do not. Hence, although the cost of wr
{"title":"Making Economic Sense Out of Unisex Life Insurance (or the Difference between Cost and Value and Why it Matters to Real People)","authors":"R. Booth","doi":"10.2139/ssrn.296782","DOIUrl":"https://doi.org/10.2139/ssrn.296782","url":null,"abstract":"In this piece, I take issue with one of the fundamental tenets of law and economics as it has been used to justify gender discrimination in the pricing of life insurance and annuities, namely, that individuals should bear their own identifiable costs so as to avoid misallocation of society's resources. Most scholars of the law and economics persuasion have argued that unisex pricing of life insurance products is a bad idea because on the average women live longer than men. They argue that it costs more to insure the life of a man because the payoff comes sooner and the present value is greater. Thus, to charge men and women the same price for life insurance would constitute a subsidy running from women (who would pay too much) to men (who would pay too little). As a result, men would buy too much insurance and women would buy too little. Using a simple example, I show here that gender-based pricing results in radically different outcomes for male and female consumers if one focuses on income rather than present value. Gender-based pricing means that a man must set aside more from his pay during life in order to secure the same insurance benefits as a woman. And a woman who uses the proceeds to buy an annuity must suffer lower benefits for a longer time than a man. In short, if one looks either at the periodic outlay by the insured or at the income available to the beneficiary under an annuity, gender-based pricing appears to be quite at odds with the reasons why people buy insurance and how much they buy. Perhaps more important, in the absence of market failure, men and women would bargain around gender-based rates (and in many cases they effectively do so), which suggests that it is gender-based rates that result in the misallocation of resources. The problem with gender-based rates lies in two unstated premises: (1) that the present value of lump sum insurance benefits is an accurate measure of value to a consumer, and (2) that unisex pricing will cause consumers to buy more or less insurance or annuities than under gender-based pricing. Most people buy insurance with a view to the income it will generate for the beneficiary. Clearly, people buy annuities to provide themselves income. In both cases, the value of the product inheres in the periodic income it generates and not the length of time over which that income will be received. Indeed, the very existence of annuities proves the point. Annuities exist only because many people are willing to trade a lump sum for an assured income. In other words, the essential idea behind an annuity is that people care more about income than about lump sum values. Thus, even though the present value of a man's death benefit is higher than a woman's death benefit because it will likely be paid sooner, what matters most to the consumer is the income it will generate for the beneficiary. This difference in perspectives is critical. Insurance companies live forever. People do not. Hence, although the cost of wr","PeriodicalId":168354,"journal":{"name":"Torts & Products Liability Law","volume":"120 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123241039","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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