Defensive Medicine: Evidence from Military Immunity

Abstract

© 2019 American Economic Association. We estimate the extent of defensive medicine by physicians, embracing the no- liability counterfactual made possible by the structure of liability rules in the Military Health System. Active- duty patients seeking treatment from military facilities cannot sue for harms resulting from negligent care, while protections are provided to dependents treated at military facilities and to all patients-active duty or not-that receive care from civilian facilities. Drawing on this variation and exploiting exogenous shocks to care location choices stemming from base- hospital closures, we find suggestive evidence that liability immunity reduces inpatient spending by 5 percent with no measurable negative effect on patient outcomes.