Document Type

Article

Publication Title

University of Pennsylvania Law Review

Abstract

Contractual liability proponents claim that states can best reform malpractice liability by allowing patients to contract over and out of liability. Proponents assert that informed patients would be better off if they were allowed to contract over liability than they would be if states reformed malpractice liability directly because informed patients would contract for the rules that maximize their welfare. Proponents also claim that states reforming malpractice liability could only benefit patients by including a right to contract out of liability. This Article demonstrates that these claims are incorrect. Informed patients who value state-imposed malpractice liability can be hurt by the introduction of contractual liability, because contractual liability produces lower deterrence benefits at a higher price. Four inefficiencies make contractual liability a less beneficial and more costly form of liability than state-imposed malpractice liability: collective goods problems, time inconsistency, adverse selection, and network externality problems. Adoption of contractual liability therefore would hurt patients who value liability because it would force them to use a less valuable and more expensive form of liability and create inefficient incentives for patients to waive liability that would have been optimal if imposed by the state. This conclusion holds whether patients negotiate liability contracts directly with individual physicians or are presented with standard form contracts governing malpractice liability offered by their health insurers.

First Page

957

Volume

158

Publication Date

2010

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