Beyond Damages Caps: Behavioral, Economic, and Legal Pathways to Reforming Medical Malpractice Liability

Abstract

Medical malpractice reform in the United States has long centered on statutory damages caps intended to control liability costs, stabilize insurance markets, and preserve access to healthcare. This paper evaluates the legal and economic performance of damages caps and argues that their effects are more limited than often assumed. Using case law, national malpractice data, and economic scholarship, the analysis shows that malpractice claim frequency has declined substantially since the 1990s, while system costs are increasingly driven by a small number of high-severity cases. In this context, damages caps modestly reduce certain payouts but do not consistently lower insurance premiums, significantly reduce defensive medicine, or address broader drivers of healthcare spending. Their legal durability also varies widely across states due to differing constitutional frameworks. The paper concludes that these caps function primarily as a redistributive mechanism rather than a comprehensive reform, ultimately proposing alternative strategies—including behavioral interventions, structured disclosure programs, and tiered damages frameworks—to improve safety, compensation, and system efficiency.