Malpractice premiums, as is well known, have been high and rising in recent years. Both the level and the growth in premiums vary substantially across states, due in large part to different “malpractice regimes” that either facilitate or inhibit the filing of claims and the awarding of large judgments. There has been considerable discussion of the effects of high or rising premiums, but a fundamental issue in predicting effects or judging normative claims about them is surely the consequences of premium changes on physician incomes and revenues. At one polar extreme, higher premiums may fall almost entirely on physician net incomes, prompting outflow from one state to another or retirement from the active practice of medicine. At the other extreme, if physicians could expect the fees they charge to increase on average by the amount of any premium increase, and if the quantity of services demanded remains unchanged, the full cost of premiums would be shifted forward to consumers (and taxpayers) as higher out-of-pocket payments and/or higher insurance premiums to cover those payments. In between, various divisions are possible.

The consequences of higher malpractice premiums are important regardless of their “incidence” – that is, the identity of those who finally bear the burden of the cost. This chapter first outlines the set of theoretically possible outcomes in terms of incidence, which turns out to be large indeed. It is impossible to choose a scenario based on the causal empirical evidence available.