Best Practice Insurance


  1. Malpractice Insurance is expensive.
  2. Medical errors are associated with 98,000 deaths every year [more than twice the deaths from car accidents by some estimates.]
  3. About two-thirds of the guidelines developed by AHPR between 1990 and 1996 were out of date with current research by 2001.


One solution is to enact damage caps.  These are limits placed on awards in malpractice lawsuits.  This would certainly decrease malpractice insurance, but would not incentivize doctors to take more care when treating a patient.

Ronen Avraham proposed private guideline insurance.  Here’s the theory:

  • Doctors or groups of doctors adopt guideline insurance.  If the doctor follows the guidelines, he is not liable for any malpractice damages.  If he does not follow the guidelines, then he is liable for damages.
  • The private ‘guideline insurance’ company is liable for the quality of the guidelines.  If the guidelines are poor, a patient can bring a suit against the guideline insurance companies.
  • Doctors will have an incentive to choose the lowest cost guideline insurance company.  Guidelines insurance companies bring down their cost by adopting the most up-to-date, cost-effective guidelines.

Do you think this could work?  More information is available here and here.

Source: Avraham, Ronen (2009) “Private and Competitive Regulation of Medicine,” The Economists’ Voice: Vol. 6 : Iss. 8, Article 2.

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