Malpractice liability, along with medical technology and payment system distortions, regularly figures among the most-cited reasons for escalating health-care spending in the United States. On the one hand, Harvard economist Amitabh Chandra conservatively estimates that upwards of $60 billion, or 3 percent of total health care costs ($1.8 trillion), is spent annually as a result of direct litigation and indirect defensive medicine costs. On the other hand, tort reform advocates place the figure at $200 billion by extrapolating, to the entire U.S. population, the results of research conducted by Stanford professor Dan Kessler and Mark McClellan. Their 1996 study shows that tort reforms reduced provider liability costs for Medicare heart patients by 5 to 9 percent.

At the heart of these debates is the following question. Does medical malpractice liability achieve its dual goal of compensating victims of medical injuries and deterring medical errors, or does it merely encourage wasteful defensive medicine without improving patient health? Despite considerable empirical research, there is little evidence that malpractice litigation deters medical negligence. The evidence is much stronger—though still hotly debated—that malpractice fears actually encourage physicians to engage in defensive medicine. My work at Shorenstein APARC explores whether malpractice pressures affect physician behavior, patient health, and health care costs in Asia. Studying physicians’ response to legal changes in Taiwan, I find that greater malpractice liability may, under certain circumstances, prompt physicians to perform more services without necessarily improving patient health.

In particular, I focus on how increased medical malpractice liability affects physicians in Taiwan who provide treatment to pregnant women. I have studied how a series of court rulings as well as an amendment to Taiwanese law between 1997 and 2004 impacted physicians’ test-ordering behavior and decisions to perform Caesarian sections. Traditionally, Taiwanese doctors are held accountable for medical malpractice under two bodies of law: tort law in the Civil Code, and criminal law for harm resulting from negligent acts in the course of professional operations. The latter, prosecutorial approach is rare among industrialized nations.

In January 1998, a Taipei District Court decision in favor of plaintiffs in a civil suit for damages sent shockwaves through the medical community. The district court judge disregarded the traditional tort requirement of proving the defendant’s negligence (or fault), and applied the “strict liability” doctrine of the Consumer Protection Law to impose liability on a medical provider without any showing of wrongdoing. The court decision—subsequently affirmed by the Taipei High Court on September 1, 1999 and by the Supreme Court on May 10, 2001—sparked resentment among medical professionals. Passions flared in heated debates between medical and legal scholars about whether medical services should be considered a covered “service” under the Consumer Protection Law. Economists and legal academics questioned whether the traditional justifications for imposing strict liability apply in the highly unpredictable practice of medicine, especially in obstetrics. The saga concluded in April 2004, when the legislature amended the Medical Law to require negligence or fault in medical malpractice cases.

My research considers the effect of these court rulings and legal amendments on physicians’ test-ordering behavior and their propensity to perform Caesarean sections. I identify two sources of variation in perceived risks of malpractice liability: (1) the differences between the level of exposure to malpractice risks due to the ownership structure and size of the physicians’ place of practice; and (2) the differences in perceived risks based on the physicians’ geographical location.

My results are consistent with the existence of defensive medicine. First, with respect to their propensity to increase laboratory tests and reduce Caesarean sections, physicians who own their clinics (“physician-owners”) in Taiwan reacted more strongly to the legal changes than did physicians who are salaried employees at larger hospitals (“nonowners”). Physician-owners’ behavior did not change, however, in discretionary expenditures that were not associated with defensive medicine. Second, physician-owners working in areas under the jurisdiction of the Taipei District Court reacted more strongly to legal change than did those practicing in Kaohsiung, Taiwan’s second largest city, at the opposite end of the island.

The negative connection between the likelihood of Caesarean deliveries and increased malpractice liability deserves special mention, since most published studies find a positive association between malpractice liability risks and Caesarean rates. However, economists Janet Currie and Bentley MacLeod at Columbia University suggest that reforms in which liability is closely aligned with defendant’s actual levels of care may produce the opposite effect. In the Taiwan context, increased medical malpractice liability accrues directly to the physician-owners. Since Caesarean sections are generally riskier than natural deliveries, it seems logical that higher tort liability in Taiwan may actually decrease the likelihood of deliveries by Caesarean sections. In this sense, my study confirms Currie and MacLeod’s predictions and empirical results.

My work contributes to our understanding of health law and policy in several concrete ways. First, I add support to the existence of defensive medicine, even in a non-Common Law jurisdiction. Since I focus on Taiwan—an environment that lacks malpractice insurance, in which physicians are either owners or employees at providers of varying sizes—my research isolates the pure effect of malpractice liability to a greater extent than do many current studies. Second, I show that interaction between the payment and legal systems may either enhance or mitigate the hypothetical pure effects of legal policies. In a fee-for-service system, physicians subject to higher malpractice risks appear much more willing to increase laboratory tests than to reduce profitable Caesarean sections. Third, my research indicates that, by altering physicians’ exposure to risks, different organizational forms and ownership structures of health care provision may affect defensive medicine at differing rates.

In sum, the practice of “defensive medicine” appears not to be a uniquely American phenomenon. Indeed, it may also play a role in health care cost escalations in Asia, especially under heightened physician liability regimes.

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Shorenstein APARC Dispatches are regular bulletins designed exclusively for our friends and supporters. Written by center faculty and scholars, Shorenstein APARC Dispatches deliver timely, succinct analysis on current events and trends in Asia, often discussing their potential implications for business.

Megan Smith, Vice President, New Business Development and General Manager, Google.org., argued that greater interconnectedness achieved by information technology is a major liberating force in the world. Whether it is aiding the coordination of protests or increasing transparency of governments, the exchange of information has huge benefits. This is not a new phenomenon. In places where people have been able to exchange information easily, social progress has followed. Megan cited the example of Seneca Falls, New York where the canal system allowed for extensive communication; it became significant in both the women's rights and abolition movements.

While a large proportion of the world is benefiting from greater interconnectedness, Africa still lacks the infrastructure to take full advantage. Submarine fiber optic cables are necessary for quick and cheap internet cables and many African countries, particularly in the east, are not connected to these, relying instead on satellites. This is likely to change over the next few years, bringing great potential for further development.

The mission of Google.org is to use technology to drive solutions to global challenges such as climate change, pandemic disease and poverty. The organization was set up as part of a commitment to devote approximately one percent of Google's equity plus one percent of annual profits to philanthropy, along with employee time.  Google.org now places its strategic focus on those projects that can leverage the resources of Google staff, particularly its engineers.

Current projects that harness the power of information include:

• Google Flu Trends: This uses aggregated Google search data to estimate flu activity up to two weeks earlier than traditional methods. This system has almost 90% accuracy in real time flu prediction and is therefore an extremely useful tool for health delivery agencies. It is now being used in 30 countries. Google is also starting to work in Cambodia to collect data around SARS.
• Google Power Meter provides a system for consumers to understand their in-home energy use and to take steps to reducing this. The Meter receives information from utility smart meters and in-home energy management devices and visualizes this information on iGoogle (a personalized Google homepage).The premise underlying this project is that greater information is going to be crucial to tackling climate change and consumers ought to be able to be empowered to make informed decisions about their energy use.
• Disaster relief: In response to the Haitian earthquake, a team of engineers worked with the U.S. Department of State to create an online People Finder gadget so that people can submit information about missing persons and to search the database. Google Earth satellite images have also been used to document the extent of damage.

Kim Scott, Director AdSense Online Sales & Operations at Google, explored the potential of new technology for both increasing decentralization and centralization.

Decentralization refers to the capacity of the internet to disperse power and influence to many more people. In the political context, this has (arguably) enabled greater citizen activism. In business, online advertising enables start-ups to get going without relying on venture capitalist funding. Individuals have greater capacity for personal expression now that they can bypass publishing power houses and distribute their own work at virtually no cost. Corresponding to these benefits are a number of negative impacts.
The same technology that allows pro-democracy groups to come together also enables terrorists and pedophile groups to organize and perpetrate harm on a greater scale.

Technology also allows for increasing centralization. The Internet provides a place for the world's information to be easily organized and accessed. But with this comes the risk that certain groups (particularly authoritarian governments) could deliberately misinform citizens.  

Kim raised a number of dilemmas for discussion, including:

• How should technology companies respond to requests from governments to hand over data?
• How should Internet companies respond to different countries' understanding of what content is acceptable? Google's policy to date has been to allow different access in different countries but it has stopped short of allowing any one country to dictate what others countries see.

Matt Halprin is a Partner leading Omidyar Network's Media and Stephen King is the Director of Investments and is based in London. They introduced us to the work of Omidyar Network which invests in market-based efforts to give people the technology tools they need to improve their lives.

The network was set up in 2004 by Pierre Omidyar, founder of eBay, and his wife Pam.  It comprises both a venture capital fund and a grant-making foundation.  The network has a strong focus on individual empowerment and is committed to market-based solutions, believing that business is one of the best mechanisms for achieving sustainable social impact. Omidyar looks to invest in projects that have potential to impact large numbers of people and that show signs of real innovation - for example, new business models or new markets.

So far $307 million has been committed, with $138 million going to for-profit investments and $169 million to non-profit grants. There are two broad areas of focus:

• Access to capital: This encompasses projects around microfinance, entrepreneurship and property rights.
• Media, markets and transparence: This encompasses projects around social media, marketplaces and government transparency. Omidyar are particularly interested in the role of journalism in ensuring accountability of governments.

Projects in the Unities States include:

• The Sunlight Foundation - works to make information about Congress and Federal government more accessible and meaningful to citizens; created the first searchable site for all federal government contracts to monitor where money is going.
• Global Integrity - uses quantitative and qualitative analysis to provide a scorecard tracking governance and corruption in different countries.

In the developing world, Omidyar looks to supports access to greater information and government transparency, which it views as key drivers of prosperity. The network is supporting global organizations, national partners in three African countries (Nigeria, Ghana and Kenya) and is establishing a pan-African mechanism for smaller grants. Current global projects include:

• Ushahidi - an open source platform to report and share data in the aftermath of a crisis. Omidyar will be working to help Ushahidi to build traffic to the site and to tackle the challenge of verifying reports.
• Infonet - a web portal that acts as an information hub for all national and devolved budgets in Kenya; currently used by NGOs, citizen groups and the media.
• Mzalendo - a one stop shop for citizens to track the activities of parliamentarians in Kenya.
• FrontlineSMS - a two way communication tool using laptops and mobile phones for organizations without internet access.