Medical liability under limited resources: A law and economics perspective

Should a lower standard of due care apply to healthcare providers facing scarce resources? We analyse tort law in its capacity to provide deterrent incentives to potential tortfeasors and to spread accident losses that were not avoided. The fact that resources in healthcare are limited, among others due to budget restraints, affects the necessary weighing of costs and benefits of precautionary measures. Limited resources may force healthcare providers to choose between treating more people with less care or fewer people with more care. We argue that limited resources provide a preference for a negligence rule over strict liability, because otherwise, part of the (limited) budget would be spent on tort damages for losses which were too expensive for society to prevent. A reversed burden of proof addresses information problems of the victims. Furthermore, regulation and medical guidelines are important in providing desirable behavioural incentives to avoid accidents.