The Effect of Mandatory Insurer Reporting on Settlement Delay

by Paul Heaton

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To improve their fiscal position, Medicare and some state Medicaid programs have recently taken steps to mandate reporting of personal injury awards and thus facilitate subrogation against such awards. Participants in the tort system have argued these additional reporting requirements might delay settlement of claims, generating welfare losses for both plaintiffs and defendants. This paper examines this problem empirically, using a rich, national dataset of closed automobile bodily injury claims. Using a differences-in-differences research design that exploits the introduction of a new Medicare reporting requirement in 2011, it demonstrates that mandated reporting increased time to settlement by 12%, or an average of 36 days. Conservative calculations suggest such delays could generate hundreds of millions of dollars in waiting costs each year. Policymakers should be aware of and seek to avoid such costs as they assess whether and how to expand reporting of personal injury awards.

This research was conducted by RAND Justice, Infrastructre, and Environment.

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