Our system of addressing medical malpractice is broken. We can say that the system is broken not so much because insurance premiums are high or because physicians are demoralized—though these features certainly are not assets either—but because the system fails to accomplish the very things for which it was built: to deter errors before they occur and to compensate the victims of errors that take place nonetheless. In today's broken system, some patients who are injured by malpractice are not compensated, whereas some of those who do receive payment have not truly suffered medical negligence. Because of this imprecision, verdicts lose their power to rebuke and deter. Compounding this is a third problem: the costs of litigation and the defensive medicine that it promotes exact a high price on an already overtaxed health spending budget. The American Medical Association counts seventeen states facing malpractice crises, with another two dozen remaining on the brink1. Addressing this crisis begins with an analysis of the problems. ### Problem 1: Compensation Patients deserve compensation when physicians breach their duty and the breach leads to injury. That rule is not applied uniformly. Brennan et al.2 showed that only a small fraction of patients who have been injured by medical negligence collect compensation. As such, the system is not sensitive. The current medical malpractice system is also not specific: many patients who have not been injured by medical errors nonetheless prevail in malpractice litigation. Patients who experience ordinary complications, or even the natural progression of their disease, may still convince a jury that compensation is due. ### Problem 2: Deterrence A system that is neither sensitive nor specific wastes money, of course; but worse, such a system produces inadequate incentives for improvement. In a rational system, a physician who loses a malpractice case will wonder: “What did I do wrong? How …