Washington Watch

Battle Brewing in the Senate on National Malpractice Reform

by Kathleen A. Ream, Director of Government Affairs

As in many states, discord reigns on Capitol Hill with respect to solving the malpractice insurance crisis. Republican proponents of federal caps on damages in health care lawsuits believe the caps will stabilize malpractice premiums, while Democrats say that caps will fail to address practices by malpractice insurance carriers that are leading rates to skyrocket and will penalize patients harmed by egregious mistakes. A fierce lobbying effort has pitted doctors, hospitals, and insurers against trial lawyers and consumer advocacy groups, and both sides have spent weeks publicizing their cause. Now, with the House's approval of legislation capping punitive awards at $250,000 (H.R.5, the Help Efficient, Accessible, Low Cost, Timely Healthcare (HEALTH) Act of 2003) on March 13, the stage is set for a battle in the Senate.

President Bush pushed aggressively for H.R.5 and has urged Senate action on it, but even the legislation's backers acknowledge that it will be a tough fight. Many Senate Democrats oppose the bill and are readying legislation that will curb an exemption from antitrust law that has existed for the insurance industry since 1945. They contend the exemption, provided in the McCarran Ferguson Act, enables collusion by malpractice carriers to set higher premiums than true competition achieves.

However, Senator Judd Greg (R-NH) - Chair of the Health, Education, Labor and Pensions Committee (HELP) - has gone on record as saying medical malpractice liability reform can be won if the public is made to understand that federal legislation is desperately needed to avert the current crisis in patient access to medical care. He believes that meaningful reform legislation could pass both the House and Senate before summer, with the support of employers and a public that understand the direct and indirect costs of the current crisis. Gregg said the Senate bill, like H.R.5, will be loosely modeled on California's Medical Injury Compensation Reform Act (MICRA) of 1975.

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States Pushing For Medical Malpractice Liability Reform
In 1975, the State of California enacted the Medical Injury Compensation Reform Act (MICRA), which limited the money victims of medical malpractice could win. Then in 1988, California voters passed a ballot initiative, Proposition 103, which - among other things - required a more stringent review by the state insurance commissioner of changes in insurance rates sought by carriers. It is a matter of debate whether MICRA or Proposition 103 is the reason that increases in malpractice insurance premiums in California have trailed the national average. Nevertheless, today many states are considering legislation similar to MICRA as they scramble to stave off mounting problems with their medical malpractice insurance markets - a crisis that some say threatens health care access. In most cases, the proposed legislation places caps on jury awards in malpractice cases. Proponents of the caps claim that high jury awards are driving the premium rates doctors are being charged for medical malpractice insurance to impossible levels. Opponents, however, view caps and insurance premiums as separate issues, and contend that caps only punish the victims of malpractice.

Thus far this year, the malpractice insurance problem has surfaced in more than 20 states. What follows is a summary of the situations in most of those states.

Connecticut - More than a dozen laws to regulate the malpractice insurance business or limit noneconomic damage awards are being considered. At public hearings on a plan to cap noneconomic damages at $250,000, proponents voiced their support of the cap, while victims of medical mistakes argued that such a cap deprives them of needed compensation. Physicians traveled to the statehouse in March to ask lawmakers to pass such legislation. They did not plan to conduct work stoppages, as some physicians have done in other states, but the Connecticut Medical Society has asked members to attend a rally to encourage medical malpractice liability reform in the state.

Florida - In preparation for the legislative session that began on March 4, the Select Committee on Medical Liability Insurance held a hearing where patients and attorneys voiced their strong opposition to a limit on pain and suffering awards, while physicians maintained that increased malpractice insurance costs are crippling their profession. In several counties, doctors have staged walkouts to protest the high rates. The Florida Medical Association has asked physicians statewide to close their offices on March 27 and participate in a rally at the state Capitol in support of legislation capping noneconomic damages at $250,000. A special task force appointed by Governor Jeb Bush (R) has issued 60 recommendations to ease the crisis. Along with the $250,000 cap, the task force recommends that Florida require physicians to report medical errors to a new Patient Safety Authority, establish a statewide electronic medication system to prevent medication errors, and audit the physician discipline process used by the state Department of Health. The task force has sent its recommendations to the state legislature where lawmakers are now trying to sort out the discrepancies. The issue promises to be one of the most heavily debated in the session. One frustration already expressed by some lawmakers is that the insurance industry has not specifically committed to reducing premiums if a cap is imposed.

Georgia - A bill aimed at containing malpractice premium increases introduced in the Senate includes a $250,000 cap on noneconomic damages. Other provisions require that an expert witness practice in the same area as the defendant physician, limit the number of times a plaintiff can dismiss a case, and exempt hospital ED providers from any noneconomic damages, except in the case of gross negligence. Subsequently, the $250,000 cap was dropped; in its place, is a provision that decreases future damages paid to a victim. The substitute bill also contains some pro business provisions (e.g., a cap on punitive damages at $250,000 in product liability cases, unless the defendant company knew that harm would occur to the victim), allows state courts to decline to accept a liability case if the plaintiff was not a Georgia resident, reduces the interest rate on damages paid to victims, and gives hospitals some protection from damages in ED cases. Georgia's medical community says the new bill does not go far enough to correct the state's premium problem.

Idaho - The House of Representatives voted 58 12 to pass legislation to cap punitive damages in medical malpractice lawsuits at $250,000 or three times the compensatory damages, whichever is greater, and to lower the state limit for noneconomic damages in such lawsuits from $682,000 to $250,000. Supporters of the bill, which include the Idaho Medical Association, say it will reduce spiraling medical malpractice premiums. In ads that appeared in seven newspapers around the state, Former Attorney General David Leroy (R) and Attorney General Larry EchoHawk opposed such a measure.

Illinois - About 500 physicians participated in a work stoppage to protest high malpractice insurance premiums in the Capitol rotunda in Springfield. Governor Rod Blagojevich (D) and other Democratic lawmakers favor increased regulation of malpractice insurers as a means to curb the growth of malpractice premiums, and plan to draft legislation soon. Meanwhile, Senate Republicans have proposed two bills supported by physicians. SB 1159 allows physicians to enter into agreements with patients that limit the amount of damages patients could collect in malpractice lawsuits. The agreements could not limit economic damages to less than $500,000. SB 1161 provides immunity from malpractice lawsuits to certain trauma centers and physicians who practice at those facilities, except in cases in which the malpractice was "willful and wanton."

Kentucky - A bill (HB 8) introduced to address the high cost of malpractice insurance premiums in Kentucky died in a state House committee the week of March 10. The legislation would have established a physician mutual insurance company; allowed the Kentucky Employers' Mutual Insurance Authority to loan the company as much as $5 million in funds; and established medical review committees to evaluate malpractice complaints against physicians.

Michigan - The Michigan State Medical Society is studying two systems to reduce malpractice rates and improve patient care that were proposed last fall by the Institute of Medicine. The systems are based on practices in Sweden and New Zealand and would require providers to identify errors when they happen, apologize to patients, and report the mistake to a state board. Under the more extensive system, an independent board would decide how much money injured patients receive, while under the more limited system, hospitals and physicians would compensate patients directly. The state would establish guidelines based on economic losses, such as health care costs and lost work time, to determine award amounts and limit awards for pain and suffering. Some Michigan officials are requesting federal funding to conduct pilot projects on the proposals.

Mississippi - Following a surgeons' work stoppage, the Senate unanimously passed S 2628, a bill that creates a self funded malpractice insurance pool for physicians, hospitals, and nursing homes in the state that cannot find coverage elsewhere. Under the bill, the Mississippi Tort Claims Board would spend $500,000 to establish the pool, and a third party would handle the underwriting. To participate in the plan, physicians must serve Medicaid beneficiaries and state and school employees. The House passed an amended version requiring publicly owned hospitals to join the pool and only opt out if they can show they have better coverage from the private sector. With the financial collapse of their insurer - Reciprocal of America, which was taken over in January by Virginia regulators - 535 doctors and 46 hospitals are facing uncertainty statewide. Mississippi insurance officials say few companies are willing to write new policies in the state.

Missouri - While Republicans in the House and Senate favor a series of tort law reforms to rein in the costs of malpractice insurance premiums, Governor Bob Holden (D) and Scott Larkin, head of the State's Department of Insurance, have proposed a Missouri Commission on Patient Safety to help reduce medical errors. The Commission would examine the 5% of doctors responsible for more than half the malpractice lawsuits filed in the State. Holden also proposed a state organized insurance program for such specialists as obstetricians and ED doctors who have an especially hard time finding affordable malpractice coverage. Meanwhile, the House approved a bill, HB 273, that: caps damages for pain and suffering in malpractice lawsuits at $350,000; require plaintiffs' attorneys to prove that a "defendant's action or omissions were willful, wanton or malicious"; reduce the time minors have to sue physicians, hospitals, dentists, and other providers; and limit punitive damages in malpractice lawsuits to no more than $500,000 or five times the net amount of compensatory damages.

Nevada - Lawmakers are considering three measures to reduce malpractice premiums. One bill, SB 97, allows doctors to make malpractice payments over time, limit liability for physicians partly involved in a medical error, limit attorneys' fees, and remove two exemptions from a $350,000 pain and suffering malpractice award cap. The bill implements reforms presented last summer to the General Assembly in a petition from physicians, and - according to a survey commissioned by Keep Our Doctors in Nevada - is supported by 76% of Nevada residents. Another bill, SB 122, allows the state insurance commissioner to prevent malpractice insurance premium rate increases. The third bill, AB 187, places a $250,000 cap on pain and suffering damages with no exemptions. It also reduces damages awarded when plaintiffs received funds for injuries or deaths that result from malpractice from insurance, workers' compensation, or other private or public programs.

New Jersey - Thousands of physicians participated in a work stoppage and asked lawmakers to pass a bill that would cap noneconomic damages in malpractice lawsuits at $250,000; place a two year statute of limitations on malpractice lawsuits; require an expert panel that includes an attorney, a physician, and a retired judge to review malpractice lawsuits before trial; and require expert witnesses that plaintiffs hire to testify in malpractice lawsuits to practice medicine in New Jersey in the same specialty as the defendant. Lawmakers reached agreement on a compromise proposal that would place a $300,000 cap on insurer and physician liability for noneconomic damage awards and establish a state fund to cover the cost of awards that exceed the amount. Under the proposal, the State would charge health insurers $2 to $3 per policy to cover most of the estimated $17 million to $25 million annual cost of the state fund. In addition, physicians and attorneys would have to pay a $15 fee for license renewals to cover part of the cost.

New York - Members of the Medical Society of the State of New York conducted a statewide physician telephone call to lawmakers to ask them to pass legislation that would place a $250,000 cap on nonecomomic damages and limit contingency fees for attorneys in malpractice lawsuits. Instead of holding a work stoppage, physicians traveled to Albany on March 11 to discuss the medical malpractice issue with lawmakers. They also plan to hold rallies across the state on May 20 in support of malpractice reforms.

North Carolina - On March 11 State Senate President Marc Basnight (D) appointed a Special Committee on Insurance and Civil Justice Reform to discuss an array of factors contributing to the increasing cost of health care. Committee members will likely consider a proposal to cap noneconomic damages in malpractice lawsuits in the state. North Carolina physicians support the proposal.

Oklahoma - About 600 physicians rallied at the state Capitol in support of a bill that would cap pain and suffering damages in malpractice lawsuits at $250,000.

Pennsylvania - According to the Pennsylvania Medical Society, 919 physicians have left the state or scaled back their practices in the last three years because of increased malpractice insurance costs. Many companies that had provided malpractice insurance have left the state, and the collapse of malpractice insurer Phico has affected tens of thousands of physicians, hospitals, and patients. Governor Ed Rendell (D) said that the state would provide financial support to help physicians cover the cost of malpractice insurance until July 1, 2003. He explained that the state will use a one time payment of $220 million in surpluses to eliminate physician payments to the Medical Care Availability and Reduction of Error program, which helps cover the cost of large malpractice awards that exceed basic malpractice insurance coverage. On April 1, a task force will recommend to the Governor reforms to address the issue in the long term.

South Carolina - Representative Jim Harrison (R), Chair of the House Judiciary Committee, said that legislation to address medical liability reforms likely will not pass the State legislature this session.

Tennessee - State regulators took control of three companies that provide malpractice insurance to thousands of physicians. The state placed Doctors Insurance Reciprocal RRG, American National Lawyers Insurance Reciprocal RRG, and the Reciprocal Alliance RRG under administrative supervision in response to the financial collapse of Virginia based Reciprocal of America, which reinsured the companies.

Texas - The House Civil Practices Committee approved by a vote of 8 1 a bill, HB 4, that would cap noneconomic damages in malpractice lawsuits at $250,000. The legislation would not limit economic damages; punitive damages would remain capped at $1.4 million. The full House will consider the bill later this month.

Utah - Physicians lobbied lawmakers at the State Capitol to pass a bill (HB 188) that would reduce the State's limit on pain and suffering awards in malpractice lawsuits from $400,000 to $250,000 in the event that Congress approves a $250,000 cap. The Utah Medical Association supports the bill; the Utah Trial Lawyers Association opposes it.

West Virginia - Some surgeons actually went on strike; other physicians threatened a work stoppage unless the Senate restored to a malpractice reform bill being considered by a joint House Senate committee a provision providing an income tax credit to help cover the cost of malpractice insurance premiums. The conferees recommended a compromise, which both chambers approved and was signed into law by Governor Bob Wise (D) on March 12. The new law - the Medical Liability Reform Act - calls for tort reform, tax breaks for doctors, and the creation of a physicians' mutual insurance company. The tort reform provisions cap noneconomic damages at $250,000, and damages for wrongful death, permanent disability, and trauma cases where care was "rendered in good faith" at $500,000.

Wyoming - Only two companies sell malpractice insurance in the state, and neither provides coverage for obstetricians. Governor Dave Freudenthal (D) said that he hopes to establish a committee to study proposals to address the problem.