SPEAKERS CONTENTS INSERTS
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80–193 PDF
2002
HEALTH CARE LITIGATION REFORM:
DOES LIMITLESS LITIGATION RESTRICT ACCESS
TO HEALTH CARE?
HEARING
BEFORE THE
SUBCOMMITTEE ON
COMMERCIAL AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
JUNE 12, 2002
Serial No. 97
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Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://www.house.gov/judiciary
COMMITTEE ON THE JUDICIARY
F. JAMES SENSENBRENNER, JR., WISCONSIN, Chairman
HENRY J. HYDE, Illinois
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
CHRIS CANNON, Utah
LINDSEY O. GRAHAM, South Carolina
SPENCER BACHUS, Alabama
JOHN N. HOSTETTLER, Indiana
MARK GREEN, Wisconsin
RIC KELLER, Florida
DARRELL E. ISSA, California
MELISSA A. HART, Pennsylvania
JEFF FLAKE, Arizona
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MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
PHILIP G. KIKO, Chief of Staff-General Counsel
PERRY H. APELBAUM, Minority Chief Counsel
Subcommittee on Commercial and Administrative Law
BOB BARR, Georgia, Chairman
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JEFF FLAKE, Arizona, Vice Chair
GEORGE W. GEKAS, Pennsylvania
MARK GREEN, Wisconsin
DARRELL E. ISSA, California
STEVE CHABOT, Ohio
MELISSA HART, Pennsylvania
MELVIN L. WATT, North Carolina
JERROLD NADLER, New York
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
MAXINE WATERS, California
RAYMOND V. SMIETANKA, Chief Counsel
SUSAN JENSEN-CONKLIN, Counsel
PATRICIA DEMARCO, Full Committee Counsel
STEPHANIE MOORE, Minority Counsel
C O N T E N T S
JUNE 12, 2002
OPENING STATEMENT
The Honorable Bob Barr, a Representative in Congress From the State of Georgia, and Chairman, Subcommittee on Commercial and Administrative Law
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The Honorable Melvin L. Watt, a Representative in Congress From the State of North Carolina, and Ranking Member, Subcommittee on Commercial and Administrative Law
The Honorable George W. Gekas, a Representative in Congress From the State of Pennsylvania
The Honorable Maxine Waters, a Representative in Congress From the State of California
The Honorable Tammy Baldwin, a Representative in Congress From the State of Wisconsin
The Honorable Jerrold Nadler, a Representative in Congress From the State of New York
WITNESSES
Dr. Donald J. Palmisano, M.D., J.D., Secretary-Treasurer of the American Medical Association
Oral Testimony
Prepared Statement
Ms. Joanne Doroshow, Executive Director, Center for Justice and Democracy
Oral Testimony
Prepared Statement
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Ms. Danielle Walters, Executive Vice President, Californians Allied for Patient Protection
Oral Testimony
Prepared Statement
Mr. Lawrence E. Smarr, President, Physician Insurers Association of America
Oral Testimony
Prepared Statement
APPENDIX
Statements Submitted for the Hearing Record
Statement of the American Insurance Association
Statement of the American Tort Reform Association
Statement of the American Dental Association
Statement of the American Bar Association
Statement of the Healthcare Liability Alliance
Statement of the American Academy of Family Physicans
Statement of the Consumers Union
Statement of the National Medical Liability Reform Coalition
Statement of the American Medical Directors Association
Statement of the American Association of Health Plans
Statement of the American Osteopathic Association
Statement of the American Hospital Association
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Statement of the American College of Obstetricians and Gynecologists
Statement of the American College of Physicians—American Society of Internal Medicine
Statement of the American Association of Orthopaedic Surgeons
Material Submitted for the Hearing Record
Material Referenced by Chairman Barr
April 2002 Issue of Health Care Financial Trends
Response to Chairman's Questions Submitted by Dr. Donald J. Palmisano
Response to Chairman's Questions Submitted by Ms. Joanne Doroshow
Response to Chairman's Questions Submitted by Ms. Danielle Waters
Response to Chairman's Questions Submitted by Mr. Lawrence E. Smarr
Letter to Chairman Barr from Ms. Sandra Katada
HEALTH CARE LITIGATION REFORM: DOES LIMITLESS LITIGATION RESTRICT ACCESS TO HEALTH CARE?
WEDNESDAY, JUNE 12, 2002
House of Representatives,
Subcommittee on Commercial
and Administrative Law,
Committee on the Judiciary,
Washington, DC.
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The Subcommittee met, pursuant to notice, at 10:35 a.m., in Room 2237, Rayburn House Office Building, Hon. Bob Barr [Chairman of the Subcommittee] presiding.
Mr. BARR. I'd like to call the hearing to order.
The costs of the tort system are predicted to soon swamp our national economy, and already, a national insurance crisis is ravaging the nation's essential health care system. Medical professional liability insurance rates have skyrocketed, causing major insurers to drop coverage or raise premiums to unaffordable levels. Doctors and other health care providers have been forced to abandon patients and practices, particularly in the high-risk specialties such as emergency medicine, obstetrics, and gynecology. Women are being particularly hard hit, as are low-income neighborhoods, rural areas, and self-employed business persons. Soaring premiums have also left medical schools reeling and small medical schools particularly vulnerable.
The purpose of the hearing today is to explore the causes of this current health care crisis, its effects on health care providers and patients' access to health care, and the success of the approach to address these problems taken by the State of California more than 25 years ago.
Virtually unscathed by the effects of the current medical professional liability insurance crisis for more than a quarter of a century, Californians have enjoyed the protection of highly successful health care litigation reforms that have made health care delivery more accessible and cost effective in their State. California's Medical Injury Compensation Reform Act, the so-called MICRA law, which was signed into law by Governor Jerry Brown in 1976, has proved immensely successful in increasing access to affordable medical care in that State.
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MICRA's reforms include a $250,000 cap on non-economic damages, limits on contingency fees lawyers can charge that allow more money to go to the victims and less to lawyers, authorization for defendants to introduce evidence showing the plaintiff received compensation for losses from outside sources in order to prevent double recoveries, and authorization for courts to require periodic payments for future damages instead of lump-sum awards in order to prevent bankruptcies in which plaintiffs would receive only pennies on the dollar.
In 1976 when California's MICRA law went into effect, the average medical malpractice premium in that State was $24,000 in 2001 dollars. In 2001, the average premium was only $14,000. Premiums in California adjusted for inflation are lower than what they were before that State implemented its health care litigation reforms, and insofar as these premiums have risen at all since then, they are rising at a much smaller rate than elsewhere in the nation.
Exhaustive research by two Stanford University economists has confirmed that direct medical care litigation reforms, including caps on non-economic damage awards, generally reduce malpractice claims rates, insurance premiums, and other stresses on doctors that may impair the quality of medical care.
Along with restricting access to insurance by physicians and to health care by patients, the mere threat of potentially limitless and bankrupting litigation also causes doctors to engage in defensive medicine, the sometimes harmful and certainly wasteful prescription of medically unnecessary medicine and the performance of unnecessary tests simply to reduce liability exposure. In this way, the current unregulated medical tort system can force doctors to practice bad medicine. It also discourages improvements in the delivery of medical care by deterring doctors from freely discussing errors or potential errors due to fear of litigation. Defensive medicine also wastes billions of dollars a year in taxpayer funds by directing money to medically unnecessary prescriptions and tests in federally funded programs.
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As a bipartisan group led by former Democrat Senator and Presidential candidate George McGovern and former Republican Senator Alan Simpson noted, ''Legal fear drives doctors to prescribe medicines and order tests, even invasive procedures, that they feel are unnecessary. Reputable studies estimate that this defensive medicine squanders some $50 billion every year.''
It is apparent that doctors themselves who are most keenly aware of the litigation threats they face are not blaming insurance companies for high premiums. They know the problem lies in an out-of-control medical litigation system. The survey conducted for the bipartisan group Common Good by the reputable Harris firm found that 87 percent of physicians stated they fear potential medical malpractice liability more today than they did when they started their careers and that 83 percent of physicians somewhat or strongly disagree with the statement, ''Physicians can trust the current system of justice to achieve a reasonable result.''
These numbers are startling, even to the most veteran pollsters, and account in large measure for the serious drop in medical school applicants we are witnessing. Sadly, the perverse result in the absence of reform is that while people may have the abstract ability to sue a doctor for unlimited, unquantifiable damages, they have fewer practicing doctors to treat them in the first place. That is not sound policy. That is a prescription for more deaths and more serious injuries that go untreated.
This hearing will also explore current dynamics affecting the provision of medical malpractice liability insurance. Some are blaming the insurance companies for the crisis in professional medical malpractice insurance. However, if insurance companies really want to stockpile profits from excessively high medical liability premiums, we must ask the following questions.
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Why are companies like St. Paul, formerly an insurer of 42,000 doctors, 750 hospitals, 5,800 health care facilities, and 72,000 health care providers, such as nurses, leaving only medical liability insurance market while staying in other insurance markets? St. Paul is also far from alone in pulling out of the professional medical liability market.
I look forward to hearing from all of our witnesses today on this most serious problem and a most needed solution.
At this time, I'd like to recognize our distinguished Ranking minority Member, the gentleman from North Carolina, Mr. Watt.
Mr. WATT. Thank you, Mr. Chairman. I confess to a touch of deja vu. It seems like for as long as I can remember, this discussion has been going on in one form or another. In the 1970's, the first wave. In the 1980's, the second wave. In the 1990's and continuing into the present, the third wave. And perhaps this hearing will benefit us by shedding some light on the issue rather than just emotion.
I would have to say that if that is to be the case, perhaps we should have had some discussion about the focus of this hearing, because while I agree that the question, does limitless litigation restrict access to health care, is a relevant question, I would think that an equally relevant question might be what would be the impact if we didn't have some medical malpractice regimen in place on the quality of care, on the standards that exist in the health care field, on the ability of people who experience real negligent treatment to obtain a recovery.
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So I am not sure that were I putting together a hearing designed to bring light and real information to bear on this issue, I would have necessarily phrased it in the way that the title to this hearing is phrased. But be that as it may, I suppose the witnesses will address a whole range of issues without regard to the subject of the hearing, because I think this is an area that cries out for reasoned factual information and much of what we have heard over the years on this issue has been based on emotion and the economics of one particular interest group or two particular interest groups, maybe the insurance companies and the medical or health care providers.
I should say to the chair that there is even some substantial disagreement on a factual basis, not on an emotional basis, about the Chairman's assertion that the California reform plan had a substantial positive impact on access to health care and cost of health care. A recent study conducted by the Santa Monica-based Foundation for Taxpayer and Consumer Rights found that MICRA, that California plan, has had no appreciable effect on curbing the rise of insurance rates for physicians. Indeed, the group found that medical malpractice insurance premiums in California escalated in the past decade at a more rapid rate than those throughout the nation in general.
So even if you listen to the Chairman's assertion, and I do not have any factual basis, I am just reading the report that somebody else did, there is substantial disagreement about the impact of prior medical malpractice reform and tort reform efforts on premiums presumably the access to health care.
Perhaps the benefit of this hearing will be that we will bring some real information to this issue, and if that occurs, I am sure that the hearing will serve a very useful purpose. If not, I suspect 2010 or 2012 will be into the fourth phase of this, this being the third, 1970, 1980, 1990. Maybe this is the fourth. But, hopefully, we will get some information that will be helpful to us in this area, and for that purpose, I thank the Chairman for convening this hearing and look forward to listening to the witnesses. Thank you.
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Mr. BARR. I thank the distinguished Ranking Member.
Are there other Members of the Subcommittee who would like to make statements, opening statements? The gentleman from the Commonwealth of Pennsylvania, Mr. Gekas.
Mr. GEKAS. Thank you, Mr. Chairman. I believe that the facts are indisputable that this issue must be addressed and must be addressed as quickly as the Congress, normally lumbering through issues like this, as quickly as the Congress can devote special time to it.
In Dr. Palmisano's testimony, which I have previewed, he cites that in Pennsylvania, in the Philadelphia area, a hospital has given up completely on prenatal care for low-income people, to which it has been attached for many, many years. Since we received Dr. Palmisano's testimony, we learned that in Pittsburgh, in the Pittsburgh area in Pennsylvania, that the St. Francis Health System has eliminated the boards of its subsidiary hospitals and taken other pecuniary steps all based on what they report is the unavailability of insurance or the high cost of premiums for such insurance.
So I think the facts are indisputable. What the solutions are, it would seem that common sense would dictate that one of them is to do something about the insurance premiums or the availability of insurance or both.
I yield back the balance of my time.
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Mr. BARR. I thank the gentleman from the Commonwealth of Pennsylvania.
Are there other Members who wish to make opening statements? The gentlelady from California is recognized.
Ms. WATERS. Thank you very much, Mr. Chairman. Since the California statute has been referred to and some studies indicating that the California statute limiting liability has served California well, I just want to go on record as saying, as one Californian who has always been opposed to this legislation, that I am concerned about the studies, or the study that is being cited as proof positive for why we should have this extraordinary effort here in the Congress of the United States to do the same type of legislation as was done in California.
I have always been opposed, and I continue to be opposed, and I would just caution the Members of this Committee that this oversight hearing on health care litigation reform is a hearing that certainly should be done, but I think we should not believe that we have all of the information that we should have in order to eventually make a decision. I think that we need to know a lot more about what has happened in California. I think that we do not know, and I have not heard any expressions here today, about those cases where you have had limits on liability, where people have received severe disability or handicaps based on their inability to get justice once they have—the liability has been limited.
I believe that in this day and time when we have extraordinary procedures and more intrusive application of medical procedures, that we should be very cautious about not allowing people to have their day in court and to receive the compensation that they should receive or their families when, in fact, there has been great harm.
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So let me just go on record as saying this is one Californian who has never supported a limitation on liability and the kind of reform, litigation reform that's being proposed. And again, I do not believe that this should be looked at here in the Congress of the United States and overriding all of the State decisions or not taking into consideration the investigations that could go on and should go on in the States on this issue. So I would yield back the balance of my time.
Mr. BARR. I thank you.
Any other Members? The gentlelady from Wisconsin.
Ms. BALDWIN. Thank you, Mr. Chairman. I'll be very brief in opening. My time in this hearing this morning is going to be strictly limited and I want to hear as many of the experts that we have before us as possible.
But the issue of access to and affordability of health care is probably the issue that brought me into public service many years ago and motivated me to want to run for Congress. This issue is critical and too many people in this country and in my district fall between the cracks.
I had a chance to have a briefing in my office the other day weighing some of the various factors that are leading to significant increases in health care premium prices for employers and for individuals in my district and across the country. As I recall from that briefing, the element that we are talking about today was actually a very small component of the reason for major increases in health care premiums.
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But protecting my constituents and protecting their access to health care and affordability of health care is of paramount importance to me, and I hope that our hearing today will shed some light.
Mr. BARR. I thank the gentlelady.
Any other opening statements? The gentleman from New York?
Mr. NADLER. Thank you, Mr. Chairman. I agree, obviously. We all know that the escalating costs of medical malpractice insurance is a severe problem for doctors, a severe problem for the affordability of health care generally, and something has to be done about it.
When I was a member of the New York legislature in 1986, we had a huge problem along these lines and the legislature passed what was supposed to be rather stringent reforms putting some limits on—I don't remember what they were, but various limits on lawyers and legal fees and various other things that made it harder for patients to get lawyers and so forth and it didn't do the trick.
Now, about that time, a Harvard study was released, I think right after the legislature had acted. A Harvard study was released which showed that something like, and forgive me if I don't remember the exact statistics, this is 16 years ago, something like 95 or 96 percent of the medical malpractice claims and judgments which hyped the premiums for everyone, came from 1.5 percent of the doctors.
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In fact, 1.5 percent of doctors, or 1 percent of doctors weren't doing their jobs properly, perhaps weren't retrained or weren't terribly competent and were creating lots of medical malpractice claims and judgments, and in effect, the so-called tort law reforms that we had enacted weren't addressing the real problem and, consequently, didn't have any real effect, that the real problem was that the State's medical disciplinary procedure wasn't working and that the handful, relatively handful, 1 percent of doctors who probably shouldn't have been practicing medicine or perhaps needed additional or retraining were causing most of the claims, or the great—not most, 95 percent of the claims and the judgments, that that was the problem and that if you really wanted to get premiums to reasonable levels and if we wanted to prevent a lot of medical malpractice, the thing to do was to deal with those 1 percent of the medical practitioners who were doing damage to their patients and causing the premiums of all the other medical practitioners to go way up and that the tort reform was simply the wrong remedy because dealing with the wrong end of the problem, with something that wasn't causing the problem.
And I suspect that the same thing is true today. I suspect that rather than go into a big political battle, which is likely not going to result in any major changes in any event, as we all know—this has been battled over for many years—we should be taking a hard look at whether, in fact, what we found, what that Harvard medical study found 15 years ago is still true today and then we ought to, perhaps, do something about the real problem that will really get the medical malpractice premiums down and that will also presumably save lives and prevent injuries instead of concentrating on what really amounts to a red herring.
Thank you, Mr. Chairman.
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Mr. BARR. I thank the gentleman.
I would like to introduce our witnesses today and then outline the terms of the hearing today.
Our first witness is Donald J. Palmisano, who is a doctor and a lawyer as well as the Secretary-Treasurer of the American Medical Association, which represents our nation's physicians. Dr. Palmisano is a general and vascular surgeon from New Orleans, Louisiana, where he was selected as one of the top doctors in New Orleans for the year 2001 by an editorial board of the New Orleans area physicians. Dr. Palmisano is also on the Board of Directors of the National Patient Safety Foundation. He is a graduate of the Tulane University School of Medicine, where he received his medical degree with honors in 1963. He is also a graduate of the Loyola University School of Law, where he was elected to the Blue Key National Honor Society. He has also served on the Governor's Commission on Medical Malpractice.
Thank you very much, Doctor, for being with us today and bringing to bear your considerable expertise. I will introduce all of the witnesses real quick and then turn to you to begin.
Our next witness will be Ms. Joanne Doroshow, the Executive Director of the Center for Justice and Democracy. Ms. Doroshow founded the Center for Justice and Democracy in 1998. She is an attorney who has worked extensively on public policy issues since 1986, when she first directed a project for Ralph Nader on liability and the insurance industry. Ms. Doroshow has also worked as a staff attorney and lobbyist for Public Citizen.
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Ms. Doroshow, we appreciate very much your being with us today and bringing us your perspective and expertise.
Our third witness will be Danielle Walters, the Executive Vice President of Californians Allied for Patient Protection. Californians Allied for Patient Protection is a broad-based coalition of health care providers, business, labor, and consumer organizations and insurers created to preserve California's landmark medical malpractice law, the Medical Injury Compensation Reform Act of 1975.
Ms. Walters, thank you very much for being with us today.
Our fourth and final witness will be Lawrence E. Smarr, President of the Physician Insurers Association of America. The Physician Insurers Association of America is a trade association comprised of more than 60 medical professional liability insurance companies owned and operated by doctors and dentists. Collectively, these companies insure approximately 60 percent of America's private practice physicians, as well as dentists, hospitals, and other health care providers.
Thank you very much, Mr. Smarr, for being with us today.
I would like to thank all of the witnesses for being with us today. I would ask each of the witnesses to limit their oral testimony to 5 minutes, and without objection, their full written statements and any additional materials they wish to submit within the 7 days in which the record for this hearing will remain open will be made a part of the permanent hearing record.
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At this time, I would like to recognize Mr. Palmisano.
STATEMENT OF DONALD J. PALMISANO, M.D., J.D., SECRETARY-TREASURER OF THE AMERICAN MEDICAL ASSOCIATION
Mr. PALMISANO. Good morning. I want to thank Chairman Barr for the opportunity to address the Members of this Subcommittee about an emerging crisis that is affecting physicians' ability to practice medicine and limiting patients' access to health care services.
Across the country, physicians are reporting in alarming numbers that they are losing their medical liability insurance or are experiencing rapidly escalating and unsustainable rate increases. As insurance becomes unaffordable or unavailable, physicians are forced to limit services, leave their practice, or relocate, all of which seriously impede patient access to health care.
Recent data indicate that rising medical liability premiums are being driven by increases in lawsuits, awards, and litigation expenses. According to new data, in just a 1-year period, the median jury award increased 43 percent, growing at seven times the rate of inflation. Further, jury awards greater than $1 million increased from 34 percent in 1996 to 52 percent in 2000. More than half of all jury awards today exceed $1 million and the average jury award has increased to about $3.5 million. These numbers speak for themselves.
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There is no doubt that our current system for resolving medical liability claims is critically flawed. The media now report almost daily that the situation is severe in some States, that emergency departments are losing staff and scaling back certain services, such as trauma units. Many OB/GYN and family physicians have stopped delivering babies, and some advanced and high-risk procedures such as neurosurgery are being postponed because surgeons cannot find or afford insurance.
Most importantly, it is our patients who suffer the true costs of a broken liability system. Not only is access to health care services affected, it drives up the cost of office visits, diagnostic tests, and prescriptions and creates long waits or long trips for certain procedures patients cannot get locally because specialists have been forced from high-risk practice areas.
When injuries occur and are caused by a breach in the standard of care, patients should receive prompt and fair compensation, including full payment of all out-of-pocket economic losses and reasonable compensation for intangible non-economic losses, such as pain and suffering. Unfortunately, studies have shown that our medical liability litigation system is neither fair nor cost effective in making a patient whole.
To bring balance to our medical liability litigation system, Congress should start by initiating effective reforms. Toward this end, we strongly encourage Congress to pass H.R. 4600, the HEALTH Act, a bipartisan bill that offers fair and reasonable reforms that have proven effective. The major reforms in the HEALTH Act are based on the successful California law known as MICRA and have been proven fair to patients and effective at maintaining stability in the medical liability insurance market in California. MICRA also is credited in saving California from the current medical liability crisis brewing in States that do not have similar reforms.
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The public supports MICRA-type reforms. A recent study by the Health Care Liability Alliance, of which AMA is a member, shows that 73 percent of Americans favor reasonable limits on pain and suffering awards. By enacting effective medical liability reforms, Congress has the opportunity to benefit patients by increasing access to medical services.
In addition, such reforms will help advance patient safety initiatives as well as curb the single most wasteful use of precious health care dollars, the cost, both financially and emotionally, of health care liability litigation. The modest proposals in the HEALTH Act would ultimately lead to a stronger health care system for all patients. Thank you.
Mr. BARR. Thank you very much, Dr. Palmisano.
[The prepared statement of Dr. Palmisano follows:]
PREPARED STATEMENT OF DONALD J. PALMISANO
On behalf of the physician members of the American Medical Association (AMA), I appreciate the opportunity to testify before you today regarding an issue that poses a serious threat to the availability of and access to quality health care for patients.
OVERVIEW
Since last fall, there have been an alarming number of physicians reporting that they are unable to obtain medical liability insurance and, if they are able to obtain such coverage, the premium increases threaten their ability to practice medicine. Also alarming is the high number of insurers that have left the medical liability market. The media now report on almost a daily basis that the situation has become so critical in some states that physicians are forced to limit services, retire early, or move to another state where liability premiums are more stable. As a result, we must ask the question, ''Will your doctor be there?''
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Patient access to care is now seriously threatened in states such as Florida, Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington, and West Virginia. In other states, such as Alabama, Arizona, Illinois, North Carolina, South Carolina, and Tennessee, a crisis is looming.
Emergency departments are losing staff and scaling back certain services such as trauma units. Many obstetrician/gynecologists and family physicians have stopped delivering babies, and some advanced and high-risk procedures (such as neurosurgery) are being postponed because surgeons cannot find or afford insurance.
The primary cause of this emerging crisis is the unrestrained escalation in jury awards that are a part of a legal system that in many states is simply out of control. New data indicate that increasing medical liability premiums are being driven primarily by increases in lawsuit awards and secondarily by increases in litigation expenses.
According to 2001 Jury Verdict Research data, in just a one year period (between 1999 and 2000), the median jury award increased 43 percent. Further, median jury awards for medical liability claims grew at 7 times the rate of inflation, while settlement payouts grew at nearly 3 times the rate of inflation. Even more telling, however, is that the proportion of jury awards topping $1 million increased from 34 percent in 1996 to 52 percent in 2000. More than half of all jury awards today top $1 million, and the average jury award has increased to about $3.5 million. It is clear that the increasing proportion of multimillion-dollar jury awards is driving the boom in claims costs.
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These numbers speak for themselves—there is no doubt that our current system for resolving medical liability claims is critically flawed.
ACCESS TO CARE IS AT RISK
The most troubling aspect of the current medical liability litigation system is the effect on patients. Unbridled lawsuits have turned some regions in our country—and in several cases entire states—into risky areas to practice medicine. Due to large jury awards and the burgeoning costs of defending against lawsuits (including frivolous claims), medical liability insurance premiums are skyrocketing. As insurance becomes unaffordable or unavailable, physicians are being forced to leave their practices, stop performing high-risk procedures, or drop vital services—all of which seriously impede patient access to care.
Three states in particular—Nevada, Pennsylvania, and Mississippi—illustrate the crisis many states are experiencing and the problems many other states will face if effective tort reforms are not enacted.
NEVADA
In Nevada, patients have been experiencing the impact of a medical liability crisis for months. The state ranks 5th among states with the highest physician liability premiums (at $94,820 per year), but only 47th out of 50 states in the number of physicians for its population, according to the American College of Obstetricians and Gynecologists (ACOG).
''Approximately 100 Las Vegas physicians have already left Nevada to practice elsewhere, announced they will be closing their practices, or retir[ed] early because they cannot afford doubling, tripling, or quadrupling rates,'' according to the Nevada State Medical Association. In Las Vegas, it is expected that more than 10% of the physicians will stop practicing or relocate, further adding to the crisis in the state, reports the Los Angeles Times in its March 4, 2002, edition. And, if the crisis is not resolved in the next few months, an ACOG survey concludes that 6 out of 10 Nevada ob-gyns will no longer practice obstetrics.
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Some physicians in Nevada stopped practicing emergency medicine because they can no longer afford medical liability insurance. In February 2002, University Medical Center's Trauma Center officials indicated that unavailability of certain on-call surgical specialists, who are unable to obtain affordable medical liability insurance coverage, could jeopardize the Center's accreditation and ability to operate a full schedule. Nevada law requires a certain number of emergency physicians and specialists to be on call 24 hours a day, seven days a week. And if the trauma center cannot comply, it could be shut down. If that happens, critically injured patients would have to be sent to trauma centers in nearby states, requiring some patients to be airlifted to hospitals in Southern California, Phoenix, Reno, or Salt Lake City.
As recently as last week, five trauma surgeons and 26 specialty surgeons made the difficult decision to resign or request leave from the University of Las Vegas Medical Center's trauma center. Some plan to leave June 30 and others July 31. This is expected to reduce by half the number of urologists, spinal surgeons, neurosurgeons, orthopedic surgeons, and cardiothoracic surgeons who will be on call to aid patients with life-threatening injuries (Las Vegas Review-Journal, June 6, 2002).
After months of almost daily news coverage regarding the medical liability crisis, Nevada Insurance Commissioner Molasky-Arman conducted a hearing on March 4, 2002, regarding the availability of medical liability insurance in the state. An order issued by the Commissioner on March 12, 2002, declared that there is ''overwhelming evidence that medical malpractice insurance is not readily available in the voluntary market in Nevada.''
As a stopgap measure, the Commissioner developed a temporary solution ''to protect the public's access to high quality health care services by ensuring the availability and affordability of medical professional liability insurance for Nevada's physician community.'' Governor Kenny Guinn is spending a significant amount of time trying to find a more permanent solution to Nevada's crisis, and many affected by the crisis are calling for a special session of the State legislature.
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PENNSYLVANIA
In Pennsylvania, the state House of Representatives' Professional Licensure Committee on the Shortage of Health Care Professionals reported that the loss of physicians and other health care professionals due to high medical liability premiums and reduced reimbursements was a ''major health care problem.''
According to the Pennsylvania Medical Society, during 2001 the major Pennsylvania medical liability carriers implemented overall rate increases ranging from 21 percent to 90.8 percent. Jury Verdict Research reports that the median verdict for Pennsylvania medical liability cases between 1994 and 1999 was $650,000, compared to California's $350,000 (a state which has had effective tort reform for 25 years).
Concerned Citizens for Care Pennsylvania (a grassroots organization in the state) is in the process of collecting an extensive list of physicians who cite the liability crisis as the reason they are no longer Pennsylvania physicians, as well as information regarding reduced services due to the crisis (www.concernedcitizensforcare.org). In addition to physicians leaving the state or reducing services, 80 percent of physicians who tried to recruit new physicians into Pennsylvania faced serious difficulty doing so. For those remaining physicians, 72 percent deferred the purchase of new equipment and the hiring of new staff because of skyrocketing premiums, according to a 2001 Pennsylvania Medical Society survey.
On May 31, 2002, Methodist Hospital in Philadelphia announced it would discontinue its prenatal-care program for low-income women effective July 1. Citing the rising costs of medical liability insurance, Methodist already announced it would stop delivering babies effective June 15, 2002. A hospital representative said that it would be a burden for many low-income women to go to another hospital affiliated with Methodist instead of getting their medical care near their homes.
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MISSISSIPPI
In Mississippi, this year alone juries awarded $27 million in medical liability cases. Mississippi's liability climate is so severe, the U.S. Chamber of Commerce is warning businesses about the danger of doing business there. Mississippi State Medical Association (MSMA) cites the state's volatile legal climate and reputation for ''jackpot justice'' as the reasons many insurance carriers have stopped doing business in Mississippi.
In a May 13, 2002 article, Forbes reported that the tort system in Mississippi was having devastating effects on patients' access to care. MSMA Immediate Past President, Dr. Hugh Gamble of Greenville, estimates the state could lose 10 percent of its 4,000 to 4,500 physicians by year's end, many of whom will relocate to states such as Louisiana which have effective tort reforms.
The North Mississippi Medical Center in Tupelo, a hospital that serves 22 counties and 600,000 people, is now finding it all but impossible to recruit new physicians. They are scared away by the state's tort-friendly medical liability environment, soaring insurance premiums, and word of exorbitant jury awards. The hospital's insurance premiums have doubled in the last year to $2 million. It may have to cut back on emergency services, and one out of every four days there is no neurosurgeon on call. During this time, patients needing a neurosurgeon must be transported to Memphis or Jackson for care. That hour is crucial; it could cost a life.
OTHER STATES
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Many Florida doctors say they are considering avoiding services associated with high legal risks such as reading mammograms. ''It hurts because we know women need mammograms,'' said radiologist Robert Entel, MD. ''But we feel like we're being punished for providing a crucial service. All it takes is one lawsuit to ruin a doctor's life.'' (Tampa Tribune, 12/19/01).
Liability costs for Texas physicians skyrocketed as much as 300 percent in some regions and for some specialties. As a result, there is only one neurosurgeon serving 600,000 people in the McAllen area. In the past two years, four South Texas patients with head injuries died before they could be flown out of the area for medical attention.
In Arizona, a small community hospital's maternity ward closed January 31, 2001, because four of the town's six family doctors stopped delivering babies due to skyrocketing premiums. People in this town must travel at least 35 miles to the next hospital center if they need OB care. Many ambulance drivers now reportedly are refusing to pick up pregnant women because of the risk of complications occurring in the ambulance.
In Massachusetts, the Boston Globe reported on May 24, 2002, that ''a serious shortage of physicians in certain specialties, particularly radiology, anesthesiology, emergency medicine, and gastroenterology, is delaying tests and surgeries forcing more doctors to work night shifts and closing pain clinics,'' according to a study of Massachusetts doctors. Also, ''Boston's large teaching hospitals are having trouble recruiting and keeping doctors,'' the Globe reports.
In New Jersey, there was a legislative hearing on June 3, 2002, where physicians testified that a spike in the cost of medical liability insurance could drive doctors out of the state or out of practice. Since last year, the cost of liability insurance has doubled for some doctors. Several insurers have left the state, leaving New Jersey physicians with few choices. Surgical specialists such as obstetricians and neurosurgeons have been hit especially hard with price increases. Until about five years ago, there were only a handful of medical liability awards over $1 million. Last year, however, New Jersey had 26 awards greater than $1 million, and this year the state has averaged one a week. ''As the problem has grown, physicians and the entire New Jersey medical community have entered a full-fledged state of crisis,'' said Bernard Saccaro of the Medical Society of New Jersey.
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Doctors in the New York area face sharp increases in their medical liability insurance costs, which are already among the highest in the country. In New York State, a majority of doctors are likely to pay at least 20 percent more in premiums over the next year. Those premiums are already substantial; for obstetricians and neurosurgeons, they can run to more than $100,000 annually (New York Times, March 22, 2002).
EFFECT ON HEALTH CARE DELIVERY—A CULTURE OF FEAR
The reality of being sued is daunting to just about everyone in the medical community. A recent Harris Interactive study (The Fear of Litigation Study—The Impact on Medicine) for Common Good illustrates just how detrimental the litigious nature of our society is to physicians and other health care professionals. This study reveals the extent to which the fear of litigation affects the practice of medicine and the delivery of health care—''From the increased ordering of tests, medications, referrals, and procedures to increased paperwork and reluctance to offer off-duty medical assistance, the impact of the fear of litigation is far-reaching and profound.''
The study shows, among other things, that more than three-fourths (76%) of physicians believe that concern for medical liability litigation has hurt their ability to provide quality care in recent years, and nearly all physicians and hospital administrators feel that unnecessary or excessive care is provided because of litigation fears. It also shows that an overwhelming majority of physicians (83%) and hospital administrators (72%) do not trust the current system of justice to achieve a reasonable result to a lawsuit.
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The Harris study found that a majority (59%) of physicians believe (''a lot'') that the fear of liability discourages open discussion and thinking about ways to reduce health care errors. The AMA has long believed that health professionals and organizations should be encouraged to report and evaluate health care errors and to share their experiences with others in order to prevent similar occurrences. However, this ''culture of fear'' caused by our over-litigious society suppresses such information.
The AMA strongly supports the principle underlying the 1999 Institute of Medicine (IOM) report entitled, To Err is Human: Building a Safer Health System, that the health care system needs to transform the existing culture of blame and punishment, which suppresses information about errors, into a ''culture of safety'' that focuses on openness and information-sharing to improve health care and prevent adverse outcomes. The AMA also supports the IOM's focus on the need for a system-wide approach to eliminating adverse outcomes and improving safety and quality, instead of focusing on individual components of the health system in an isolated or punitive way. Toward this end, the AMA supports S. 2590, the ''Patient Safety and Quality Improvement Act'' (and the anticipated companion bill being drafted by the House Energy and Commerce Committee), as well as H.R. 4889, the ''Patient Safety Improvement Act of 2002.'' These bills would provide a framework to create a ''culture of safety'' by establishing a confidential, non-punitive, and evidence-based system for reporting health care errors. There is a very broad and strong consensus of agreement on this legislative approach within the health care community. By implementing this approach, errors can be identified and analyzed to improve patient safety by preventing future errors.
In addition to patient safety and quality improvement, the fear of litigation stifles the advancement of new medical treatments and medications, encourages physicians to practice defensive medicine, overwhelms the health care system with paperwork—leaving less time for patient care, and discourages qualified candidates from pursuing a career in medicine or from moving to a state with a bad liability climate.
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THE PRACTICAL SOLUTION
The AMA recognizes that injuries due to negligence do occur in a small percentage of health care interactions, and that they can be as devastating or worse to patients and their families than injury due to natural illness or unpreventable accident. When injuries occur and are caused by a breach in the standard of care, the AMA believes that patients are entitled to prompt and fair compensation.
This compensation should include, first and foremost, full payment of all out of pocket ''economic'' losses. The AMA also believes that patients should receive reasonable compensation for intangible ''non-economic'' losses such as pain and suffering and, where appropriate, the right to pursue punitive damages.
Unfortunately, our medical liability litigation system is neither fair nor cost effective in making a patient whole. Transformed by high-stakes financial incentives, it has become an increasingly irrational ''lottery'' driven by open-ended non-economic damage awards. A new study by Tillinghast-Towers Perrin shows that our tort system, in general, is an extremely inefficient mechanism for compensating claimants—returning less than 45 cents on the dollar to claimants and only 20 cents of tort cost dollars to compensate for actual economic losses. This study also reveals that the cost of our tort system is significantly higher than other countries and almost twice the average.
The AMA believes that to effectively stabilize medical liability insurance rates—while continuing to ensure that patients who have been injured through negligence are fairly compensated—Congress must pass fair and reasonable reforms to our medical liability litigation system that have proven effective. Toward this end, we strongly urge Congress to pass H.R. 4600, the ''Help Efficient, Accessible, Low Cost, Timely Health Care 'HEALTH' Act of 2002,'' a bipartisan bill that would lead to a stabilized medical liability insurance market and bring balance to our medical liability litigation system.
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The major provisions of the HEALTH Act would benefit patients by:
Awarding injured patients unlimited economic damages (e.g., past and future medical expenses, loss of past and future earnings, cost of domestic services, etc.);
Awarding injured patients non-economic damages of up to $250,000 (e.g., pain and suffering, mental anguish, physical impairment, etc.), with states being given the flexibility to establish or maintain their own laws on damage awards, whether higher or lower than those provided for in this bill;
Awarding injured patients punitive damages of up to two times economic damages or $250,000, whichever is greater;
Establishing a ''fair share'' rule that allocates damage awards fairly and in proportion to a party's degree of fault; and
Establishing a sliding-scale for attorneys' contingent fees, therefore maximizing the recovery for patients.
These reforms are not part of some untested theory—they work. The major provisions of the HEALTH Act are based on the successful California law known as MICRA (Medical Injury Compensation Reform Act of 1975). MICRA reforms have been proven to stabilize the medical liability insurance market in California—increasing patient access to care and saving more than $1 billion per year in liability premiums—and have reduced the time it takes to settle a claim by 33 percent. MICRA is also saving California from the current medical liability insurance crisis brewing in many states that do not have similar reforms.
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In fact, according to Medical Liability Monitor, the gap between medical liability insurance rates in California and those in the largest states that do not limit non-economic awards is substantial and growing. One national insurance company (The Doctors Company) recently reported a 93 percent difference in average rates between obstetrician/gynecologists in California (with MICRA reforms) and Nevada (with no MICRA-type reforms).
MICRA-type reforms are effective, especially at controlling non-economic damages. Several economic studies substantiate this point. One study looked at several types of reforms and concluded that capping non-economic damages reduced premiums for general surgeons by 13% in the year following enactment of MICRA, and by 34% over the long term. Similar results were shown for premiums paid by general practitioners and ob-gyns. It was also shown that caps on non-economic damages decrease claims severity (Zuckerman et al. 1990).
Another study published in the Journal of Health Politics, Policy and Law concluded that caps on non-economic damages reduced insurer payouts by 31%. Caps on total damages reduced payouts by 38% (Sloan, et al. 1989). Another study concluded that states adopting direct reforms exhibited reductions in hospital expenditures of 5% to 9% within three to five years. If these figures are extrapolated to all medical spending, a $50 billion reduction in national health spending could be achieved through such reforms (Kessler and McClellan, Quarterly Journal of Economics, 1997). Further, a 1998 Congressional Budget Office study asserts that caps on non-economic damages have been extremely effective in reducing the severity of claims and medical liability premiums. Conversely, a 1996 American Academy of Actuaries study shows that medical liability costs rose sharply in Ohio after the Ohio Supreme Court overturned a tort reform law that set limits on non-economic damages.
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Furthermore, three-quarters of Americans understand the detrimental effect that excess litigation has on our health care system. A new survey conducted by Wirthlin Worldwide for the Health Care Liability Alliance (HCLA) (of which AMA is a member) shows that the vast majority of Americans agree we need common sense medical liability reform. Among the findings:
71 percent of Americans agree that a main reason health care costs are rising is because of medical liability lawsuits.
78 percent say they are concerned about access to care being affected because doctors are leaving their practices due to rising liability costs.
73 percent support reasonable limits on awards for ''pain and suffering'' in medical liability lawsuits.
More than 76 percent favor a law limiting the percentage of contingent fees paid by the patient.
These findings are consistent with previous surveys commissioned by HCLA.
Without effective reforms, our medical liability litigation system will continue to destabilize the medical liability insurance market, increase health care costs, limit patient access, and stifle advancement in medical procedures, medications, and patient safety improvement.
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CONCLUSION
Physicians and patients across the country realize more and more every day that the current medical liability situation is unacceptable. Unless the hemorrhaging costs of the current medical liability system are addressed at a national level, patients will continue to face an erosion in access to care because their physicians cannot afford or obtain medical liability insurance. The reasonable reforms of the HEALTH Act have brought stability in those states that have enacted similar reforms.
By enacting meaningful medical liability reforms, Congress has the opportunity to increase access to medical services, eliminate much of the need for medical treatment motivated primarily as a precaution against lawsuits, improve the patient-physician relationship, help prevent avoidable patient injury, improve patient safety, and curb the single most wasteful use of precious health care dollars—the costs, both financial and emotional, of health care liability litigation. The modest proposals in the HEALTH Act answer these issues head on and would strengthen our health care system.
The AMA appreciates the opportunity to testify on the adverse effect that our current medical liability litigation system imposes on patient access to health care and urges Congress to pass the HEALTH Act.
Mr. BARR. Ms. Doroshow, you are recognized for 5 minutes, ma'am.
STATEMENT OF JOANNE DOROSHOW, EXECUTIVE DIRECTOR, CENTER FOR JUSTICE AND DEMOCRACY
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Ms. DOROSHOW. Thank you, Mr. Chairman. I would first like to introduce somebody who is sitting behind me. Her name is Sandra Katada and she, unfortunately, was not able to sit on the panel to testify today. She comes all the way from Texas and her daughter was tragically killed by medical malpractice by a doctor who is still practicing in that State who, very tragically, because of his incompetence, and was before her child died responsible for the death of several other babies in the State and subsequently to her baby's death. I would like to submit her statement for the record so at least that her written statement gets in.
[The prepared statement of Ms. Katada follows in the Appendix]
Ms. DOROSHOW. But these are the kinds of people that I would urge the Committee in further exploring this issue to talk to.
There is an egregious amount of malpractice that goes on in this country. The Harvard Medical malpractice study that Representative Nadler mentioned also talked about the amount of malpractice that happens, and the National Academy of Sciences recently extrapolated those figures to estimate that 98,000 people are killed in hospitals every year due to medical errors.
The bill that has been introduced, H.R. 4600, to deal with this insurance crisis, frankly, be an abomination, not only for the victims of medical malpractice, but for the quality of health care in this country in that it would reduce the financial responsibility of hospitals and other medical providers to pay for their medical errors, and also because it will do absolutely nothing to control the insurance crisis that we find ourself in right now, that we found ourselves in in the mid-1980's and, that we found ourselves in in the mid-1970's. If I may, I would just like to read a couple of quotes from newspapers. This is the Washington Post.
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''Doctors and hospitals in West Virginia have been saying for weeks that they would have to close their doors at the end of this month when three major insurance companies plan to cancel malpractice insurance coverage for most of the State's medical providers.''
In the St. Petersburg Times, ''Doctors are threatening to quit practicing some specialties and move out of the State while South Florida hospitals and trauma centers have threatened to shut down or curtail their services.''
Both of these articles appeared in May 1986. We are seeing the exact same kind of reports today in the newspaper. In the mid-1980's, States responded with a huge number of tort restrictions passed in virtually every State in the country. New York certainly was one State that responded that way, as well as many others. In the back of my testimony, you will see lists and lists of tort restrictions that were passed because lawmakers were told that this was the only way to bring down insurance rates.
Well, it didn't. Rates came down on their own because of the insurance cycle. They eventually flattened out in the late 1980's and stayed kind of low for about 17 years, and all of a sudden we're seeing an increase again. This has absolutely nothing to do with lawsuits. There is only one source for jury verdict data that is ever cited that we just heard from this last witness alleging a 43 percent increase in verdicts. This is from an organization called Jury Verdict Research that essentially issues bogus data and has been called before Congress before and challenged. The chairman of this company has been challenged and was so in the mid-1980's for misuse of this data, and they are doing the same thing again. This is not true. The average claim, med mal claim in this country is $30,000, and it has stayed virtually constant for the last 10 years.
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What is happening is that we were in a hard market. This is the hard part of the insurance economic cycle. It happens every so often. Interest rates drop. There has been severe underpricing of insurance rates in years prior to this and now insurance compaines are losing money and they're raising rates and they're canceling coverage.
And unless Congress actually tries to deal with and adjust this phenomenon, we are going to continue to see these volcanic eruptions in insurance premiums, whether they're affecting med mal lines or other lines. Unless there is real insurance reform in this country, this problem is never going to end.
We actually did a study in 1999 which—this is before the last crisis. We looked at every State in the country that enacted tort reform and did a correlation between what happened in those States and insurance rates and found that there was absolutely no correlation between enactment of tort reform and insurance rates, and so I would hope that the Committee recognizes what the real problem is here.
Mr. BARR. Thank you very much.
[The prepared statement of Ms. Doroshow follows:]
PREPARED STATEMENT OF JOANNE DOROSHOW
Mr. Chairman, members of the Subcommittee, I am Joanne Doroshow, President and Executive Director of the Center for Justice & Democracy, a national public interest organization that is dedicated to educating the public about the importance of the civil justice system. I appreciate the opportunity to address the issue of health care litigation. I might respectfully disagree with the premise of the hearing, however, in that health care litigation is certainly not limitless in this country today.
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Following the conclusion of this written testimony, you will find a list of major tort restrictions in medical malpractice cases that state lawmakers have enacted since the mid-1980s. They enacted these laws after medical and insurance lobbyists told them that legislation was needed to reduce medical malpractice insurance rates, just as they are telling you today. It should be noted that this extensive list does not include every state restriction on patients' right to sue, such as laws found in many states requiring patients to present affidavits or ''certificates of merits'' before cases can even be brought.
Today, I would like to discuss why these laws have had terrible consequences for patients while doing nothing to improve the affordability or availability of insurance.
For the last 17 years, doctors and hospitals nationwide have experienced a relatively stable medical malpractice insurance market. Insurance was available and affordable. Rate increases were modest. In fact, over the last 10 years, average premiums increased by only 1.9 percent nationwide, far below medical inflation. Meanwhile, profits for medical malpractice insurers soared, generated by high investment income.
Medical malpractice insurance companies are now experiencing a downturn and they are raising premiums and canceling coverage for doctors, or at least threatening to do so, in virtually every state in the country. One insurance insider, Richard G.M. Marko, senior Vice President of National Markets at Liberty Mutual Insurance Co. in Boston, recently told an insurance audience that from 1994 to 1999, insurance rates decreased by about 50 percent and that now, after two straight years of increasing rates, only about half of that decrease has been made up. This is not a state-specific phenomenon. It is not even a country-specific phenomenon. It is even happening in countries like Australia and Canada that do not have jury trials in civil cases.
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This so-called insurance ''crisis'' is an exact repeat of the last insurance ''crisis'' that hit the United States in the mid-1980s and an earlier one in the mid-1970s. As its predecessors, today's insurance ''crisis'' has absolutely nothing to do with the U.S. legal system, tort laws, lawyers or juries. It is driven by the insurance underwriting cycle and remedies that do not specifically address this phenomenon will fail to stop these wild price gyrations in the future.
One solution that Congress has proposed to respond to these problems, H.R. 4600, would be as egregious for patients and the quality of health care in America, as it would be ineffective in bringing insurance rates under control. It is based entirely upon a false predicate—that the U.S. civil justice system is to blame for insurance price-gouging. Moreover, this particular bill fantastically overreaches, providing immunities for drug companies that have no relation whatsoever to medical malpractice issues.
To summarize:
Contrary to insurance company claims that medical malpractice verdicts are ''exploding,'' the current average medical malpractice insurance payout is about $30,000 and has been virtually unchanged for the last decade. In fact, total insurance payouts to all claimants have hovered between $2.5 billion and $4 billion per year. By comparison, Americans spend twice that much—about $8 billion—on dog food each year. Moreover, medical malpractice costs, as a percentage of national health care expenditures, are at an all time low, 0.55 percent. In light of the fact that medical malpractice is the eighth leading cause of death in the United States, killing more people than breast cancer, AIDS and traffic deaths, medical malpractice insurance is an amazing value, covering all medical injuries for about one-half of one percent of health system costs. On the other hand, the cost of medical errors is huge. Total national costs (lost income, lost household production, disability and health care costs) are estimated to be between $17 billion and $29 billion each year.(see footnote 1) The problem here is the degree of malpractice itself.
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Volcanic eruptions in insurance premiums for doctors have occurred three times in the last 30 years. The cause is always the same: a severe drop in investment income for insurers compounded by severe underpricing in prior years. Each time, insurers have tried to cover up their mismanaged underwriting by blaming lawyers and the legal system. Under this theory, one would have to believe that jury verdicts or trial lawyers have timed their ''aggression'' to precisely coincide with the insurance industry's economic cycle, so that the aggression impacts just when the market turns hard. In other words, one would have to accept the notion that they were aggressive in the mid 1970s, then non-aggressive for a decade, then aggressive in the mid-1980s, non-aggressive for 17 years and are now aggressive again. This is ludicrous.
In the midst of the last insurance ''crisis'' in the mid-1980s, state lawmakers enacted often severe tort restrictions on patients' rights in this country, to reduce insurance rates. These laws had absolutely no impact on insurance rates. Some states that resisted enacting any ''tort reform'' experienced low increases in insurance rates or loss costs relative to the national trends, and some states that enacted major ''tort reform'' packages saw very high rate or loss cost increases relative to the national trends. In other words, there was no correlation between ''tort reform'' and insurance rates.(see footnote 2) Indeed, a few years after the mid-1980s insurance ''crisis,'' the insurance cycle flattened out, rates stabilized and availability improved everywhere—until now, over a decade later. The flattening of rates had nothing to do with tort law restrictions enacted in particular states, but rather to modulations in the insurance cycle everywhere. In 1991, Washington's insurance commissioner Dick Marquardt concluded in a report that it was ''impossible to attribute stable insurance rates to tort-law changes or the damages cap,'' since rates also improved in states that did not pass tort reform. The American Insurance Association (AIA) and the American Tort Reform Association (ATRA) have admitted in published statements that lawmakers who enact ''tort reforms'' should not expect insurance rates to drop, most recently with the AIA's March 13, 2002 statement, ''[T]he insurance industry never promised that tort reform would achieve specific premium savings.''
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H.R. 4600 is a cruel bill that would reduce the protections and rights of citizens in every state in this country. The bill directly interferes with the independence of our nation's civil justice system, tying the hands of judges and juries who hear the evidence in a case, and undermining our country's uniquely individualized system of justice. H.R. 4600 would make it more difficult or impossible for injured patients to hold accountable those who have injured them. Adding to the already existing barriers that prevent injured patients from turning to the courts, H.R. 4600 presents a peril to both family safety and democracy in our country.
History is clear on this matter: legislative attempts to reduce insurance rates by taking away the rights of the most seriously injured in our society has been and continues to be a failed public policy.
CALIFORNIA IS A FAILED MODEL FOR PROPOSED NATIONAL RESTRICTIONS
ON PATIENTS' RIGHTS
In the mid-1970s, California enacted severe tort restrictions for patients who have been injured by malpractice (MICRA). Among other things, this law allows patients to recover no more than $250,000 in non-economic compensation no matter how egregious the malpractice or serious the injury; prohibits patients from receiving damages in a lump sum; repeals the collateral source rule; and imposes restrictions on the attorneys' fees of patients. The medical establishment is campaigning to spread this law, one of the most draconian in the nation, not only to other states, but also to the entire nation in H.R. 4600, arguing falsely that this cap has kept premiums down dramatically.
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The Center for Justice & Democracy (CJ&D) and the California-based Foundation for Taxpayer and Consumer Rights submit to the Subcommittee today data that show California's MICRA law has failed to slow premium increases for doctors and hospitals. In fact, over the last decade, the average malpractice premium in California has grown more quickly than it has in the nation overall.
This actuarial analysis was done by nationally recognized actuary J. Robert Hunter, former Texas Insurance Commissioner and Federal Insurance Administrator under Presidents Ford and Carter, who compared national malpractice premium trends to those in California. Hunter found that from 1991 to 2000, malpractice premiums in California stayed close to national premium trends. The 2000 average premium per doctor in California was only 8.2 percent below that of the nation ($7,200.61 vs. $7,843.75) while the average malpractice premium in California between 1991 and 2000 actually grew more quickly (3.5 percent) than it did in the nation overall (1.9 percent.) According to Hunter, ''There is not much difference in the rates or the rate of change between California and the nation based on the latest decade of experience.''
This analysis has, for the first time, exposed as an insidious public relations scam the notion that California's cruel law has controlled the growth of malpractice insurance premiums. This law has had terrible consequences for many innocent people, while doing nothing to improve the affordability of liability insurance for doctors. Jamie Court, Executive Director of the Foundation for Taxpayer and Consumer Rights, says, ''California is a failed model for the national restrictions being proposed on patients. California patients have been denied adequate compensation and representation for their injuries, and California doctors have seen almost no premium savings. Only the insurers have gotten rich in the good times.'' These data are found in the following table:
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The consequences for patients of California MICRA law has been, quite simply, unfathomable. In his upcoming book Corporateering: How the Invisible Hand Steals the Individual's Freedom, Jamie Court of the Foundation for Taxpayer and Consumer Rights, writes:
Twelve years old Steven Olsen is blind and brain damaged because, as a jury ruled, he was a victim of medical negligence when he was two years old. He fell on a stick in the woods while hiking. Under the family's HMO plan, the hospital pumped Steven up with steroids and sent him away with a brain tumor, although his parents had asked for a CAT scan because they knew Steven was not well. Steven Olsen came back to the hospital comatose. At trial, medical experts testified that had he received the $800 CAT scan, which would have detected a growing brain mass, he would have his sight and be healthy today.
The jury awarded $7.1 million in non-economic damages for Steven's avoidable life of darkness and suffering. However, the jury was not told of a two-decade-old restriction on non-economic damages in the state. The judge was forced to reduce the amount to $250,000. The jurors only found out that their verdict had been reduced by reading about it in the newspaper. Jury foreman Thomas Kearns expressed his dismay in a letter published in the San Diego Union Tribune:
''We viewed video of Steven, age 2, shortly before the accident. This beautiful child talked and shrieked with laughter as any other child at play. Later, Steven was brought to the court and we watched as he groped, stumbled and felt his way along the front of the jury box. There was no chatter or happy laughter. Steven is doomed to a life of darkness, loneliness and pain. He is blind, brain damaged and physically retarded. He will never play sports, work, or enjoy normal relationships with his peers. His will be a lifetime of treatment, therapy, prosthesis fitting and supervision around the clock.''
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Our medical-care system has failed Steven Olsen, through inattention or pressure to avoid costly but necessary tests. Our legislative system has failed Steven, bowing to lobbyists of the powerful American Medical Association (AMA) and the insurance industry, by the Legislature enacting an ill-conceived and wrongful law. Our judicial system has failed Steven, by acceding to this tilting of the scales of justice by the Legislature for the benefit of two special-interest groups. I think the people of California place a higher value on life than this.''
In 2001, Steven had 74 doctor visits, 164 physical and speech therapy appointments, and three trips to the emergency room. And his parents say that was a good year because Steven was not hospitalized. Steven's mother Kathy had to leave her job because caring for Steven is a full time job. She has to struggle constantly with the school district for Steven to receive special education classes. One day, Steven ate a light bulb, not an uncommon problem for children with brain injuries. He has to be watched constantly. Corporate executives that seek to limit jury awards for the individual's pain and suffering claim society must do so to save money. Yet these executives typically make millions every year without any of Steven Olsen's pain and suffering. Limiting their responsibility for the pain of individuals reduces not only the corporation's accountability, but the worth of the individual to that of a mere object.
A NEW INSURANCE ''CRISIS'' TAKES HOLD
Three times in the last 30 years, the insurance industry has created liability insurance ''crises,'' making insurance unaffordable or, in some cases, unavailable at any price for many businesses and professions. A crisis happened in the mid-1970s, precipitating the first wave of ''tort reform'' in medical malpractice insurance and product liability insurance, particularly.
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A more severe crisis took place in the mid-1980s, when most liability insurance was impacted. At that time, manufacturers, municipalities, doctors, nurse-midwives, day-care centers, non-profit groups and many other commercial customers of liability insurance were faced with insurance rate increases of 300 percent or more. Many could not find coverage at any price. Now, once again, in 2002, the country is experiencing what has become known as the ''hard market'' part of the cycle, this time impacting property as well as liability coverages, with medical malpractice lines of insurance seeing rates going up 100% or more in some states.
What precipitates these crises is always the same. Insurers make their money from investment income. During years of high interest rates and/or excellent insurer profits, insurance companies engage in fierce competition for premiums dollars to invest for maximum return. More specifically, insurers engage in severe underpricing and insure very poor risks just to get premium dollars to invest. But when investment income decreases because interest rates drop, the stock market plummets and/or cumulative price cuts make profits become unbearably low, the industry responds by sharply increasing premiums and reducing coverage, creating a ''liability insurance crisis.''
Here's how one insurance expert recently described the problem:
A quick examination of the medical malpractice insurance marketplace in the second half of 2001 might lead a dispassionate observer to conclude this segment of the insurance industry is confused, in disarray, and generally in a state of disorder. Premiums are doubling, hospital deductibles are tripling, claims-free physicians are being nonrenewed, insurers are leaving territories en masse. Simply put, the market is in chaos. . . . Yet, in a perverse way, the condition of the medical malpractice market is actually quite rationale and not at all surprising.
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What is happening to the market for medical malpractice insurance in 2001 is a direct result of trends and events present since the mid to late 1990s. Throughout the 1990s and reaching a peak around 1997 and 1998, insurers were on a quest for market share, that is, they were driven more by the amount of premium they could book rather than the adequacy of premiums to pay losses. In large part this emphasis on market share was driven by a desire to accumulate large amounts of capital with which to turn into investment income.
In a perfect world, investment income would cover any deficiencies that might exist in underwriting results and the insurers' aggressive marketing and pricing strategy would prove to be successful. Alas, we do not live in a perfect insurance world and, as competition intensified, underwriting results deteriorated. Regardless of the level of risk management intervention, proactive claims management, or tort reform, the fact remains that if insurance policies are consistently underpriced, the insurer will lose money.
Clearly a business cannot continue operating in this fashion indefinitely. Indeed, this has been the case for such long time writers of professional liability insurance as Frontier, Reliance, and P.I.E Mutual. These companies, who suffered through several years of weakening performance, have been liquidated or are otherwise inactive.
In August 2001, the list of impaired medical malpractice insurers got longer as the Pennsylvania Department of Insurance placed PHICO under state rehabilitation. PHICO, one of the ten largest writers of medical malpractice insurance, has been one of the more aggressive underwriters during the late 1990s. The company has seen its surplus decrease dramatically over the past year and half from almost $200 million to under $10 million. Regulatory intervention was necessary as it became obvious PHICO's premiums had been inadequate to cover losses.(see footnote 3)
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Each time in the last 30 years when the market has turned ''hard,'' the insurance industry has tried to cover up its pricing errors by blaming lawyers and the legal system for the liability insurance price jump. Like clockwork, there are frenetic calls for legislative limits on victims' rights to sue.
TERRORIZING STATES—CIRCA 1980S
The liability insurance crisis of the mid-1980s, which led many states to enact ''tort reform,'' was acute. Small businesses, doctors, non-profit groups and others were hit with dramatic increases in insurance premiums, reduced coverage and arbitrary policy cancellations. The situation received extensive media attention, such as Time Magazine's 1986 cover story entitled, ''Sorry, Your Policy is Cancelled.''(see footnote 4)
It was in the midst of this crisis—January 17, 1986—that a number of business, professional and insurance trade organizations announced the formation of the American Tort Reform Association (ATRA). ATRA and its member organizations, the insurance industry and other large corporations blamed the crisis on the legal system and lobbied extensively for ''tort reform,'' claiming that enactment of ''tort reform'' would cause insurance rates to stabilize and even fall. Indeed, great pressure was brought to bear on state legislatures around the country to restrict the rights of innocent victims to recover for their injuries in order to bring down insurance rates.
This was despite the fact that numerous studies at the time, including those conducted by the National Association of Attorneys General(see footnote 5) and state commissions in New Mexico, Michigan and Pennsylvania,(see footnote 6) confirmed that the crisis was not caused by the legal system but rather by the insurance cycle and mismanaged underwriting by the insurance industry. Even the insurance industry admitted this internally. In 1986, Maurice R. Greenberg of American International Group told an insurance audience in Boston that the industry's problems were due to price cuts taken ''to the point of absurdity'' in the early 1980s. Had it not been for these cuts, Greenberg said, ''[T]here would not be 'all this hullabaloo' about the tort system.''(see footnote 7)
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As Business Week magazine also explained a January 1987 editorial:
Even while the industry was blaming its troubles on the tort system, many experts pointed out that its problems were largely self-made. In previous years the industry had slashed prices competitively to the point that it incurred enormous losses. That, rather than excessive jury awards, explained most of the industry's financial difficulties.(see footnote 8)
Threats and intimidation by reinsurers were an additional driving force behind the liability insurance crisis of the mid-1980s. Evidence gathered by over a dozen state attorneys general for an anti-trust class action filed in 1988, and settled in 1995, found that a number of insurance companies had helped cause the insurance crisis by restricting coverage to commercial customers and raising prices, creating an atmosphere intended to coax states into enacting ''tort reform.''(see footnote 9) As John J. Byrne, Chairman and Chief Executive Officer of Geico Corp., put it, ''[T]he goal is to withdraw [from the market] and let the pressure for reform build in the courts and in the state legislatures.''(see footnote 10)
Reinsurers were in the middle of it. In fact, according to the anti-trust complaint, Lloyd's of London became the locus of meetings and discussions for a coordinated industry effort to raise commercial insurance rates, abandon certain lines of coverage, change the standard terms of coverage used by the majority of the industry and enact ''tort reforms.''(see footnote 11) To reach these goals, reinsurers misled U.S. public officials about reasons for rate hikes and policy cancellations and their commitment to the U.S. market.
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Some of the threats directed at lawmakers were quite brash. In 1985, attorney Jeff Johnson of the U.S. law firm LeBoeuf, Lamb, Leiby and MacCrae(see footnote 12)—Lloyd's U.S. counsel—told Alaska state legislators:
If you change your tort laws in Alaska, you will have a market here when the rest of the United States will not. Lloyd's is pulling out of the United States as a reinsurer—they have already pulled out of Connecticut, New York and New Jersey—and they're continuing to pull out of more states.(see footnote 13)
As a result, Alaska's Director of Insurance, John George, proceeded to tell Alaska's Defense Council, ''Lloyd's is threatening to pull out of the United States, in fact they are pulling out of the States one by one, but they will stay in Alaska if we enact tort reform. If we all work together we might be able to steam roller this legislation.''(see footnote 14) (Alaska responded by enacting a broad ''tort reform'' bill.)
Despite its threats, Lloyd's never pulled out of the United States. And, within two years, desperately in need of U.S. business, Lloyd's representatives began attempting to smooth over any evidence of withdrawal and minimize their earlier intimidation of U.S. companies and public officials.(see footnote 15)
MEDICAL MALPRACTICE—THEN AND NOW
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In the mid-1980s, lawmakers in many states passed tort restrictions in medical malpractice cases after being told by insurance companies and others that this was the only way to reduce skyrocketing insurance rates for doctors. Lawmakers were responding to news reports like these, virtually identical to the reports of today:
''An American Medical Association official says escalating costs of medical malpractice insurance are increasing health-care costs for the public and forcing doctors to curtail some services.'' Baton Rouge Morning Advocate, May 31, 1986.
''Doctors are threatening to quit practicing some specialties or move out of the state while South Florida hospitals and trauma centers have threatened to shut down or have curtailed services.'' St. Petersburg Times, May 7, 1987.
''Busloads of physicians from around [New York] state will travel to Albany on Wednesday, May 21, to rally for legislative reform of the state's medical liability system.'' PR Newswire, May 19, 1986.
''Doctors and hospitals in [West Virginia] have been saying for weeks that they would have to close their doors at the end of this month when three major insurance companies planned to cancel malpractice insurance coverage for most of the state's medical providers.'' Washington Post, May 24, 1986.
''Hundreds of doctors, especially those in high-risk specialties like obstetrics and orthopedics, refused to accept new patients last February when a state Insurance Division decision opened them up to massive retroactive premium increases.'' The Record (New Jersey), July 24, 1986.
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Medical malpractice is one line of insurance that reinsurers historically have targeted for rate hikes. According to Director of Insurance for the Consumer Federation of America J. Robert Hunter, when he was Federal Insurance Administrator in the 1970s, a group of insurance companies in the medical malpractice line told him that Lloyd's had just doubled its reinsurance rates while supplying no data to justify this increase.(see footnote 16)
The influence of reinsurers over rates has been particularly effective even over doctor-owned mutual insurance companies, which account for more than half the medical liability insurance in this country and should be independent of the profit considerations that motivate pricing decisions by the rest of the industry.
For example, in 1985 testimony before the Maryland Governor's Task Force on Maryland Mutual Society's request for a 70 percent rate increase for OB/GYNs (when a 10 percent reduction was justified), the company's president stated, ''In order to keep [reinsurers'] participation on cover we had to accede to some strong suggestions from the reinsurers to beef up the rate charged to the OB's and it might be relevant to point out Med Mutual is . . . the only company in the state writing OB's.''(see footnote 17)
In 1987, after heavy lobbying by the Medical Mutual Society, Maryland's legislature passed a bill to limit collateral source payments in medical malpractice cases. According to Maryland Delegate Lawrence Wiser, in early August 1987, John Spinella, then of Medical Mutual, was asked why there was little rate reduction as a result of the new collateral source law. Spinella replied that there would not be much rate impact because Medical Mutual still had to pay the same premiums to their London reinsurers.(see footnote 18)
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In Arizona in April 1987, the Mutual Insurance Company of Arizona (MICA) announced medical malpractice rate increases averaging 36 percent across the board, with some as high as 50 percent, despite a whopping $38 million surplus, up 23 percent from 1985. MICA said the surplus was needed to maintain a 1:1 premium/surplus ratio, which it claimed was required by the Arizona Department of Insurance (DOI). DOI Director Dave Childers, however, denied that his department had ever required such a premium/surplus ratio.(see footnote 19)
Six months later, during a subcommittee hearing of the Governor's Committee in Medical Malpractice Insurance in Arizona, Woody Beckman, MICA's actuary, implicated the reinsurance industry as responsible for both the high surplus and the premium increases. According to task force member Jim Roush, Staff Director of Fairness and Accountability in Insurance Reform, ''There were . . . several legislators in attendance who remember, as I do, that it was a whole new defense of the surplus and certainly the first time any of us had heard of any linkage to the reinsurance market. . . .''(see footnote 20)
A few years after the mid-1980s insurance crisis, the insurance cycle flattened out, rates stabilized and availability improved everywhere. This had nothing to do with tort law restrictions enacted in particular states, but rather with modulations in the insurance cycle everywhere. However, now that the market has again turned ''hard,'' particularly as medical malpractice insurers are once again sharply increasing medical malpractice premiums around the country, there are renewed calls for ''tort reform'' reflecting an intensity not seen since the mid-1980s.
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It should be noted that other factors are making the medical malpractice situation even worse this year. A major medical malpractice insurer, St. Paul Cos., has withdrawn from the medical malpractice insurance market, creating a major ''supply and demand'' problem in some states. St. Paul has had a history of problems. For example, some reports indicate that the company lost a large amount of money in the Enron fiasco. One thing is certain, however. This company has had so many other management problems that even after eliminating its medical malpractice business, Standard & Poor's said on May 16, 2002 that it still was placing its ratings of the company on ''CreditWatch with negative implications'' for reasons having nothing to do with medical malpractice.
In addition, price increases in general were sped up by the September 11th terrorist attacks, collapsing two years of anticipated increases into a few months. However, the bulk of the increases are not related to pricing for terrorism, per se. This is a classic economic cycle.
Therefore, it should come as no surprise that a 1999 Center for Justice & Democracy study, Premium Deceit—the Failure of ''Tort Reform'' to Cut Insurance Prices, found that enactment of laws that restrict injured patients' rights to go to court has not succeeded in lowering insurance costs or rates.
Premium Deceit is the first-ever look at 14 years of property/casualty insurance price trends nationwide. Its actuarial analysis was again conducted by J. Robert Hunter, who called Premium Deceit ''the most extensive review of insurance rate activity in the wake of the 'liability insurance crisis' of the mid-1980s ever undertaken. It was designed to test the impact on liability insurance rates of 'tort reforms' enacted in reaction to the liability insurance crisis of the mid-1980s, and in the years since.''
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Hunter said, ''Despite years of claims by insurance companies that rates would go down following enactment of tort reform, we found that tort law limits enacted since the mid-1980s have not lowered insurance rates in the ensuing years. States with little or no tort law restrictions have experienced approximately the same changes in insurance rates as those states that have enacted severe restrictions on victims' rights.'' In other words, laws that restrict the rights of injured consumers to go to court do not produce lower insurance costs or rates and insurance companies that claim they do are severely misleading this country's lawmakers.
Moreover, spokespeople for national ''tort reform'' organizations admitted in published statements following the release of Premium Deceit that lawmakers who enact ''tort reforms'' should not expect insurance rates to drop. Specifically, when asked to respond to Premium Deceit, Sherman Joyce, president of the American Tort Reform Association (ATRA), told the publication Liability Week, ''We wouldn't tell you or anyone that the reason to pass tort reform would be to reduce insurance rates.''(see footnote 21) Victor Schwartz, ATRA's General Counsel and one of the principal ''tort reform'' lobbyists in Washington on behalf of business interests, told Business Insurance that while he thought some severe ''tort reform'' measures could reduce insurance rates, he said when pressed that, ''more importantly . . . many tort reform advocates do not contend that restricting litigation will lower insurance rates, and 'I've never said that in 30 years.' ''(see footnote 22)
And in a startling March 13, 2002 admission, the American Insurance Association (AIA), a major insurance industry trade group, said lawmakers who enact ''tort reform'' should not expect insurance rates to drop. Specifically, an AIA press release, evidently issued to critique Premium Deceit, led with an astounding face-saving pronouncement: ''[T]he insurance industry never promised that tort reform would achieve specific premium savings.''
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The insurers' strategy is evidently to make rates so high or coverage so unavailable that doctors threaten to leave the state or give up medicine entirely, jeopardizing the health care of citizens. Trade and business associations are conveying this message to lawmakers and the public everywhere.
But are these threats real, or are they industry tactics meant to terrorize lawmakers into delivering whatever the insurers want? In their landmark series, ''The Price of Practice,'' Charleston Gazette reporters Lawrence Messina and Martha Leonard found that despite claims from the West Virginia Medical Association that the lack of ''tort reform'' had caused a mass exodus of doctors from the state, the number of doctors in West Virginia had increased yearly, with the state seeing a 14.3 percent increase in its number of doctors between 1990 and 2000. This increase is at a rate about 20 times greater than the population.(see footnote 23) The paper said in a March 1, 2001 editorial:
The Medical Association has made much of the fact that Wheeling has lost all three of its neurosurgeons in the past year. But two of those neurosurgeons are near the top of the list for the number of malpractice suits brought against them. In all but one of the 19 lawsuits brought against those two doctors, the insurance company representing them settled out of court, apparently paying damages. The third neurosurgeon left town shortly after being sued for malpractice. That neurosurgeon admitted drilling into the wrong side of his patient's head during an operation, possibly leaving her permanently scarred. The same neurosurgeon lost a jury trial for $1.8 million for botching a surgery that caused multiple cerebral aneurysms and cardiac arrest. Is Wheeling really worse off for losing these doctors?(see footnote 24)
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Similar findings have recently been made of Pennsylvania doctors. According to a recent census conducted by the Pennsylvania Medical Professional Liability Catastrophe Loss Fund (CAT fund), the state agency that provided backup malpractice coverage for doctors and hospitals, the number of Pennsylvania doctors increased by 13.5 percent between 1990 and 2000, a period the population grew just 3.4 percent.(see footnote 25) The head of the CAT fund, John H. Reed, reported not only that there was no evidence of ''any major departure of physicians from the state'' but also that Pennsylvania had ''more doctors [in 2001] than we did five years ago or ten years ago.''(see footnote 26) Moreover, Morning Call reporter Ann Wlazelek found in her investigational series, ''Examining Medical Malpractice,'' that in the year 2000 ''Pennsylvania ranked ninth-highest nationally for physician concentration, a top-10 position it has held since 1992. There were 318 doctors for every 100,000 residents in 2000, according to the American Medical Association.''(see footnote 27)
In New York, where OB/GYN's say they are leaving the state, the New York Public Interest Research Group (NYPIRG) released figures showing that New York State is third in the nation in its number of obstetricians and gynecologists per capita, well ahead of California (ranked 27th). When compared to the region, only Connecticut (ranked 2nd) is ahead of New York State in the number of ob gyns per capita. Moreover, the number of physicians practicing in New York State has skyrocketed and is increasing at a rate faster than the national average. The number of physicians in New York State has risen dramatically over the past twenty years. New York had 280 doctors per 100,000 people in 1980; it had 414 physicians per 100,000 population in 1998. The nation's ratio of physicians per capita rose by 43.6% compared with the 47.9% increase in New York during that same period. New York State is now ranked second to Massachusetts in the number of doctors per capita.
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Other analyses have come to similar conclusions. One recent study found that, ''despite anecdotal reports that favorable state tort environments with strict . . . tort and insurance reforms attract and retain physicians, no evidence suggests that states with strong . . . reforms have done so.''(see footnote 28) A 1995 study of the impact of Indiana's medical malpractice ''tort reforms,'' which were enacted with the promise that the number of physicians would increase, found that ''data indicate that Indiana's population continues to have considerably lower per capita access to physicians than the national average.''(see footnote 29)
MEDICAL MALPRACTICE, ''TORT REFORM'' AND INSURANCE RATES
During past and current liability insurance crises, the insurance industry has tried to cover up its pricing errors by blaming ''aggressive'' lawyers and the legal system for the liability insurance price jump. Under this theory, one would have to believe that trial lawyers have timed their ''aggression'' to precisely coincide with the insurance industry's economic cycle, so that the aggression impacts just when the market turns hard. Thus, one would have to accept the notion that lawyers were aggressive in the mid 1970s, then non-aggressive for a decade, then aggressive in the mid-1980s, non-aggressive for 17 years and are now aggressive again. This is ludicrous.
Yet it has been a surprisingly easy message for the media to accept, or at least misunderstand. Certainly, the media's willingness to accept the notion that big jury awards have caused the recent rise in insurance rates fits with their typical over-coverage of big-dollar jury verdicts.(see footnote 30) In one study, for example, researchers discovered that the mean personal injury verdict reported in the New York Times over a six-year period was almost 16.5 times larger than the mean award recorded in the New York Jury Reports for New York State and 15.4 times larger than the awards recorded in the metro New York area.(see footnote 31) This kind of reporting paints a grossly erroneous picture of a tort system spiraling out of control.
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Recent reporting of the medical malpractice crisis has followed the same pattern. For example, ABC News reported on March 5, 2002 that ''[m]ost doctors need malpractice insurance in order to practice. But jury awards in malpractice lawsuits are climbing from a median of $370,000 in 1994 to, as you can see, $800,000 in 1999.''(see footnote 32)
Similarly, a March 22, 2002 New York Times article reported, ''The [AMA] and the insurers say the crux of the problem is the ballooning cost of awards to victims of medical errors. Between 1995 and 2000, for example, the average jury award jumped more than 70 percent to $3.5 million, and a few claims in 2000 even ran to more than $40 million, according to Jury Verdict Research in Horsham, Pa.''(see footnote 33)
Reality tells a completely different story, however. Insurance companies are paying victims of medical negligence on average under $32,000 and have been for the last decade.(see footnote 34) Even assuming a 15 percent increase over the next few years, the averages would stay below $35,000 per claimant. In fact, total insurance payouts to all claimants have hovered between $2.5 billion and $4 billion per year. By comparison, Americans spend at least twice that much—about $8 billion—on dog food each year. Moreover, medical malpractice costs, as a percentage of national health care expenditures, are now at an all time low, 0.55 percent.
The above analysis, conducted for the Center for Justice & Democracy by actuary J. Robert Hunter, Director of Insurance for the Consumer Federation of America, examined year 2000 insurance data, the most recent available from the National Association of Insurance Commissioners and A.M. Best and Co. Hunter, former Texas Insurance Commissioner and Federal Insurance Administrator, concludes, ''Medical malpractice insurance is amazing value, considering that it covers all medical injuries for about one-half of one percent of health system costs.''
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And let there be no doubt that deaths and injuries due to medical malpractice are substantial. In late 1999, the National Academy of Sciences Institute of Medicine (IOM) published To Err is Human; Building a Safer Health System. The study makes some striking findings about the poor safety record of U.S. hospitals due to medical errors.(see footnote 35) For example:
Between 44,000 and 98,000 deaths occur each year in U.S. hospitals due to medical errors, the higher figure extrapolated from the 1990 Harvard Medical Practice study of New York hospitals. Even using the lower figure, more people die due to medical errors than from motor vehicle accidents (43,458), breast cancer (42,297) or AIDS (16,516).
These figures underestimate the magnitude of the medical malpractice problem, since hospital patients represent only a small percentage of the total population at risk. Not included, for example, are errors at outpatient surgical centers, physician offices and clinics.
The cost of medical errors is huge. Total national costs (lost income, lost household production, disability and health care costs) are estimated to be between $17 billion and $29 billion each year, of which health care costs represent over one-half.
Following the IOM study, several newspapers ran extensive series on the degree and cost of malpractice in their states. For example, in March 2000, a New York Daily News week-long investigative series found that ''hundreds of New York State doctors, dentists and podiatrists—ranging from modest practitioners to prominent surgeons—have amassed extensive hidden histories of malpractice yet continue to treat patients.'' Moreover, ''making even three malpractice payments is rare—only 1% of the nation's doctors have crossed that line, according to the national database. But those doctors account for 24%—or $5.6 billion—of the money paid to aggrieved patients. . . . The effect of failing to crackdown on the tiny percentage of doctors with the worst malpractice records is stunning, because they are a powerful driving force behind medical misfeasance nationwide.''
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These conclusions are similar to those found by Public Citizen's Health Research Group in its book 20,125 Questionable Doctors.(see footnote 36) The group found that only one-half of 1 percent of 770,320 licensed medical doctors face any serious state sanctions each year. ''Too little discipline is still being done,'' the report said. ''2,696 total serious disciplinary actions a year, the number state medical boards took in 1999, is a pittance compared to the volume of injury and death of patients caused by negligence of doctors. . . . Though it has improved during the past 15 years, the nation's system for protecting the public from medical incompetence and malfeasance is still far from adequate.''
Despite the amount of medical negligence currently harming patients in this country, very few victims file suit and those who do often have a very difficult time winning their cases. The 1990 Harvard Medical Practice study, which found that medical negligence in New York hospitals results in 27,000 injuries and 7,000 deaths every year, also found that eight times as many patients are injured by medical malpractice as ever file a claim; 16 times as many suffer injuries as receive any compensation.(see footnote 37) Moreover, defendants now prevail in 76.6 percent of all medical malpractice trials, according to the Bureau of Justice Statistics and the National Center for State Courts.(see footnote 38)
What may seem like a recent epidemic of medical malpractice is, unfortunately, nothing new. Consider that in 1985 the director of Maternal/Fetal Medicine at Pasadena's Huntington Memorial Hospital told the American College of Obstetrics and Gynecology: ''The greatest cause of malpractice is malpractice. You must understand that some of the malpractice out there is so grievous, offensive and implausible as to beggar the imagination.''(see footnote 39) This kind of information led Business Week to write in its August 3, 1987 issue, ''So what can we do? Start by facing up to what the problem is not. It is not a malpractice insurance crisis. Nor, contrary to popular mythology, is the problem a lawsuit crisis. The real crisis is the degree of malpractice itself.''(see footnote 40)
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A WORD ABOUT DEFENSIVE MEDICINE COSTS
There is universal agreement that at most a very small portion of health care costs result from ''defensive medicine.'' In 1994, the Office of Technology Assessment was asked, initially by proponents of sweeping malpractice tort restrictions, to study the issue. This much-anticipated landmark study by the OTA, entitled Defensive Medicine and Medical Malpractice (July 1994), completely undermined the credibility of claims that bills like H.R. 4600 will significantly reduce ''defensive'' medicine. The OTA found that:
Only ''a relatively small proportion of all diagnostic procedures—certainly less than 8 percent—is likely to be caused primarily by conscious concern about malpractice liability risk.'' The OTA also stressed that this figure actually ''overestimates the rate'' of ''defensive'' medicine because it ''is based on physicians' responses to hypothetical clinical scenarios that were designed to be malpractice sensitive.''
Most physicians who order ''aggressive diagnostic procedures. . .do so primarily because they believe such procedures are medically indicated, not primarily because of concerns about liability.''
The effects of traditional tort reforms—particularly caps on damages and amendments to the collateral source rule—on defensive medicine ''are likely to be small.''
''[P]hysicians consistently overestimate their own and their colleagues' risk of being sued.''
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Defensive medicine ''may benefit patients.''
''It is impossible to accurately measure the overall level and national cost of defensive medicine.''
''Health care reform may change financial incentives toward doing fewer rather than more tests and procedure. If that happens, concerns about malpractice may act to check potential tendencies to provide too few services.''
H.R. 4600 WILL HAVE TERRIBLE CONSEQUENCES FOR PATIENTS
One-Way Preemption. Like most recent federal tort reform bills, H.R. 4600 would present a major interference with the traditional authority of state court judges and juries in medical malpractice and products liability cases. It would be a massive federal preemption of state law, pandering to this country's insurance and pharmaceutical companies. Its one-way preemption of state law provisions that protect patients makes clear that the intent of this legislation is not to make medical malpractice and products liability laws uniform in the 50 states. Rather, it is a carefully crafted bill to provide relief and protections for the insurance and drug companies. Every provision places a ceiling on patient recovery in tort litigation, but allows state laws to survive where those laws place more restrictions on patients' rights. There is nothing in this bill to protect patients.
$250,000 Aggregate Cap on Non-Economic Damages, regardless of the number of parties against whom the action is brought. Non-economic damages compensate injured consumers for the human suffering accompanying injuries caused by wrongful conduct. These are intangible but real injuries, like infertility, permanent disability, disfigurement, pain and suffering, loss of a limb or other physical impairment. Caps on non-economic damages hurt those who suffer most—men, women and children who suffer brain injury, amputation, paralysis, quadriplegia and other devastating injuries. And they have a disproportionate effect on plaintiffs who do not have high wages—like women who work inside the home, children, seniors and the poor, who are thus more likely to receive a greater percentage of their compensation in the form of non-economic damages if they are injured. In recent years, such caps have been found to be unconstitutional in a number of states, violating a right to jury trial and interfering with the proper functioning of the courts.
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Complete Abolition of Joint and Several Liability for Economic and Non-Economic Damages, overturning many state laws. Again, this provision would burden the most seriously injured patients. The doctrine of joint and several liability has been part of the common law for centuries. It is a rule that applies to allocating damages when more than one defendant is found fully responsible for causing an entire injury. If one of them is insolvent or cannot pay compensation, the other defendants much pick up the tab so the innocent victim is fully compensated. Courts have always held that it applies only to injuries for which the defendant is fully responsible. That means that his negligent or reckless behavior must be an ''actual and proximate'' cause of the entire injury. This is a high standard. (See, e.g., Richard Wright, ''The Logic and Fairness of Joint and Several Liability,'' 23 Memphis State Law Review 45 (1992).
Joint and several liability is rarely used. But it has been critical in cases such as those involving the anti-miscarriage drug DES, where it was not possible for a victim to establish which of many manufacturers produced the drug that caused cancer. In one DES case, a court held manufacturers jointly liable for an entire injury, on the basis of ''actual analytic cooperation'' and ''information pooling'' by a number of manufacturers and later ''conscious parallel activity'' in seeking FDA approval of the use of the drug. When joint and several liability is limited or abolished, however, wrongdoers are let off the hook and the innocent victim receives far less compensation for injuries than the judge or jury has determined they deserve.
Limits on Punitive Damages. This bill provides that punitive damages may only be awarded if the plaintiff proves by an impossibly heightened standard of clear and convincing evidence that: (1) the defendant acted with malicious intent to injure the plaintiff; or (2) the defendant understood the plaintiff was substantially certain to suffer unnecessary injury, yet deliberately failed to avoid such injury. The bill further limits punitive damages to two times the amount of economic damages or $250,000, whichever is greater. Moreover, the bill completely immunizes manufacturers of drugs and devices that are approved by the FDA from punitive damages and extends immunity to the manufacturers of drugs and devices that are not FDA-approved, yet are ''generally recognized as safe and effective.'' Finally, the bill immunizes the manufacturer or seller of drugs from punitive damages for packaging or labeling defects.
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Punitive damages are assessed against defendants by judges or juries to punish particularly outrageous, deliberate or harmful misconduct, and to deter the defendant and others from engaging in similar misconduct in the future. According to the Bureau of Justice Statistics, only 1.1 percent of medical malpractice plaintiffs who prevailed at trial were awarded punitive damages in 1996. Of these, 1.2 percent of plaintiff winners were awarded punitive damages by juries.(see footnote 41) Although rare, the prospect of having to pay punitive damages in a lawsuit by an injured patient causes companies and other wrongdoers to operate more safely. In the case of the Dalkon Shield IUD, which killed and injured thousands of women, it took 11 punitive damage awards over a number of years, totaling in excess of $24.8 million, before A.H. Robins finally agreed to urge doctors and women to remove the device and offered to pay for the removal. Robins would not have taken this needed action without ''growing concern about the rising tide of punitive damages claims against the company,'' as reported in the Wall Street Journal.(see footnote 42)
Repealing the Collateral Source Rule. H.R. 4600 would repeal the collateral source rule, which prevents a wrongdoer from reducing its financial responsibility for the injuries it causes by the amount an injured party receives (or could later receive) from outside sources. Payments from outside sources are those unrelated to the wrongdoer, like health or disability insurance, for which the injured party has already paid premiums or taxes. The collateral source rule is one of fairness and reason. Government benefits received by the injured victim are entitlements, which lawmakers determined should be available, and should not be manipulated to benefit wrongdoers who produce injury. The rule's premise is that the wrongdoer's liability and obligation to compensate should be measured by the harm done and the extent of the injuries inflicted. In this way, the rule helps promote deterrence.
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Contingency Fee Limits. H.R. 4600 gives the court power to restrict plaintiff's attorney fees regardless of whether recovery is by judgment, settlement, or any form of alternative dispute resolution. The bill specifies that contingent fees, regardless of the number of plaintiffs, may not exceed: (1) 40 percent of the first $50,000 recovered; (2) 33 percent of the next $50,000 recovered; (3) 25 percent of the next $500,000 recovered; and (4) 15 percent of any recovery in excess of $600,000. Under a contingency fee arrangement, a lawyer agrees to take a case on behalf of an injured patient without obtaining any money up front from the client. This is a risk, because if the case is lost, the lawyer is paid nothing. This system provides injured consumers who could not otherwise afford legal representation with access to the courts. The principal impact of contingency fee limits is to make it less likely attorneys can afford to risk bringing many cases, particularly the more costly and complex ones, providing practical immunity for many wrongdoers.
In 1986, James Gattuso of the conservative Heritage Foundation, later with the Competitive Enterprise Institute, wrote an article for the Wall Street Journal entitled ''Don't Rush to Condemn Contingency Fees.'' He stated the truth about contingency fees—that the contingency fee system both ensures that injured persons who could not otherwise afford legal representation obtain access to the legal system, and, ''rather than encourage baseless lawsuits, the contingent fee actually helps screen them out of the system.'' On the other hand, defense lawyers are paid by the hour. They are the ones motivated to increase their hours by conducting unnecessary discovery, filing frivolous motions or refusing to participate in meaningful settlement negotiations until immediately before trial. It is more than unfair to restrict plaintiff's attorney fees when defendants have no such restrictions.
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Structured Settlements. Allowing all future damages over $50,000 to be paid periodically, as does H.R. 4600, leaves those injured by malpractice and unsafe products vulnerable and undercompensated while large insurance companies reap the interest benefits of a plaintiff's jury award. Moreover, this provision increases the hardships of the most seriously injured patients who are hit soon after an injury with large medical costs and must make adjustments in transportation and housing.
Reduced Statute of Limitations. The legislation reduces the amount of time an injured patient has to file a lawsuit to one year from the date the injury was discovered or should have been discovered, but not later than three years after the date of injury. This statute of limitations, which is much more restrictive than a majority of state laws, would cut off meritorious claims involving diseases with long incubation periods. Thus, a person who contracted HIV through a negligent transfusion but learned of the disease more than five years after the transfusion would be barred from filing a claim.
REAL INSURANCE REFORMS
For medical malpractice insurers, high-pressure tactics have paid off and will pay off again unless Congress take responsible, remedial steps to reign in the power and control the abuses of insurance companies. Otherwise, we will never be able to deal systematically with the tactics of this industry, which consistently looks for scapegoats to cover up its own instability and mismanagement.
1. Meaningful Disclosure.
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With rare exceptions, federal and state laws today do not force even licensed property/casualty insurance companies to disclose meaningful information to U.S. authorities that could substantiate or refute their allegations about the financial health of the industry or the impact of the U.S. judicial system. Nor do we understand today the covert influence that the reinsurance industry may be having on the current medical malpractice insurance ''crisis,'' with doctors being price-gouged around the country.
At the federal level, officials currently have no legal authority to collect data from insurance companies or even to question an insurer effectively when it shuts off the flow of insurance/reinsurance to a specific line of insurance or threatens a specific state. Even at the state level, state reporting laws typically allow insurance companies to conceal such figures as:
Premium income and payouts for specific sublines of insurance;
Reserves and the amount of losses ''incurred but not reported'' (IBNR)—the insurer's guess at the amount for claims that have occurred prior to the end of an accounting period but are not reported until after the end of the reporting period—for each line of insurance;
How much insurers pay out for different types of damages, i.e., economic damages, non-economic damages and punitive damages;
How victims actually fare—in other words, how much insurers actually pay in settlements or verdicts that are reduced post-trial compared to victims' injuries and losses; and
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How much insurers pay in cases involving multiple defendants (where joint and several liability may be an issue).
Congress should have information on payouts, losses, income and reserves to determine the true condition of the insurance industry and how victims are faring under the present system. Congress should set minimum disclosure standards for surplus lines and reinsurers operating in the United States and encourage states to set state-specific or stricter disclosure standards if they so choose.
2. Congress Should Create Alternative Reinsurance Programs.
During cycle bottoms, reinsurance is often more difficult to find than primary insurance, particularly when reinsurers refuse to cover certain risks. And sharp rate increases by reinsurers may force insurers to drop additional risks to satisfy state premium/surplus ratios. When reinsurers hiked premium rates and reduced coverage in the mid-1980s, U.S. insurers had no effective recourse. Small businesses and other entities that may have wanted to self-insure were unable to find reinsurance.
A federal reinsurance program would ensure that primary companies and entities that self-insure can purchase reinsurance even during cycle bottoms or when other reinsurers abandon certain markets. When rates skyrocket or coverage decreases, a government reinsurance program would exert downward pressure on reinsurance rates. This in turn would enable insurers to maintain reasonable rates.
To supplement a federal reinsurance program, states could establish an interstate compact to create joint reinsurance programs. For example, as a condition of doing business in any member state, the compact could require an insurance company to contribute a small percentage of its premiums to fund a self-sustaining joint program that would write reinsurance in all member states for businesses and others that self-insure in accordance with jointly-established underwriting standards.
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If efficiently run, a government reinsurance program can and should make money. Congress established a similar program to reinsure insurers against riot-caused damages when private insurers pulled out of inner-city markets in 1968. The program made a profit of $125 million while keeping insurance available in the inner cities.
3. Congress Should Repeal the Federal Anti-Trust Exemption.
Since 1944, the McCarran-Ferguson Act has allowed insurance companies to fix prices. A law repealing the federal anti-trust exemption would ensure that all domestic and foreign insurers and reinsurers that do business in the United States are subject to federal anti-trust prohibitions applicable to other industries. Such legislation would prohibit the insurance industry from acting in concert to raise prices and would prohibit tying arrangements, market allocation among competitors and monopolization. Increased competition would bring lower prices and would increase the availability of insurance for consumers.
If the McCarran-Ferguson Act were repealed, the industry-owned and controlled, for-profit Insurance Services Office, Inc. (ISO) and other rating bureaus could still jointly collect, compile and disseminate past data relating to premiums and claims. However, price-fixing agreements would be illegal. Moreover, ISO would be forced to disclose to insurance buyers the documents it prepares for insurance sellers, listing both current prices major insurers charge for auto and homeowner insurance and the ISO advisory rates.
CONCLUSION
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In a March 5, 1995 New York Times article, Dr. Wayne Cohen, then-medical director of Bronx Municipal Hospital, said, ''The city was spending so much money defending obstetrics suits, they just made a decision that it would be cheaper to hire people who knew what they were doing.''(see footnote 43) In a somewhat obscure way, Dr. Cohen actually heralded one of the most important functions of lawsuits and the civil justice system: deterring unsafe practices. Numerous hospital and medical procedures have been made safer as a result of lawsuits. These include, anesthesia procedures, catheter placements, drug prescriptions, hospital staffing levels, infection control, nursing home care and trauma care, all of which are documented in the Center for Justice & Democracy study, Lifesavers: CJ&D's Guide to Lawsuits that Protect Us All.
Indeed, our goal must be to reduce medical negligence. Moreover, effective insurance reforms are the only way to stop the industry from abusing its enormous economic influence, which it uses to promote a legislative agenda that bilks taxpayers and severely hurts the American public. Laws and proposals that increase the obstacles sick and injured patients face in the already difficult process of prevailing in court are certainly the wrong way to respond to any medical malpractice insurance ''crisis.'' Tort restrictions only reduce the financial incentive of institutions like hospitals and HMOs to operate safely, when our objectives should be deterring unsafe and substandard medical practices while safeguarding patients' rights.
MAJOR TORT RESTRICTIONS ENACTED IN MEDICAL
MALPRACTICE CASES, 1985–1999
Alabama
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Pre-1985: collateral source
87: med mal cap (but declared unconstitutional in 91)
87: punitive cap (but declared unconstitutional in 93)
87: collateral source (but declared unconstitutional in part in 96)
Alaska
86: cap, non-economic
86: joint and several liability
86: collateral source rule
88: joint and several liability (ballot initiative)
97: cap, all damages
97: punitive cap
97: prejudgment interest
Arizona
Pre-1985: med mal collateral source
87: joint and several
89: med mal structured settlements (but declared unconstitutional in 94)
Arkansas
Pre-1985: medical malpractice structured settlements
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California
Pre-1985: med mal cap, noneconomic; med mal collateral source; med mal contingency fees; med mal structured settlements
86: joint and several liability (ballot initiative)
Colorado
86: cap, noneconomic
86: joint and several liability
86: punitive cap
86: collateral source
88: med mal cap, all damages
88: med mal statute of repose
88: med mal structured settlements
92: med mal collateral source
Connecticut
85: med mal collateral source
86: joint and several (i.e. proportional) liability
86: contingency fees
Delaware
Pre-1985: collateral source; med mal contingency fees; med mal structured settlements
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District of Columbia
Pre-1985: collateral source
Florida
86: joint and several liability
86: collateral source
86: med mal structured settlements
86: contingency fees
86 : punitive cap
88: cap noneconomic (but declared unconstitutional in 91)
88: med mal cap, noneconomic (depending on arbitration)
Georgia
87: punitive cap
87: joint and several liability
Hawaii
86: cap, noneconomic
86: joint and several liability (except medical products)
86: collateral source (liens)
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Idaho
87: cap, noneconomic
87: joint and several liability
87: structured settlements
90: collateral source
Illinois
Pre-1985: med mal collateral source
85: medical malpractice structured settlements
85: med mal contingency fees
95: cap, noneconomic (but declared unconstitutional in 97)
95: joint and several liability (but declared unconstitutional in 97)
95: punitive cap (but declared unconstitutional in 97)
Indiana
Pre-1985: joint and several liability
86: collateral source
93: med mal cap, all damages
93: med mal contingency fee
95: punitive cap
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Iowa
Pre-1985: joint and several liability; med mal collateral source
86: structured settlements
87: collateral source
87: prejudgment interest
87: structured settlements
97: joint and several liability
97: prejudgment interest
Kansas
85: med mal punitive cap (but expired in 88)
86: med mal cap (but declared unconstitutional in 88)
86: med mal structured settlements (but declared unconstitutional in 88)
87: cap, noneconomic
87: punitive cap
88: collateral source (but declared unconstitutional in 93)
Kentucky
88: joint and several liability (but codified common law rule)
88: collateral source (but declared unconstitutional in 95)
Louisiana
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Pre-1985: med mal cap; med mal structured settlements (Patients Comp. fund); joint and several liability
87: joint and several liability
87: prejudgment interest
96: joint and several liability
Maine
85: med mal structured settlements
85: med mal contingency fees
88: prejudgment interest
89: med mal collateral source
Maryland
Pre-1985: collateral source
86: cap, noneconomic
86: structured settlements
Massachusetts
86: med mal cap, noneconomic
86: med mal collateral source
86: med mal contingency fees
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Michigan
86: med mal cap, noneconomic
86: collateral source
86: structured settlements
86: prejudgment interest
87: joint and several liability
93: med mal cap, noneconomic
95: joint and several liability
Minnesota
86: cap, noneconomic (but repealed in 90)
86: collateral source
86: prejudgment interest
88: joint and several liability
Mississippi
89: joint and several liability
98: med mal statute of repose
Missouri
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86: med mal cap, noneconomic
86: med mal structured settlements
87: joint and several liability
87: collateral source
Montana:
87: joint and several liability (but declared unconstitutional in 94)
87: collateral source
95: med mal cap, noneconomic
95: med mal structured settlements
97: joint and several liability
Nebraska
Pre-1985: collateral source; med mal cap (cap increased in 92)
86: prejudment interest (but improved prior standard)
92: joint and several liability (but improved prior standard)
Nevada
Pre-1985: med mal collateral source
87: joint and several liability
89: punitive cap
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New Hampshire
86: cap, noneconomic (but declared unconstitutional in 91)
86: punitive abolished
89: joint and several liability
95: prejudgment interest
New Jersey
Pre-1985: contingency fees
87: joint and several liability
87: collateral source
95: punitive cap
95: joint and several liability
New Mexico
87: joint and several liability (but codified common law)
92: med mal structured settlement
92: med mal cap (except punitives)
New York
86: joint and several liability
86: collateral source
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86: structured settlements
86: med mal contingency fees
North Carolina
95: punitive cap
North Dakota
87: joint and several liability
87: collateral source
87: structured settlements
93: punitive cap
95: med mal cap, noneconomic
Ohio
87: joint and several liability
87: structured settlements
96: cap, noneconomic
96: joint and several liability
96: punitive cap
96: collateral source
96: prejudgment interest
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Oklahoma:
86: prejudgment interest
95: punitive cap
Oregon
87: cap, noneconomic
87: joint and several liability
87: med mal punitives abolished against doctors
87: collateral source
95: joint and several liability
Pennsylvania
Pre-1985: med mal collateral source
96: med mal punitive cap
Rhode Island
86: med mal collateral source
87: prejudgment interest
South Carolina
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Pre-1985: med mal structured settlements (Patient Comp. Fund with annual cap)
South Dakota
Pre-1985: med mal collateral source; med mal cap; noneconomic
86: med mal cap, economic (but declared unconstitutional 96)
86: med mal structured settlements
87: joint and several liability
Tennessee
Pre-1985: med mal collateral source
Texas
87: med mal cap (but declared unconstitutional in 88, although allowed for wrongful death, 90)
87: joint and several liability (except environmental)
87: punitive cap
87: prejudgment interest
95: joint and several liability
95: punitive cap
Utah
85: med mal collateral source
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86: med mal cap, noneconomic
86: joint and several liability
86: med mal structured settlements
Vermont:
Pre-85: joint and several liability
Virginia
Pre-1985: med mal cap (although cap raised in 83 and 99)
87: med mal (children injured at birth, no right to sue, no noneconomic or punitives)
87: punitive cap
Washington
Pre-1985: punitive cap; med mal collateral source
86: cap, all damages (but declared unconstitutional in 88)
86: joint and several liability
86: structured settlements
West Virginia
86: med mal cap, noneconomic
86: med mal joint and several liability
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Wisconsin
Pre-1985: med mal (Patient Comp. Fund)
86: med mal cap, noneconomic (but expired 90)
86: med mal contingency fees
95: med mal cap
95: joint and several liability
95: med mal structured settlements
95: med mal collateral source
Wyoming
86: joint and several liability
Mr. BARR. Ms. Walters.
STATEMENT OF DANIELLE WALTERS, EXECUTIVE VICE PRESIDENT, CALIFORNIANS ALLIED FOR PATIENT PROTECTION
Ms. WALTERS. Mr. Chairman and Members, thank you for inviting me to testify before you on this important issue. I am Danielle Walters, Executive Vice President of Californians Allied for Patient Protection, or CAPP.
CAPP was formed to preserve California's landmark medical liability law known as MICRA. You have already heard an outline of the provisions of that law. I am here this morning to share with you California's 27-year history with medical liability reform that began as an experiment and is now a bona fide success story.
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Let me start by reading you some headlines that provide some perspective on where we began. ''Insurance Rates Per Medical Care,'' San Jose Mercury News. ''Doctors Face Insurance Crisis, May Affect 8,000 in Southland,'' Los Angeles Times. ''Physician Strike May Be Widened,'' New York Times.
These were typical headlines in 1975 when California was a State in crisis. Liability premiums soared more than 300 percent. Numerous medical liability carriers left the State completely, and many physicians, particularly high-risk specialists such as obstetricians and neurosurgeons, were forced to close their doors because they were either unable to get insurance or unable to afford the inflated rates.
In the early 1970's, in effect—California in the early 1970's, in effect, answered the question this hearing is asking. The unlimited liability providers faced created an acute access to care crisis to the point that California patients, health care professionals, and the media demanded action.
In 1975, Governor Jerry Brown called a special session of the California legislature to address the crisis. The State legislature engaged in its own independent investigation and hired its own actuaries to get to the bottom of the problem and determine if a crisis actually existed. Indeed, it did.
For the record, I am submitting in my written testimony the firsthand account of MICRA's creation from the perspective of Fred Hiestand. He is CAPP's CEO and general counsel, and during the 1970's, he served as an advisor to Governor Brown and to Henry Waxman, who was then a State Assemblyman and chair of the Committee charged with examining and developing a solution to California's problem.
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As an aside, our current governor, Governor Davis, was also instrumental in MICRA's development, as he was Governor Brown's Chief of Staff during that period.
The efforts of Governor Brown and then Assemblyman Waxman culminated in the bipartisan passage of MICRA. MICRA addressed the medical liability insurance problem by instituting measures designed to fix a broken system and assure that medical malpractice insurance would be available at realistic and affordable rates. The Chairman of this Committee has already outlined you the main provisions of that law.
More than a quarter of a century later, MICRA's provisions enable health care professionals to focus on providing high-quality care without engaging in costly defensive medicine practices just to protect themselves against being sued. Because of MICRA, California has a healthy and competitive medical liability insurance market and now has some of the lowest medical malpractice premiums in the United States. When you compare California to other large diverse States, physicians in California pay one-half to one-third of what their colleagues pay for the same liability coverage, and I've enclosed a chart in my testimony.
In addition, medical liability claims are resolved, on average, faster in California. This translates into savings, but more importantly, provides injured plaintiffs with their desperately needed compensation sooner.
The evidence also shows that MICRA has in no way inhibited access to our court system. California is still very litigious, in fact, one of the most litigious States in the nation. Historical data of per capital malpractice filings in Los Angeles County shows a consistent pattern of filings in claims in medical liability, and I've also enclosed that data for your reference.
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We have also examined the average award since MICRA's inception. Awards grow in excess of the rate of inflation. This is due to the fact that most liability awards consist of both economic and non-economic damages. So while non-economic damages are limited to 250 under MICRA, the economic side of the award is not limited and reflects increases in the cost-of-living, the cost of medical care, rehabilitation, lost earnings, and so forth. I have also enclosed that data in my written testimony for your review.
Retired Supreme Court Justice Cruz Reynoso, who is currently a professor of law at UCLA, who upheld MICRA's constitutionality while serving on the bench stated, and I quote, ''MICRA has reached a balance between the interest that plaintiffs have and the interest of providing reasonable insurance and medical attention.''
The California legislature indeed had a very difficult task of finding the balance between ensuring that Californians would have access to care and protecting those individuals who are harmed through an act of medical negligence. Subsequent legislatures have also reexamined MICRA and the debate has focused on the impact on access to care, particularly for the millions of Californians with limited or no health coverage. The front-line providers who serve this population, rural and urban clinics, public health care professionals, have repeatedly made it clear to the legislature that preserving MICRA is an essential element of their continued ability to offer medical services to people who cannot find care elsewhere.
MICRA now has a 27-year legacy of preserving access to care, utilizing health care dollars efficiently, and providing appropriate compensation to injured patients. MICRA has immunized California from the medical liability crisis that is currently sweeping the country.
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Over the past year, my organization has served as a resource to elected officials, health care organizations, and the media in States reeling with the meltdown of their medical liability system. We are proud that this law is now being viewed as a model for addressing medical liability problems throughout the nation.
Thank you again for this opportunity and I'll do my best to answer any questions you may have.
Mr. BARR. Thank you, Ms. Walters.
[The prepared statement of Ms. Walters follows:]
PREPARED STATEMENT OF DANIELLE J. WALTERS
Mr. Chairman and members, thank you for inviting me to testify before your committee on this important issue. My name is Danielle Walters. I am the Executive Vice President of Californians Allied for Patient Protection, or ''CAPP.'' Californians Allied for Patient Protection is a broad-based coalition of health professionals, health care institutions and insurers that are dedicated to preserving California's landmark medical liability law, the Medical Injury Compensation Reform Act of 1975—better known as MICRA.
I am here this morning to share with you California's 27-year history with medical liability reform that began as an experiment and now is a bona fide success story. Let me start by reading you some headlines that provide perspective on where we began:
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''Insurance Rates Peril Medical Care''—San Jose Mercury News
''Doctors Face Insurance Crisis—May Affect 8,000 in Southland''—The Los Angeles Times
''Physician Strike May be Widened''—New York Times
''New Bay Area Crisis in Medical Care: Doctors Might Halt Practice''—San Francisco Chronicle
These were typical headlines in 1975, when California was a state in crisis.
In the early 1970s, a medical liability insurance crisis gripped the state. Liability premiums soared more than 300 percent, numerous medical liability carriers left the state completely and many physicians—particularly high-risk specialties such as obstetrics and neurosurgery—were forced to close their doors because they were either unable to get insurance or unable to afford the inflated rates.
California in the early 1970s, in effect, answered the question this hearing is asking. The unlimited liability providers faced created an acute access to care crisis, to the point that California patients, health care professionals and the media demanded action.
In 1975, Governor Jerry Brown called a special session of the California Legislature to address the medical liability crisis. The state Legislature engaged in its own independent investigation of the crisis and hired its own actuaries to get to the bottom of the problem and to determine if a ''crisis'' actually existed. Indeed it did.
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For the record, I am submitting a first-hand account of MICRA's creation from the perspective of Fred Hiestand, CAPP's CEO and General Counsel (Attachment A). Mr. Hiestand was an advisor to Governor Brown and to Henry Waxman, then a state Assemblyman and Chair of the Committee charged with examining and developing a solution to California's medical liability crisis.
The efforts of Governor Brown and Assemblyman Waxman culminated in the bi-partisan passage of MICRA. MICRA addressed the medical liability insurance problem by instituting measures designed to fix a broken system and assure that medical malpractice insurance would be available at realistic and affordable rates.
The main provisions of the MICRA reforms include:
A $250,000 limit on non-economic damages;
Ensuring compensation for economic damages such as medical bills, lost wages, future earning, custodial care and rehabilitation;
Providing a statute of limitations on claims;
Ensuring the bulk of the award goes to the plaintiff by limiting attorney contingency fees on a sliding scale;
Requiring advance notice of a claim;
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Allowing for binding arbitration of disputes; and
Providing for periodic payment for future damages.
More than a quarter of a century later, MICRA's provisions enable health care professionals to focus on providing high-quality care without engaging in costly defensive medicine practices just to protect themselves against being sued. Because of MICRA, California has a healthy and competitive medical liability insurance market and now has some of the lowest malpractice premiums in the United States. When you compare California to other large, diverse states, physicians in California pay one-half to one-third of what their colleagues pay for the same liability coverage.
In addition, medical liability claims are resolved on average faster in California. This of course translates into savings, but more importantly provides injured plaintiffs with their desperately needed compensation sooner.
The evidence also shows that MICRA has in no way inhibited access to our court system; California is still very litigious. Historical data of per capita medical malpractice filings in Los Angeles County shows a consistent pattern of filings.
We have also examined the average awards since MICRA's inception. Awards have grown in excess of the rate of inflation. This is due to the fact that most liability awards consist of both economic and non-economic damages. So while non-economic damages are limited to $250,000, the economic side of the awards reflects increases in the cost of living, the cost of medical care, rehabilitation, lost earnings, and other factors.
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According to retired California Supreme Court Justice Cruz Reynoso, who upheld MICRA's constitutionality: ''MICRA has reached a balance between the interest that plaintiffs have and the interest of providing reasonable insurance and medical attention.''
The Legislature indeed had the very difficult task of finding the balance between ensuring that Californians would have access to care and protecting individuals who are harmed through an act of medical negligence. Subsequent legislatures have also re-examined MICRA on numerous occasions, with the debate focusing on the impact upon access to care, particularly for the millions of Californians with limited or no health coverage. The front-line providers who serve this population—including rural and urban clinics, public health care professionals and others—have repeatedly made it clear to the Legislature that preserving MICRA is an essential element of their continued ability to offer medical services to people who often cannot find care elsewhere.
MICRA now has a 27-year legacy of preserving access to care, utilizing health care dollars efficiently and providing appropriate compensation to injured patients. MICRA has immunized California from the medical liability crisis that is currently sweeping the nation.
Over the past year, my organization has increasingly served as a resource to elected officials, health care professionals and the media in states reeling with the melt-down of their medical liability systems. We are proud that this law is now being viewed as a model for addressing medical liability problems throughout the nation.
Thank you again for this opportunity to testify. I will do my best to answer any questions you may have.
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ATTACHMENT A
DECLARATION OF FRED J. HIESTAND, CEO AND GENERAL COUNSEL, CALIFORNIANS ALLIED FOR PATIENT PROTECTION (''CAPP'')
JUNE 12, 2002
Introduction
Thank you for the invitation to share with you highlights of the story of how California learned, and has so far continued, to control what was once a runaway medical liability and litigation crisis.
From 1974–76 I was immersed in California's medical liability insurance crisis; first as the consultant to the Legislative Committee that studied its causes and predicted its occurrence; then as advisor to the Governor and the Legislature forced to come to grips with it through the enactment of legal reforms. Now and for the past three years I have served as CEO and General Counsel to CAPP, a broad based organization of health care providers, professional medical associations, medical liability carriers and community clinics dedicated to preserving and protecting those very legal reforms that took effect in 1976 and solved our state's medical liability crisis. This almost thirty year journey of biography as history underscores that what we learn from the past can enable us to avoid repeating its unfortunate excesses. Here, in a ''nutshell'' is what that history teaches.
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The California Experience, or Deja Vu All Over Again
In late 1974 California physicians and hospitals were shocked by announcements from the major insurance companies writing medical liability coverage for them that their premiums needed to be raised 400%. This calamity was predicted by the Assembly Select Committee on Medical Malpractice in a report issued earlier that summer by its chairman, Assemblyman Henry A. Waxman, which warned that:
[M]edical malpractice group insurance rates for doctors have increased more than four hundred percent (400%) in just two brief years between 1968 and 1970; [moreover,] [t]he medical malpractice insurance market is a highly unstable one and, if rates continue to escalate as they have in the past few years, malpractice insurance carriers may be priced outside the market. (PRELIMINARY REPORT, Assembly Select Committee on Medical Malpractice, June 1974, Pp. 3–4.)
Waxman's warning was prescient, though it did not anticipate the suddenness or severity of California's medical malpractice insurance crisis. Alarmed hospitals and physicians responded to it by restricting medical care to emergencies. Access to needed health care was jeopardized for Californians in the same way it is today threatened for citizens in Florida, New York, Nevada, Ohio, Pennsylvania, West Virginia and other states undergoing their own medical malpractice insurance crises. Within a few months newly elected Governor Jerry Brown called an extraordinary session of the Legislature in which he proclaimed:
The cost of medical malpractice insurance has risen to levels which many physicians and surgeons find intolerable. The inability of doctors to obtain such insurance at reasonable rates is endangering the health of the people of this State, and threatens the closing of many hospitals. The longer term consequences of such closings could seriously limit the health care provided to hundreds of thousands of our citizens. (Proclamation of Governor Edmund G. Brown, Jr. to Leg. (May 16, 1975) Stats. 1975 (Second Ex. Sess. 1975–1976) p. 3947.)
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Not everyone agreed at the time that there was a real crisis in California. Personal injury attorneys charged, as they do today about the catastrophes sweeping other states, that California's malpractice insurance emergency was ''contrived,'' a result of bad stock market losses by insurers. To separate fact from fantasy California's Joint Legislative Audit Committee ordered the Auditor General to undertake a study to determine if the crisis was real or not. In December 1975 that study, contracted by the Auditor General to Booz-Allen Consulting Actuaries, reported that '' premiums paid by California doctors for medical malpractice insurance have increased significantly over the past fifteen years, but have not kept pace with increasing claim costs; [and] the average premium in 1976 is expected to be about five times higher than the 1974 average.'' (CALIFORNIA MEDICAL MALPRACTICE INSURANCE STUDY, Report by Booz, Allen & Hamilton, Inc. For the Office of the Auditor General, State of California, Dec. 5, 1975, Pp. 1–2.).
By the time the Auditor General reported that California's malpractice insurance crisis was indeed ''real,'' the Legislature enacted the Medical Injury Compensation Reform Act of 1975 (''MICRA''). MICRA's purpose is stated in its preamble:
The Legislature finds and declares that there is a major health care crisis in the State of California attributable to skyrocketing malpractice premium costs and resulting in a potential breakdown of the health delivery system, severe hardships for the medically indigent, a denial of access for the economically marginal, and depletion of physicians such as to substantially worsen the quality of health care available to citizens of this state. The Legislature, acting within the scope of its police powers, finds the statutory remedy herein provided is intended to provide an adequate and reasonable remedy within the limits of what the foregoing public health and safety considerations permit now and into the foreseeable future. (Stats. 1975, Second Ex. Sess. 1975–1976, ch. 2, §12.5, p. 4007.)
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The ''Key Legal Reforms'' for Taming Runaway Malpractice Litigation and Liability Premiums
The ''statutory remedy'' that tamed runaway malpractice premium costs was comprehensive and dealt with major changes in the regulation of the medical profession, insurance and legal reforms. Most of these reforms were recommended by the Assembly Select Committee on Medical Malpractice that Henry Waxman chaired in 1974 and Governor Jerry Brown urged be adopted in his proclamation calling the Legislature into a special session to solve the crisis. MICRA's legal reforms curbed unfair practices and inefficiencies in our system for resolving medical malpractice disputes. It put a ceiling of $250,000 on exploitive non-economic ''pain and suffering'' damages, and assured full compensation for economic losses: wages, medical bills, rehabilitation and custodial care for as long as necessary.
MICRA also permits arbitration, lets the jury know of other payments a plaintiff is receiving for the same injuries his suit is based on, marshals and preserves resources for ongoing care of the plaintiff by allowing periodic payment of future damages, and assures that the most severely injured plaintiffs get a proper share of any recovery by requiring that attorneys' contingency fees be paid on a sliding scale—the larger the recovery the smaller the lawyer's percentage.
MICRA has achieved for California some of the lowest malpractice premiums in the country. States without MICRA reforms are now experiencing their own version of California's mid-1970s medical liability crisis. Since 1975, California's premiums have risen 168 percent, while U.S. premiums has increased 420 percent (National Association of Insurance Commissioners 1999 Profitability Study). Today the average annual liability premium for an Ob/Gyn in California is $ 45,000, half of the average physicians pay in other large states without MICRA (Medical Liability Monitor, 2001).
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Numerous scholarly studies show that the $250,000 ceiling on non-economic damages accounts for the principal difference between California's stability and the chaos of other states in professional liability coverage costs. Despite these savings, the average malpractice settlement and award in California, adjusted for post-MICRA inflation, is greater today than it was before MICRA. Without MICRA, pay outs by California carriers on behalf of health care providers sued for professional liability would mirror the claims experience of other states and send corresponding coverage costs through the roof.
California's medical malpractice disputes are settled 23 percent faster. The cost of settlements is 53 percent lower than the national average (The Doctors' Company). The Congressional Budget Office stated that medical malpractice reform like California's would result in savings of $1.5 billion over ten years (CBO Analysis of H.R. 4350, July 24, 1998). The congressional study does not include the hidden costs of defensive medicine. A Stanford University study shows that California's medical liability reform would save the national health care system $50 billion a year in defensive medicine costs (Kessler DP, McClellan M. Do doctors practice defensive medicine? Q J Econ. 1996. 111:353–390). Reducing health care costs safeguards access to medical care for those who lack basic health coverage.
Medical liability is not one of California's many problems with health care. MICRA is a proven success. Other states now look to the California experience as they try to fashion solutions to their growing emergency with medical liability insurance. MICRA continues to prove that providing fair and equitable compensation for those negligently injured can be achieved in ways that preserve an orderly insurance marketplace and maintain access to quality health care. It is a success for Californians, and will be for patients, governments and taxpayers across the country.
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Mr. BARR. Mr. Smarr.
STATEMENT OF LAWRENCE E. SMARR, PRESIDENT, PHYSICIAN INSURERS ASSOCIATION OF AMERICA
Mr. SMARR. Chairman Barr, Representative Watt, and Members of the Subcommittee, thank you for this opportunity to present to you today.
The PIAA has always supported health care liability reform that will defer frivolous lawsuits while more fairly and quickly compensating patients who have been injured. In our view, the litigation explosion ongoing in our nation is beginning to restrict access to health care as providers are unable to pay for or even find liability insurance.
The PIAA companies were formed for two major and equally important reasons, to provide a stable malpractice insurance market and to collect industry data to discover the true nature of medical injuries so that doctors could practice safer medicine. The PIAA companies, unlike many of our commercial competitors, are in the market to stay. It is all that we do and we must do it very well to survive in the face of ever-escalating claim costs and the inefficiency of our tort system.
We began collecting malpractice claim data in 1985 for risk management purposes. At present, there are over 180,000 claims and suits in the PIAA data sharing project, and here are some of the telling statistics that we have.
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In 2001, only 30 percent of all malpractice actions resulted in an indemnity payment being made to the plaintiff, and only 1 percent through plaintiff verdict. For claims resolved at verdict, the doctor won 81 percent of the time. However, these cases are very costly to defend, as shown on this chart. The average cost to defend these meritless claims in 2001 was $22,967. Claims going through trial to a defense verdict cost $85,000, on average. As you can see, defense costs have risen dramatically.
As shown on this next chart, average claim payments for losses and adjustment expenses have risen dramatically over the last decade, to $328,000 in 2000. This chart shows a compound annual growth in mean payment of 6.8 percent, and that is the top line on this chart.
The rising average indemnity payment value means that more claims are being paid at higher levels, as shown on this next chart. There is a decided shift toward larger payment values, with claims under $100,000 comprising a shrinking portion of the whole.
As shown on the next chart, in 2001, 7.9 percent of the paid claims closed with values of $1 million or greater were paid on behalf of individual practitioners, increasing the cost of reinsurance.
Because of these rising costs, insurer financial performance has deteriorated significantly. Tillinghast-Towers Perrin, an actuarial firm, has calculated that the physician-run carriers had a 2001 net operating loss of 10 percent, following a modest 4 percent profit in the prior year. The highly regarded publication, Best Aggregates and Averages, shows medical malpractice as being the least profitable line of insurance in 2000, having a combined loss ratio of 133.5, meaning that total losses exceeded premiums by 33.5 percent. The best data for 2001 is expected to show significant additional deterioration when it becomes available later this summer.
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Due to low market interest rates, insurers are no longer able to make up the underwriting deficit by using investment income to help keep physician premiums down. The trial lawyers will say that medical malpractice insurers lost large amounts in the stock market. However, medical malpractice insurers are 80 percent invested in high-grade bonds, with only about 13 percent of their assets in stocks.
Ms. Doroshow has presented information indicating that average medical malpractice payments for indemnity and expenses were about $30,000 during the last decade. Included in that flawed calculation of Ms. Doroshow's data are those 70 percent of claims which closed with no indemnity payment, in other words, claims which had no merit and should not have been made at all. This is a clear attempt to misrepresent the facts.
Ms. Doroshow also tells us that there is not much difference in the insurance rates between California, where effective tort reforms were enacted 27 years ago, and the nation, again, the result of improper data interpretation. This next chart tells the truth. Here are actual premium numbers reported to the respected industry publication, Medical Liability Monitor, for three of the larger specialties in major cities in the United States. As you can clearly see, the Los Angeles premiums are significantly less than those in other major cities.
The fact is that the average claim payment and the cost of defending meritless lawsuits are rising sharply. In some States, these two factors are making it too expensive for some doctors to continue to practice medicine. We have all heard of OB/GYNs who have stopped delivering babies and trauma centers that plan to close. As this happens, the patients' access to care is restricted.
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My last chart shows the effectiveness of MICRA, using some of the same data the Center for Justice and Democracy has misrepresented in its work. This chart shows the raw data for premiums reported to the NAIC for California and the rest of the United States for the period 1976 to 2000, apples to apples. California increased by 167 percent and the rest of the country by 505 percent. Clearly, we can see that MICRA does work.
This concludes my remarks. On behalf of the PIAA member companies, the doctors and hospitals they insure, and their patients, we thank you for permitting us to present to you today and I will be happy to answer any questions you may have.
Mr. BARR. Thank you.
[The prepared statement of Mr. Smarr follows:]
PREPARED STATEMENT OF LAWRENCE E. SMARR
Chairman Barr, Representative Watt and Members of the Subcommittee, thank you for this opportunity to present to you today our views on the need for Federal health care litigation reform. My name is Lawrence E. Smarr, and I am President of the Physicians Insurers Association of America (PIAA). The PIAA is a trade association comprised of 51 insurance company members which are owned and/or operated by physicians, dentists, hospitals, and other health care providers. Collectively, these companies insure over 60% of the Nation's practicing physicians. At last count, PIAA companies insured more than 277,000 doctors and 1,100 hospitals in the United States. On behalf of our member companies and their insureds, the PIAA has always supported health care liability reform that will more fairly and quickly compensate patients who have received negligent care while deterring frivolous lawsuits.
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BACKGROUND
Lawsuits against doctors for malpractice in America date back to Colonial times, becoming more prevalent by the mid-1800's. Respected physicians in these early times actually welcomed the advent of litigation as a way to drive a growing body of poorly trained or untrained practitioners out of business. However, to their great dismay, the litigation crisis which developed by the middle of the century focused on the best trained and qualified doctors, who were held to higher standards than the profligate charlatans and hacks posing as care givers.
As technology improved, America's best physicians became the victims of their own science, and some limited their practices to avoid litigation. Of great concern around 1850 was the treatment of compound fractures, which often resulted in shortened limbs or other abnormalities. Doctors were sued for poor outcomes, even though the prior treatment of this condition was amputation. By the end of the nineteenth century, professional liability insurance became available to help protect physicians and spread their risk. Once again, an unintended result emerged—every physician was now worth suing.(see footnote 44)
Since these times, there have been great advances in medicine and technology, and with them come ever higher standards of performance for medical practitioners. The legal system has kept pace with the growth in availability and quality of medical care, and physicians feel ever more challenged to defend their everyday actions in hopes of preventing meritless litigation. Doctors err, and mistakes do occur. However, fully 70% of all medical malpractice actions brought against physicians result in no indemnity payment being made to the plaintiff (or his/her lawyer). However, these cases are very costly to defend. The average cost to defend these meritless claims in 2001 was $22,967, with those going through trial to a defense verdict costing $85,718 on average.(see footnote 45)
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THE BEGINNINGS OF THE CURRENT ENVIRONMENT
But, medical malpractice claims were still pretty uncommon until the 1970s. In the 40-year period between 1935 and 1975, 80% of all medical malpractice lawsuits were filed in the last five years of that period.(see footnote 46) Hemorrhaging losses forced many of the commercial insurers to leave the medical malpractice insurance marketplace. This void was quickly filled by physician and other provider owned/controlled specialty insurers funded by the doctors and entities they were to insure. This ''crisis of availability'' was short lived, as doctors and others contributed capital to support the efforts of their state medical and hospital associations, among others, to start as many as 100 specialty carriers across the country. Dubbed ''bed pan mutuals'' by their commercial competitors (many of whom had fled the market), these upstarts were not expected to succeed where the giant commercials could not find success. But they did, and quickly grew in number and size to insure over half of the physician market.
A second crisis emerged in the early 1980's, known as a ''crisis of affordability.'' Insurers faced ever-mounting losses, with rampant increases in paid claim frequency (number of paid claims) and severity (amount of indemnity payment). For some yet unknown reason, paid claim frequency actually began dropping off in the 1984 time frame. Not recognizing the turn in this statistic, insurers maintained their rates at higher levels. Not until an actual downturn in claim payments materialized did they fully recognize the fundamental change in this statistic (paid claim frequency). On average, it takes more than 5 years for an insurer to pay a malpractice claim after the date of the incident—mostly due to delay in reporting (22 months) and the timeliness of the tort system (43 months).(see footnote 47) Paid claim severity continued its long-term upward trend of about 5 percent per year.
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The good news about frequency and insurer profitability drew new competitors into the market and fueled the expansion of existing carriers. High interest rates also helped to offset premium needs, and proved very attractive to insurers who were able to hold on to their earned premium dollars for five or more years on average. This positive economic
scenario bred fierce competition. Due to past profits carried as excess loss reserves, as well as high levels of current investment income, many carriers were able to compete on price, hoping to gain market share. The specialty carriers, which traditionally operated in only one or a few states and wrote only medical malpractice insurance, were advised by A.M. Best, the most widely recognized industry rating agency, to expand their operations and product lines to enhance their spread of risk.
THE PERFECT STORM
During the last half of the 1990's, paid claim frequency returned to its former level and severity continued to increase. As average claim payments rose, so did the cost of reinsurance, which normally covers the top layers of large claim payments. The excess loss reserves many carriers relied on to offset current premium requirements were exhausted.
Professional liability insurers rely on investment income to offset the need for increased insurance premiums. In general, they maintain very conservative investment portfolios comprised of high grade bonds. During the period 1995–2001, medical malpractice insurers invested approximately 80% of their assets in bonds, with the remainder divided among stocks, mortgages, real estate and working cash(see footnote 48). As long as these bonds are held to maturity, market risk is all but avoided in return for accepting the lesser current income risk inherent with interest rate fluctuation. During the last half of the 1990s, market interest rates declined to new lows, cutting the earning power of investments and increasing the need for premium revenues. The combination of these factors provided ''the perfect storm'' for medical malpractice insurers.
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THE PERFECT STORM
Continued long-term upward claim severity trend (average cost of claim)
Paid claim frequency (number of paid claims) returning to prior higher levels
Declining market interest rates
Exhausted loss reserve redundancies
Premium rates set well below requirements due to competitive pressures
Greater proportion of large losses, significantly effecting the cost of reinsurance
PROFITABILITY—THE CURRENT SITUATION
As the new millennium began, insurers who were not able to weather the storm began to experience poor financial results. Several ceased underwriting operations, such as Phico and long-time market share leader St. Paul. The majority of carriers which still remained in the market began taking long overdue rate increases. Those carriers that heeded the advice of A.M. Best to expand into other lines and territories soon saw that they could not successfully compete in these established markets and began to withdraw. This compounded the availability problem for physicians and hospitals in addition to the St. Paul global cessation of underwriting and other departing carriers.
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Doors were opened, however, for those insurers left in the market. Formerly beset with the pressures of competition on price, they found themselves taking necessary rate increase actions and at the same time being flooded with new applications for insurance. Doctors must have malpractice insurance in order to practice or gain hospital privileges, and hospitals in kind must have insurance to acquire necessary accreditations. They have no option but to pay the greatly increased malpractice costs.
That is not to say that the medical malpractice insurers are profiting through this experience. In fact, a survey of 29 medical liability insurers companies indicates a net operational loss of 10% for the year 2001.(see footnote 49) This follows a meager profit of 4% in the prior year. Even if the carriers are successful in implementing rate level increases through the end of 2002 to offset their losses, they are still faced with long-term increases in claim severity. The average loss and loss adjustment expense paid on claims reported to the PIAA Data Sharing Project has experienced a compound annual growth of 6.8% during the decade of the 1990s, as shown below.
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Insurers generally report that claim frequency has remained constant over the past several years, but fear the negative impact this may have if it begins to rise again.
Insurance carriers income statements have deteriorated significantly over the past few years. This performance can be seen through a widely used statistic called the combined loss ratio, which is calculated by dividing indemnity losses plus loss adjustment expenses and underwriting expenses by written premium. As shown in the table below, this statistic has risen sharply over the past two years.
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ROLE OF INVESTMENT INCOME
As can be seen in the table above, investment income (mostly interest) plays a major role in providing money to pay claims. In 1995, the carriers included in this example earned investment income equal to 49% of their premium writings. This has declined to 31% in the most recent year. Recent articles in the press(see footnote 50) criticize insurers for relying on investment income to offset premiums, and imply that it is improper to depend on the vagaries of the financial markets to fund insurance risk. Specialty liability carriers are keenly aware that they cannot accept much market risk, given the risk inherent in their primary business. That is why they invest primarily (80%) in high grade bonds, which have a high degree of safety. Using this investment income to offset premiums provides a significant benefit to the physicians and hospitals they insure.
T1UNDERWRITING CAPACITY
Insurers now find themselves in the position of having too much business, stretching the capacity of their underlying capital (surplus). During 2001, the premium-to-surplus relationship deteriorated from one dollar in surplus for each 55 cents of premium to one dollar for every 72 cents of premium, as determined by Tillinghast in its annual Market Review and Update presented to the 2002 PIAA COO/CPE Workshop.(see footnote 51) Thus, the carriers' cushion to protect against underestimation of losses was reduced by 24%. The more new business the carriers write or rate increases they take without adding to surplus, the more this relationship deteriorates.
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Insurers must maintain a reasonable premium-to-surplus ratio. They cannot add an unlimited number of new insureds without adding to surplus. While the current premium-to-surplus relationship is still healthy, the deteriorating trend in this statistic must be halted to avoid financial impairment. Absent a reversal in current claim payment trends, the only way to increase surplus is through rate increases.
Another important parameter for professional liability insurers is the relationship of reserves to surplus. Because medical malpractice carriers are highly leveraged, it only takes a minor revision in the loss reserves estimated to pay claims (remember, claims are paid more than five years after they happen, on average), to have a significant effect on solvency. As shown in the chart below, net loss and loss adjustment expense reserves rose in 2001 to be 209% of surplus. As this is approximately a two-to-one ratio, if the loss reserve estimates are ultimately found to be 10% too low, surplus will be reduced by 20% to make up the difference.
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SUMMARY
The constant critics of health care providers and their insurers, the trial lawyers, would have us believe that all is well in the medical malpractice industry. They report in Pennsylvania and other hot spots that the troubles of the insurance carriers that cause them to raise rates are caused by a combination of bad management and poor stock market investments.(see footnote 52) Not likely, as they invest only minimally in equity securities.(see footnote 53) This view focuses on the few carriers which tried to compete on price and were unable to handle the inordinate increases in paid claim severity. To that extent, these carriers could be said to be poorly managed. But, they are the minority of the industry and not representative of most medical liability insurers.
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There is no real solution in sight to ease the financial burdens of health care providers. The insurers they formed a quarter century ago are now the majority in the market. They have the accurate data to measure profit and loss, and know that the current rates are justified. The only way to curtail the increasing number of excessive verdicts and settlements is through federal medical liability reform. During the period 1991 to 2001, the percentage of million dollar plus claims increased from 2.06% to 7.90%. In 1991, 40.6% of all paid claims were greater than $100,000. This statistic has increased to 64.5% in 2001, as shown on the charts which follow.(see footnote 54)
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The trial lawyers also don't talk about the fact that they take a significant percentage of this money home with them, leaving less for the truly injured patient. While there is no repository of contingency fee payments like there is for insurance losses, anecdotal reports indicate that contingency fees have risen above 40%, not including the legal expenses associate with of settlement or trial, which come out of the plaintiff's pocket, win or lose.
Escalating malpractice insurance costs have been contained in those states which have been able to enact effective medical liability system reforms, such as California. California passed the Medical Injury Compensation Reform Act (MICRA) in 1975, which has worked well in compensating injured patients in California and also controlling the malpractice insurance element of health system costs. These same reforms are found in H.R. 4600, the Help Efficient, Accessible, Low-cost, and Timely Healthcare Act of 2002 (the HEALTH Act). The PIAA fully supports the provisions of this act, which when signed into law, will provide the same protections to patients across the United States as found in California for over a quarter century. The following chart, which was compiled from data reported to the National Association of Insurance Commissioners, speaks volumes about MICRA's effectiveness:
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We thank the Members of the Committee and their staff for holding this important hearing and inviting us to testify. We look forward to working with you to make the health care liability system fairer for everyone. I will be happy to answer any questions you may have.
Mr. BARR. Let me, if I could, Mr. Smarr, pick up where you concluded your testimony, and that is with an analysis of the statistics and the actual figures. Is there anything specific in the figures—and I'll certainly give you an opportunity to respond, too, Ms. Doroshow—to the figures that she cited in terms of how they were arrived at?
Mr. SMARR. There are two sets of figures, one that tries to describe claim costs and the data for that was extracted from the data reported to the National Association of Insurance Commissioners, and unfortunately, the actuary, Mr. Hunter, included all the claims that paid at zero, and we know that 70 percent of all claims which are filed against doctors are closed without an indemnity payment to the plaintiff and that greatly distorts the average paid claim value, which is cited to be about $30,000. Our data, which shows that the average value in 2000 is just over $328,000, is actual data reported by our member companies.
Mr. BARR. So an actual difference of ten-fold.
Mr. SMARR. Yes, sir.
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Mr. BARR. So it's not just sort of a margin of error difference.
Mr. SMARR. That's right. The other issue has to do with California premiums compared to premiums across the nation, and here, data was taken, again from the NAIC, and the premium data is for all types of risks, hospitals, dentists, nursing homes, as well as doctors, and we know that only about two-thirds of total premiums are reported, by the way, to the NAIC because there are a lot of insurance mechanisms that aren't insurance companies, and those premiums are divided by doctor counts taken for the nation from the Statistical Abstract of the United States, and generated originally by the American Medical Association, but those doctor counts include all types of doctors, doctors who are practicing medicine and those who are not, and there are a lot of doctors who don't actually practice medicine and have patient care, meaning they don't need malpractice insurance—retired doctors, doctors in administrative medicine, doctors who are teaching, doctors who are working for governments, doctors in industry. So, again, we've got an apple and an orange that are used to provide average premium amounts, data which is just totally not applicable to describing average premiums.
Mr. BARR. It certainly sounds like the books have been cooked in order to arrive at figures that downplay the size of the payouts and the cost of the premiums. How would you respond to this, Ms. Doroshow?
Ms. DOROSHOW. The data was done, calculated, by Bob Hunter, J. Robert Hunter, who some of you may know [sic]. He's an actuary. He was a former Federal Insurance Administrator under Ford and Carter. He was actually appointed by Richard Nixon as the Chief Federal Actuary originally. He's also the former Texas Insurance Commissioner and he is currently the Director of Insurance for the Consumer Federation of America.
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Bob Hunter does impeccable work and the only criticisms that ever come of the kind of analysis that he does comes from the insurance industry, regulators, Federal officials——
Mr. BARR. Where the criticisms comes from doesn't really answer the question of whether or not he did include data in here which does skew the figures.
Ms. DOROSHOW. Right. Let me get to that. The $30,000 average figure is a closed claim study. What he was trying to do is to determine what exactly insurers are paying to settle claims, not what the headlines in the paper are about jury awards and so forth. What are they paying?
From an actuarial standpoint—at least, that's how he explained it to me—to have an accurate figure, you need to include loss adjustment expenses in there. These are what the insurance companies are paying not just to pay the victims but to pay their lawyers, to pay the expenses that they need to pay out in order to settle claims. That happens—that payment happens whether or not it's a zero payment to a victim or a $30,000 payment or a $1 million payment. So it would be wrong from an actuarial standpoint to not include that information and not produce a general figure about what exactly insurers are paying per claim.
Now, if you want to argue that the 70 percent of claims, of medical malpractice victims who get nothing are frivolous cases, well, that's another question, because with the amount of malpractice that goes on in this country, 98,000 people being killed just in hospitals every year——
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Mr. BARR. That's—that whole area is subject to great debate, whether that's an accurate figure, but that's getting us off track, I think.
Ms. DOROSHOW. Well, you know, I think it's important to understand exactly what insurers are paying out here, and the figures about jury verdicts, and that is what you see in the paper and that is what is driving this debate are extraordinary jury verdicts, that is certainly an inaccurate way of describing what exactly insurance companies are paying out in claims in this country.
We certainly stand by his data and the PIAA has criticized Bob Hunter. I mean, they're the only organization that we've ever seen publicly do that, and if he were able to be here today to help me and to present you with his actuarial analysis, I'm sure it would be of great interest to this Committee. It's just too bad that he's not here today.
Mr. BARR. That, it would be. I think we could probably all agree on that.
The gentleman from North Carolina, Mr. Watt, is recognized for 5 minutes.
Mr. WATT. Thank you, Mr. Chairman. I doubt that it's going to get us anywhere to debate what the base should be in an equation. It does strike me as a little unusual to be saying that people who file a claim and have that claim resolved before it goes to litigation shouldn't be considered in the base. I mean, I just—or people who resolve—file a claim and go all the way through litigation and end up getting no award shouldn't be considered in the base. I mean, I just don't understand that, but I want to go at this from a slightly different angle.
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I want to, with Ms. Walters and Mr. Smarr, assume for the moment that what you all are saying is true, that MICRA worked, that you ended up with a different set of charges for Los Angeles than you have in New York, Chicago, Miami. Let's assume that that is the case. It seems to me that if it is the case, California recognized that they had a problem and they dealt with it.
What I'm having trouble with is this jump from that to somehow this issue ought to be federalized, that as—how did—Mr. Palmisano said it, Congress should start by initiating reform. If you assume that California had a problem and they dealt with it, my State had tort reform in 1995, I'm sure a number of different States have had tort reform, I've never known a person to start being treated in a hospital in one State and end up in another State in the hospital. I don't know how this is interstate commerce.
I simply don't understand the rationale for us having this debate at this level. You know, if California solved the problem, if Pennsylvania has a problem, it seems to me that Pennsylvania can go and solve that problem. If New York has a problem, it seems to me that New York can go and solve that problem. What I don't understand is why this has to be federalized, and—I mean, I hope—Ms. Walters, maybe you can—you seemed to give the most persuasive case for your belief that California solved its problem. Why—how do you get from there to somehow or another we have the obligation to solve every State's problem as opposed to leaving it to the States to resolve this?
Ms. WALTERS. We're very happy with what we have and would like to keep it. What others——
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Mr. WATT. Yes, but if we federalize it, aren't we just going to—we're going to preempt your State laws, aren't we?
Ms. WALTERS. Not necessarily, at least the way the current legislation is drafted, it would not because we have a prevailing——
Mr. WATT. Then why are we doing this if we are not preempting the State laws? I mean, why would the Federal Government have a role in this if we're not going—if this is not a Federal issue, if we are not going to federalize the law, why are we doing this?
Ms. WALTERS. My understanding, and in looking at what's going on throughout the nation and examining—actually, I believe it was from Ms. Doroshow's written testimony, she outlined all the various States who have enacted medical liability reforms very similar to California's only to have them thrown out by their Supreme Courts, their State Supreme Courts. Ours is——
Mr. WATT. Okay. Well, I mean, are we big brother here? I mean, last time I checked, we were still operating in a federalist form of Government here where the States had certain rights and—I mean, is there some Commerce Clause that gets us there? What are we doing?
Mr. Smarr, maybe you have some response to this, and maybe Mr. Palmisano. I just don't understand how you get from the original argument that you make that States have dealt with this effectively to the position that, somehow, that means the Federal Government should resolve a problem. That seems to me to lead to the exact opposite conclusion.
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Mr. PALMISANO. Mr. Watt, if I may, as a physician, we want to make sure that there's access for patients. This past week, I've traveled from Florida to Georgia to——
Mr. WATT. Yes, you moved in interstate commerce. Do you practice in interstate commerce?
Mr. PALMISANO. No, I don't, sir, but——
Mr. WATT. Where do you practice?
Mr. PALMISANO. I practice in New Orleans, in New Orleans East, but——
Mr. WATT. Okay. You practice in Louisiana.
Mr. PALMISANO. Right, but as a visitor to States, I want to make sure that if I'm injured in an auto accident or in a cab that there's a physician who will treat me in a trauma center, and I think all of Americans want that, and that's our concern. The advantage——
Mr. WATT. That's a pretty broad definition of the Commerce Clause.
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Mr. PALMISANO. Well, it's we want to make sure that all Americans have the opportunity to be treated and have access to medical care when they need it. We think patients are going to be harmed in our nation. We see it in Nevada——
Mr. WATT. You acknowledge that there's a Federal right to medical care?
Mr. PALMISANO. No——
Mr. WATT. If that's where we are, I think we better be doing a drug—prescription drug benefit pretty damn quickly and a universal health coverage pretty quickly.
Mr. PALMISANO. What I'm saying is that we ought to have access. AMA policy is that we should have access to health care, including emergency care, in our country, and right now, we see detriments to the availability when women in Nevada can't find an obstetrician because the obstetricians are leaving the State and moving to California.
Mr. WATT. But don't you think the legislature in Nevada can resolve that problem if they perceived it as a problem?
Mr. PALMISANO. Well, apparently, it hasn't been resolved in a number of States, Pennsylvania, Nevada, Mississippi, West Virginia, and the list grows every day. And so what we're trying to do is give a model that works and will also respect State law. If the State wants to change the cap, the State has the right to do that.
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Mr. BARR. The time of the gentleman——
Mr. WATT. You've been very generous and I thank you.
Mr. BARR. We'll hopefully have some additional time.
The gentleman from the Commonwealth of Pennsylvania, Mr. Gekas, is recognized for 5 minutes.
Mr. GEKAS. I thank the chair.
In looking at the final page and final graph that Mr. Smarr presented, it's obvious that even with the reforms of MICRA, the costs to Californians and to the system rose 167 percent while the rest of the nation at 505. It seems to me that the only constant cost factor in MICRA is the cap on the non-economic damages. So this chart reflects, does it not, the cost of health care itself, and the cost of the operating room and the cost of services in the hospital and all the other things that go into health care, have caused this increase to California and that the non-economic cap has helped keep it down. Is that the full answer to this?
Mr. SMARR. Yes, largely, it is. The American Academy of Actuaries have studied the California MICRA reforms and concluded that the $250,000 cap on pain and suffering, as well as, to a lesser extent, the collateral source rule reform, contribute to the reduction of costs in California and in other States that have enacted those laws. But the cap is the big reason.
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Mr. GEKAS. Yes?
Ms. WALTERS. If I might add, you've hit the nail on the head in terms of our economic costs are not limited. So, for example, in an award, the economic costs of lost wages, future care, rehabilitation, whatever that patient needs throughout their lifetime are covered fully and grow as those costs grow, and so that does reflect the growth that's happened in our awards.
Mr. GEKAS. And isn't it true that the States who have tried to match or approach matching MICRA have had their Supreme Courts deal a death blow to them because of the limit on non-economic damages?
Ms. WALTERS. Some have and some haven't. It's a mixed bag.
Mr. GEKAS. What would some other reason be for a Supreme Court——
Ms. WALTERS. Well, some of them have similar reforms in place to MICRA. Some of the States have similar reforms in place——
Mr. GEKAS. No, what I'm asking you is what other rationales were employed by the Supreme Courts in those States that knocked down the attempts to match MICRA, do you know?
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Ms. WALTERS. I've not examined the specific reasons for those.
Mr. GEKAS. Does Mr. Smarr know?
Mr. SMARR. Generally, I believe that the caps on damages—in Illinois, for example, Illinois passed a law similar to MICRA a few years ago and it was questioned on constitutional challenges having to do with the fact that there was more than one issue included in a health bill that was being considered and the Supreme Court determined that the MICRA provisions, MICRA-like provisions, were not germane to the legislation that was passed and overturned the legislation on constitutional grounds.
I'm not an expert on this, but I'm told that State constitutions are very thick documents and have lots of loopholes in them. They're very easy to find defects in there which make overturning the tort reforms very easy. I've also read that the trial lawyers, ATLA, have actually constituted an in-house law firm to go after State tort reforms and defeat them on constitutional challenges.
It is—the passage of a Federal bill is truly necessary because in many States, such as Pennsylvania, which has a constitutional prohibition against a cap on non-economic damages, it just can't be done, and in those where it has been done, it's being challenged all the time. There has to be a Federal solution.
Mr. GEKAS. I yield back the balance of my time.
Mr. BARR. The gentleman from New York is recognized for 5 minutes.
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Mr. NADLER. Thank you. I am trying to think who to ask the questions to. I suppose Mr. Smarr would be as good a person as any.
The National Association of Insurance Commissioners report on profitability in 1997 said that malpractice insurance profits are more than double property and casualty insurance profits. I think somebody said that they were the least profitable insurance line here. Can someone, Mr. Smarr, comment on the fact that the National Association of Insurance Commissioners say that malpractice insurance profits are more than double the property and casualty insurance profits, the implication being that this crisis is caused by profiteering by the insurance companies, not by the tort laws?
Mr. SMARR. I'm not familiar with the statistic that you're citing and the number—the statistic that I gave came from Best Aggregates and Averages. A.M. Best is the leading insurance rating firm in the United States.
Mr. NADLER. That's very interesting, because Mr. Best says that losses paid by insurers for medical negligence—I wasn't going to cite him, because I didn't know he was bona fide, but you just cited that he was bona fide, so I will cite him—that losses paid by insurers for medical negligence amounted to only 33 cents out of every $100 dollars of health care spending. So Mr. Best seems to be saying that the cost of providing medical negligence is negligible as part of the problem with health care spending.
Mr. SMARR. We estimate, and a lot of others have, that medical malpractice direct costs are about 1 percent of health care, and——
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Mr. NADLER. One percent.
Mr. SMARR [continuing]. And as I'm sure you know, there are three-and-a-half to——
Mr. NADLER. But Best has said it's one-third of 1 percent, but all right——
Mr. SMARR. Well, he may, but they're three-and-a-half to 5 percent of Medicare reimbursements to physicians are accounted for medical malpractice insurance. But that's—we're really not talking about—that's not the primary issue. The issue has become access to health care, because premiums that the doctors are required to pay are incredibly high at this point——
Mr. NADLER. All right, fine. You don't have to repeat everything. We know that that's the major problem. My problem with everything that you've been saying is that you've identified a real problem. No one doubts that the medical malinsurance premiums are very high and are a real problem. The question is, why?
Let me read you a few quotes and get your reaction to them. Sherman Joyce, the President of the American Tort Reform Association, the premier body leading the charge for the kind of things you're advocating, says, ''We wouldn't tell you or anyone that the reason to pass tort reform would be to reduce insurance rates.'' This is from an article titled, ''Study Finds No Link Between Tort Reforms and Insurance Rates'' in Liability, week of July 19, 1999.
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And Michael Prince, ''Tort Reforms Don't Cut Liability Rates,'' the study says, Business Insurance, July 19, 1999, quotes Victor Schwartz, another leading tort reform advocate from Shook, Hardy, and Bacon, saying ''Many tort reform advocates do not contend that restricting liability will lower insurance rates. I've never said that in 30 years.''
And finally, on March 13 of this year, Deborah Allen of the American Insurance Association, Executive Vice President, eliminated any pretense that caps on damages or other limitations of the legal rights of Americans might result in lower insurance costs by saying, quote, ''Insurers never promised that tort reform would achieve specific premium savings.'' This is from an article titled, ''AIA Cites Fatal Flaws in Critics' Reports on Tort Reform,'' March 13, 2002.
So let me ask you, what guarantees do we have and why should we believe that all these so-called tort reforms that would make it harder for patients who are harmed by medical malpractice to find lawyers to recover what they—perhaps what juries think they should recover, what the law now says they should recover? What guarantees do we have that they would result in lower medical mal rates when people from the American Tort Reform Association and other tort reform advocates, the American Insurance Association, say they wouldn't?
Mr. SMARR. I'm only familiar with the first quote that you cited, having to do with Sherman Joyce, and I've talked with him about that and his comments were taken out of question at the discussion—taken out of context, pardon me. The discussion had to do with a products liability reform, a very minor reform that would not have much economic effect that was being considered at the time.
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Mr. NADLER. All right. Forget his quote, then. The Vice President of the American Insurance Association said that insurers never promised that tort reform would achieve specific premium savings. This is from just a couple months ago, in March, ''AIA Cites Fatal Flaws in Critics' Reports on Tort Reform.''
Mr. SMARR. I know that the AIA has disputed that particular allegation, but I don't have the——
Mr. NADLER. They disputed the quote or they disputed the assertion that tort reform would lower——
Mr. SMARR. Yes.
Mr. NADLER [continuing]. Insurance rates? Yes——
Mr. SMARR. No, no. They disputed them being quoted out of context to say that tort reform would not lower insurance rates. But again, I don't have the specifics with me here today.
But I can talk to you about the reduction in insurance rates due to tort reform. The PIAA in 1997 conducted an analysis of this and it found that in States that passed tort reforms, that rates declined soon thereafter by, I believe it was 11 percent. When we have an escalating market, when prices are going up, tort reform works to dampen the effect of rising rates.
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Mr. NADLER. Well, let me ask you—let me ask you the other question that—this will be my last question, since I see the red light. I cited the Harvard study, and I think Ms. Doroshow referred to it. It's an old study at this point. It's from 1986. I don't know if there are more modern studies, and I also don't know of anything that refuted it, which basically led to the conclusion that the real problem with these—with—the real cause, aside from business practice of the insurance companies who underprice at various price, but forgetting all that, which is a whole different subject, the major cause is that we're not dealing with the 1 percent, the one-and-a-half percent of doctors who cause 90-some-odd percent of the medical malpractice claims, and if we dealt with them by getting them out of practice or retraining them or something, get proper discipline, in other words, you'd have a lot fewer victims of medical malpractice, you'd have a lot fewer injuries and deaths, and you'd have much lower rates, and that going after the ability of victims to recover is attacking the wrong side of the problem. Would you comment on that?
Mr. SMARR. There are several facets to that answer. First of all, you're not going to find many allergists who have been sued. You're not going to find many rehabilitative medicine doctors that have been sued.
Mr. NADLER. If I look at my allergies, I want to sue my allergist. [Laughter.]
Mr. SMARR. But you're not going to find many orthopedic surgeons who have not been sued, many OB/GYNs, many neurosurgeons, the doctors who care for the most critically injured or ill patients. They have a sincere problem.
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And so when you look at the 1 percent of doctor count, you have to consider the distribution of the physician specialties in that regard. Studies that I've done have shown that most doctors that have been sued have only one claim. There are not many doctors that have multiple claims.
Mr. NADLER. Most doctors——
Mr. BARR. The time of the gentleman from New York has expired.
Mr. NADLER. May I have unanimous consent for one additional minute?
Mr. BARR. You already have three, and I think in fairness to the other members of the panel, so we can at least get this round finished, and then we will have some additional time.
I recognize the gentleman from Arizona for 5 minutes.
Mr. FLAKE. I thank the Chairman and I apologize for arriving late.
Ms. Doroshow, the New England Journal of Medicine reviewed confidential records of patients and found that the severity of disability was a determining factor on malpractice claims, not what actually happened there in the hospital or office. Can you comment on that? Is that—what is the determining factor? Is it severity of injury or what, actual malpractice by the doctor? Is this study accurate, in your view?
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Ms. DOROSHOW. I'm sorry, I'm not familiar with the study so I can't really comment on the details of it, and I—I guess I can't answer the question. I don't know what determines whether—you're saying whether a claim gets paid or not?
Mr. FLAKE. No, whether a claim is filed or not.
Ms. DOROSHOW. Filed or not?
Mr. FLAKE. Yes.
Ms. DOROSHOW. I think there are a lot of different factors and I would imagine that severity of an injury must be an important factor.
Mr. FLAKE. There is a Harvard study that said that over half of filed medical professional liability claims studied were brought by plaintiffs who suffered either no injuries at all, or if they did, such injuries were not caused by their health care providers but by an underlying disease. Do you want to comment on that?
Ms. DOROSHOW. I don't know of any study that supports that kind of view. I mean, if you look at what the National Academy of Sciences put out in their recent study and the Institute of Medicine, there's nothing in that data, in those statistics, that reflect anything like that. I mean, basically, they say between 44,000 and 98,000 people die every year in hospitals due to medical malpractice. That's an extraordinary number of people.
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Mr. FLAKE. And I think it's the same Harvard study that you cited in your testimony.
Ms. DOROSHOW. The National Academy of Sciences, my understanding is they extrapolated from the Harvard study to come up with the higher figure, 98,000 death figure. They also looked at other studies and they came out with about 44,000 deaths per year. Even by those lower numbers, I think medical malpractice, then, is the eighth leading cause of death in the United States, ahead of AIDS, traffic deaths.
Mr. FLAKE. Do any of the other panelists want to comment?
Mr. SMARR. Yes, I would. The extrapolations appeared in a subsequent article published in the Yale Law Review by two or three of the authors and I'd like to just tell the Subcommittee that the Harvard study was conducted in 1984 with data collected from 51 New York hospitals about bad outcomes in medical treatment. If you read the study, it's very hard to determine how many people actually died that were calculated or included in that study. We hired an actuary to help us do that. The study is this thick. And I think our number is 91. I've seen another number that says it's 171 people who actually died. The study clearly says the deaths were due to conditions—to medical negligence, but also due to other conditions, including the seriousness of injury to the patient.
So those 91 or 171 deaths that happened in New York in 1984 were extrapolated by the authors to be 98,000 deaths and were then used by the Institute of Medicine to represent the number of patients that are dying due to medical negligence in the year 2000 in the United States.
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Now, I have to tell you, there are some number of patients who die due to medical negligence each year, and whatever number that is, that is entirely unfortunate. But the Harvard study data certainly can't be used as the yardstick for that.
Mr. FLAKE. Any other comments from other panelists?
Mr. PALMISANO. Donald Palmisano. I think Troy Brennan's work—he also wrote in the New England Journal of Medicine and his work shows that the correlation was with severity of injury, as you've just discussed, not related to negligence. And obviously, something is wrong with the system. Back in 1978 when the National Association of Insurance Commissioners looked at 72,000 cases, they found that 62 percent were closed with zero payment whatsoever, and now we have figures of 70 percent. In some States, it's as high as 80 percent, zero payment.
Unfortunately, in America, just because somebody brings a claim against you, you're not considered negligent unless you're found to be negligent in the courtroom. So I don't think we should mix those figures. He should be considered just like in the criminal justice system. You're not guilty unless you're proven guilty. There's a presumption of innocence.
Another comment I want to add, on the way here, as we were driving by, we passed the National Archives building and there are two statues out in front. One on the left said ''Study the Past,'' and the one on the right said, ''What is Past is Prologue.'' We have good data now from the mid-1970's, California data, Louisiana data, places where in Louisiana hospitals couldn't buy insurance at any cost. In California, they were at the top of the hit parade in professional liability premiums. Now, they're down at the bottom.
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So I think you have, as you well know, better than me, a grave responsibility, because we're talking about access to care for patients and we believe patients will be hurt in our country if physicians aren't available and this is a driving force that will get physicians out of the practice of medicine. Thank you.
Mr. FLAKE. Thank you. I thank the Chairman.
Mr. BARR. Thank you.
The gentlelady from California is recognized for 5 minutes.
Ms. WATERS. Thank you very much. I have a few questions, Mr. Palmisano. Could you tell me quickly, what is Intrepid Resources and what do you do at Intrepid Resources?
Mr. PALMISANO. Intrepid Resources? That's a Federal trademark for the medical risk management company——
Ms. WATERS. I can't hear you.
Mr. PALMISANO. It's a company that does risk management advice, safety tips for hospitals. We do safety lectures, try to——
Ms. WATERS. Do you handle claims?
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Mr. PALMISANO. I'm sorry?
Ms. WATERS. Do you handle claims?
Mr. PALMISANO. Do we handle claims? We give advice on claims. In the past, we have done claims analysis and advised as to whether a case should be settled or whether a case should be defended. Yes, we have done that.
Ms. WATERS. Okay.
Mr. PALMISANO. But we mainly do—we have what we call the big A and the 25 Cs, anticipate what could go wrong, try to make safety tips——
Ms. WATERS. Okay. All right. That's good. I also want to know, you're a founding member of the Louisiana Medical Mutual Insurance Company——
Mr. PALMISANO. Yes.
Ms. WATERS [continuing]. A physician-owned liability insurance company.
Mr. PALMISANO. Yes. I was on that board for approximately 9 years. That's one of the PIAA companies that Mr. Smarr heads up. It was spun off by the Louisiana State Medical Society in the mid-1970's when we had trouble buying insurance. Many medical societies formed their own insurance companies, and that's what that is.
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Ms. WATERS. All right. Let me just say that I have some information from the website, Intrepid's webpage, information that I guess is given on how to beat medical malpractice claims. Are you familiar with that?
Mr. PALMISANO. I don't think we have that word on our website. If you want to read it to me, I'll be glad to explain.
Ms. WATERS. I can't hear you.
Mr. PALMISANO. I said, I don't believe I use that word on the website, those words. If you'd like to read it to me, I'd be glad to give an explanation.
Ms. WATERS. Well, it says a physician is required to give reasonable care. Although the physician may aspire to give the best care, the law does not require the best. The law requires a minimally acceptable level of care. Thus, my analogy to—well, the low——
Mr. PALMISANO. That's what the law means. Negligence is that you must give reasonable care. By definition, negligence is an unintentional act, and so what you must do is give reasonable care to a patient, and if you do not and that directly causes injury, that's negligence. It has nothing to do with intent. But the point that we try to make, we aspire to do our very best——
Ms. WATERS. But I was just wondering if the website, the quotes were correct. The law does not require the best——
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Mr. PALMISANO. That is——
Ms. WATERS [continuing]. The law requires——
Mr. PALMISANO. That is the law. Yes, ma'am, it is——
Ms. WATERS. That's what your website says.
Mr. PALMISANO. The website says what it says, which is in front of you, that you have to give reasonable care——
Ms. WATERS. The law requires a minimally acceptable level of care?
Mr. PALMISANO. I'm sorry?
Ms. WATERS. The law requires a minimally acceptable level of care.
Mr. PALMISANO. Which is reasonableness, and if you knock that low hurdle over——
Ms. WATERS. No, I was just trying to see if these quotes were correct——
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Mr. PALMISANO. They are correct.
Ms. WATERS [continuing]. From you on your website, because I——
Mr. PALMISANO. They are correct, Ms. Waters.
Ms. WATERS. Okay, thank you. I do understand that. And do you also say that—do not panic if you are sued and point fingers at other treating physicians or other hospital. Lack of courage only guarantees a plaintiff win. Remember, 62 percent of malpractice claims are closed without any payment. Only 18 percent go to trial and the doctor wins 89 percent of the time.
Mr. PALMISANO. That's the National Association of Insurance Commissioners that I mentioned——
Ms. WATERS. Is this your—it's on your website?
Mr. PALMISANO. It's on the website, that's correct.
Ms. WATERS. Okay. Let me just ask, aside from Ms. Doroshow, do you have any complaints about the insurance companies at all? Is anybody unhappy with or suspect that there may be gouging, that there may be gaming, and do you have any recommendations about reform for the insurance company, that industry at all, anybody?
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Mr. SMARR. I'll speak to that. The companies that are my members were formed during the insurance crisis of the 1970's, when the commercial carriers fled the market. I know. I was there. I was involved in forming a company in Pennsylvania. And the companies are run by doctors, by dentists, by hospital administrators who populate their boards, who serve on their committees, who make decisions about claim settlements and underwriting.
And we really tried to come to grips with this ever-escalating cost of litigation through better knowledge, and these companies have been able to provide a stable market throughout the past 20 years. Unfortunately, the regulation of companies is not always perfect and we see some carriers enter the market who do not perform as well and as respectably as some of the others——
Ms. WATERS. Excuse me. What percentage of coverage is provided by the doctors that you represent?
Mr. SMARR. We think, and there's no real way of counting this. In fact, it's a growing number as the commercial carriers leave. But we think that our carriers insure 60 percent of the private practicing physicians in the United States.
Ms. WATERS. That's kind of a guess?
Mr. SMARR. It is, because, number one, you don't know how many——
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Ms. WATERS. Who are the other——
Mr. SMARR [continuing]. Practicing physicians there are.
Ms. WATERS. Who are the other insurance companies?
Mr. SMARR. Well, until recently, it was St. Paul, which was the second largest insurer, CNA, which is withdrawing from the market, Zurich, the Medical Protective Company, and a host of other commercial carriers that have small portfolios.
Ms. WATERS. All right. As I understand it——
Mr. SMARR. And, I might add, self-insured entities are a large chunk.
Ms. WATERS. So the Louisiana Medical Mutual Insurance Company is one of the companies that you represent?
Mr. SMARR. Yes, ma'am.
Ms. WATERS. What had been your experience in terms of the mutual—the Louisiana Medical Mutual Insurance Company in terms of escalating costs of coverage for doctors? Have you been disadvantaged to the point that you've had to increase the premiums?
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Mr. PALMISANO. Well, I'm no longer with them, since 1989, Ms. Waters. I was on their board until 1989. But as you know, we have a very effective tort reform law in Louisiana, and although our premiums do go up, we have some of the lowest rates in the nation. And in our surgical group, for instance, a surgeon would pay $25,000 a year and our colleagues in Florida and other places pay perhaps over $100,000. Our obstetricians pay much, much less than the $202,000——
Ms. WATERS. So you don't have these problems in Louisiana?
Mr. PALMISANO. Not to the extent of any other place. We have—we're very pleased we're able to get that——
Ms. WATERS. This insurance company that you helped to found is not paying out exorbitant amounts for malpractice claims, is that right?
Mr. PALMISANO. Well, I'm not going to—I don't want to speak for Louisiana Medical Mutual because I'm not on their board and Mr. Smarr——
Ms. WATERS. But you kind of know what they're doing. You keep up with——
Mr. PALMISANO. We know what they're doing in the sense of the premium increases and so on that come our way. But we certainly are at a great advantage. In fact, a Member of Congress recently put out in a press release that he wants to fix the tort law because he doesn't want all the Mississippi doctors to be moving into Louisiana.
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Ms. WATERS. Excuse me. Is the Medical Mutual Insurance Company of Louisiana paying out large sums for medical malpractice?
Mr. SMARR. I was recently with the chairman and the CEO of that company and they told me that while they do benefit from effective tort reforms in Louisiana, that their costs are increasing, however, from a much lower base. Their rates are lower. However, they are seeing their frequency of claims begin to rise in Louisiana, and as we look across the country, frequency has been rather level, at a high level, but level. And so there is concern there that there will be upward pressure on the rates for LAMMICO.
Ms. WATERS. Thank you. I yield back the balance of my time.
Mr. BARR. Thank you. The time of the gentlelady is expired.
I have two documents that I would ask unanimous consent to insert in the record. Both of these relate to responses to earlier statements regarding the American Tort Reform Association, the American Insurance Association, and Victor Schwartz of the American Tort Reform Association. Without objection, those will be made a part of the record.
[The information of Mr. Barr follows in the Appendix]
Mr. BARR. I would like to also advise all of the witnesses that if there are any additional materials that any of you wish to supply to this panel for the record, the record will remain open for seven additional days and some of us, including myself, will have additional questions for you and we would appreciate very much your responding to those on a timely basis so that we might have as complete a record, both for this Subcommittee as well as for action by the full Judiciary Committee on this very, very important matter.
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Ms. WATERS. Will the gentleman yield?
Mr. BARR. Yes, ma'am.
Ms. WATERS. I'm sorry. I did not—I'm not sure. Mr. Palmisano, is he now the President of the AMA or is he aspiring to be?
Mr. PALMISANO. Ms. Waters, I am Secretary-Treasurer of the AMA. I will be running as a candidate for President-Elect. That will take place either Saturday or Tuesday, depending on how many more nominations there are.
Ms. WATERS. Oh, you have an election coming up on Tuesday, Saturday?
Mr. PALMISANO. Well, hopefully, it will happen on Saturday, Ms. Waters.
Ms. WATERS. Oh, I see. Thank you.
Mr. BARR. Thank you. At this time, I'd like to thank all four members of our panel who have added considerably to this very, very important national debate and I look forward to continuing this in other forums in order to obtain the necessary relief for doctors and patients all across this country. Thank you.
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[Whereupon, at 12:04 p.m., the Subcommittee was adjourned.]
A P P E N D I X
Statements Submitted for the Hearing Record
PREPARED STATEMENT OF THE AMERICAN TORT REFORM ASSOCIATION
The quote given by the Center for Justice and Democracy about ATRA's view regarding the relationship between insurance costs and tort reform reminds us of a lesson we learned from a distinguished minister who observed, ''things taken out of context are pretext.'' The statements made by ATRA about how tort reform's purpose is not to reduce insurance costs were made in the late 1990s when federal product liability bills were being considered by the United States Congress. The purpose of the product liability bills were not to reduce insurance costs, but to create fairness and uniformity of law in product liability actions. The bills contained no limits on punitive or pain and suffering damages. It was never lobbied on the basis of reducing insurance costs.
The situation today in medical malpractice is very different. Obviously, medical malpractice costs can be reduced if rational limits are placed on pain and suffering damages. That was the case in the MICRA reforms in California, and would be the case in other efforts to have state medical malpractice reform today.
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We hope that this places ATRA's quotes put forth by the Center for Justice and Democracy in context, and also makes clear that ATRA believes that limits on pain and suffering damages can reduce the cost of medical malpractice insurance.
PREPARED STATEMENT OF THE AMERICAN DENTAL ASSOCIATION
The American Dental Association (ADA), a professional organization that represents more that 140,000 licensed dentists in the United States, believes that federal legislation is needed to remedy the root cause of excessive liability insurance premiums, which can and do threaten patient access to health care services.
To address this problem, the ADA supports H.R. 4600, the ''Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 2002.'' This legislation, sponsored by Representative Jim Greenwood (R-PA), would reduce liability costs that are burdening the health care delivery system without compromising the legal rights of persons truly injured as the result of malpractice. H.R. 4600 would:
encourage the speedy resolution of claims through implementation of a 3-year statute of limitations on health care-related injuries in most cases;
provide for a $250,000 limit on noneconomic damages;
ensure that each party shall be liable only for the amount of damages that should be allocated in direct proportion to his or her responsibility;
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place express limits on contingency fees that can be collected by plaintiff's counsel;
permit introduction of information concerning collateral source benefits;
state that future damages may be paid by periodic payments; and
permit state statutory limits on compensatory and punitive damages to remain in effect, regardless of whether they are greater or smaller than the limits provided in the Act.
The ADA is concerned that the current sharp increases in malpractice premiums are adversely affecting access to medical services, and could soon also affect dental services. Some medical specialties are seeing increases of up to 100 percent in liability insurance premiums. As a result, some physicians are no longer providing procedures that would put them at risk of liability suits, and some are moving to areas with lower insurance rates or, retiring early. The ADA hopes that congressional action will stem this tide.
Many insurers cite the skyrocketing amounts of jury awards in medical liability cases as their rationale for premium increases. According to Jury Verdict Research's report, ''Medical Malpractice: Verdicts, Settlements and Statistical Analysis'', the median national jury award in medical liability claims jumped 43% in one year—from $700,000 in 1999 to $1 million in 2000. H.R. 4600 would place fair, reasonable limits on such awards.
While the practice of dentistry differs profoundly from medicine, insurance premiums are still a concern for dentists and should be of concern to dental patients and third party payers, such as private sector employers and federal and state governments. Some dental liability insurance experts predict that dentists will face a substantial growth in premiums within 3 to 5 years. Significant increases in the cost of dental malpractice coverage will necessarily make oral health care services more expensive. With more than 50 percent of all dental expenditures paid out-of-pocket by the dental consumer, any unnecessary increases in dental costs could make dental care less attainable for many Americans. And because of the progressive nature of dental disease, those who choose to forgo care as a result of increased costs will face the unfortunate fact that untreated dental disease almost certainly worsens over time.
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Dentists have worked hard to deliver the best dental care in the world while struggling to keep it affordable. Increased liability premiums could jeopardize these efforts, resulting in more expensive dental care for all: patients, employers, and public health programs such as Medicaid.
Mr. Chairman and members of the committee, thank you for providing the ADA with this opportunity to discuss our views on much needed liability reform. We look forward to working with you on this issue.
PREPARED STATEMENT OF THE HEALTH CARE LIABILITY ALLIANCE
''DOES LIMITLESS LITIGATION RESTRICT ACCESS TO HEALTH CARE?''
The Health Care Liability Alliance (HCLA) is a national advocacy coalition of more than three dozen organizations representing doctors, hospitals, medical liability insurers, producers of medicine and health care consumers (membership list attached). The members of the HCLA believe federal legislation is needed to bring fairness and cost-efficiency to America's medical liability system. The growing list of states across the country that are experiencing a medical liability crisis reinforces our belief that we have a national problem that demands a national solution.
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American Public Concerned About Access
The title of this hearing is ''Does limitless litigation restrict access to health care?'' New research shows that the majority of Americans would answer with a resounding ''YES.'' This past April, the Health Care Liability Alliance commissioned a poll by Wirthlin Worldwide on the attitudes of the American public on the issue of medical liability lawsuits and how they relate to our health care system. The results were clear and also were consistent with similar polling done for the HCLA over the past six years.
On the question of access to care, 78% of Americans expressed concern that skyrocketing medical liability costs could limit their access to care. With the cost of medical liability insurance in many states increasing at astronomical rates, many doctors and other health care providers are being forced to scale back services, move to states with medical liability reform laws and thus more stable insurance rates, or they are choosing to retire early.
Additionally, more than seven out of 10 Americans (71%) believe that medical liability litigation is one of the primary forces driving up health care costs.
The American public is also very clear on what the solutions should be to this problem. By a wide margin (73% to 26%) Americans favor a law that would guarantee injured patients full payment for lost wages and medical costs, and place reasonable limits on awards for ''pain and suffering'' in medical liability cases. In addition, more than three-quarters of Americans (76%) favor a law limiting the percentage that a trial lawyer can collect in a settlement or award from a medical liability case.
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Liability Reforms is Needed
Specifically, the HCLA advocates the federal adoption of health care liability reforms enacted in California under the Medical Injury Compensation Reform Act (MICRA) of 1975. For more than 25 years, MICRA has demonstrated that patients' rights can be protected within a system that controls medical liability costs.
The Help Efficient Accessible Low-cost Timely Healthcare (HEALTH) Act of 2002, which was recently introduced by Representative Jim Greenwood, follows the MICRA provisions and will go a long way to protecting patients' access to care. The following provisions are included in the HEALTH Act:
A $250,000 cap on non-economic damages (pain and suffering), and full payment of all other costs and damages incurred.
Collateral source payment offsets, thus preventing double payment for the same expense.
Periodic payment of future damages over $50,000.
Encouraging speedy resolution of claims
Fair share rule
Limitation of plaintiff attorney contingency fees
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Limitation of punitive damages to apply only in the case of clear and convincing evidence that the defendant intended to injure the claimant.
The HCLA has strongly endorsed the HEALTH Act and we urge this committee and the full House to act on this legislation in the near future.
We appreciate the opportunity to submit written testimony and we look forward to working with the committee on this important issue.
HCLA Members 2002
American Academy of Dermatology
American Academy of Orthopaedic Surgeons
American Association of Neurological Surgeons
American Clinical Laboratory Association
American College of Cardiology
American College of Obstetricians and Gynecologists
American College of Osteopathic Emergency Physicians
American College of Osteopathic Surgeons
American College of Physicians - American Society of Internal Medicine
American College of Surgeons
American Health Care Association
American Hospital Association
American Insurance Association
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American Medical Association
American Osteopathic Association
American Society for Bariatric Surgery
American Tort Reform Association
Association of American Medical Colleges
Californians Allied for Patient Protection
Congress of Neurological Surgeons
Coop. of Am. Phys../Mutual Protection Trust
The Doctors' Company
Federated Ambulatory Surgery Association
Federation of American Health Systems
Hospital and Healthsystem Association of Pennsylvania
MAG Mutual Insurance Company
Medical Assurance Company of Mississippi
Medical Mutual Ins. Co. of Maine
Medical Mutual Ins. Co. of North Carolina
Medical Mutual Liab. Ins. Soc. of Maryland
Medical Liab. Mutual Insurance Company (NY)
Medical Protective Company
Midwest Medical Insurance Company
NORCAL Mutual Insurance Company
Northwest Physicians Mutual Insurance Company
Organon, Inc.
Pennsylvania Medical Soc. Liab. Ins. Co.
Physicians Ins., A Mutual Company
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Physician Insurers Association of America
Professional Liability Foundation
ProAssurance
State Volunteer Mutual Insurance Company
Texas Medical Liability Trust
Tort Reform Institute
Washington State Medical Association
PREPARED STATEMENT OF THE AMERICAN ACADEMY OF FAMILY PHYSICIANS
This statement is submitted on behalf of the 93,500 members of the American Academy of Family Physicians. The topic of the Judiciary Commercial and Administrative Law Subcommittee hearing is entitled, ''Does Limitless Litigation Restrict Access to Health Care?'' The Academy believes that litigation does restrict access and drive up the cost of health care services. Likewise it forces physicians to drop certain services because they cannot afford professional liability insurance.
Research on Rural Maternity Care Outcomes
According to data from the Health Research and Services Administration (HRSA), family physicians are more likely than other primary care physicians to practice in rural areas. A study entitled, Obstetric Practice Patterns in Washington State after Tort Reform: Has the Access Problem Been Solved? (Rosenblatt, R., et al., Obstetrics & Gynecology, December 1990) reported that rural women continued to experience difficulty finding prenatal and maternity care as a result of a explosion in litigation in 1985-1986. This difficulty in obtaining care continued even while the overall supply of family physicians, obstetricians and midwives remained stable throughout the state.
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When confronted with substantially higher costs for liability coverage, family physicians are often forced to stop delivering babies. With fewer physicians providing maternity and prenatal care, women's access is restricted, depriving them of the proven benefits of early intervention. Another study from Washington state, Rural Residence and Poor Birth Outcomes in Washington State (Larson, E., et al., Journal of Rural Health, Summer 1992) shows that women in rural areas do not have poorer birth outcomes than urban residents. However, rural women delivering in urban hospitals did have poorer birth outcomes compared to the birth outcomes of urban woman. The lack of local, affordable access to medical care has a predictable negative impact on health outcomes. As these studies show, at least some of the access problem is associated with the cost of professional liability insurance and the fear of litigation.
The need for national tort reform has also been clear to family physicians for some time. The following exerpt from a study published in the Western Journal of Medicine, June 1991, entitled, Tort Reform and the Obstetric Access Crisis by Rosenblatt, R.. et al., may signal what lies ahead as the next liability crisis looms:
Although these are cross-sectional data [for Washington, Alaska, Montana, and Idaho], we know from previous studies that before the past five years most family physicians—and virtually all ob-gyns—incorporated obstetrics into their practices. Yet this study shows that a minority of family physicians now continue to actively practice obstetrics, particularly in urban areas. Given the dependence of rural communities on family physicians for routine obstetric care, this pattern explains the widespread concern for the availability of that care in these states.
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The data are remarkably similar for the four states. As in other studies, physicians reported that issues related to medical malpractice are the most powerful factors influencing their collective decisions to continue basic practice. The cost of medical malpractice insurance is the most important factor, often exceeding the fiscal capacity of family physicians to continue to offer this service. To this economic decision is added the difficult-to-quantify—but no less important—emotional effects of a climate in which obstetrics malpractice suits are perceived as increasingly common and increasingly expensive.
Although all four states did enact some tort reform in the 1980s, none of these four states enacted a package of tort reforms such as California's Medical Injury Compensation Reform Act of 1975 (MICRA). The MICRA reforms have already brought stability and fairness to the California legal system for the past 27 years. Californians Allied for Patient Protections (CAPP), a major consumer group supportive of MICRA, have found that legal disputes in California are settled 23 percent faster than the national average. At the same time, the number of suits filed in California matches the national average. In 1998, the Congressional Budget Office estimated that tort reforms such as those effective in California would result in savings of $1.5 billion over ten years.
AAFP Support for H.R. 4600
The American Academy of Family Physicians supports The Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 2002 (H.R. 4600) because it would bring the same rational reforms contained in MICRA to all states' professional liability systems. Given what researchers have shown in the past concerning the impact of high insurance costs on patient access, the AAFP supports federal legislation to stabilize the medical tort reform systems in the states. According to Kenneth S. Abramowitz, as quoted in a New York Times article on September 9, 2001, ''The rising cost of malpractice coverage is becoming one of the most important factors driving inflation for physicians' services.''
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H.R. 4600 would require that a party pay damages only to the extent that the party was liable for the harm caused. Family physicians provide primary care (comprehensive and coordinated care for all life stages and both genders). They are the overall medical managers for a vast number of patients in the U.S., with responsibility for making referrals to subspecialists. Family physicians need the protections of joint and several liability reforms to ensure that they are not held responsible for the clinical decisions of others.
H.R. 4600 would limit attorneys' fees ensuring that a larger proportion of the award actually goes to the patient who was harmed. According the Physician Insurers of America, less than one percent of paid claims exceeded $1 million in 1985. By the year 2000, that number increased almost six percent. However, with contingency fees taking upwards of forty percent of a settlement, average citizens who seek redress in court find out too late that they will end up with only a tiny portion of the award. This provision ensures that they are treated fairly after they leave the courthouse.
The Academy also supports a cap on non-economic damages such as contained in H.R. 4600. The Office of Technology Assessment drafted an analysis of tort reforms in 1993 entitled, ''Impact of Legal Reforms on Medical Malpractice Costs.'' That report found that the one reform shown to consistently reduce medical liability costs was a cap on non-economic damages. While economic losses, such as lost wages, medical expenses and rehabilitation costs are fully compensated, non-economic damages reflect the monies collected for intangible losses.
Conclusion
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The Academy appreciates the opportunity to address the Judiciary Committee regarding the impact of high liability costs and the impact on patient access to care. As previous research has revealed there is a connection between the cost of insurance premiums as well as the fear of litigation and the availability of care for rural pregnant women. Other impacts on the nation's health care system may not be as easily traced but the Academy's members believe that these hidden costs are present and threaten to return in the current environment.
We look forward to working with the Judiciary Committee to find a workable solution for patients and physicians.
PREPARED STATEMENT OF THE NATIONAL MEDICAL LIABILITY REFORM COALITION
Mr. Chairman, Ranking Member Watt, members of the subcommittee, the National Medical Liability Reform Coalition appreciates this opportunity to submit for the hearing record a statement noting how the current healthcare liability system is restricting access to health care.
The National Medical Liability Reform Coalition (NMLRC) is an alliance of associations representing nurses, physicians, hospitals, health plans, long-term care providers, and other parties dedicated to improving the nation's system for resolving healthcare liability claims.
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There is a growing concern that the healthcare liability crisis in this country is compromising patient access to care. The goals of the system are to fairly, expeditiously, and cost-effectively compensate injured patients and deter unsafe practices. Unfortunately, the current system does not accomplish these goals.
For the past 11 years, Medical Liability Monitor has annually surveyed underwriters for the premium rates for general surgery and obstetrics-gynecology. According to the editor, Carol Golin, because of rapidly rising insurance premiums, this is the first year in which the newsletter will conduct a second survey (USA Today, December 4, 2001, Soaring Malpractice Premiums Stun Many Doctors). According to that survey, some states have experienced unusually large liability insurance rate increases: Florida, Mississippi, Pennsylvania, Tennessee, Texas, West Virginia. These premium increases are leading to the closing of physician practices and health care facilities in these states. In turn, patients who live in smaller or isolated communities in these states are the first to feel the loss of a physician's office or nursing home.
Additionally, AON Risk Consultants, Inc. performed an actuarial analysis of the trends in general liability/professional liability for nursing homes. The study found that the liability costs per nursing home bed have increased at an annual rate of 24% a year from $240 in 1990 to $2360 in 2001. Claim costs have absorbed 20% of the Medicaid reimbursement increase nursing homes have received since 1995. This shows dollars earmarked for patient care are instead offset to pay for increased liability insurance premiums.
Limitless liability negatively affects access to health care. According to the Mississippi State Medical Society, 90 percent of the obstetricians in Mississippi and 75 percent of the general, orthopedic and emergency surgeons have been sued. Every single neurologist in Mississippi with more than ten years of experience has been sued. As a result, few Mississippi towns under 20,000 residents have a physician who will deliver babies.
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The Institute of Medicine issued a report entitled, ''Medical Professional Liability and the Delivery of Obstetrical Care,'' in which it recommended alternatives to the current tort system. In the mid-70s through the mid-80s, the link between diminished access to medical care for patients and the rise in liability premiums was clear. A strong economy and stock market held this link in abeyance through most of the 1990s, but this complex link is reemerging as a health care access problem—especially in rural areas and especially for those on Medicaid. The National Commission to Prevent Infant Mortality stated over a decade ago that there is a link between physicians dropping pregnancy-related care because they could no longer afford the professional liability insurance required to provide this service and a loss of access to medical care for women.
Reports from across the country indicate that access to medical care is affected by the healthcare liability crisis, including the closing of trauma centers. The Los Angeles Times reported, ''In Las Vegas, more than 10% of the doctors are expected by summer to quit or relocate, plunging the city toward crisis. Already, specialists are becoming harder to find around the country and trauma centers that treat life-threatening emergencies are closing.'' According to the Chronicle on Higher Education, ''The University of Nevada School of Medicine has indicated that it will lose its medical-malpractice insurance on July 1,'' and may ''even close.'' Other major news outlets, such as ABC and CBS, are reporting similar findings.
As of January 2002, major medical liability insurance underwriters, Frontier, St. Paul Global Health Care, PHICO and Reliance, have all left the market or have become insolvent. ''In 2001, eight states saw two or more liability insurers raise rates by at least 30 percent last year. Physicians in more than a dozen states saw one or more insurers take a 25 percent or higher rate increase.'' (AMA News, January 7, 2002, Professional Liability Insurance Rates Go Up; Doctors Go Away) Anticipated percentage increases range from the low to upper double digits for those companies that continue to write this insurance product.
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Some states are recognizing the link between high professional liability insurance premiums and the resulting loss of access to medical care. Pennsylvania's Attorney General, Mike Fisher, sent a letter to Chief Justice Stephan Zappala of the Pennsylvania Supreme Court in which he wrote,
''Pennsylvania is facing a potential health care crisis due to the unaffordability and unavailability of medical professional liability insurance. Insurers have requested increases for 2002 as high as 20 percent on the heels of 20 to 60 percent hikes in 2001. . . . In recent months, two of the states largest insurers stopped issuing medical malpractice insurance. Doctors are retiring early, relocating their offices to neighboring states or discontinuing their practices. Hospitals are faced with the possibility of closing trauma units. Perhaps the most important consequence is the rising cost of health for all Pennsylvanians.''
Pennsylvania is not alone. For example, according to the Mississippi State Medical Society, premiums for pregnancy-related care liability insurance have risen from 20 percent to 400 percent. According to a Washington Post article, November 23, 2001, ''Waldemar 'Lanny' Prichard, [a family physician in Indianola, MS] said he would stop delivering babies next year unless he gets a break on his malpractice insurance bill . . . Prichard's premium for the coming year: $70,000. His gross salary last year: $72,000.'' The article goes on to cite the lack of physicians willing to deliver babies in rural Mississippi. ''Three of six doctors in Cleveland, MS who deliver babies ended that part of their practice in October because of the increase in premiums. Greenwood (Mississippi) soon will go from four to two. Yazoo City, which has 145,550 residents, has no one practicing obstetrics.''
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To achieve health care access, NMLRC believes that Congress should enact a package of effective tort reforms, including:
limit on pain and suffering (non-economic) awards;
periodic payment of future damages;
elimination of double payment of awards;
a reasonable statute of limitations;
a sliding scale for contingency fees; and
proportionate liability among all parties.
These reforms, which are embodied in HR 4600, the Help Efficient, Accessible, Low Cost, Timely Health Care Act of 2002, will meet the intended goals of the system by allowing greater access to care, adequately compensating injured patients, and allowing quicker resolutions.
Again, thank you for the opportunity to share these views.
National Medical Liability Reform Coalition Members
American Academy of Dermatology Association
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American Academy of Facial Plastic and Reconstructive Surgery
American Academy of Family Physicians
American Academy of Ophthalmology
American Academy of Otolaryngology - Head and Neck Surgery
American Academy of Pediatrics
American Association of Blood Banks
American Association of Health Plans
American Association of Homes and Services for the Aging
American Association of Neurological Surgeons
American Association of Orthopaedic Surgeons
American College of Cardiology
American College of Nurse-Midwives
American College of Obstetricians and Gynecologists
American College of Osteopathic Emergency Physicians
American College of Osteopathic Family Physicians
American College of Physicians-American Society of Internal Medicine
American College of Radiology
American College of Surgeons
American Gastroenterological Association
American Health Care Association
American Medical Group Association
American Osteopathic Association
American Society for Clinical Pathology
American Society for Reproductive Medicine
American Tort Reform Association
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American Urological Association
Congress of Neurological Surgeons
Healthcare Leadership Council
Hospital & Healthsystem Association of Pennsylvania
Joint Council of Allergy, Asthma & Immunology
Medical Group Management Association
VHA Inc.
PREPARED STATEMENT OF THE AMERICAN ASSOCIATION OF HEALTH PLANS
Mr. Chairman, Ranking Member Watt, members of the subcommittee, the American Association of Health Plans (''AAHP'') appreciates the opportunity to submit for the hearing record a statement on the consequences of unfettered litigation on our health care system. In addition to the statement by the National Medical Liability Reform Coalition, which outlines how frivolous litigation increases costs, decreases quality and patient access, AAHP would like the Subcommittee to take the following additional comments into consideration when reviewing the immediate need for medical malpractice reform. Congress must address the medical malpractice crisis and the constant abuses of personal injury lawyers.
Twenty-seven cents of every new health care dollar is driven by litigation, government mandates and waste, fraud, and abuse. As consumers confront rising health costs, declining access to care, and growing concerns about quality, the political debate must shift to containing litigation.
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There is a clear mandate among physicians and consumers to fix the medical malpractice system. A national poll of physicians released by AAHP demonstrates that physicians see the current medical malpractice system as seriously flawed, having a clear adverse impact on both the quality and cost of this nation's health care, and thus restricting access to care. For example:
The overwhelming majority of doctors (78%) say that the threat of malpractice lawsuits does not make them deliver better quality care.
Over nine out of ten doctors (92%) think the threat of liability suit has increased defensive medicine.
Over half of the physicians surveyed (57%) say that the current medical liability system makes physicians less willing to report medical errors.
Thus, in order to increase health care quality and expand access to care, AAHP encourages meaningful medical malpractice reform designed to eliminate frivolous lawsuits, ensure uniformity, sanction those that bring such clams, prevent the use of unsound science in the courtroom, and restrict baseless class action lawsuits that attempt to inappropriately use the courts to make health care policy. This subcommittee has a unique opportunity to achieve important liability reforms. As Representatives Greenwood and Cox discussed in HR 4600, the Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 2002:
The current civil justice system is adversely affecting patient access to health care services, better patient care, and cost-efficient health care, in that the health care liability system is a costly and ineffective mechanism for resolving claims of health care liability and compensating injured patients. . . .
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We encourage the subcommittee to take advantage of this opportunity and ensure that the interests of consumers are placed before those of personal injury lawyers.
PREPARED STATEMENT OF THE AMERICAN OSTEOPATHIC ASSOCIATION
Introduction
Mr. Chairman, the American Osteopathic Association (AOA), represents the nation's 47,000 osteopathic physicians. We thank you for holding this timely hearing on the current professional liability insurance crisis. The title of this hearing asks ''Does Limitless Litigation Restrict Access to Health Care?'' The AOA believes that the answer is a resounding YES.
As you know, the medical liability insurance system has severe problems. Physicians, hospitals, and other health care providers face increases in their liability insurance coverage that range from 30% to 300%. Numerous liability insurance providers no longer write policies in certain states or geographical areas. This makes it difficult for thousands of physicians to secure liability insurance coverage at all. The dramatic increase in liability insurance premiums and lack of available coverage forces physicians around the country to make impossible decisions: do they limit the services they provide their patients; do they cease to perform certain high-risk procedures; do they move to a different state that has enacted real reforms, or, do they simply close their practices?
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Patients' Access to Care Jeopardized
The current crisis creates significant ''access-to-care'' problems across the country, especially in those states with the most severe medical malpractice insurance problems. It is well documented that physicians in Pennsylvania, Nevada, Mississippi, Texas, Florida, West Virginia and several other states are being forced to limit services, move to neighboring states, or close their practices as a result of the medical liability crisis in their states. The departure of physicians threatens patients' access to quality health care. Furthermore, since this problem also impacts hospitals, the problem is expanded, putting patient access to essential health care services at risk.
The AOA urges Congress to assist these states by passing Federal medical liability insurance reforms. We believe that this issue warrants Federal action given the fact that medical liability insurers operate interstate, not intrastate and that this issue is impacting a majority of states around the nation. Additionally, several states lack the time and resources to draft and implement this type of law. Many states conduct legislative sessions every other year. If Congress does not act, patients across the country will face a decrease in their access to quality health care.
It is important to note that this is not a ''specialist'' problem. The crisis has a devastating impact upon the nation's primary care providers; family physicians, general internists, and pediatricians. Additionally, if a rural or underserved community loses a primary care provider the access to care issue is compounded since that community likely lost its only physician.
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The AOA also is concerned that the ''litigious environment'' surrounding our members leads them to the practice of defensive medicine in an effort to eliminate future lawsuits. This type of behavior only increases the cost of health care for the patient and our society.
History of the Current Crisis
We believe that this crisis has three phases: availability, affordability, and risk management.
The professional liability insurance crisis begins when physicians in a state or region face limited availability of professional liability insurance coverage. Availability problems originate when insurance companies refuse to provide coverage to physicians in certain states or geographic areas, leave the medical liability market, or become insolvent. A major factor in an insurance company's decision to write policies in a particular state is the stability of that states tort system. States that face the worse availability problems are the same state's that have seen dramatic increases in the number and severity of jury awards in the past few years.
Affordability is a byproduct of availability. With fewer and fewer insurance companies willing to write policies, physicians must pay more for coverage. Companies that do elect to provide coverage in these unstable states do so at much higher prices.
The final phase is risk-management. In an effort to obtain affordable coverage, physicians are forced to conduct risk assessments of their practices. As a result of these assessments, physicians limit services and eliminate high-risk procedures in an effort to secure affordable premiums. In many cases, physicians are unable to find a company willing to underwrite a policy or provide affordable coverage. The only recourse is to close their practices or move to a different state.
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Solution
The AOA is committed to quality health care, through programs of continuing medical education, the Healthcare Facilities Accreditation Program that works to enhance and enforce quality standards at all hospitals in which osteopathic medicine is practiced, along with other initiatives designed to improve quality of care. We will continue these efforts that begin in medical school and continue for our members throughout their careers.
The AOA recognizes that, in a small percentage of cases, injuries due to negligence do occur. We also recognize that these injuries can have devastating impacts upon the patients and their families. The AOA fully supports an individual's right to seek fair compensation when injured as a result of substandard care. The AOA fully supports patients receiving appropriate reimbursement for ''economic'' losses, including current and future medical expenses, lost wages, and other economic factors. Unfortunately, our medical liability litigation system is ineffective in making a patient whole. Recent studies suggest that less than 50 cents of every dollar awarded goes to the injured patient.
The AOA believes that comprehensive medical liability insurance reform legislation must be passed this year. The AOA also believes that this issue, if left uncorrected, will have significant and devastating consequences into the foreseeable future.
The AOA strongly supports the ''Help, Efficient, Accessible, Low-Cost, Timely, Health Care Act of 2002'' (H.R. 4600). We urge Congress to pass this bipartisan legislation now. H.R. 4600 is based on the health care liability reforms enacted in California under the Medical Injury Compensation Reform Act (MICRA) of 1975. For over 25 years, MICRA has demonstrated that patients' rights can be protected at the same time that medical liability costs are kept stable.
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The AOA, through its Council on Federal Health Programs, endorsed six basic principles that we believe, when enacted together, will stabilize the medical malpractice insurance market and ensure patients have access to health care without limiting injured patients access to compensation. Each of these provisions is included in the HEALTH Act.
The AOA endorsed principles are:
A uniform statute of limitations
A cap on non-economic damages
Collateral source payment offsets
Periodic payment of future damages
Joint and several liability reforms
Limitation of plaintiff attorney contingency fees
The AOA is not alone in its support for medical liability insurance reforms. Seventy-five percent of Americans questioned in a new Wirthlin Worldwide survey believe that excess litigation has a detrimental effect on our health care system. Conducted for the Health Care Liability Alliance (HCLA), of which AOA is a member, the survey shows that the vast majority of Americans agree we need common sense medical liability reform. Among the findings:
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71 percent of Americans agree that a main reason health care costs are rising is because of medical liability lawsuits.
78 percent say they are concerned about access to care being affected because doctors are leaving their practices due to rising liability costs.
73 percent support reasonable limits on awards for ''pain and suffering'' in medical liability lawsuits.
More than 76 percent favor a law limiting the percentage of contingent fees paid by the patient.
Conclusion
Without effective reforms, our medical liability litigation system will continue to destabilize the medical liability insurance market, increase health care costs, and limit patients' access to quality health care.
The AOA appreciates that several Members of Congress are working on other approaches to this problem and we look forward to working with them on their efforts. However, we must be very clear in our message that insurance reform or reinsurance reform is not an acceptable alternative to medical liability insurance reform. Such legislation may provide beneficial reforms that would improve the effectiveness of medical liability reform laws, but cannot be used as a substitute to such a law being enacted. We firmly believe that Congress must pass comprehensive medical liability insurance reforms that contain the six provisions outlined above. Any proposal that does not address the current tort system should not be viewed as an alternative to H.R. 4600.
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Physicians, hospitals, nursing homes and patients across the country realize that the current medical liability situation is unacceptable. Unless the escalating costs of the current medical liability system are addressed at a national level, patients in many states will be forced to deal with a shortage of health care providers. The HEALTH Act provides meaningful reforms that have brought stability in those states that have enacted similar reforms.
By passing the HEALTH Act, Congress can increase access to medical services, eliminate the practice of defensive medicine, improve the patient-physician relationship, improve patient safety, and slow the wasteful use of health care dollars.
The AOA and our members stand ready to work with this Committee and all Members of Congress to ensure that osteopathic physicians can continue to provide high quality care to our patients across the nation.
PREPARED STATEMENT OF THE AMERICAN HOSPITAL ASSOCIATION
The American Hospital Association (AHA), representing almost 5,000 member hospitals, health care systems, networks and other providers of care, is pleased to submit this statement for the record regarding the hearing entitled, ''Does Limitless Litigation Restrict Access to Health Care?'' The answer to this question is, unfortunately, yes. That is why we strongly support the bipartisan Helping to Ensure Affordable, Low-cost, Timely Healthcare Act of 2002 (H.R. 4600).
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The current medical liability system is a costly and ineffective way of resolving health care liability claims and compensating injured patients. This has led to a growing crisis in many states, especially Delaware, Florida, Mississippi, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Washington and West Virginia, where the inherent problems in the health care liability system are causing skyrocketing premiums. In many areas, the problem is so bad that insurance companies are pulling out of the market altogether, leaving providers unable to risk, without adequate coverage, delivering the health care services that patients need.
In Pennsylvania, for example, Methodist Hospital in Philadelphia announced that it would no longer be able to provide prenatal care for low-income women as of July 1, 2002. The reason given for this unfortunate reduction of services was the rising costs of medical liability insurance. Methodist had already announced that it would stop delivering babies as of June 15, 2002.
Astronomical liability premiums and a lack of insurers is causing some physicians to leave certain areas of the country to practice in communities where premiums are lower. This leaves many communities underserved, with little or no access to appropriate health care services. Thomas J. Corder, President and CEO of Camden-Clark Memorial Hospitals in Parkersburg, West Virginia, recently stated that there are ''numerous examples of care being limited in West Virginia's cities. In Putnam County and Jackson County, the sole community provider hospitals have closed their OB units because of the inability of the obstetricians in those markets to continue to practice because of the cost of malpractice insurance. In Wheeling, one of the largest cities in West Virginia, all of the neurosurgeons have left. It is commonplace in Wheeling for trauma patients to be airlifted to Pittsburgh or other large metropolitan areas for neurological problems.''
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The United States has the world's most expensive tort system, with tort costs over the past 50 years outpacing growth in the U.S. economy by a factor of four. Such growth has not translated into efficiency. According to the General Accounting Office, 43 percent of insurance defense costs are spent on claims that have no merit. Other studies show that many claims with merit are never filed.
The AHA is an active member of the Health Care Liability Alliance (HCLA), a group of providers and insurers working together for liability reform. HCLA has consistently worked to educate key policymakers and legislators on the need for federal liability reform.
While many states are facing sharp increases in the cost of health care liability insurance, California stands as a model for the nation. The AHA believes that the California-style reforms enacted under the Medical Injury Compensation Reform Act (MICRA) of 1975 and reflected in H.R. 4600 should be adopted at the federal level. For more than 25 years, MICRA has demonstrated that patients' rights can be protected at the same time that medical liability costs are reduced. H.R. 4600 includes the following MICRA type reforms:
A limit on non-economic damages. By placing a ceiling of $250,000 on non-economic damages (pain and suffering), stability is restored to the insurance market. All economic losses and/or costs are paid in full. Such a cap provides for affordable coverage, and ensures that health care providers can buy coverage. It does not affect a plaintiff's ability to be fully compensated for economic damages such as medical expenses or lost wages.
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Establish a fair share rule. The ''joint and several'' rule allows any defendant to be liable for the entire amount of an award, regardless of how small that defendant's share of the fault may be. As a result, the rule generally punishes a co-defendant (or a sole defendant) who is fully insured or has substantial assets—the so-called ''deep pocket'' defendant. For some providers, this removes any incentive to carry full liability insurance coverage. By establishing a fair share rule in health care lawsuits, each party is liable solely for its share of damages and not for the share of any others.
Periodic payments. Periodic payments would allow compensation to be made in intervals rather than a lump sum, permitting settlements to be geared to a plaintiff's needs over the course of his or her life. In addition, because periodic payments can be funded through an annuity, future needs can be fully met at a considerably lower cost to the health care system.
Regulation of attorneys' fees. Under the current health care liability system, patients awarded compensation are often shortchanged. Money that should go toward their long-term care goes instead goes to their attorneys. This is because, traditionally, attorneys in liability cases are paid through contingency fees, which provide the attorney a percentage of the plaintiff's award. Percentage limitations should be applied to attorneys' fees.
The California experience under the MICRA law has proven to be fairer to the medically injured. While the number of health care liability claims brought by medically injured plaintiffs in California, on a per capita basis, is the same as before MICRA, the compensation actually paid to those medically injured in California was higher after MICRA than before.
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The AHA also supports a uniform statute of limitations in health care liability cases and the continued development of successful conflict resolution programs. Bringing liability claims to court is often inefficient and costly and renders unpredictable results. Nontraditional approaches can play an important role in reforming the health care liability system.
We appreciate the opportunity to submit this statement for the record. We look forward to working with members of the Judiciary Committee as this important issue moves through the legislative process.
PREPARED STATEMENT OF AMERICAN COLLEGE OF OBSTETRICIANS AND GYNECOLOGISTS
On behalf of the American College of Obstetricians and Gynecologists (ACOG), an organization representing more than 44,000 physicians dedicated to improving the health care of women, we urge you to bring an end to the limitless litigation restricting women's access to health care.
In addition to providing an overview of the issue, this statement will explain how the medical liability crisis compromises obstetric care for women and detail the consequences for women's health care if limitless litigation persists. This statement will also highlight how the medical liability crisis is acutely affecting nine states, including Pennsylvania and New York, explaining how access to basic and important women's health care in those states is severely jeopardized because of a liability system gone awry.
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I. The Effects of Limitless Litigation on Women's Health Care: An Overview
The number of lawsuits against all physicians has been rising over the past 30 years in an increasingly litigious climate, and obstetrics-gynecology—considered a ''high risk'' specialty by insurers—remains at the top of the list of specialties affected by this trend.
An ailing civil justice system is severely jeopardizing patient care for women and their newborns. Across the country, liability insurance for obstetrician-gynecologists has become prohibitively expensive. Premiums have tripled and quadrupled practically overnight. In some areas, ob-gyns can no longer obtain liability insurance at all, as insurance companies fold or abruptly stop insuring doctors.
When ob-gyns cannot find or afford liability insurance, they are forced to stop delivering babies, curtail surgical services, or close their doors. The shortage of care soon affects hospitals, public health clinics, and medical facilities in rural areas and inner cities.
Now, women's health care is in jeopardy for the third time in three decades. This crisis will only end soon with legislative intervention. The recurring liability crisis involves more than the decisions of individual insurance companies. The manner in which our antiquated tort system resolves medical liability claims is at the root of the problem.
A liability system—encompassing both the insurance industry and our courts—should equitably spread the insurance risk of providing affordable health care for our society. It should fairly compensate patients harmed by negligent medical care. It should provide humane, no-fault compensation to patients with devastating medical outcomes unrelated to negligence—as in the case of newborns born with conditions such as cerebral palsy. Our current system fails on all counts. It's punitive, expensive, and inequitable for all, jeopardizing the availability of care.
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Jury awards, which now soar to astronomical levels, are at the heart of the problem. The average liability award increased 97% between 1996 and 2000, fueled by states with no upper limits on jury awards. This ''liability lottery'' is enormously expensive, and patients who need, but can't get, health care, pay the price.
The current liability system encourages attorneys to focus on relatively few claims with exorbitant award potential, ignoring other claims with merit. Even then, much of a jury award goes straight into the lawyers' pockets; often, less than half of every medical liability dollar ever reaches the patient.
Patients and physicians need a real solution to this crisis. In the 1980s, the Institute of Medicine warned that the liability crisis compromised the delivery of obstetric care for women across the nation. It urged Congress to provide both immediate relief and long-term solutions. ACOG has asked the Institute to reexamine this issue and update its report.
The liability crisis continues to compromise the delivery of health care today. A recent Harris survey showed that three-fourths of physicians feel their ability to provide quality care has been hurt by concerns over liability cases. And, patients understand the problem, too. An April 2002, survey by the Health Care Liability Alliance found that 78% of Americans are concerned about the impact of rising liability costs on access to care.
II. How This Crisis Compromises the Delivery of Obstetric Care
Obstetrics-gynecology is frequently among the top three specialties in the cost of professional liability insurance premiums. Nationally, insurance premiums for ob-gyns increased over time: the median premium increased 167% between 1982 and 1998. The median rate rose 7% in 2000, and 12.5% in 2001, with increases ranging from 0.3% to 69%, according to a survey by Medical Liability Monitor, a newsletter covering the liability insurance industry.
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A number of insurers are abandoning coverage of doctors altogether. The St. Paul Companies, Inc., which handled 10% of the physician liability market, announced in recent months that it was withdrawing from that market. One insurance ratings firm reported that five medical liability insurers failed in 2001. One-fourth of the remaining insurers were rated D+ or lower, an indicator of serious financial problems.
According to Physicians Insurance Association of America, ob-gyns were first among 28 specialty groups in the number of claims reported against them in 2000. Ob-gyns were the highest of all specialty groups in the average cost of defending against a claim in 2000, at a cost of $34,308. In the 1990s, they were first—along with family physicians-general practitioners—in the percentage of claims against them closed with a payout (36%). They were second, after neurologists, in the average claim payment made during that period ($235,059).
Although the number of claims filed against all physicians climbed in recent decades, the phenomenon does not reflect an increased rate of medical negligence. In fact, ob-gyns win most of the claims filed against them. A 1999 ACOG survey of our membership found that over one-half (53.9%) of claims against ob-gyns were dropped by plaintiff's attorneys, dismissed or settled without a payment. Of cases that did proceed to court, ob-gyns won 7 out of 10 cases closed by a jury or court verdict.
When a jury does grant an award, it can be exorbitant, particularly in states with no upper limit on awards. Jury awards in all civil cases averaged $3.49 million in 1999, up 79% from 1993 awards, according to the latest reports from Jury Verdict Research of Horsham, Pennsylvania. The median medical liability award jumped 43% in one year, from $700,000 in 1999, to $1 million in 2000: it has doubled since 1995.
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Ob-gyns are particularly vulnerable to this trend, because of jury awards in birth-related cases involving poor medical outcomes. The average jury award in cases of neurologically impaired infants, which account for 30% of the claims against obstetricians, is nearly $1 million, but can soar much higher. One recent award in a Philadelphia case reached $100 million.
We survey our members regularly on the issue of medical professional liability. According to our most recent survey, the typical ob-gyn is 47 years old, has been in practice for over 15 years—and can expect to be sued 2.53 times over his or her career. Over one-fourth (27.8%) of ACOG Fellows have even been sued for care provided during their residency. In 1999, 76.5% of ACOG Fellows reported they had been sued at least once so far in their career. The average claim takes over four years to resolve.
III. Women's Health Consequences of Limitless Litigation
The medical liability crisis is complex, affecting every aspect of our nation's ability to deliver health care services. As partners in women's health care, we urge Congress to end the medical liability insurance crisis. Without legislative intervention, women's access to health care will continue to suffer. Bring an end to the meteoric rise in liability premiums that is already impeding women's access to health care.
This crisis is obstructing mothers' access to obstetric care. When confronted with substantially higher costs for liability coverage, ob-gyns and other women's health care professionals stop delivering babies, reduce the number they do deliver, and further cut back-or eliminate-care for high-risk mothers. With fewer women's health care professionals, access to early prenatal care will also be reduced, depriving them of the proven benefits of early intervention.
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Limitless litigation also threatens women's access to gynecologic care. Ob-gyns have, until recently, routinely met women's general health care needs—including regular screenings for gynecologic cancers, hypertension, high cholesterol, diabetes, osteoporosis, sexually transmitted diseases, and other serious health problems. Staggering premiums continue to burden women's health care professionals and will further diminish the availability of women's care.
Legislative intervention is needed to avert another rural health crisis. Women in underserved rural areas have historically been particularly hard hit by the loss of physicians and other women's health care professionals. With the economic viability of delivering babies already marginal due to sparse population and low insurance reimbursement for pregnancy services, increases in liability insurance costs are forcing rural providers to stop delivering babies. Help sustain those providers dedicated to caring for America's rural women and mothers.
Allowing the crisis to continue will mean community clinic cutbacks. Also hurt by the medical liability crisis are the nation's 39 million uninsured patients—the majority of them women and children—who rely on community clinics for health care. Unable to shift higher insurance costs to their patients, these clinics have no alternative but to care for fewer people.
Acting now can save more women from the ranks of the uninsured. Health care costs continue to increase overall, including the cost of private health care coverage. As costs continue to escalate, employers will be discouraged from offering benefits. Many women who would lose their coverage, including a large number of single working mothers, would not be eligible for Medicaid or SCHIP because their incomes are above the eligibility levels. Last year, 11.7 million women of childbearing age were uninsured. Without reform, even more women ages 19 to 44 will move into the ranks of the uninsured.
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As partners in women's health care, ACOG urges Congress to act swiftly to avert further access issues for women.
IV. Women's Health Suffers Nationwide
As ob-gyns, our primary concern is access to affordable, quality health care. Help us maintain the highest standard of care for American's women and mothers by ending the crisis in the following nine ''Hot States'': Florida, Mississippi, Nevada, New Jersey, New York, Pennsylvania, Texas, Washington, and West Virginia. In three other states—Ohio, Oregon, and Virginia—a crisis is brewing, while four other states—Connecticut, Illinois, Kentucky and Missouri—should be watched for mounting problems.
In identifying these states, the College considered a number of factors in the escalating medical liability insurance crisis for ob-gyns. The relative weight of each factor could vary by state. Factors included: the lack of available professional liability coverage for ob-gyns in the state; the number of carriers currently writing policies in the state, as well as the number leaving the medical liability insurance market; the cost, and rate of increase, of annual premiums based on reports from industry monitors; a combination of geographical, economic, and other conditions exacerbating an already existing shortage of ob-gyns and other physicians; the state's tort reform history, and whether tort reforms have been passed by the state legislature—or are likely to be in the future—and subsequently upheld by the state high court.
A. Florida
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With the highest average premium for ob-gyns in the nation in 2000, at $158,000 per year, Florida has a high number of medical liability lawsuits and a history of large jury awards. According to First Professionals Insurance Company, Inc., Florida's largest medical liability insurer, one out of every six doctors is sued in the state as compared to one out of every 12 doctors nationwide.
In South Florida, where insurers say litigation is the heaviest, annual premiums for ob-gyns went as high as $208,949 in 2001—the highest rates in the country, according to Medical Liability Monitor.
The liability situation has been so chronic in Florida that during the crisis of the 1980s, the state began to allow doctors to ''go bare'' (not have liability coverage), as long as they could post bond or prove ability to pay a judgment of up to $250,000.
Double- and triple-digit premium increases have forced some doctors to cut back on staff, while others have left the state or have stopped performing high-risk procedures to avoid the lofty rates. Ob-gyns in this state are more likely than their colleagues in other states to no longer practice obstetrics.
Florida already has some tort-reform laws aimed at protecting doctors. But more recent Florida Supreme Court rulings have weakened such laws, causing the number of lawsuits to climb again. Now Florida is one of at least a dozen states contemplating another round of legislation.
B. Mississippi
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According to the Mississippi State Medical Association, medical liability insurance rates for doctors who deliver babies have risen 20% to 400% in the past year, depending on the carrier. Annual premiums range from $40,000 to $110,000.
The Delta Democrat Times reported that from 1999 to 2000, the number of liability lawsuits faced by Mississippi physicians increased 24%, with an additional 23% increase in the first five months of 2001.
According to the Delta Democrat Times, 324 Mississippi physicians have stopped delivering babies in the last decade. Only 10% of family physicians deliver babies.
In Cleveland, Mississippi, three of the six doctors who deliver babies dropped that part of their practice in October 2001 because of the increase in premiums.
In Greenwood, Mississippi, where approximately 1,000 babies are born every year, the number of obstetricians has dropped from four to two. The two remaining obstetricians are each limited to delivering 250 babies per year, leaving approximately 500 pregnant women searching for maternity care, reports the Mississippi Business Journal.
In Yazoo City, Mississippi, which has 14,550 residents, there is no one practicing obstetrics.
Natchez, Mississippi, which serves a 6-county population of over 100,000, has only three physicians practicing obstetrics.
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The State Legislature defeated 12 tort and insurance reform bills this year. No reforms were approved during the 2002 session, which adjourned in mid-April.
The St. Paul Companies, Inc., was the 14th insurer to leave Mississippi in five years, according to the Mississippi State Medical Association.
State Insurance Commissioner George Dale has stated that unless tort reform is passed, it is unlikely that insurance companies will be interested in doing business in Mississippi.
C. Nevada
In December 2001, The St. Paul Companies, Inc., the nation's second largest medical liability insurer, announced it would no longer renew policies for 42,000 doctors nationwide—including the 60% of Las Vegas doctors who were insured by St. Paul. Replacement policies are costing some Nevada doctors four or five times as much as before: $200,000 or higher annually, more than most doctors' take-home pay, the Los Angeles Times reports. Prior to the St. Paul announcement, insurance premiums for Las Vegas ob-gyns had been in the $40,000 range.
A February 2002 survey of Clark County ob-gyns, commissioned by their ob-gyn society, revealed:
60% indicated that they are going to drop obstetric care from their practices because they cannot afford the increases in their professional liability insurance.
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50% reported they have been quoted premium increases ranging from 50% to 200%.
42.3% are making plans right now to leave the state if there is no resolution in the medical liability situation in the next couple of months.
78% percent indicated that they ultimately will have to leave the state if there is no long-term solution.
According to a March article in the Las Vegas Review-Journal, many Las Vegas Valley doctors say they will be forced to quit their practices, relocate, retire early or limit their services if they cannot find more affordable rates of professional liability insurance by early summer.
According to the Nevada State Medical Association, it is estimated that between 200 and 250 physicians will be facing bankruptcy, closing their offices, or leaving Nevada this year.
In February 2002, the Las Vegas Sun reported that medical liability cases in Clark County had more than doubled in the past six years. In that period, plaintiffs' awards in the county totaled more than $21 million.
USA Today reports that in the past two years, Nevada juries have awarded more than $1.5 million each in six different medical liability trials.
Recruiting doctors to Las Vegas is extremely difficult because of the escalating medical liability premiums and the perception that it is highly litigious. Nevada currently ranks 47th in the nation for its ratio of 196 doctors per 100,000 population. The state's medical school produces just 50 physicians a year.
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Unlike neighboring California, which has a cap on noneconomic damages, there is no limit in Nevada as to what juries can award patients in medical liability cases.
D. New Jersey
In February 2002, the Newark Star-Ledger reported that three medical liability insurance companies went bankrupt or announced they would stop insuring New Jersey physicians in 2002 for financial reasons. The state's two largest medical liability insurers have stated that they cannot pick up all the extra business and are rejecting doctors they deem high risk.
MBS Insurance Services of Denville, one of New Jersey's largest medical liability insurance brokers, estimates that approximately 300 to 400 of the state's doctors cannot get insurance at any price.
According to the Medical Society of New Jersey, premiums have risen 50% to 200% over last year.
According to the Star-Ledger, ''An obstetrician with a good history—maybe just one dismissed lawsuit—can expect to pay about $45,000 for $1 million in coverage. Rates rise if the physician faces several lawsuits, regardless of whether the physician has been found liable in those cases.''
The president of the New Jersey Hospital Association says that rising medical liability premiums are a ''wake-up call'' that the state may lose doctors. Hospital premiums have risen 250% over the last three years, and 65% of facilities report that they are losing physicians due to liability insurance costs.
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E. New York
New York State currently faces a shortage of obstetric care in certain rural regions. Increasing liability insurance costs will only exacerbate these access problems.
In 2000, New York was second only to Florida in the average cost of annual liability insurance premiums for ob-gyns ($144,973 per year).
Also in 2000, there was a total of $633 million in medical liability payouts in New York State, far and away the highest total in the country. According to the insurance consumer web site www.insure.com, this is 80% more than the state with the second highest total.
Increased insurance rates have forced some physicians in New York to ''quit practicing or to practice medicine defensively, by ordering extra tests or procedures that limit their risk,'' according to a recent New York Times report.
Physician medical liability insurance costs have historically been a problem in New York State. The legislature and governor had to take significant action in the mid-1970s and again in the mid-1980s to avert a liability insurance crisis that would have jeopardized access to care for patients.
F. Pennsylvania
Pennsylvania is the second-highest state in the country for total payouts for medical liability. During the fiscal year 2000, combined judgments and settlements in Pennsylvania amounted to $352 million—or nearly 10% of the national total.
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From the beginning of 1997 through September 2001, major liability insurance carriers writing in Pennsylvania increased their overall rates 80.7% to 147.8%, according to a January 2002 York Daily Record article.
Philadelphia and the counties surrounding it are hardest hit by the liability crisis. From January 1994 through August 2001, the median jury award in Philadelphia for a medical liability case was $972,900. For the rest of the state, including Pittsburgh, the median was $410,000.
One-quarter of respondents to an informal ACOG poll of Pennsylvania ob-gyns say they have stopped or are planning to stop the practice of obstetrics.
80% of medical students who come to the state for a world-class education ultimately choose to practice elsewhere, according to the Pennsylvania State Medical Society.
On April 24, 2002, Methodist Hospital in South Philadelphia announced that it will stop delivering babies due to the rising costs of medical liability insurance. The labor and delivery ward will close June 30, leaving that area of the city without a maternity ward. Methodist Hospital has been delivering babies since its founding in 1892.
Despite some tort reform measures passed by the state legislature (House Bill 1802) this past winter, ob-gyns were disappointed the measures did not provide more relief. The law did not include: caps on jury awards; sanctions on frivolous suits; changes in joint and several liability; limits on lawyers' fees; or, a guarantee that a larger share of jury awards will go to injured plaintiffs.
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The rules for venue of court cases in Pennsylvania are very liberal. Recently approved measures only appoint a committee to study venue shopping, but do not limit the practice.
Since HB 1802 passed, experts predict a 15% to 20% overall reduction in doctors' liability premiums. But with the 50% to 100% premium increases of the last two years, medical officials believe the bill is not enough to stop physicians from leaving practice or to attract new physicians. Nor do they believe new insurers will begin writing policies in Pennsylvania.
G. Texas
Preliminary results of a recent Texas Medical Association physician survey indicate that:
More than half of all Texas physicians responding, including those in the prime of their careers, are considering early retirement because of the state's medical liability insurance crisis.
Nearly a third of the responding physicians said they are considering reducing the types of services they provide because of recent premium increases for medical liability. The percentage of physicians answering ''yes'' to that question was higher in Fort Worth, Houston, San Antonio, and Dallas than in Brownsville or El Paso.
Medical liability insurance premiums for 2002 are expected to increase from 30% to 200%, according to the Texas Medical Association. In 2001, ob-gyns in Dallas, Houston, and Galveston paid medical liability insurance premiums in the range of $70,00 to $160,000.
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According to Governor Rick Perry's office, between 1996 and 2000 an average of one in four Texas physicians had a medical liability claim filed against them. In the Lower Rio Grande Valley, the situation is even worse.
According to a February 2001 Texas Medical Association survey, one in three Valley doctors say their insurance providers have stopped writing liability insurance.
In 2000, 51.7% of all Texas physicians had claims filed against them, according to the Texas Medical Examiners Board. Patients filed 4,501 claims, up 51% from 1990.
By some estimates, as many as 86% of medical liability claims filed in Texas are dismissed or simply dropped without payment to the patient. Yet providers and insurance companies must still spend millions of dollars in defense, even against baseless claims.
According to a Texas Medical Association study, the amount paid per claim in 2000 was $189,849 (average for all physicians), a 6% increase in one year.
Texas has no limits on noneconomic damages in medical liability cases, although the legislature enacted such limits in the 1970s as part of a comprehensive set of reforms. The Texas Supreme Court later rejected them in the 1980s.
Texas has procedures in place to screen lawsuits for merit and to sanction lawyers who file frivolous suits, but these are not enforced uniformly across the state, according to an April 2002 news release issued by Governor Rick Perry.
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Only about 30% of the medical liability insurance market is served by insurance companies that are regulated by the Texas State Department of Insurance and subject to rate review laws, according to Governor Perry's office.
H. Washington
According to Medical Liability Monitor, in late 2001 the second largest carrier in Washington State announced that it was withdrawing from providing medical liability insurance for Washington physicians. This decision by Washington Casualty Company impacted approximately 1,500 physicians.
In 2001, state ob-gyns paid medical liability insurance premiums in the range of $34,000 to $59,000. For many physicians, this meant an increase of 55% or higher from the year 2000.
According to the Pierce County Medical Society, some Tacoma specialists reported 300% increases.
Unlike California, Washington has no cap on noneconomic damages in medical liability cases. A previous cap was found unconstitutional by the State Supreme Court in 1989.
In April, The Olympian reported that Washington State Insurance Commissioner Mike Kreidler's office has heard repeatedly from physicians throughout the state that they may be forced out of Washington because of high medical liability rates or the lack of available insurance.
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I. West Virginia
There are only three carriers in the state—including the state-run West Virginia Board of Risk and Insurance Management—currently writing medical liability policies for doctors. Annual premiums range from $90,700 to $99,800.
In 2000, many physicians had problems affording or finding insurance. This urgency prompted Governor Bob Wise to issue a request for proposals to commercial insurance carriers asking them to provide terms under which they would be willing to come to the state. The governor's office received no response at all. To date, some carriers previously active in West Virginia are under an indefinite, self-imposed moratorium for new business in the state, according to the West Virginia State Medical Society.
Legislation eked out during a grueling special session in the fall of 2001 reestablished a state-run insurer of last resort. However, with rates 10% higher than the highest commercial rate, and an additional 50% higher for those physicians who are considered high risk, the state-run insurer does not solve the affordability problem, according to ob-gyns in the state.
According to an informal survey of ACOG's West Virginia section, more than half of all ob-gyn residents plan to leave the state once they have completed training because of the state's medical liability insurance climate. A majority of private practitioners who provide obstetric care plan to leave the state if there is not improvement in the insurance crisis.
West Virginia cannot afford to lose more doctors. The West Virginia State Medical Society reports that a majority of the state is officially designated by the federal government as a health professional shortage area and medically underserved.
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V. Conclusion
Thank you, Mr. Chairman, for your leadership on this important issue and for the Subcommittee's attention to this crisis. We appreciate the opportunity to present our concerns for the panel's consideration, and look forward to working with you as we push for a solution.
PREPARED STATEMENT OF THE AMERICAN COLLEGE OF PHYSICIANS - AMERICAN SOCIETY OF INTERNAL MEDICINE
The American College of Physicians-American Society of Internal Medicine (ACP-ASIM) - representing 115,000 physicians and medical students - is the largest medical specialty society and the second largest medical organization in the United States. We congratulate the Subcommittee on Commercial and Administrative Law for holding this important hearing on a subject matter that has more relevance today than ever before. Of the College's top priorities for 2002, addressing the health care liability crisis and its impact on access to care is one of the most critical to our members. ACP-ASIM thanks Congressmen Bob Barr, Chairman of the Subcommittee, Melvin Watt, Ranking Member of the Subcommittee, and other members, for holding this important hearing to discuss how limitless litigation can and has begun to restrict patient access to health care.
Background
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Doctors across the country are experiencing sticker shock when they open their medical malpractice insurance renewal notices—if they even get a renewal notice. After more than a decade of generally stable rates for professional liability insurance, physicians have seen costs dramatically increase in 2000–2002. And in some areas of the country, premiums have soared to unaffordable levels. According to the Medical Liability Monitor, in mid-2001, insurance companies writing in 36 states and the District of Columbia claim to have raised rates well over 25 percent. With the new rate assessments coming in July 2002, rates are expected to increase even further.
While obstetricians, neurosurgeons and other high-risk specialists have been hit hard, internists have been one of the hardest hit specialties—having seen a record 45 percent increase in the last three years. In some cases, physicians, even those without a track record of lawsuits, could not find an insurance company willing to provide coverage. These physicians are being forced to decide whether to dig deeper and pay the steeper bill, change carriers, move out of state, or retire from the practice of medicine.
Of these options, changing carriers may not even be an alternative. Finding replacement coverage won't be as easy as it was in a buyer's market. Companies writing professional liability coverage are fleeing or being chased from the market. As an example, St. Paul Companies, which insures doctors in 45 states and is the second largest medical underwriter in the country, announced late in 2001 that it no longer would write medical liability policies. It plans to phase out coverage as physicians contracts expire over the next 18 to 24 months. Frontier and Reliance are also gone. Other commercials, such as PHICO, CNA and Zurich, are significantly cutting back. Even some provider-owned insurers, committed to this market by their founders, are pulling back from some states in which they extended sales.
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The Perfect Storm
At a time when the market is squeezing physician and hospital margins, the rise in professional liability insurance may be the deciding factor that contributes to whether physician offices and emergency rooms keep their doors open. Recently, the costs of delivering health care have been driven by increased costs of new technologies; increased costs of drugs that define the standard of care acceptable for modern medicine; the rising costs of compliance under increasing state and federal regulation; the low reimbursement rate under Medicare and Medicaid; and the declining fees from managed care have all been contributing factors that have affected patient access to health care.
Unquestionably, there is real potential that rising insurance rates ultimately will reduce access to care for patients across the country. Indeed, press accounts on a daily basis are demonstrating exactly that from coast to coast. Physician offices and emergency rooms have been closing their doors all across the country due to the exorbitant costs. The states most severely hampered by the spiraling out-of-control rates are: West Virginia, Florida, Illinois, Ohio, Texas, Nevada, Michigan, Pennsylvania, and Oregon. Several other states are just beginning to feel the impact.
Some states have tried to address the dramatic increase in professional medical liability insurance rates with very little success. At best, attempts by the states to solve this problem have resulted in only band-aid approaches to the more underlying problem: the escalation of lawsuit awards and the expense of litigation has led to the increase in medical liability premiums. This fact has resulted in many patients not receiving or delaying much needed medical care—a fact Congress can no longer ignore. ACP-ASIM strongly believes that Congress must act to stabilize the market to avoid further damage to the health care system.
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Relief for Physicians From Soaring Malpractice Premiums
Federal legislation has finally been introduced to help curb the spiraling upward trend in malpractice premiums. H.R. 4600, the ''Help Efficient, Accessible, Low Cost, Timely Health Care'' (HEALTH) Act of 2002, will attempt to safeguard patient access to care, while continuing to ensure that patients who have been injured through negligence are fairly compensated. ACP-ASIM strongly endorses this legislation as a means to stabilize medical liability insurance market and bring balance to our medical liability litigation system. The HEALTH Act achieves this balance through the following common sense reforms:
Limit on pain and suffering (non-economic) awards. This requirement limits unquantifiable non-economic damages, such as pain and suffering, to no more than $250,000.
Unlimited recovery for future medical expenses and loss of future earnings (economic) damages. This provision does not limit the amount a patient can receive for physical injuries resulting from a provider's care, unless otherwise restricted by state law.
Limitations on punitive damages. This requirement appropriately raises the burden of proof for the award of quasi-criminal penalties to ''clear and convincing'' evidence to show either malicious intent to injure or deliberate failure to avoid injury. This provision does not cap punitive damages, rather, it allows punitive damages to be the greater of two times the amount of economic damages awarded or $250,000.
Periodic payment of future damages. This provision does not reduce the amount a patient will receive. Rather, past and current expenses will continue to be paid at the time of judgment or settlement while future damages can be funded over time. This ensures that the plaintiff will receive all damages in a timely fashion without risking the bankruptcy of the defendant.
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Elimination of double payment of awards. This requirement provides for the jury to be duly informed of any payments (or collateral source) already made to the plaintiff for her injuries.
A reasonable statute of limitation on claims. This requirement guarantees that health care lawsuits will be filed no later than 3 years after the date of injury, providing health care providers with ample access to the evidence they need to defend themselves. In some circumstances, however, it is important to guarantee patients additional time to file a claim. For example, the legislation extends the statue of limitations for minors injured before age 6.
A sliding scale for contingency fees. This provision will help discourage baseless and frivolous lawsuits by limiting attorney incentives to pursue meritless claims. Without this provision, attorneys could continue to pocket large percentages of an injured patient's award, leaving patients without the money they need for their medical care. The sliding scale would look something like this:
Forty percent (40%) of the first fifty thousand dollars recovered
Thirty-three and one-third percent (33 1/3%) of the next fifty thousand dollars recovered
Twenty-five percent (25%) of the next five hundred thousand dollars recovered
Fifteen percent (15%) of any amount recovered in excess of six hundred thousand dollars
Proportionate liability among all parties. Instead of making a party responsible for another's negligent behavior, this requirement ensures that a party will only be liable for his or her own share. Under the current system, defendants who are only 1 percent at fault may be held liable for 100 percent of the damages. This provision eliminates the incentive for plaintiff's attorneys to search for ''deep pockets'' and pursue lawsuits against those minimally liable or not liable at all.
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These common sense recommendations have been proven to work. The HEALTH Act is based on provisions contained in the California Medical Injury Compensation Reform Act (MICRA). Since its enactment in the mid-1970's, the MICRA reforms have helped reduce the overall costs of medical malpractice and have contributed to the increase in patient access to care. During this recent malpractice insurance crisis, California's rates have changed only slightly, while other states have spiraled to out of control levels.
Conclusion
ACP-ASIM is pleased that the Subcommittee agreed to conduct this hearing to address the serious problem of soaring medical malpractice premiums that physicians are facing across the country. We strongly urge the Subcommittee to pass the common sense reforms contained in the HEALTH Act that allow greater access to care, while adequately compensating injured patients. We appreciate the opportunity to present our views.
PREPARED STATEMENT OF THE AMERICAN ASSOCIATION OF ORTHOPAEDIC SURGEONS
On behalf of the American Association of Orthopaedic Surgeons (AAOS), representing 18,000 board-certified orthopaedic surgeons throughout the United States, we are pleased to offer a statement to the House Judiciary Committee, Subcommittee on Commercial and Administrative Law. We thank Chairman Barr and members of the subcommittee for holding this important hearing and believe the time is right to address problems with the current tort system. AAOS supports the adoption of federal measures that will permit orthopaedic surgeons to better provide high quality services at reasonable costs to their patients. Without action, we fear patient access to specialty care will be threatened.
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Across the country, surgical practices and emergency rooms are closing or reducing their hours of availability to patients due to substantially increased rates of professional liability insurance and an unavailability of insurers willing to provide coverage.
Last year, commercial carriers in eight states raised their rates by more than 30 percent, and another 12 states increased premiums by more than 25 percent. In some states, high-risk specialists have had their insurance cancelled or not renewed. In some states, our physicians are finding their premiums being raised by 200–300 percent—even without ever having a claim filed against them. Patient care has suffered further because physicians must increase their patient load in order to afford increased coverage rates, while at the same time reduce the amount of time dedicated to each individual. It has become difficult for orthopaedists to provide the kind of care and attention they would like to provide their patients.
There are some startling statistics regarding the cost of practicing medicine in today's current legal environment. For instance:
At Temple University in Philadelphia, Pennsylvania, faculty have been unable to recruit orthopaedic fellows to fill slots that have remained open for two years, despite the qualified specialists that receive training at the University.
Health care providers in the Kansas City area experienced 25 percent to 100 percent increases in medical liability insurance rates, after both the St. Paul Cos. and Chicago Insurance Co. withdrew from the medical malpractice market, and PHICO Insurance Co. declared bankruptcy. The three companies provided malpractice coverage to about one-fourth of the physicians in Missouri.
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A survey done by North Mississippi Health Services, found 15 percent of the company's doctors are considering early retirement and 30 percent are considering jobs in other states because of legal issues. The survey also revealed that 80 percent of the doctors who have found affordable liability insurance are practicing ''defensive medicine,'' performing extra tests to create a record that can be used in case of a lawsuit.
The University of Nevada School of Medicine, the state's only medical school, will lose its liability insurance July 1, and if replacement coverage is not found, the medical care of thousands of patients treated by faculty and residents could cease, according to the dean of the school.
In a recent survey conducted by the AAOS, we learned that two-thirds of the respondents indicated that the cost of their professional liability has affected their practice. Physicians are limiting the scope of their practice, ordering more tests and turning away from charity care. They are retiring or leaving certain states altogether just to survive. As the population continues to age, we are gravely concerned of the consequences of less access to quality orthopaedic care.
There is a serious crisis facing medicine, and physicians need relief. One commonsense solution is H.R. 4600—the ''Help, Efficient, Accessible, Low-cost, Timely Health Care (HEALTH) Act of 2002,'' introduced by Representative Greenwood (R-PA) and several others, including Representatives Chris Cox (R-CA), John Murtha (D-PA), Patrick Toomey (R-PA), Collin Peterson (D-MN), Dave Weldon (R-FL), Charles Stenholm (D-TX), Chip Pickering (R-MS), Ken Lucas (D-KY) and James Moran (D-VA). This bipartisan legislation safeguards patients' access to care through reasonable, comprehensive, and effective health care liability reforms. AAOS supports the provisions contained within the HEALTH Act and believes a significant measure of relief can be achieved if it is adopted.
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Importantly, the HEALTH Act addresses several critical inconsistencies within the current system. H.R. 4600 sets reasonable limits on noneconomic damages and implements a system of several liability, in which the physician is liable only to the extent he or she is responsible, thus ensuring a more fair allocation of responsibility. Another key principle protects payment of all medical expenses yet supports the allowance for periodic payment of future damage awards, which ensures that a physician need not risk bankruptcy, and therefore provide no compensation. The legislation also allows for the timely resolution of claims. AAOS urges the members of this subcommittee to support H.R. 4600 and for the House to quickly pass this important legislation.
These are proven reforms that work in states that have adopted them. Similar legislation passed in California in the mid-1970's resulting in a stabilization of the professional liability situation. However, not every state has enacted legislation. Federal legislation is needed to bring uniformity to this situation.
Thank you again, Chairman Barr, for holding this hearing. Comprehensive reform of the current tort system is needed. Continued patient access to specialty care will be compromised if steps are not immediately taken.
Materials Submitted for the Hearing Record
NOTES OF THE USE OF QUOTES
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The Center for Justice & Democracy and the Consumers Union, among other organizations opposed to legal reform, have circulated the following quotes. Each is refuted or put into context below.
Quote: ''We wouldn't tell you or anyone that the reason to pass tort reform would be to reduce insurance rates.'' —Sherman Joyce, President, American Tort Reform Association
Context: Sherman Joyce has made clear that the above quote was made in reference to federal products liability bills introduced in the late 1990's that contained no limits on punitive damages or on pain and suffering damages. Mr. Joyce has stated ''The situation today in medical malpractice is very different. Obviously, medical malpractice costs can be reduced if rational limits are placed on paid and suffering damages. That was the case in the MICRA reforms in California, and would be the case in other efforts to have medical malpractice reform today.''(see footnote 55)
Quote: ''[T]he insurance industry never promised that tort reform would achieve specific premium savings.'' —American Insurance Association
Context: The American Insurance Association press release to which opponents refer includes the following full quote: ''First, the insurance industry never promised that tort reform would achieve specific premium savings, but rather focused consistently on the benefits of fairness and predictability.(see footnote 56) The press release in fact condemns a recent report by the Center for Justice & Democracy that falsely claims that state tort reform laws have failed to lower insurance premiums as a ''grossly inaccurate and misleading attempt to sabotage the continuing need for meaningful tort reform.''(see footnote 57) The press release further states that ''Contrary to the [report] authors' erroneous conclusions, tort reform has helped to make the civil justice system fairer, and it has improved insurance market conditions by making insurance costs more stable and predictable.''(see footnote 58)
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Quote: ''[M]any tort reform advocates do not content that restricting litigation will lower insurance rates, and I've never said that in 30 years.'' —Victor Schwartz, General Counsel, American Tort Reform Association
Context: Victor Schwartz, has stated in an e-mail to Judiciary Committee staff that ''The quote [relied on by opponents of the HEALTH Act] is taken completely out of context and those who are using it are shameless. The quote was referring to a 1998 product liability bill that had no limits on pain and suffering damages, punitive damages, the collateral source rule or joint and several liability. It merely stabilized and unified product liability law. By way of contrast, I would note in this current context, the Federal Med Mal bill [the HEALTH Act] does contain meaningful limits on damages. Like its predecessor, MICRA in California, it will lower insurance costs.''
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RESPONSE TO CHAIRMAN'S QUESTIONS BY DR. DONALD J. PALMISANO
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RESPONSE TO CHAIRMAN'S QUESTIONS BY MS. JOANNE DOROSHOW
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RESPONSE TO CHAIRMAN'S QUESTIONS BY MS. DANIELLE J. WALTERS
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RESPONSE TO CHAIRMAN'S QUESTIONS BY MR. LAWRENCE E. SMARR
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(Footnote 1 return)
Kohn, Corrigan, Donaldson, Eds., To Err is Human; Building a Safer Health System, Institute of Medicine, National Academy Press: Washington, DC (1999).
(Footnote 2 return)
Hunter, J. Robert, , Premium Deceit—the Failure of ''Tort Reform'' to Cut Insurance Prices, Center for Justice & Democracy (1999).
(Footnote 3 return)
Charles Kolodkin, Gallagher Healthcare Insurance Services, ''Medical Malpractice Insurance Trends? Chaos!'' September 2001, http://www.irmi.com/expert/articles/kolodkin001.asp.
(Footnote 4 return)
George J. Church, ''Sorry, Your Policy Is Canceled,'' Time Magazine, March 24, 1986.
(Footnote 5 return)
Francis X. Bellotti, Attorney General of Massachusetts, et al., Analysis of the Causes of the Current Crisis of Unavailability and Unaffordability of Liability Insurance (Boston, MA: Ad Hoc Insurance Committee of the National Association of Attorneys General, May 1986).
(Footnote 6 return)
See, e.g., New Mexico State Legislature, Report of the Interim Legislative Workmen's Compensation Comm. on Liability Insurance and Tort Reform, November 12, 1986; Michigan House of Representatives, Study of the Profitability of Commercial Liability Insurance, November 10, 1986; Insurance Comm. Pennsylvania House of Representatives, Liability Insurance Crisis in Pennsylvania, September 29, 1986.
(Footnote 7 return)
Greenwald, ''Insurers Must Share Blame: AIG Head,'' Business Insurance, March 31, 1986.
(Footnote 8 return)
''What Insurance Crisis?'' Business Week, January 12, 1987.
(Footnote 9 return)
In re Insurance Antitrust Litigation, MDL No. 767, No. C–88–1688 [CAL] (N.D. Cal.); The State of Texas v. Insurance Services Office, Inc., et al, No. 439089 (Tex. Dist. Ct., Travis Co., 53rd Jud. Dist., filed March 22, 1998). See also, ''Final Approval Given To Insurance Antitrust Settlement,'' Mealey's Litigation Reports, April 18, 1995; ''Ten States Announce They Will Join Antitrust Suits,'' Insurance Antitrust & Tort Reform Report, June 15, 1986; Joanne Doroshow and Adrian Wilkes, Goliath: Lloyd's of London in the United States, Center for Study of Responsive Law (1988), text accompanying n. 74–77; pp. 69–95.
(Footnote 10 return)
Journal of Commerce, June 18, 1985.
(Footnote 11 return)
In re Insurance Antitrust Litigation, MDL No. 767, No. C–88–1688 [CAL] (N.D. Cal.); The State of Texas v. Insurance Services Office, Inc., et al, No. 439089 (Tex. Dist. Ct., Travis Co., 53rd Jud. Dist., filed March 22, 1998).
(Footnote 12 return)
LeBoeuf, Lamb, Greene and MacCrae is the firm's current name.
(Footnote 13 return)
The Liability Insurance Crisis, Hearings Before the Subcomm. On Economic Stabilization of the House Comm. On Banking, Finance and Urban Affairs, 99th Cong., 2nd Sess. 83 (1986) (Testimony of J. Robert Hunter) (Exh. I, sheet 3) (Excerpt from Report of Casualty Insurance Colloquium held for Alaska State Legislators by the Insurance Industry, September 17, 1985) (Statement by Jeff Johnson).
(Footnote 14 return)
Summary of Casualty Insurance Colloquium held for Alaska State Legislators by the Insurance Industry (September 17, 1985) (Statement from summary of presentation of John George, Director of Insurance, State of Alaska).
(Footnote 15 return)
See, e.g., ''Lloyd's Forecast is Bullish,'' Journal of Commerce, September 8, 1987.
(Footnote 16 return)
See, Joanne Doroshow and Adrian Wilkes, Goliath: Lloyd's of London in the United States, Center for Study of Responsive Law (1988), pp. 74–75.
(Footnote 17 return)
The Liability Insurance Crisis, Hearings Before the Subcomm. On Economic Stabilization of the House Comm. On Banking, Finance and Urban Affairs, 99th Cong., 2nd Sess. 83 (1986) (Testimony of J. Robert Hunter) (Exh. I, Sheet 1).
(Footnote 18 return)
Telephone Interview by with Delegate Lawrence Wiser, October 13, 1987.
(Footnote 19 return)
Letter from Jim Roush, Staff Director, Fairness and Accountability in Insurance Reform to , dated October 8, 1987.
(Footnote 20 return)
Ibid.
(Footnote 21 return)
''Study Finds No Link between Tort Reforms And Insurance Rates,'' Liability Week, July 19, 1999.
(Footnote 22 return)
Michael Prince, ''Tort Reforms Don't Cut Liability Rates, Study Says,'' Business Insurance, July 19, 1999.
(Footnote 23 return)
Martha Leonard, ''State has seen sharp increase in number of doctors,'' Sunday Gazette Mail, February 25, 2001.
(Footnote 24 return)
''Malpractice Association distorts facts,'' Charleston Gazette, March 1, 2001.
(Footnote 25 return)
Ann Wlazelek, ''Doctors' ad campaign baseless; They're not fleeing Pa., but malpractice straits create 'hostile' climate,'' Morning Call, March 24, 2002; Josh Goldstein, ''Recent census of doctors shows no flight from Pa,'' Philadelphia Inquirer, October 2, 2001.
(Footnote 26 return)
Josh Goldstein, ''Recent census of doctors shows no flight from Pa,'' Philadelphia Inquirer, October 2, 2001.
(Footnote 27 return)
Ann Wlazelek, ''Doctors' ad campaign baseless; They're not fleeing Pa., but malpractice straits create 'hostile' climate,'' Morning Call, March 24, 2002.
(Footnote 28 return)
Eleanor D. Kinney, ''Malpractice Reform in the 1990s: Past Disappointment, Future Success?'' 20 J. Health Pol. Pol'y & L. 99, 120 (1995), cited in Marc Galanter, ''Real World Torts,'' 55 Md. L. Rev. 1093, 1152 (1996).
(Footnote 29 return)
Eleanor D. Kinney and William P. Gronfein, ''Indiana's Malpractice System: No-Fault by Accident,'' 54 Law & Contemp. Probs. 169, 188 (1991), cited in Marc Galanter, ''Real World Torts,'' 55 Md. L. Rev. 1093, 1152–1153 (1996).
(Footnote 30 return)
See, e.g., Judy Aks, Anne Bloom, Michael McCann & William Haltom, ''Hegemonic Tales and Subversive Statistics: A Twenty-Year Study of News Reporting about Civil Litigation,'' Paper presented at the annual Law and Society meetings in Miami, Florida, May 26–29, 2000, pp. 19–20; Marc Galanter, ''An Oil Strike in Hell: Contemporary Legends About the Civil Justice System,'' 40 Arizona L. Rev. 717, 745 (Fall 1998), citing Oscar Chase's study, ''Helping Jurors Determine Pain and Suffering Awards,'' 23 Hofstra L. Rev. 763, 771–73, 782 (Summer 1995); Daniel Bailis & Robert MacCoun, ''Estimating Liability Risks with the Media as Your Guide: A Content Analysis of Media Coverage of Tort Litigation,'' 20 Law and Human Behavior 419 (1996).
(Footnote 31 return)
Marc Galanter, ''An Oil Strike in Hell: Contemporary Legends About the Civil Justice System,'' 40 Arizona L. Rev. 717, 745 (Fall 1998), citing Oscar Chase's study, ''Helping Jurors Determine Pain and Suffering Awards,'' 23 Hofstra L. Rev. 763, 771–73, 782 (Summer 1995).
(Footnote 32 return)
''Doctors trying to stay in business as price for malpractice insurance goes up,'' ABC World News Tonight, March 5, 2002.
(Footnote 33 return)
Joseph B. Treaster, ''Doctors Face A Big Jump In Insurance,'' New York Times, March 22, 2002.
(Footnote 34 return)
Memo from to Interested Persons with attached spreadsheet prepared by J. Robert Hunter, Director of Insurance, Consumer Federation of America, November 14, 2001.
(Footnote 35 return)
Kohn, Corrigan, Donaldson, Eds., To Err is Human; Building a Safer Health System, Institute of Medicine, National Academy Press: Washington, DC (1999).
(Footnote 36 return)
Sidney Wolfe et al., 20,125 Questionable Doctors, Public Citizen Health Research Group, Washington, DC (2000).
(Footnote 37 return)
Harvard Medical Practice Study, Patients, Doctors and Lawyers: Medical Injury, Malpractice Litigation, and Patient Compensation in New York (1990).
(Footnote 38 return)
Examining the Work of State Courts, 2001; A National Perspective from the Court Statistics Project (2001), p. 94; ''Tort Trials and Verdicts in Large Counties, 1996,'' U.S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, NCJ–179769 (August 2000), p. 4.
(Footnote 39 return)
Letter from Ralph Nader to Florida Speaker Mills and Senate President Vogt (1988).
(Footnote 40 return)
Christopher Farrell, ''Let The Free Market End Malpractice Warfare,'' Business Week, August 3, 1987.
(Footnote 41 return)
''Tort Trials and Verdicts in Large Counties, 1996,'' U.S. Department of Justice, Bureau of Justice Statistics, NCJ 179769 (August 2000), p. 7.
(Footnote 42 return)
Walsh, Mary Williams, ''A.H. Robins Begins Removal Campaign for Dalkon Wearers,'' Wall Street Journal, Oct. 30, 1984; Finley, Lucinda, ''Female Trouble: The Implications Of Tort Reform For Women,'' 64 Tenn. L. Rev. 847, 866 (Spring 1997).
(Footnote 43 return)
Dean Baquet and Jane Fritsch, ''New York's Public Hospitals Fail, and Babies Are the Victims,'' New York Times, March 5, 1995.
(Footnote 44 return)
Mohr, JC, American Medical Malpractice Litigation in Historical Perspective, JAMA. 2000; 283: 1731–1737.
(Footnote 45 return)
PIAA Data Sharing Project, May 2002.
(Footnote 46 return)
Professional Liability in the '80s, Report 1, American Medical Association, 10, 84, p4.
(Footnote 47 return)
PIAA Data Sharing Project, December, 2001.
(Footnote 48 return)
Tillinghast-Towers Perrin, Medical Malpractice—Market Review and Update, March 2002.
(Footnote 49 return)
Tillinghast.
(Footnote 50 return)
Rieders, C.A., U.S. N ewswire via NewsEdge Corporation, Bad Business Practices, not Lawsuits, Plague State Malpractice Industry. Dec. 7, 2001.
(Footnote 51 return)
Tillinghast.
(Footnote 52 return)
Philadelphia Daily News via NewsEdge Corporation; January 15, 2002.
(Footnote 53 return)
Tillinghast.
(Footnote 54 return)
PIAA Data Sharing Project, December, 2001.
(Footnote 55 return)
Press release, American Tort Reform Association (June 12, 2002).
(Footnote 56 return)
Press release, ''AIA CITES FATAL FLAWS IN CRITIC'S REPORT ON TORT REFORM'' (Washington, D.C., March 13, 2002).
(Footnote 57 return)
Id.
(Footnote 58 return)
Id.