SPEAKERS CONTENTS INSERTS
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HELP EFFICIENT, ACCESSIBLE, LOW-COST,
TIMELY HEALTHCARE (HEALTH) ACT OF 2003
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
MARCH 4, 2003
Serial No. 3
Printed for the use of the Committee on the Judiciary
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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
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
WILLIAM L. JENKINS, Tennessee
CHRIS CANNON, Utah
SPENCER BACHUS, Alabama
JOHN N. HOSTETTLER, Indiana
MARK GREEN, Wisconsin
RIC KELLER, Florida
MELISSA A. HART, Pennsylvania
JEFF FLAKE, Arizona
MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
STEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee
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JOHN CONYERS, Jr., Michigan
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
LINDA T. SÁNCHEZ, California
PHILIP G. KIKO, Chief of Staff-General Counsel
PERRY H. APELBAUM, Minority Chief Counsel
C O N T E N T S
MARCH 4, 2003
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The Honorable Lamar Smith, a Representative in Congress From the State of Texas, and Chairman, Subcommittee on Courts, the Internet, and Intellectual Property
The Honorable John Conyers, Jr., a Representative in Congress From the State of Michigan, and Ranking Member, Committee on the Judiciary
Mrs. Sherry Keller, Conyers, GA
Mrs. Leanne Dyess, Member, Coalition for Affordable and Reliable Health Care
Dr. Donald J. Palmisano, M.D., President-Elect, American Medical Association
Mr. Lawrence E. Smarr, President, Physician Insurers Association of America
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Statements Submitted for the Hearing Record
Statement of the Alliance of Specialty Medicine
Statement of Mary R. Grealy, President, Healthcare Leadership Council
Statement of Frank Clemente, Director, Public Citizen's Congress Watch
Statement of the American College of Physicians-American Society of Internal Medicine
Statement of the College of American Pathologists
Statement of the American Academy of Family Physicians
Statement of Rodney C. Lester, President of the American Association of Nurse Anesthetists
Statement of the American College of Obstetricians and Gynecologists
Statement of Mr. John McCormack, Pembroke, Massachusetts submitted by Representative Delahunt
Page 6 PREV PAGE TOP OF DOCMaterial Submitted for the Hearing Record
Department of Health and Human Services report: Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the quality of Health Care, March 3, 2003
Ten questions and answers on H.R.5, the HEALTH Act
Remarks by the President on Medical Liability Reform at the University of Scranton
The Washington Times Editorial by Bruce Bartlett, ''Toll of Torrential Torts''
The Washington Times Editorial by Gary J. Andres and Michael McKenna, ''Malpractice Remedies''
Letter from Premier to the Honorable Jim Greenwood, a Representative in Congress From the State of Pennsylvania, in support of H.R. 5
HELP EFFICIENT, ACCESSIBLE, LOW-COST, TIMELY HEALTHCARE (HEALTH) ACT OF 2003
TUESDAY, MARCH 4, 2003
House of Representatives,
Page 7 PREV PAGE TOP OF DOCCommittee on the Judiciary,
The Committee met, pursuant to call, at 9:20 a.m., in Room 2141, Rayburn House Office Building, Hon. Lamar S. Smith presiding.
Mr. SMITH. [Presiding.] The Judiciary Committee will come to order. Today's hearing is on H.R. 5, the ''Help Efficient, Accessible, Low-Cost, Timely Healthcare Act of 2003'', otherwise known as the HEALTH Act.
We will start with opening statements by me and by the Ranking Member, Mr. Conyers, and without objection, the opening statements of all other Members will be made part of the record.
Mr. SMITH. After the opening statements, we will look forward to hearing from our witnesses.
I will recognize myself first for an opening statement.
Today America faces a national insurance crisis that is destroying our health care system. Medical liability insurance rates have soared, causing major insurers either to drop their coverage or raise premiums to unaffordable levels.
Doctors and other health care providers have been forced to abandon patients and practices, particularly in high-risk specialties such as emergency medicine, brain surgery, obstetrics and gynecology.
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Women are particularly hard hit, as are low-income individuals and rural residents. This is an intolerable problem that cries out for action.
H.R. 5, the HEALTH Act, is modeled after California's quarter-century-old and highly successful health care litigation reforms. Like California's Medical Injury Compensation Reform Act, known as MICRA, the HEALTH Act includes a $250,000 cap on noneconomic damages, limits on the contingency fees lawyers can charge, and authorization for defendants to introduce evidence to prevent double recoveries.
As a result of MICRA, since 1975 premiums paid in California increased only 167 percent, while premiums paid in the rest of the country increased 505 percent, or three times as much. What works in California might work across America.
The Congressional Budget Office has found that, ''In States that currently do not have controls on malpractice torts, the HEALTH Act would significantly lower premiums for medical malpractice insurance from what they would otherwise be under current law.''
If California's legal reforms were implemented nationwide, we could spend billions of dollars more annually on patient care.
Nothing in the HEALTH Act limits in any way the award of economic damages. Economic damages include anything of value that can be quantified, including lost wages, lost services, medical costs, and the cost of pain-reducing drugs and lifetime rehabilitation care. Reasonable legal reforms, such as those in the HEALTH Act, still allow for very large multimillion-dollar awards to deserving victims. In just the last year, for example, an injured child in California received an award of $84 million, and a 30-year-old homemaker received an award of $12 million for economic damages.
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According to the Department of Health and Human Services, ''Unless a State has adopted limitations on noneconomic damages, the cost of these awards is paid by all other Americans through higher health care costs, higher health insurance premiums, higher taxes, reduced access to quality care, and threats to quality of care.''
The American people understand this problem. A poll conducted in early February shows that 59 percent of Americans believe the crisis should be solved, either by reining in personal injury lawyers or by placing caps on the amounts juries can award. The obvious cause of skyrocketing medical liability premiums is escalating jury verdicts. The median malpractice jury award doubled between 1995 and 2000 from a half a million to $1 million, and that doesn't reflect the huge cost of cases that don't result in jury awards. In fact, 70 percent of all medical malpractice claims result in no payments, because claims are either dismissed or withdrawn.
The CEO of Methodist Children's Hospital in San Antonio, and also one of the only three pediatric neurosurgeons in the area, someone I met with just a few weeks ago, has seen his premiums increase from less than $20,000 to $85,000 over the last 10 years. He has been sued three times. In one case his only interaction with the person suing was that he stepped into her child's hospital room and asked how the child was doing. Each jury cleared him of any wrongdoing, and the total amount of time all three juries spent deliberating was less than 1 hour. Of course, the doctor's insurance company did spend a great deal of time, money and effort on his defense.
Another doctor from Texas, a family physician, was sued 12 times in 13 years. All of the suits were dropped, but her insurance went up nearly 200 percent.
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An out-of control health care litigation system also costs taxpayers billions of dollars annually. As former Democratic Senator George McGovern has written, ''The 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 $50 billion a year, enough to provide medical care to millions of uninsured Americans.''
As Representatives of the American people, Congress has a choice. Will we help solve the current health care crisis by passing the HEALTH Act?
Now, that concludes my opening statement, and now I will recognize the gentleman from Michigan, Mr. Conyers, for his opening statement.
Mr. CONYERS. Thank you, Mr. Chairman. Good morning, Members and friends. I am happy to be here. We are confronted with a very important problem, and like many legislative problems, it depends on what perspective you are looking at; it depends on what experience you bring to the subject.
So I would like to begin with an economic consideration. The reason malpractice insurance premiums are rising, the basic reason, is that investment income by insurance companies is plummeting. As we all know, insurers make their money, really, mostly from investment income. During years of high stock market returns and interest rates, malpractice premiums go down. When investment income decreases, and we are in the middle of a 4-year bear market, the industry responds by sharply increasing premiums and reducing coverage, creating a liability insurance crisis. This boom-bust cycle took place in the 1970's and 1980's, and it is happening again now.
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Another reason is that draconian laws capping damages do not reduce insurance premiums. A comparison of States that have enacted severe tort restrictions and those that have not, which was performed by the Center for Justice and Democracy, found no correlation between tort reform and insurance rates. Indeed, some of the resisting States experienced lower increases in insurance rates, while some States that enacted tort reforms experienced higher rate increases relative to the national trends.
For example, last year's data showed that in the practice of internal medicine, States with caps on damages had higher premiums than States without caps. For general surgeons, insurance premiums were 2.3 percent higher in States with caps on damages. On average, malpractice premiums were no higher in the 27 States that have no limitation on malpractice damages than in the 23 States that do have such limits.
Now, Mrs. Sherry Keller is here, so I am not going to tell you about her situation, but with this bill the big insurance companies are trying to convince us that the cause of skyrocketing medical malpractice premiums is trial lawyers. And they have really been bashed these last few years, haven't they?
My colleagues, the reality is grossly negligent health care professionals unfortunately have more to do with the high awards than the lawyers. The reality is approximately 100,000 people die each and every year from medical malpractice. Whatever the reasons for the anger the President has toward lawyers, and he is one, his proposal doesn't hurt lawyers nearly as much as it hurts innocent victims of medical malpractice. We will all be watching very carefully and listening to his remarks before the American Medical Association, which will come on shortly.
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I thank you for this opportunity, Mr. Chairman.
Mr. SMITH. Thank you, Mr. Conyers.
I would like to thank all Members for their attendance today. This is an important subject, and we appreciate their interest and their presence, and also the interest shown by those who are in the audience today as well.
Let's proceed to our witnesses, and our first witness is Sherry Keller. Mrs. Keller is here today to tell us how her experience with medical care left her severely injured.
Our next witness is Leanne Dyess, from Vicksburg, Mississippi. She is here to testify about how this patient access crisis has affected the lives of herself and her family. Her husband Tony suffered from permanent brain injury because neurosurgeons near the site of the car accident had been priced out of the profession by unaffordable medical malpractice liability insurance rates.
Our third witness is Donald J. Palmisano, who is a doctor and a lawyer, as well as the president-elect of the American Medical Association, which represents the Nation's physicians. Dr. Palmisano is a general and vascular surgeon from New Orleans, Louisiana, where he was selected recently as one of the top doctors in New Orleans. Dr. Palmisano is also on the board of directors of the National Patient Safety Foundation.
Page 13 PREV PAGE TOP OF DOC Our final witness is Lawrence E. Smarr, President of the Physician Insurers Association of America. The Physician Insurers Association of America is a trade association of more than 60 medical professional liability companies owned and operated by doctors and dentists. Collectively these companies insure 60 percent of America's private practice physicians as well as dentists, hospitals and other health care providers.
I thank you all for being with us here this morning. I need to alert you to the fact that testimony will be limited to 5 minutes or less, if you want to summarize it, and we appreciate your participating today. As I mentioned a while ago, your complete statements will be made part of the record.
Speaking of that, let me take care of one matter here. Without objection, I would also like to be made a part of the record a new Health and Human Services report on medical liability that was released yesterday, and two articles in The Washington Times from yesterday on the President's speech at the University of Scranton, in Pennsylvania on January 16th in regard to medical malpractice reforms, and also 10 questions and answers regarding the HEALTH Act. And without objection, so ordered.
[The information referred to follows in the Appendix]
Mr. SMITH. The gentleman from Massachusetts.
Mr. DELAHUNT. Thank you, Mr. Chairman. And before we begin, I would also like to submit for the record a statement by Mr. John McCormack of Pembroke, MA, who is a constituent of mine. In there he explains what happened to his daughter as a result of medical errors that had severe and profound consequences, not just resulting in her death, but for the entire family.
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Mr. SMITH. Without objection, that will be made a part of the record as well, Mr. Delahunt. Thank you.
[The information referred to follows in the Appendix]
Mr. SMITH. Let's begin. Mrs. Keller, if you will start, please.
STATEMENT OF SHERRY KELLER, CONYERS, GA
Mrs. KELLER. Good day, ladies and gentlemen. I thank you for the opportunity to speak to you today. My name is Sherry Keller. I am a victim of medical malpractice, and I beg for your consideration of my story and the McConnell amendment.
I come here at risk of my own best interests, but my commitment to this cause commands my heart to do so without any reservation. This is the issue, not the money. One week after a complete hysterectomy, the staples were removed from my incision site. That night the wound oozed, and upon notification to my doctor, she told me to come into the office so she could clean the wound.
I was placed up on the gyno bed. She began to clean the wound, and when she did so, she pulled on it. And when she pulled on it, I opened up like a Ziplock bag, hip to hip. While I was now going to take a little bit more time than what she had planned, she left me there like that, in the interim, to see other patients, make a few phone calls. I had gone into shock, lost consciousness, and fell from the bed, hitting my head on the way down, C2 through C7 spinal cord injury, quite similar to that of actor Christopher Reeve or that killed Dale Earnhardt.
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I lost and regained consciousness at least five times on the floor of the doctor's office, in an effort to try to get out into the hallway, in order to be found. Making it out to the hallway, I called, ''Help me.'' the doctor and the nurses then scrambled, saw me laying there like that, naked from the waist down, my intestines hanging out, in severe shock. They picked me up from the hallway, and that is when I began screaming in pain and lost the use of my arms.
My husband was called back from the waiting room; an argument between the two of them about whether or not I needed an ambulance. She wanted him to take me to the ER on his own, and he insisted that he could not handle me in that condition. An ambulance was called, but I was not even afforded a neck collar due to the doctor's orders of transport only.
Patient care meant nothing. Doctor's power meant everything. Unbeknownst to me, she had called ahead to the ER and let them know that I was her patient, and she would take care of it.
I was left in the ER for 2 1/2 hours before she was able to get to the ER to dress my wound, my complaints of pain, the obvious contusion to my head ignored, arm function limited by that point, unable to stand completely on my own. I was just sore from the fall. Go home. I was sent home with a broken neck because of doctor power and doctor protocol. Patient care meant nothing.
This is not to impugn all doctors. This is not to say all doctors are bad. I do not hold resentment toward all doctors. My neurosurgeon was a miracle worker. He saved me. But just as there are good and bad lawyers, good and bad policemen, there are good and bad doctors.
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Our bad doctors need to be held accountable. Just as President Bush has called for the executives of Enron to be held accountable, doctors need to be held accountable, and the only recourse I as a citizen have is our jury system. That is my right. That is the only right and the only venue I have to hold the physician accountable for the care and trust that we are conditioned to give them. Even in a doctor office visit they hold our lives in their hands, and far too often with far too cavalier an attitude.
I had chosen to give up any form of a career in order to raise my children, both college scholarship award winners, both academically excelling very well, my younger is now straight A's, both contributing to this society. But because of my choice to bring in responsible members to society, my value through this, through the McConnell bill, will be nothing. Because I had no economic input, my value as a person is nothing. The only award, the only recourse, the only accountability I will have is through the pain and suffering.
I have heard several Representatives mention a malpractice lawsuit is like winning the lottery. Well, I would like to ask any of you who would turn over a limb or a lung or a life for a lottery ticket. It is not a lottery. I am not in the position to win anything. I would gladly give back Bill Gates' money if I could trade it back for my spinal cord. No amount of compensation is going to pay me back for what I have lost, the ability for me to reach for this paper takes extraordinary effort; the ability to just go to the bathroom, gone. Things that we takeeveryday movement, taken from me. I will never have the freedom a healthy body has; never the complete use of my arms, legs. I suffer every day, 24 hours a day. Every time I have to try to reach for something, the pain is excruciating. No amount of medicine can take the pain away. It can subside, but it is always there. In my dreams I suffer. I am awakened many times during the night because of problems in my spinal cord. I can't even sleep through the night.
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What kind of money is going to compensate that? None. But to say that $250,000 is more than enough is an insult. I now have to hire cleaning people, a driver to do basic errands, go to the bank. A 10-minute trip to the grocery store now takes 3 hours, of which I have to hire somebody to do. I will have to do so forever. These are out-of-pocket expenses that would not be covered. All of the chores, the errands, gardening, landscaping, cleaning, you name it, and for the rest of my life I now have to hire somebody else to do it, and not only is it degrading, but it is coming out of my pocket.
Mr. SMITH. Mrs. Keller, thank you for your testimony.
[The prepared statement of Mrs. Keller follows:]
PREPARED STATEMENT OF SHERRY KELLER
First, I want to thank Chairman Sensenbrenner and Congressman Conyers. I greatly appreciate the opportunity you have given me. My name is Sherry Keller and I am a victim of medical malpractice.
I am 44 years old. I live with my husband in Conyers, Georgia, a suburb of Atlanta, and have two college-age sons. This is my story.
About 4 years ago, I underwent a complete hysterectomy. The doctor failed to suture and staple the incision site, instead only stapling me shut. One week after the staples were removed, I noticed that one area of the wound was oozing. After reporting this to my doctor, I was called into her office the next day so she could clean the wound.
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Once there, she had me lie on the examination table. She pulled on the incision, and I opened up like a zip-lock bag, just as though I were in surgery. The doctor said she was going to call a wound care specialist and then left me alone for 3545 minutes while she saw other patients and made personal calls to her home.
I went into shock, lost consciousness and fell from the table, hitting my head on the counter on the way down, causing c2-c7 spinal cord injury similar to that sustained by actor Christopher Reeve and deceased race car legend Dale Earnhardt. I also suffered traumatic brain injury and a severe concussion.
Eventually, after going in and out of consciousness at least 5 times, drenched in sweat and with my guts hanging out, I was able to pull myself out into the hallway to get help. I was immediately picked up out of the hallway so that other patients wouldn't see me, causing me to lose all function in my arms.
The doctor then began arguing with my husband about why he, not an ambulance, should take me to an emergency room. My husband finally prevailed, and the doctor called for an ambulance. When the ambulance came, I was not given a neck collar, because, as I later found out, the doctor had requested transport only and the EMS workers were required to follow her orders.
After arriving at the emergency room, I was basically given no medical attention, because my doctor had instructed the ER that she would take care of me when she arrived at the hospital. Two and a half hours later, the doctor arrived, cleaned my wound and sent me home, explaining that any pain and soreness I was experiencing were caused by the fall. I was never given steroids, which could have reduced some of the swelling and prevented the damage from progressing. Once home, I kept falling down and could barely walk.
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Now, four years later, I am an incomplete quadriplegic. I will never have the freedom a healthy body has, never be able to use my arms for the simplest of tasks, never walk holding a child's hand, never explore and see the splendour of this country. Even a simple trip to the bathroom is now gone. Every day, each and every day, for the rest of my life.
We, as victims, endure pain and suffering 24 hours a day, with physical pain that no amount of medicine can take away. Suffering comes even in sleep, in dreams and in one's physical state every day and every night. It will be so for the rest of my life, all at the hands of one negligent physician, whom we as a society are conditioned to trust.
Far too cavalier an attitude within the medical ranks regarding public trust results in untold pain and suffering within the general public, to be lived constantly for our entire lives. The inability to reach, sit, anything and everything the average person takes for granted, also produces incalculable suffering. If pain and suffering cannot be measured, how can it possibly be capped?
I gave my life to raising my 2 sons and taking care of my family. I feel I've contributed more to society by the choice I made. But under H.R. 5, my value is nothing. Despite the extent of my physical pain and suffering, which forced me to abandon my hopes of becoming a painter, the only compensation I would receive is $250,000. So when I hear doctors and legislators say that medical malpractice awards are like winning the lawsuit lottery, it really burns my butt.
It is an outrage that victims of medical malpractice are to be trivialized for the profit margin of big business. In the shadow of Enron, where President Bush called for the accountability of all responsible, how can physicians not be held accountable for the extent to which their errors have devastated lives?
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Limiting compensation to victims while still fully protecting doctors is not only terribly unfair, it is immoral, outrageous and reeks of injustice. We are the innocent victims. To punish us a second time literally adds insult to injury.
Doctors are meticulously trained to cure us, keep us alive and improve our quality of life. They take a solemn oath to ''do no harm.'' It is a noble profession, a calling of sorts. We put our trust in doctors unlike any other profession. They are human. Mistakes are made, sometimes honest mistakes and sometimes blatantly incompetent ones. Mistakes cost lives, create medical nightmares and destroy the lives of victims and their families.
The goal must be to reduce medical negligence. This can only happen if physicians are held accountable. Laws and proposals that increase the obstacles sick and injured patients face in the already difficult process of prevailing in court are 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.
Caps cannot be allowed, not in a great society like ours that bases itself on fairness and equality to all.
Thank you for your time and consideration.
Mr. SMITH. Mrs. Dyess.
Page 21 PREV PAGE TOP OF DOCSTATEMENT OF LEANNE DYESS, MEMBER, COALITION FOR AFFORDABLE AND RELIABLE HEALTH CARE
Ms. DYESS. Chairman Smith, Ranking Member Conyers, distinguished Members of the House Judiciary Committee, it is an honor for me to sit here before you this morning to open up my life and the life of my family in an attempt to demonstrate how medical liability costs are hurting people across America.
While others may talk in terms of economics and policy today, I want to speak to you from the heart. I want to share with you the life my two children and I are now forced to live because of a crisis in health care that I believe can be fixed. And when I leave and the lights are turned off and the television cameras go away, I want you and all America to know one thing, and that is this crisis isn't about insurance. It is not about doctors or even hospitals or personal injury lawyers. It is a crisis about individuals and their access to what I believe is otherwise the greatest health care in the world.
Our story began on July 5 of last year when my husband Tony was returning from work in Gulfport, MI. We had started a new business. Tony was working hard, as I was. We were doing our best to build a life for our children, and their futures were filled with promise. Everything looked bright.
Then in an instant everything changed. Tony was involved in a single-car accident. They suspect he may have fallen asleep, though we will never know. What we do know is that after removing him from the car, they rushed Tony to Garden Park Hospital in Gulfport. He had injuries and required immediate attention.
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Shortly thereafter, I received a phone call I pray no other wife will ever have to receive. I was informed of the accident and told the injuries were serious, but I cannot describe to you the panic that gave way to hopelessness when they told me, we don't have the specialists necessary to take care of him. We will have to airlift him to another hospital.
I couldn't understand this. Gulfport is one of the fastest growing and most prosperous regions in Mississippi. Garden Park is a good hospital. Where were the specialists who could have taken care of my husband?
Almost 6 hours passed before Tony was airlifted to University Medical Center, 6 hours for the damage to his brain to continue before they had a specialist capable of putting a shunt into the back of his head to relieve the pressure on the brain, 6 unforgettable hours that changed our life.
Today Tony is permanently brain-damaged. He is mentally incompetent, unable to care for himself, unable to provide for his children, unable to live the vibrant, active and loving life he was living just moments before the accident.
I could share with you the panic of a women suddenly forced into the role of both mother and father to her teenaged children, of a women whose life is suddenly caught in limbo, unable to move forward or backwards. I could tell you about a woman who now had to worry about the constant care of her husband, who had to make concessions she never thought she would have to make in order to be able to pay for his care and therapy.
Page 23 PREV PAGE TOP OF DOC But to describe this would be to take us away from the most important point and value of what I have learned. Mr. Chairman, I have learned that there was no specialist on staff that night in Gulfport because rising medical liability costs had forced physicians in that community to abandon their practices. In that area, in that time, there was only one doctor who had the expertise to take care of Tony, and he was forced to cover multiple hospitals, stretching him thin and unable to care for everyone. Another doctor quit his practice just days before Tony was admitted because his insurance company terminated all of the medical liability policies nationwide. That doctor could not obtain affordable coverage. He couldn't practice. And on that hot night in July, my husband and our family drew the short straw.
I have also learned that Mississippi is not unique, that this crisis rages in States all across America. It rages in Nevada where young expectant mothers cannot find OB-GYNs. It rages in Florida where children cannot find pediatric neurosurgeons. It rages in Pennsylvania, where the elderly who have come to depend on their orthopedic surgeons are being told that those trusted doctors are moving to States where practicing medicine is affordable and less risky.
The real danger of this crisis is that it is not readily seen. It is like termites in the structure of a home. They get into the woodwork, but you cannot see the damage. The walls of the house remain beautiful, but you don't know what is going on beneath the surface, at least not for a season. Then one day you go to hang a picture or a shelf, and the whole wall comes down. Everything is destroyed.
Before July 5, I was like most Americans, completely unaware that just below the surface of our Nation's health care delivery system serious damage was being done by excessive and frivolous litigation.
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Mr. SMITH. Could I ask you to summarize the rest of your testimony?
Ms. DYESS. In all of these cases, all across America, if you go somewhere, to an emergency room, you expect there to be a doctor there, all of us. We have to do whatever it takes, whatever it takes, to get your child some care, your parents, your grandparents, ourselves care when we need it. If we don't do something, down the road she might not have a doctor to take care of her, one that really does her thelike the neurosurgeon she was talking about. We might not have anybody to take care of us, any of us. We don't need to stand still.
Mr. SMITH. Thank you, Mrs. Dyess.
[The prepared statement of Mrs. Dyess follows:]
PREPARED STATEMENT OF LEANNE DYESS
Chairman Sensenbrenner, Ranking Member Conyers, distinguished members of the House Judiciary Committee:
It's an honor for me to sit before you this afternoonto open up my life, and the life of my family, in an attempt to demonstrate how medical liability costs are hurting people all across America. While others may talk in terms of economics and policy today, I want to speak from the heart.
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I want to share with you the life my two children and I are now forced to live because of a crisis in health care that I believe can be fixed. And when I leave and the lights turn off and the television cameras go away, I want youand all Americato know one thing, and that is that this crisis is not about insurance. It's not about doctors, or hospitals, or even personal injury lawyers. It's a crisis about individuals and their access to what I believe is, otherwise, the greatest health care in the world.
Our story began on July 5th of last year, when my husband Tony was returning from work in Gulfport, Mississippi. We had started a new business. Tony was working hard, as was I. We were doing our best to build a life for our children, and their futures were filled with promise. Everything looked bright. Then, in an instant, it changed. Tony was involved in a single car accident. They suspect he may have fallen asleep, though we'll never know.
What we do know is that after removing him from the car, they rushed Tony to Garden Park hospital in Gulfport. He had head injuries and required immediate attention. Shortly thereafter, I received the telephone call that I pray no other wife will ever have to receive. I was informed of the accident and told that the injuries were serious. But I cannot describe to you the panic that gave way to hopelessness when they somberly said, ''We don't have the specialist necessary to take care of him. We need to airlift him to another hospital.''
I couldn't understand this. Gulfport is one of the fastest growing and most prosperous regions of Mississippi. Garden Park is a good hospital. Where, I wondered, was the specialistthe specialist who could have taken care of my husband?
Page 26 PREV PAGE TOP OF DOC Almost six hours passed before Tony was airlifted to the University Medical Centersix hours for the damage to his brain to continue before they had a specialist capable of putting a drain into his head to relieve the pressure on his brainsix unforgettable hours that changed our life.
Today Tony is permanently brain damaged. He is mentally incompetent, unable to care for himselfunable to provide for his childrenunable to live the vibrant, active and loving life he was living only moments before his accident.
I could share with you the panic of a woman suddenly forced into the role of both mother and father to her teenage childrenof a woman whose life is suddenly caught in limbo, unable to move forward or backward. I could tell you about a woman who now had to worry about the constant care of her husband, who had to make concessions she thought she'd never have to make to be able to pay for his therapy and care. But to describe this would be to take us away from the most important point and the value of what I learned.
Chairman Sensenbrenner, I learned that there was no specialist on staff that night in Gulfport because rising medical liability costs had forced physicians in that community to abandon their practices. In that area, at that time, there was only one doctor who had the expertise to care for Tony and he was forced to cover multiple hospitalsstretched thin and unable to care for everyone. Another doctor had recently quit his practice just days before Tony was admitted because his insurance company terminated all of the medical liability policies nationwide. That doctor could not obtain affordable coverage. He could not practice. And on that hot night in July, my husband and our family drew the short straw.
Page 27 PREV PAGE TOP OF DOC I have also learned that Mississippi is not unique, that this crisis rages in states all across America. It rages in Nevada, where young expectant mothers cannot find ob/gyns. It rages in Florida, where children cannot find pediatric neurosurgeons. And it rages in Pennsylvania, where the elderly who have come to depend on their orthopedic surgeons are being told that those trusted doctors are moving to states where practicing medicine is affordable and less risky.
The real danger of this crisis is that it is not readily seen. It's insidious, like termites in the structure of a home. They get into the woodwork, but you cannot see the damage. The walls of the house remain beautiful. You don't know what's going on just beneath the surface. At least not for a season. Then, one day you go to hang a picture or shelf and the whole wall comes down; everything is destroyed. Before July 5th, I was like most Americans, completely unaware that just below the surface of our nation's health care delivery system, serious damage was being done by excessive and frivolous litigationlitigation that was forcing liability costs beyond the ability of doctors to pay. I had heard about some of the frivolous cases and, of course, the awards that climbed into the hundreds of millions of dollars. And like most Americans I shook my head and said, ''Someone hit the lottery.''
But I never asked, ''At what cost?'' I never asked, ''Who has to pay for those incredible awards?'' It is a tragedy when a medical mistake results in serious injury. But when that injuryoften an accident or oversight by an otherwise skilled physicianis compounded by a lottery-like award, and that award along with others make it too expensive to practice medicine, there is a cost. And believe me, it's a terrible cost to pay.
Like most Americans, I did not know the cost. I did not know the damage. You see, Mr. Chairman, it's not until your spouse needs a specialist, or you're the expectant mother who needs an ob/gyn, or it's your child who needs a pediatric neurosurgeon, that you realize the damage beneath the surface.
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From my perspective, sitting here today, this problem far exceeds any other challenge facing America's health careeven the challenge of the uninsured. My family had insurance when Tony was injured. We had good insurance. What we didn't have was a doctor. And now, no amount of money can relieve our pain and suffering. But knowing that others may not have to go through what we've gone through could go a long way toward helping us heal.
Congressman Sensenbrenner, I know of your efforts to see America through this crisis. I know this is important to you, and that it's important to the President. I know of the priority Congress is placing upon doing something... and doing it now. Today, I pledge to you my complete support. It is my prayer that no womanor anyone elseanywhere will ever have to go through what I've gone through, and what I continue to go through every day with my two beautiful children and a husband I dearly love.
Mr. SMITH. Dr. Palmisano.
STATEMENT OF DONALD J. PALMISANO, M.D., PRESIDENT-ELECT, AMERICAN MEDICAL ASSOCIATION
Dr. PALMISANO. Thank you, Mr. Chairman. Good morning. I am Donald Palmisano, president-elect of the American Medical Association, and a surgeon from New Orleans.
The policy of the American Medical Association is decided through a democratic policymaking process involving physician delegates representing every State, nearly 100 national specialty societies, Federal service agencies and other group sections. AMA policy dictates support for national medical liability reform. My testimony represents this policy.
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So again, Mr. Chairman, thank you for inviting the AMA to participate in today's hearing. I want to express our gratitude to you and the other cosponsors of H.R. 5 for your efforts to bring reasonable reforms to our broken medical liability system.
Mr. Chairman, you know that our health care system is facing a crisis when patients have to leave their State to receive urgent surgical care, or when a pregnant woman cannot find an OB-GYN physician to monitor her pregnancy and deliver her baby, or when community health centers have to reduce their services or close their doors because of liability insurance concerns.
You know that our health care system is facing a crisis when efforts to improve patient safety and quality are stifled because of lawsuit fears. Escalating jury awards and the high costs of defending against lawsuits, even meritless suits, are causing medical liability insurance premiums to soar. Several recent Government and private sector reports referenced in our written testimony confirm this. Over the past 2 years, many physicians have been hit with medical liability premium increases of 25 percent to 400 percent, and reports show that the average jury award is reaching $3.5 million.
The medical liability crisis is a growing national problem that affects more than just physicians and other health care professionals and institutions. The medical liability crisis has become a serious problem for patients, affecting their ability to access health care services that would otherwise be available to them, including services provided to Medicare and Medicaid patients. As medical liability insurance becomes unaffordable or unavailable, physicians are being forced to close their practices or drop vital services, seriously affecting patient access to care.
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There are now 18 States that are in crisis, up from 12 States last year, and in many other States a crisis is looming. A key provision of H.R. 5 is a $250,000 limit on noneconomic damages.
There is a direct and compelling Federal interest in reforming our outmoded medical liability system. According to estimates by HHS, excessive medical liability adds $47 billion annually to what the Federal Government pays for Medicare, Medicaid and other Government programs. We need a national solution. And I mentionthat is why the AMA is supporting H.R. 5, and that is why we join with numerous other members of a broad-based coalition known as the Health Coalition on Liability and Access to urge this Congress to promptly reform the medical liability system.
A key provision is the $250,000 noneconomic cap, and there is flexibility in the bill for States to adjust the cap to suit their particular circumstances. In Florida, a nonpartisan task force recently found that the greatest long-term impact on health care provider liability insurance rates is a $250,000 cap on noneconomic damages, which would eliminate crisis of availability and affordability of health care in Florida.
As discussed in our written statement, this limit on noneconomic damages has worked in California, and it can work nationwide.
Mr. Chairman, as you have recognized, the time for action is past due. We must act now to fix our broken medical liability system. Recent polls show that the American public is in favor of reasonable limits on noneconomic damages. We must bring common sense back to our courtrooms so patients can have access to their physicians, whether in emergency rooms, delivery rooms or operating rooms. Thank you very much.
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Mr. SMITH. Thank you, Dr. Palmisano.
[The prepared statement of Dr. Palmisano follows:]
PREPARED STATEMENT OF DONALD J. PALMISANO, MD, JD
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 is seriously threatening the availability of and access to quality health care for patients. I would especially like to express our gratitude to you, Mr. Chair, and other Members of the Committee who are cosponsors of H.R. 5, for providing a much needed focus for action at the national level.
I am Donald Palmisano, MD, JD, President-elect of the AMA and a general and vascular surgeon from New Orleans, LA. The policy of the AMA is decided through its democratic policy-making process in the AMA House of Delegates, which meets twice a year. Our House is comprised of physician delegates representing every state, nearly 100 national medical specialty societies, federal service agencies (including the Surgeon General of the United States), and six sections representing hospital and clinic staffs, resident physicians, medical students, young physicians, medical schools, and international medical graduates. AMA policy dictates support for national medical liability reform. In particular, the AMA supports H.R. 5, the HEALTH Act.
Mr. Chair, you know that our health care system is facing a crisis when patients have to leave their state to receive urgent surgical care. You know that our health care system is facing a crisis when pregnant women cannot find an OB/GYN to monitor their pregnancy and deliver their baby. You know that our health care system is facing a crisis when community health centers have to reduce their services or close their doors because of liability insurance concerns. You know that our health care system is facing a crisis when dedicated professionals, who have trained for years, want to give up the work of a lifetime and retire. You know that our health care system is facing a crisis when physicians and other health care professionals believe they work in a culture of fear, rather than a culture of safety. You know that our health care system is facing a crisis when efforts to improve patient safety and quality are stifled because of lawsuit fears. An unrestrained medical liability system is driving our health care system into crisis.
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As you have recognized, the time for action is past due. Physicians across the country are making decisions now, and more and more patients are wondering, ''Will their doctor be there?'' We must act now to fix our broken medical liability system. That is why we are here supporting H.R. 5, and that is why we join with numerous other members of a broad-based coalition known as the Health Coalition for Liability and Access to urge this Congress to promptly reform the medical liability system.
ACCESS TO CARE IS AT RISK
The crisis facing our nation's medical liability system has not wanedin fact, it is getting worse. Escalating jury awards and the high cost of defending against lawsuits, even frivolous ones, have caused medical liability insurance premiums to reach unprecedented levels. As a result, a growing number of physicians can no longer find or afford liability insurance. Over the past two years, many physicians have been hit with medical liability premium increases of 25 to 400 percent. Some hospitals have seen premiums increase 140 percent in the same time period.
The most troubling aspect of this crisis is its impact on patients. As insurance becomes unaffordable or unavailable, physicians are being forced to close their practices or drop vital servicesall of which seriously impede patient access to care. 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 physicians can no longer afford or even find the liability insurance they need to practice. According to the American Hospital Association's 2002 TrendWatch 1, more than 26% of health care institutions have reacted to the liability crisis by cutting back on services, or even eliminating some units.
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A 2002 survey conducted by Wirthlin Worldwide shows that 78 percent of Americans say they are concerned about access to care being affected because doctors are leaving their practices due to rising liability costs.
Virtually every day for the past year there has been at least one major media story on the plight of American patients and physicians as the liability crisis reaches across the country. Access to health care is now seriously threatened in states such as Florida, Georgia, Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington, and West Virginia. On top of this, we expect at least five more states to be in a full blown crisis in the near future, with a crisis looming in at least 26 other states. A sample of media reports in the appendices to this testimony illustrates the problems faced by patients and physicians in some of these statesproblems many other states will face if effective tort reforms are not enacted.
We must bring common sense back to our courtrooms so that patients have access to their emergency rooms, delivery rooms, operating rooms, and physicians' offices.
THE LITIGATION SYSTEM IS CAUSING THE CRISIS
The primary cause of the growing liability 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. While there have been several articles published since the mid-1990s indicating that increases in jury awards lead to higher liability premiums, in the last year a growing number of government and private sector reports show that increasing medical liability premiums are being driven primarily by increases in lawsuit awards and litigation expenses.
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In his State of the Union Address last month, President Bush stressed that we all are threatened by a legal system that is out of control. The President stated that ''Because of excessive litigation, everybody pays more for health care and many parts of America are losing fine doctors.'' The President's remarks are substantiated in several recent government and private sector reportsreports making clear that the medical liability litigation system in the United States has evolved into a ''lawsuit lottery,'' where a few patients and their lawyers receive astronomical awards and the rest of society pays the price as access to health care professionals and services are reduced.
RECENT FEDERAL GOVERNMENT REPORTS
In a July 2002 report released by the U.S. Department of Health and Human Services (HHS), the federal government concluded that the excesses of the litigation system are threatening patients' access to health care. This federal government report states that insurance premiums are largely determined by the litigation system, and that the litigation system is inherently costly, unpredictable, and slow to resolve claims. Just to defend a claim now costs on average over $24,000. Further, the fact that about 70 percent of claims end with no payment to the patient indicates the degree to which substantial economic resources are being squandered on fruitless legal wranglingresources that could be used to reduce health costs so that more Americans could find health insurance.
Even when there is a large award in favor of an injured patient, a large percentage of the award never reaches the patient. Attorney contingent fees, added with court costs, expert witness costs, and other ''overhead'' costs, can consume 4050 percent of the compensation meant to help the patient.
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On September 25, 2002, HHS issued an update on the medical liability crisis. This update reported on the results of a survey conducted by Medical Liability Monitor (MLM), an independent reporting service that tracks medical professional liability trends and issues. According to MLM, the survey determined that the crisis identified in HHS's July report had become worse. The federal government reported that:
The cost of the excesses of the litigation system are reflected in the rapid increases in the cost of malpractice insurance coverage. Premiums are spiking across all specialties in 2002. When viewed alongside previous double-digit increases in 2000 and 2001, the new information further demonstrates that the litigation system is threatening health care quality for all Americans as well as raising the costs of health care for all Americans. (emphasis added)
This federal government update further highlights that liability insurance rates are escalating faster in states that have not established reasonable limits on unquantifiable and arbitrary non-economic damages. The government's report states that:
. . . 2001 premium increases in states without litigation reform ranged from 3075%. In 2002, the situation has deteriorated. States without reasonable limits on non-economic damages have experienced the largest increases by far, with increases of between 36113% in 2002. States with reasonable limits on non-economic damages have not experienced the same rate spiking. (emphasis added)
HHS also compared the range of physician liability insurance premiums for certain specialties in California, which has established reasonable limits on awards for non-economic damages, to the premiums in states that have not enacted similar limits. The results reveal how excessive awards for non-economic damages affect premiums. For example, in 2002, OB/GYNs in California paid up to $72,000 in medical liability premiums. In Florida, which does not limit non-economic damage awards, OB/GYNs paid up to $211,000 for liability coverage.
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Further, a 2002 Congressional Budget Office study on H.R. 4600 (107th Congress), which included a limitation on non-economic damages, asserts that:
CBO's analysis indicated that certain tort limitations, primarily caps on awards and rules governing offsets from collateral-source benefits, effectively reduce average premiums for medical malpractice insurance. Consequently, CBO estimates that, in states that currently do not have controls on malpractice torts, H.R. 4600 would significantly lower premiums for medical malpractice insurance from what they would otherwise be under current law.
In Florida, as indicated in the example given above, medical liability premiums are among the highest in the nation. The situation in Florida has become so dire that Governor Bush created a special Task Force to examine the availability and affordability of liability insurance. This Task Force held ten hearings over a five month period and received extensive testimony and information from numerous, diverse sources.
Among the many findings in its report released on January 29, 2003, the Governor's Task Force found that the level of liability claims paid was the main cause of the increases in medical liability insurance rates. The Task Force ultimately concluded that ''the centerpiece and the recommendation that will have the greatest long-term impact on healthcare provider liability insurance rates, and thus eliminate the crisis of availability and affordability of healthcare in Florida, is a $250,000 cap on non-economic damages.''
RECENT PRIVATE SECTOR REPORTS
Page 37 PREV PAGE TOP OF DOC Evidence that the litigation system is broken, and that the medical liability crisis is growing, is further established in a study released by Tillinghast-Towers Perrin on February 11, 2003. Tillinghast reported that ''The cost of the U.S. tort system grew by 14.3% in 2001, the highest single-year percentage increase since 1986,'' which is ''equivalent to a 5% tax on wages.'' This is the only study that tracks the cost of the U.S. tort system from 1950 to 2001 and compares the growth of tort costs with increases in various U.S. economic indicators. Some of the key findings of this study are stunning:
The U.S. tort system is a highly inefficient method of compensating injured parties, returning less than 50 cents on the dollar to people it is designed to help and returning only 22 cents to compensate for actual economic loss.
As of 2001, U.S. tort costs accounted for slightly more than 2% of GDP, signaling an increase after a 13-year decline in the ratio of tort costs to GDP.
While the cost of the U.S. tort system has increased one hundred fold over the last fifty years, GDP has grown by a factor of only 34.
Medical malpractice costs have risen an average of 11.6% a year since 1975 in contrast to an average annual increase of 9.4% for overall tort costs, outpacing increases in overall U.S. tort costs.
The study also adds that ''These trends continued in 2002, with no sign of abatement in the near future.'' In a press release accompanying this study, a Tillinghast principal stated that, ''Absent sweeping tort reform measures, we expect most of these trends to continue in 2003 and beyond.''
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In a 2001 report by Jury Verdict Research, data show that 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.
These are just a few examples of growing evidence that reveal that out-of-control jury awards are inexorably linked to the severe increases in medical liability insurance premiums. It is clear that corrective action through federal legislation is urgently needed.
BLAMING INSURANCE INDUSTRY INVESTMENTS IS A RED HERRING
Organizations opposing H.R. 5 have claimed that soaring medical liability insurance premiums are the result of declining investments in the insurance industry, and that liability reforms do not stabilize the insurance market. The reports discussed above, as well as several other authoritative and credible studies, reveal such claims to be misleading, based on flawed analysis, and contrary to the facts.
Last month, Brown Brothers Harriman & Co. (BBH) released a report (''Did Investments Affect Medical Malpractice Premiums?'') that analyzed the impact of insurers' asset allocation and investment income on the premiums they charge. BBH concluded that there is no correlation between the premiums charged by the medical liability insurance industry, on the one hand, and the industry's investment yield, the performance of the U.S. economy, or interest rates, on the other hand.
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In addition, on February 4, 2003, BBH released an addendum to this study that analyzed National Association of Insurance Commissioners (NAIC) data to determine whether investment gains by medical liability insurance companies declined in the recent bear market. BBH asked the question: ''Did medical malpractice companies raise premiums because they had come to expect a certain percentage gain that was not achieved due to market conditions?'' BBH determined that the decline in equities (which are a small percentage of insurance company investments) was more than offset by the capital gains by bonds (which make up a substantial part of insurance company investments) due to a decline in interest rates. BBH concluded that ''investments did not precipitate the current crisis.''
BBH's findings are corroborated by other recent reports. On September 25, 2002, HHS released an update on the medical liability crisis addressing claims that the crisis is caused by the management practices of the insurance industry. HHS concluded that such claims are not supported by facts, stating ''Comparisons of states with and without meaningful medical liability reforms provide clear evidence that the broken medical litigation system is responsible.''
In addition, a summary of medical liability insurer annual statement data in A.M. Best's Aggregates & Averages, Property-Casualty, 2002 edition shows that the investment yields of medical malpractice insurers have been stable and positive since 1997. A.M. Best reports that medical liability insurers have approximately 80% of their investments in the bond market. Also, recent NAIC data show that physicians' medical liability insurance premiums between 19762000 have risen 167% in California (which established effective liability reforms in 1975) compared to 505% in the rest of the United States.
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The report on which H.R. 5 opponents base most of their speculations, produced under the direction of J. Robert Hunter for the Americans for Insurance Reform (AIR), is flawed in a number of ways. The AIR/Hunter study purports that there is no current explosion in medical liability insurance payouts, and that the explosion in medical liability insurance premiums is due to the insurance underwriting cycle. While medical liability insurance premiums, medical liability award payouts, and tort law factors differ across states, the premium and payout data presented in AIR's report are at the national level. One cannot use national data to draw valid conclusions about how state-specific changes in premiums may be related to state-specific changes in payouts. Conclusions about what has or has not caused recent premium escalation without accounting for the state-level factors listed above are unsupportable.
In addition to claiming that the current medical liability crisis is an insurance issue, there have been attempts to argue that medical liability insurance premium rates in California have remained stable because of Proposition 103, not because of the successful medical liability reforms (known as MICRA-discussed later) that have been in place in California since 1975. Such claims are misguided. Proposition 103, also known as the Insurance Rate Reduction and Reform Act, applies to all lines of insurance, not just medical liability insurance. It was passed as an initiative by the voters in 1988 (thirteen years after MICRA), yet did not take effect until 1989. This is when the state's high court struck down its rate rollback provisions while maintaining the remainder of the law.
Proposition 103 implemented a basic standard that ''no rate shall be approved or remain in effect which is excessive, inadequate, unfairly discriminatory or otherwise in violation of this chapter.'' However, Proposition 103 provides that ''every insurer which desires to change any rate shall file a complete rate application with the commissioner.'' Proposition 103 also requires that the Department of Insurance grant a hearing for a challenge to any increase above 15 percent for commercial lines of insurance.
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According to Californians Allied for Patient Protection, ''Insurers have regularly applied for and obtained significant rate increases in all lines of insurance, except medical liability where MICRA has kept the rates from rising astronomically. Between September and the end of October, 2002, for instance, the Insurance Department approved more than 75 applications for double-digit increases in insurance rates.'' None of these approved increases included medical liability insurance. This illustrates that Proposition 103 is not responsible for keeping medical liability premiums down. Rather, as we discuss later, it is MICRA that has been the force behind California's success.
Such misdirected claims as discussed above are a disservice to patients who are losing access to health care services, and an affront to the physicians and other health care professionals who dedicate their lives to healing and caring for the sick and working to find ways to improve the quality of care. America's medical liability crisis is too serious and the consequences of inaction too grave for the public and Congress to use anything but the facts to make decisions about reform. In short, these claims are counterproductive to the debate on resolving the medical liability crisis.
The medical liability crisis is a growing national problem that requires a national solution. If the crisis was just a matter of physicians obtaining or affording medical liability insurance in one state, we might agree that a national approach would not necessarily be required. However, the problem goes far beyond physicians and other health care professionals and institutions. The medical liability crisis has become a serious problem for patients and their ability to access health care services that would otherwise be available to them, including services provided to Medicare and Medicaid patients.
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Also, the premise that it is within the ability of every state to enact legislation to effectively resolve their respective medical liability crisis has been shattered by the fact that many state liability reform laws have been nullified by activist state courts or stripped of their most effective provisions under state constitutions that limit reforms. Taking into consideration that studies show the litigation system to be an ineffective, and often unfair, mechanism for resolving medical liability claims, we believe that the time is ripe for a uniform, federal approach to resolving the liability crisis.
Moreover, there is a direct and compelling federal interest in reforming our outmoded medical liability system. According to estimates by HHS, altogether medical liability adds $60 billion to $108 billion to the cost of health care each year. This means higher health insurance premiums and higher medical costs for all Americans, and especially for the federal government given that one-third of the total health care spending in our country is paid by the Medicare and Medicaid Programs. Further, HHS estimates that excessive medical liability adds $47 billion annually to what the federal government pays for Medicare, Medicaid, the State Children's Health Insurance Program, Veterans' Administration health care, health care for federal employees, and other government programs.
THE LIABILITY CRISIS AND PATIENT SAFETY
The AMA's policy is to be part of the solution to improving patient safety and quality. The AMA believes that one preventable error is one error too many. In fact, the AMA helped launch the National Patient Safety Foundation (NPSF) in 1996 to address patient safety issues, well before publication of the IOM report. The NPSF's approach is to create a culture of cooperative learning and mutual improvement, as opposed to a culture of shame and blame.
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Quality of care improves when there is greater access to physicians and health care services. A culture of safety requires a legal environment that encourages professionals and organizations to work together to identify problems in providing care, evaluate the causes, and use that information to improve care for all patients. An over-litigious system is anathema to building a strong and effective national patient safety program.
Under our current liability system, the reality of being sued is daunting to just about everyone in the medical community. A 2002 Harris Interactive study (The Fear of Litigation StudyThe Impact on Medicine) 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 about medical liability litigation has negatively affected 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.
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.
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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 H.R. 663, the ''Patient Safety and Quality Improvement Act,'' which was favorably reported by the House Energy & Commerce Committee on February 12, 2003. H.R. 663 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 paperworkleaving 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.
THE PRACTICAL SOLUTION
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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. As mentioned above, studies show that our tort system, in general, is an extremely inefficient mechanism for compensating claimantsreturning less than 45 cents on the dollar to claimants and only 20 cents of tort cost dollars to compensate for actual economic losses.
To ensure that all patients who have been injured through negligence are fairly compensated, the AMA believes that 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 the ''Help Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act,'' a bipartisan bill that would bring balance to our medical liability litigation system.
Page 46 PREV PAGE TOP OF DOC 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 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 up to $250,000 or up to two times economic damages, 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 theorythey 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 Californiaincreasing patient access to care and saving more than $1 billion per year in liability premiumsand 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. In fact, according to MLM, as discussed above, 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.
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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, 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 (i.e., amount of the claim) (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 experienced 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, as discussed above, a 2002 Congressional Budget Office study on H.R. 4600 (107th Congress) asserts 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 liability reform law in the 1990s that set limits on non-economic damages. (Ohio recently enacted a new liability reform law.)
Furthermore, a Gallup poll released on February 5, 2003, show that 72% of those polled favor a limit on the amount patients can be awarded for pain and suffering. This Gallup poll is consistent with a 2002 survey conducted by Wirthlin Worldwide showing that three-quarters of Americans understand the detrimental effect that excess litigation has on our health care system. The Wirthlin survey shows that the vast majority of Americans agree we need common sense medical liability reform. In addition to the 78 percent discussed above who said that they are concerned about access to care, the survey found that:
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71 percent of Americans agree that a main reason health care costs are rising is because of medical liability lawsuits.
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.
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 can no longer find or afford 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, and curb the single most wasteful use of precious health care dollarsthe 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.
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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 H.R. 5, the HEALTH Act.
MEDICAL LIABILITY CRISIS AFFECTS ACCESS TO CARE
THE MEDICAL LIABILITY CRISISA NATIONWIDE PROBLEM
Women are facing waiting lists of four months before being able to get an appointment for a mammogram because at least six mammography centers in South Florida alone have stopped offering the procedure as a result of increasing medical liability insurance premiums. ''This trend is troubling. There are a growing number of older people and less and less people to provide mammograms,'' said Jolean McPherson, a Florida spokeswoman for the American Cancer Society. South Florida Sun Sentinel, Nov. 4, 2002.
Aventura Hospital in South Florida closed its maternity ward and cited $1,000 in insurance premiums for each delivery as the prime factor. Aventura is one of six maternity wards to close in recent months. Now, patients will be forced to drive to other counties and other facilities. ''There may be waits getting into a labor-room floor,'' said OB/GYN Aaron Elkin, MD. Miami Herald, Oct. 19, 2002.
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''Without a doubt, access to health coverage is being affected. Some of our emergency rooms are losing their effectiveness,'' said Dr. Greg Zorman, neurosurgery chief at Memorial Regional Hospital in Hollywood. His unit gets several patients a week from smaller ERs that have lost neurosurgery coverage. South Florida Sun Sentinel, February 5, 2003.
Port Charlotte cardiologist Leonardo Victores, MD, left for Kansas in the face of medical liability premiums that were going to increase 100 percent. ''He's moving to Kansas because that state has caps on malpractice awards,'' said colleague Mark Asperilla, MD. Sun Herald, Jan. 1, 2003.
Despite having no malpractice claims or disciplinary actions on his record, Lakeland OB/GYN John Kaelber, MD, was forced to close his practice and leave the state in the wake of insurance premiums that doubled. Lakeland Ledger, Nov. 21, 2002.
More than 50 Bradenton patients had to postpone elective surgeries and more than 100 office visits were canceled because two physicians were unable to obtain liability insurance. The insurer may leave the state altogether. Bradenton Herald, Jan. 24, 2003.
After recently receiving notice of a premium spike coming in July 2002, Vladimir Grnja, MD, decided that he would ''go bare'' and drop all medical liability insurance coverage. Rates for the Hollywood, FL radiologist were to rise to $112,000 from $35,000 a year (a 220% increase), mainly because of litigation over mammograms. ''No doctor wants to go bare,'' said Dennis Agliano, MD, chairman of the Florida Medical Association's special task force on the Florida medical liability crisis. But with significant premium hikes in Florida for specialties like OB/GYN, neurosurgery, thoracic surgery, radiology and even primary care, ''some doctors have no choice,'' he says. Some neurosurgeons in South Florida, are paying a $200,000 premium for coverage of $250,000 per occurrence, making insurance practically meaningless. The Florida Medical Association reports that more than 1,000 doctors in Florida have no medical liability insurance. Doctors in West Virginia and Ohio are also reportedly going bare. Modern Physician, April 1, 2002.
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Ob/Gyns in the ''Sunshine State'' face the highest premiums in the nation, some as high as $208,000. Many surgeons also are facing premiums in excess of $200,000.
Fourteen of the 16 neurosurgeons in Broward County cannot afford insurance and are going ''bare.'' Neurosurgeons in Pinellas County are considering doing the same rather than face increases of 55 percent or greater to more than $100,000.
The Miami Herald reports one radiologist saw his premiums increase from $32,000 to $112,000 in one year due to ''mushrooming lawsuits involving mammograms.'' Another radiologist told the St. Petersburg Times he would no longer read mammograms because of the high risk of being sued.
Cardiologists and internists also are seeing insurance rates double or triple this year.
An insurance executive told the South Florida Sun-Sentinel that insurance companies are paying out $1.30 for every $1.00 they collect in premiums, a fact that cries out for medical liability reform.
And, what's worse $100,000 only buys about $1 million in coverage, a small amount compared to soaring jury verdicts. Tallahassee Democrat, June 30, 2002.
PHICO, the third largest professional liability insurer in Florida was forced into liquidation earlier this year. Zurich American Insurance Co., and Clarendon National also are leaving the Florida market. Remaining insurers are on record as saying they will draw sharper lines between which physician specialty they will and will not insure.
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Florida's community hospitals are considering the drastic step of no longer requiring physicians to carry professional liability insurance to ensure the hospitals can remain open.
''The squeeze is hitting South Florida extremely hard, and it's gradually spreading out to the rest of the state,'' Dennis Agliano, MD, FMA secretary and chair of its tort reform task force. (The South Florida Business Journal)
Several Florida Supreme Court rulings have weakened tort reforms in Florida.
''Litigation was and always will be the problem in Florida until there are caps,'' said Bob White, COO of First Professionals Insurance Co., Florida's largest carrier.
Medical Specialists of the Palm Beaches, a 50-physician group, saw its premiums rise from $800,000 to $2.5 million this year.
American Physicians Assurance announced on July 17, 2002 that it is leaving the state
Farmer's Insurance has announced its intent to leave the state. Among other insurers, MAG is still writing policies, while Medical Protective and ProNational are being very selective. FPIC, the largest medical liability carrier in the state, endorsed by FMA, is only writing very selectively. Both Clarendon and St. Paul have pulled out entirely.
According to the FMA's General Counsel, Florida's existing caps simply do not work and are never used. The caps only apply in cases where the physician agrees to arbitration and in order for the case to go to arbitration the physician must admit liability. In addition, the original intent of this Florida provision was to have the cap apply to each incident, but it has been interpreted to apply to per claimant, which obviously also decreases its effectiveness. The lack of a straight cap is the primary reason for the current crisis in Florida. Unlike such States as Kansas, Florida, has not seen an increase in frequency of claims, but there has been an increase for severity in jury awards.
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In a presentation before FMA, the medical liability insurance carrier, EPIC, presented facts that demonstrate the medical liability crisis in Florida. During 1975, there were 380 health care lawsuits in Florida, resulting in $10.8 million in jury awards and costing $1.5 million to defend. In 2000 there were 880 lawsuits alleging malpractice, resulting in awards of $219 million and costing $36 million to defend.
Dr. Oliver Bayouth says his medical-malpractice premiums are skyrocketing. The Orlando obstetrician is paying about $100,000 for insurance this year, up at least 25 percent from two years ago. Frustrated, Bayouth says he is thinking about moving his practice out of Florida. Orlando Sentinel, January 20, 2002.
In South Florida, where insurers say litigation is the heaviest, ob/gyns pay as much as $202,949 a yearthe highest rates in the country, according to Medical Liability Monitor, a Chicago-based newsletter. Orlando Sentinel, January 20, 2002.
Dr. Alan Appley, an Orlando neurosurgeon, moved his practice to Lafayette, Louisiana, last year in part to escape Florida's soaring malpractice rates. Orlando Sentinel, January 20, 2002.
Dr. Joseph Boyer, an Orlando cardiologist, says his rates rose 64.6 percent, to $99,000, in 2002. Orlando Sentinel, January 20, 2002.
Central Florida Cardiothoracic Surgery in Orlando says it will pay about $140,000 to insure two surgeons in 2002, compared with about $54,000 last year. Orlando Sentinel, January 20, 2002.
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Dr. Alexander Jungreis, an Orlando neurosurgeon, said his liability insurance premiums tripled this year. Orlando Sentinel, January 20, 2002.
Dr. Jorge Perez, an Orlando internist, said his insurer canceled his policy last year even though he never had a claim filed against him. His new company is charging him $18,000 per year, compared with the $11,000 he previously paid, on top of a $25,000 fee to cover possible lawsuits from prior incidents. Orlando Sentinel, January 20, 2002.
Nationwide, one out of every 12 doctors gets sued each year, while in Florida it's one out of every six, said Bob White, chief operating officer of Jacksonville-based First Professionals Insurance Co., the state's largest provider of medical liability insurance with about 33 percent of the market. Orlando Sentinel, January 20, 2002.
According to a Georgia Board for Physician Workforce study released in January 2003, 2,800 physicians in Georgia are expected to stop providing high-risk procedures to limit medical liability.
The study also indicated that 1,750 physicians reported that have stopped or plan to stop providing ER coverage and 630 physicians plan to quit practicing or leave the state. In addition, 1 in 5 family physicians and 1 in 3 Ob-Gyns reported plans to stop providing high-risk procedures, including delivering babies.
Page 55 PREV PAGE TOP OF DOC But numbers alone do not tell the whole story; there is a very human side to this crisis. For instance, although she is only in her first year of medical school at Medical College of Georgia, the liability crisis has already caused Thandeka Myeni, 26, to reconsider her preference for obstetrics, one of the specialties hardest hit by medical liability increases. ''I definitely think it could be discouraging,'' she said. The Augusta Chronicle, Nov. 13, 2002.
Evans Memorial, a rural hospital in Claxton, decided to ''go bare''have no coverage at all-instead of paying what it considered an exorbitant medical liability premium. Only one insurer offered a malpractice policy for the hospital and its nursing home, and the annual premium for $1 million in coverage would have been $581,000, up from $216,000 last year. ''We just thought it was outrageous,'' said Eston Price, Evans Memorial administrator. The Atlanta Journal-Constitution, Oct. 7, 2002.
The largest hospital in the state's health system has bought a new policywith a deductible of $15 millioncovering 953-bed Grady Memorial, a nursing home and clinics. On each paid claim below that mark, Grady is responsible for every dollar. The $15 million deductible starts again with each claim. ''Grady faces open-ended liability,'' said Timothy Jefferson, Grady Health System executive vice president and chief counsel. The Atlanta Journal-Constitution, Oct. 7, 2002.
Knowing that malpractice premiums were rising for everyone in the industry, Ty Cobb Health System CEO, Chuck Adams earmarked enough money for a 100 percent increase. The bill arrived by fax this summer, just 24 hours before a check was due. Not only was the insurance company increasing his deductible tenfold, but the premium jumped from $553,000 to $3.15 milliona 469 percent increase. ''We were numb,'' said Adams, who eventually got an extension and another cheaper policy at $1.65 million. ''There goes our expansions, like a renovation of the Hart County Emergency Room.'' The Atlanta Journal-Constitution, Aug. 11, 2002.
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''Dr. Edmund Wright, a Fitzgerald family practitioner who performed Caesarian sections, has given up that part of his practice. His premiums quadrupled to $80,000 in 2002 and would have been $110,000 if he had continued the surgical delivery procedure.'' Wright said, ''I don't know if I really want to do this anymore.'' The Atlanta Journal-Constitution, Aug. 11, 2002.
Insurance costs are rising so high and so quickly because of medical malpractice lawsuits that many doctors are quitting medical practice, said Michael Greene, who has a family practice in Macon. The problem is increasing so fast that Georgia will soon face a critical shortage of physician, Greene said. ''It hasn't hit with a tidal wave yet, but the waves are beginning to lap at the shore,'' Greene continued. The Macon Telegraph, Aug. 3, 2002.
David Cook, executive director of the Medical Association of Georgia, said the malpractice crisis is driving more doctors into early retirement. ''One-third of doctors 55 and older say they plan to reduce their hours or get out altogether,'' he said. ''These are physicians at the peak of their diagnostic powers.'' The Times (Gainesville), July 17, 2002).
40 percent of the State's hospitals have seen have seen medical liability premium go up 50 percent or more in 2002. A rural hospital in Bainbridge actually faced increases from $140,000 to $970,000.
St. Paul was the second largest carrier in Georgia before its pull-out. The remaining insurers are raising rates for some specialties by 70 percent or greater. Some ER physicians, Ob-Gyns and radiologists have not yet found new coverage.
Page 57 PREV PAGE TOP OF DOC On average, Georgia physicians are facing premium increases of 30 percent or greater for 2002.
Georgia physicians paid more than $92,000,000 to cover jury awards for 2000. That amount was the 11th highest in the nation despite Georgia ranking only 38th in total number of physicians in the United States.
The median jury award increased from $225,000 in early 1990s to $480,000 by late 1990s.
The number of paid claims totaling $1 million or more increased from one in 1990 to 13 in 2000. There was one claim of $2 million or more in 1991, and more than 5 so far in 2002; according to MAG Mutual, which insures 70% of Georgia physicians. Atlanta Journal & Constitution Aug. 11, 2002
Although Mississippi enacted some medical liability reforms late last year, it is still too early to see if this will stem the exodus of physicians from the State. The reason: the Mississippi cap on non-economic damages has broad exceptions and the trial bar is looking for ways to get around its limits. In short, Mississippi remains in crisis.
The Mississippi State Medical Association still estimates that the state could lose as many as 10 percent of its 4,0004,500 physicians.
Obstetricians in Mississippi still worry about what is going to happen to their patients who face longer trips to the hospital while already in labor. Women who used to walk or make a short drive for both prenatal visits and delivery now face a 45-minute drive by car to the only physician in their area who can still treat OB patients.
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Pregnant women who are considered high-risk, such as someone with diabetes, cannot be treated at the Kosciusko Medical Clinic because it is too risky for physicians, where seven physicians formerly practiced obstetrics and gynecology. Only three were predicted to remain in January 2003. The Clarion-Ledger, Aug. 26, 2002.
Only two neurosurgeons remain in practice in the Gulf Coast-area of Mississippi, and general surgeons are in short supply because of the state's medical liability crisis. ''Everybody is reduced to the same low level of trauma care that we had 20 years ago,'' said Steve Delahousey, vice president of operations at American Medical Response ambulance service. Jan. 29, 2003 Biloxi Sun Herald
Neurologist Terry Smith, MD said he had applied with 14 companies, and Medical Assurance was his last hope to find coverage before his current policy expired on Aug. 4, 2002. His premium went from $55,000 a year to potentially $150,000 with a $132,000 tail to his old insurer. ''I'm looking at writing a check for $300,000,'' said Smith, who does brain surgery at three hospitals in Jackson and Harrison counties. Associated Press, July 11, 2002.
Four rural hospitals in Ocean Springs faced closure, as their insurer, Medical Assurance Company of Alabama, was not renewing their coverage because the insurer was leaving Mississippi.
Greenwood Hospitalthe only trauma center in a 55-mile radiuswas unable to keep its Level-II trauma center rating because area neurosurgeons have left, citing the high cost of liability insurance. Greenwood also has lost 2 of its 4 Ob-Gyns.
Page 59 PREV PAGE TOP OF DOC At least 15 insurers, including St. Paul, have left Mississippi in the previous five years.
Nursing homes in Mississippi have faced insurance increases as high as 900 percent in the previous two years according to industry representatives.
Tupelo has lost 3 of its 5 neurosurgeons in the previous two years because of the State's legal climate. A physician-delegate to the Mississippi Economic Council predicts nearly 100 physicians will leave Tupelo in the near future.
In Cleveland, Mississippi, three of the town's six Ob-Gyns have stopped delivering babies. Yazoo City's 14,550 residents have no ob-Gyns. According to the Mississippi State Medical Association, insurance rates for Ob-Gyns have increased from 20400 percent in the previous year.
Since 1995, Mississippi has been home to 21 verdicts of $9 million or greater. Before 1995, there were none. In the first quarter of this year, $31 million was awarded in such cases. The total for the entirety of last year was $32 million. Daily Mississippean (Oxford, MS), July 30, 2002.
A Natchez doctor's group is seeking to build a $6 million medical office building across state lines in Louisiana rather than face continuing lawsuits and skyrocketing insurance premiums in Mississippi.
Mississippi has been voted the nation's worst liability climate by the U.S. Chamber of Commerce, which has warned businesses away from doing business in the state. Rural areas are particularly hard hit by the state's liability crisis. Twenty-five of Mississippi's 80 counties have fewer physicians today than they did in 1990. 21 of those counties have 10 or fewer physicians.
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''The legislative process has slammed the proverbial door in the face of the entire business and medical communities,'' Mississippi's director of the National Federation of Independent Business told the Associated Press.
Mississippi needs doctors like Kirk Kooyer, MD. He is the only pediatrician in Sharkey and Issaquena Counties, where the majority of patients live below the poverty level. Kooyer moved to the Mississippi Delta to serve those who cannot otherwise get medical treatment. Because of increasing litigation risks and high insurance premiums, Kooyer has decided to leave the Delta. His absence will put a strain on the community hospital because there is no pediatrician to take his place.
In 2001, Bolivar County in western Mississippi had six physicians providing obstetrical care; today it has three. Obstetrics insurance for a doctor in Bolivar County jumped from $28,000 to $105,000, with a $25,000 deductible. The Wall Street Journal, May 1, 2002
In neighboring Sunflower County, all four physicians who delivered babies have quit private practice. The Wall Street Journal, May 1, 2002
In the northern half of the state last year there were nine practicing neurosurgeons; now there are just three on emergency call. The Wall Street Journal, May 1, 2002
In 1998, 227 Mississippians filed malpractice suits. Based on the suits filed during the first quarter of 2002, the Medical Association Company of Mississippi predicts over 550 medical liability suits will be filed this year.
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Across the State, there is a veritable litigation explosion, in Jefferson County, for example, there are only about 9,740 residentsbut the number of lawsuits filed in 1999 numbered 10,000. A year later, in 2000, the number of plaintiffs on the docket increased to 27,000, or nearly three times the number of residents. The Washington Times, May 11, 2002.
In August, Nevada Governor Guinn called a special legislative session to address medical liability issues. In just four days, Nevada legislators enacted a meaningful liability reform bill.
Unfortunately, while Nevada passed needed reforms, the crisis there has not yet been averted due to continued lack of availability and affordability of medical liability insurance. Insurers in Nevada have not yet reduced their premiums and physicians are still leaving the state, particularly in Southern Nevada.
Why? Because the trial bar has threatened to institute legal challenges to this new law that could thwart and delay its implementation. Without the full force and effect of reforms right now, the scenario that has crippled access to medical care in Nevada will continue.
60 percent of Las Vegas-area Ob-Gyns have said they would stop delivering babies in 2002 because of the out-of-control legal system and skyrocketing liability premiums.
Page 62 PREV PAGE TOP OF DOC Las Vegas' only trauma center, which treated more than 11,000 patients in 2001, closed for 10 days in July 2002 because it did not have enough surgeons to staff the center.
When a trauma center closes, ''some patients are going to die that wouldn't die . . . the quicker you're at the trauma center, the better chance you have of survival,'' a Las Vegas surgeon told NPR. The next closest trauma center is at least 5 hours away.
''There is an unavailability of [medical liability] insurance,'' said Nevada State Insurance Commissioner Alice Molasky-Arman, at a March 4, 2002 hearing where insurance officials testified they would no longer insure any new obstetricians, surgeons and other high-risk specialists.
A Las Vegas Ob-Gyn was forced to close her practice and leave 30 pregnant patients behind because her liability insurance increased from $37,000 to $150,000 in one year. She now practices in Los Angeles and pays only $17,000. Some Nevada women have had to call as many as 50 Ob-Gyns just to find one who is accepting new patients.
Nevada 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. An ACOG survey concludes that 6 out of 10 Nevada Ob-Gyns will no longer practice obstetrics.
''Approximately 100 Las Vegas physicians have already left Nevada to practice elsewhere, announced they will be closing their practices, or retire early because they cannot afford doubling, tripling, or quadrupling rates,'' according to the Nevada State Medical Association.
Page 63 PREV PAGE TOP OF DOC 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. Los Angeles Times, March 4, 2002.
Recently, 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 was expected to reduce by half the number of urologists, spinal surgeons, neurosurgeons, orthopedic surgeons, and cardiothoracic surgeons who could be on call to aid patients with life-threatening injuries. Las Vegas Review-Journal, June 6, 2002.
Obstetricians and gynecologists remain particularly hard hit, who, like trauma centers, face premium increases of as much as 500 percent. Las Vegas Review-Journal, March 6, 2002.
Earlier this summer President Bush spoke with Jill Barnes, a Nevada resident who is more than two months pregnant. Mrs. Barnes and her husband were recently told by their home physician that he would not be accepting any new obstetrics patients. Unable to find a Las Vegas-area obstetrician to treat her, Mrs. Barnes has been forced to go out of state to find one. ''When she goes into labor, she'll have to drive across the desert for two hours'' to Arizona, her husband told the Las Vegas Review-Journal. The Washington Times, July 31, 2002.
Point in fact, Dr. Shelby Wilbourn, a Las Vegas-area obstetrician-gynecologist has cut staff, stopped taking new patients and decided to leave the state (he's going to Maine) after his insurance premium jumped from $33,000 to $80,000 this year. The Washington Times, July 31, 2002.
Page 64 PREV PAGE TOP OF DOCNew Jersey
A multi-physician practice in Teaneck, NJ, was forced to layoff employees and reduce the number of deliveries it performed because of medical liability insurance premium increases of more than 120 percent. ''All of my colleagues are experiencing the same pressures,'' said George Ajjan, MD. Bergen Record, May 22, 2002.
One out of every four hospitalsnearly 27 percenthas been forced to increase payments to find physicians to cover Emergency Departments. Physicians are increasingly reluctant to take on such assignments because of the greater liability exposure. Hospitals report that more and more physician specialties are being hit by the crisis. While a previous New Jersey Hospital Association survey in March 2002 found that OB/GYNs and surgeons were primarily affected, the new survey finds a deepening impact for neurologists/neurosurgeons, radiologists, orthopedists, general practitioners and emergency physicians. New Jersey Hospital Association, Jan. 28, 2003 news release.
''We have as much to lose as they have,'' said Joan Hamilton, a patient who attended a recent rally in New Jersey in support of her physician. Bergen Record, Oct. 6, 2002.
Physicians, nursing homes and hospitals are all in jeopardy. Liability premiums for hospitals increased more than 150% over the past 3 years. A N.J. American Hospital Association survey found that nearly 2/3 of hospitals had one or more instances where physicians were forced out of medicine because of high premiums.
64.8 percent of all New Jersey hospitals said they have had physicians stop practicing medicine or plan to stop because of the state's liability crisis.
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New Jersey's largest insurer, the MIIX company, declared May 9, 2002, it is getting out of the medical liability business. Previously, MIIX insured 7,000 physiciansnearly 40% of the state. MIIX previously left the medical liability insurance markets in Ohio, Pennsylvania and Texas, citing those states' out-of-control legal climates as an unacceptable business risk.
After years of only a few large jury awards, New Jersey had 26 greater than $1 million in 2001, and is averaging one a week in 2002, MIIX President Patricia Costante told the Philadelphia Inquirer June 4. New Jersey has no limits on non-economic damages in medical liability cases.
New Jersey physicians are also facing difficulty finding new insurance because PHICO, which insured 9%, and St. Paul, with 6% of the market, have pulled out.
After making the difficult decision to no longer deliver babies, one New Jersey obstetrician will see his liability insurance rates plummet from $82,000 to $8,000. ''I'm devastated,'' one of patients told the Atlantic City Press.
New Jersey physicians are predicting as many as 25% of the state's Ob-Gyns will be unable to afford liability insurance if nothing is done to stabilize the market. According to the Medical Society of New Jersey, premiums for Ob-Gyns have risen 50% to 200% over the past year.
The New Jersey Supreme Court ruled May 29, 2002, that ER doctors are not immune from lawsuits under the state's good Samaritan law and may be sued for malpractice.
Page 66 PREV PAGE TOP OF DOC Some general surgeons are seeing rate increases from $30,000 to $110,000. Zurich, one of the remaining liability insurance carriers has informed physicians it will raise rates 120 percent.
New York physicians still pay, in most instances, the highest medical liability premiums in the country. Ob-Gyns' average premium is $144,973, according to the American College of Obstetricians and Gynecologists.
New York continues, by far, to lead the country in total medical liability payouts, with $633 million total in 2000. That is 80% more than the state with the second highest total, Pennsylvania (at $352 million), and 300% more than California (at $200 million). Average medical liability verdicts have skyrocketed recently, going from an average of $1.7 million in 1994 to $6 million in 1999.
''The number of doctors leaving Erie County last year doubled from the previous year, a trend that continues in 2002,'' wrote Donald Copley, MD, an officer of the Erie County Medical Society in Business First of Buffalo. ''I've watched sadly as valued colleagues have left Erie County and even the profession. A competent young specialist recently quit doing high risk diagnostic procedures to become a business consultant. Several local obstetricians have stopped delivering babies to reduce their insurance expenses. A half dozen nationally-known doctors have quietly left Western New York. The number of doctors leaving Erie County last year doubled from the previous year, a trend that continues in 2002.'' Buffalo Business First, April 15, 2002.
Page 67 PREV PAGE TOP OF DOC The Medical Society of New York says the trend of physicians leaving New York State or retiring early is happening across the state.
''The rising cost of malpractice coverage is becoming one of the most important factors driving inflation for physicians' services,'' said a managing director of the Carlyle Group, the investment group for The New York Times.
The Ohio Supreme Court has overturned three tort reform measures in the past 15 years. Following the state Supreme Court's 1995 overturning of the state's tort reforms, premium increases and jury verdicts began rising. Family physicians in rural areas are increasingly no longer performing obstetrical services. Recently, Ohio again enacted medical liability reforms, but it is too soon to tell if the courts there will let these reforms take root.
Meanwhile, according to a recent Ohio State Medical Association survey, 79% of Ohio physicians reported an increase in their medical lawsuit insurance costs over the last two years, with an average increase of 41%. And 51% of Ohio physicians are contemplating early retirement, while 15% are considering or have relocated their practices, as a result of rising costs.
Physician groups in Cincinnati are seeing increases between 20 and 100%. ''I expect this to get worse,'' Ken Folz, CEO of Patient First, told the Cincinnati Business Courier.
According to Daniel J. McLaughlin, a vascular surgeon in Cleveland, some specialists in the region have seen their malpractice premiums increase 600 percent this year, and typical premiums for surgeons with just three or four years of experience have doubled or tripled, to from $50,000 a year to as much as $100,000 or more. Health Leaders Magazine, Sept. 2002.
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In July, Westlake oncologist Dr. Romeo Diaz was faced with an insurance premium of $80,000double what he paid last year. He would have gone out of business had it not been for his patients, who raised the needed $40,000 to help Diaz stay insured. ''At first I thought he was playing,'' said Kathy Fritsch, a patient of Diaz for 10 years. ''But when he looked up at me, he was crying. He said his insurance rose from $40,000 last year to $80,000 this year. It used to be $20,000.'' Morning Journal, July 31, 2002.
Dr. William Hurd, chairman of the department of obstetrics and gynecology at the Wright State University School of Medicine, said the liability insurance issue already is driving young doctors out of the Dayton area. ''In the last two years, not a single one of our (OB/GYN) residents has set up a practice in Dayton, or even Ohio,'' Hurd said. Dayton Daily News, Aug. 28, 2002.
The average jury verdict in Ohio was $11.7 million in 2001. In 2000, it was $8.6 million.
Physicians in Cleveland are being forced to lay-off staff and discontinue high-risk procedures, reported the Cleveland Plain Dealer February 18, 2002.
After not replacing a retiring office manager and moving to a smaller office, a 55-year-old Cleveland-area surgeon who was only sued once quit practicing medicine rather than accept an 80% liability premium insurance increase. Another surgeon, who has never been sued, no longer performs high-risk procedures and saw his insurance rates jump from $40,000 to $90,000 in one year.
''If I were advising medical students now, I would tell them to take a real hard look at going into some of these high-risk specialties,'' John Bastulli, MD, told the Plain Dealer.
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Ohio ranked among the top five states for premium increases according to the Medical Liability Monitor.
''My premium jumped this year from $14,000 to $35,000. I can't afford to continue obstetrics at that price. I'll have to give up delivering babies as of Jan. 1, 2003. I practice in a primarily rural area, and there isn't any other obstetrical care here, so expectant women will have to drive long distances to receive prenatal care. Some 75% of my patients don't have the financial resources to do so. Yet, studies have shown that proper prenatal care fosters healthier newborns and healthier newborns cost society less money. I find it difficult to accept that my liability insurance premiums will force me to give up a side of my practice that has meant a lot to me and to my patients, but I'll have no recourse.''A Mt. Gilead family practitioner.
''We've done the math: If we're going to take care of this debt (our annual insurance payment will increase from $100,000 to more than $500,000), our service is going to go out the window. To recoup the loss, we'd have to add 400 patient visits a month. You can't turn Ob-Gyn into a factory.''A Columbus obstetrician-gynecologist.
''I just sat down with paper and pencil, and it became not financially rewarding to stay.''An Athens obstetrician-gynecologist, in reference to why he retired from his practice early.
''I practice in southern Ohio in a town of 7,000. We have a small community hospital with a family birth center. There are three of us who do obstetricstwo family practitioners and one OB/GYN. In order to break even, our unit needs 150 deliveries a year. That is 50 deliveries each. If we go over 30 deliveries now, our premiums are in the $4060,000 range, which is impossible financially. We are struggling with limiting our ob to 30 each, but that will cause the OB unit to go under and close. We all love ob, and are well trained in providing high-risk OB care, but we're going to be forced to stop. If this occurs, there will be no OB care between Athens and Lancaster, Ohio. Tort reform needs to occur yesterday!''A Logan family practitioner
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''I'm just postponing the inevitable. If the situation doesn't change, I could be insolvent in five years and have to close my practice. I'm only 49. Who will care for my patients? Discontinuing obstetrics is not an option. We need help!''A Dayton obstetrician
''In the past two years, my medical liability premiums have increased more than 50%. I have no claims, graduated first in my medical school class, and was chief resident at OSU. I had been treating some of my chronic pain patients with acupuncture (medical research documents decreased pain and decreased inflammation with acupuncture). Due to the skyrocketing medical liability premiums, I will have to stop offering this treatment for these patients to try to decrease my costs of insurance.''A Columbus physical medicine and rehabilitation physician.
''My premiums increased significantly, but my reimbursement level is down because of the Medicare cuts. In order to stay in practice, I had to float a loan from my pension fund. I am actively looking to leave this state. I know of one colleague who gave up his private practice and went to work at the local VA hospital, so they would cover his liability premium.A Warren cardiologist.
''This five physician practice recently had to give up obstetrics due to our rates. We have been committed to delivering full-range family practice...true womb to tomb medicine. We had to send our patients to local OBs. We and our patients are devastated by this turn of events.''A Medina family practitioner
''After a mad scramble to obtain insurance, it came down to 5:45 p.m. on the day before my insurance expired to obtain insurance. I was literally 15 minutes from having to close a practice that cares for over 4,000 people in this town.''A Coldwater family practitioner
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''We have an obstetrician-gynecologist retiring because his insurance company pulled out of Ohio. To buy a tail and the new policy would cost this man $140,000, which he couldn't afford to do.''A Rossford obstetrician-gynecologist.
''I was told two months ago that I will have no insurance after the 11th of September. I have had no claims filed against me.''An Akron general surgeon
''My carrier has refused to cover me for bariatric procedures. I have had to turn patients away who need this service.''A Massilon general surgeon
Rural families in John Day, Hermiston, and Roseburg counties, Oregon have either lost obstetric care or have seen services drastically reduced. The Business Journal of Portland, Jan. 10, 2003.
Only by dropping obstetrics were two Hermiston physicians able to afford their liability insurance premiums. ''It's something you don't like to tell patients,'' said Doug Flaiz, MD. The Oregonian, Oct. 29, 2002.
''No one with $100,000 in debt from medical school wants to start a practice in a place where they could find themselves completely broke and having to pick up and go somewhere else to start all over again,'' said Rosemari Davis, CEO of Willamette Valley Medical Center, who has seen three of her center's family practitioners stop delivering babies. The News Register, Jan. 28, 2003.
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In 1999, the Oregon Supreme Court overturned the State's law capping non-economic damages. Since then, multi-million dollar claims have become commonplace, according to the Oregon Medical Association.
Since the 1999 decision, Oregon physicians are experiencing rapidly rising premiums and insurers becoming more reluctant to offer policies to physicians, such as Ob-Gyns and surgeons, who perform high-risk procedures.
Recent jury verdicts include: $8 million, $8.5 million, $10 million and $17 million.
Rural patients in Oregon are being particularly hard hit. A small town clinic, Roseburg Women's Healthcare, which delivered 80% of the babies for the area, closed its doors in May 2002 because its liability insurance was canceled after one large lawsuit. ''We consider this a medical crisis for the community,'' Mercy Medical CEO Vic Fresolone told the Associated Press.
The Roseburg clinic physicians paid $17,000 per physician per year in 2001 for medical liability insurance and are now receiving quotes for $80,000100,000 per physician.
Oregon's only academic health centerthe Oregon Health & Science Centerreports fewer medical students are applying for its Ob-Gyn residency positions. Ob-Gyn residents elsewhere reportedly are increasingly concerned about setting up practice in Oregon due to the state's broken liability system.
A major liability insurer, Northwest Physicians Mutual Insurance Company, announced in 2002 it would not write new policies to obstetricians. Remaining insurers are raising rates by 60% or more.
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''We lost $12.5 million last year (2001),'' Jim Dorigan, CEO of Northwest Physicians Mutual, told the Portland Business Journal June 21st. Dorigan also said the company no longer is renewing policies for any physician who delivers babies.
A level-III trauma center in Rogue Valley is dropping its trauma designation to obtain professional liability insurance. Rates would have been unaffordable if neurosurgery continued to be performed.
According to the Pennsylvania Medical Society Alliance, 919 doctors have decided to leave the Keystone State or have scaled back their practices as premiums spiraled upward over the past three years. The Baltimore Sun, Feb. 5, 2003.
Dr. Anthony Clay never thought he would have to leave Philadelphia. He has spent his whole life theregrowing up and attending college, medical school, and residency to become a cardiologist. He treats families he has known since boyhood. He likes knowing where his patients live, work, and shop. All nine of his siblings still live there. But, Dr. Clay is leaving his practice in Philadelphia this Spring because of surging malpractice insurance rates. He is starting over in Delaware, where his insurance costs will drop from roughly $70,000 a year to $8,000. ''It's been terrible,'' said Dr. Clay, 40. ''In this field, you've been with the patient, and also the family, in some of their most life-defining momentsin the throes of a heart attack with no blood pressure. Wrongly or rightly, the patient credits you with being there when they weren't doing so well. You realize you've created a bond. I take that very seriously.'' Baltimore Sun, February 5, 2003.
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Brian Holmes, MD, is one of an estimated 18 percent of Pennsylvania neurosurgeons to have left the state, retired, or limited his or her practices because of the medical liability crisis. ''It saddened me to move, but I had no choice. It was either move or go out of business.'' Philadelphia Business Journal, Sept. 25, 2002.
After 25 years of practice, OB/GYN Michael Horn, MD, stopped delivering babies in 2002 because of the fear of getting sued. ''It's just the potential, the not knowing if someone will seek an outlandish reward. I don't want to expose myself or my family.'' Burlington County Times, Oct. 2, 2002.
Medical students are less likely to seek residencies in Philadelphia, and residents are less likely to stay and practice in the area because of ''prohibitively high'' medical liability insurance rates, according to Jefferson Medical College professor Stephen L. Schwartz, MD. Associated Press, Oct. 4, 2002.
OB/GYN Lawrence Glad, MD, used to deliver about 500 babies a year40 percent of all the babies born in Fayette County annually. After his premiums skyrocketed from $57,000 to $135,000, however, he closed his practice in the fall of 2002. Pittsburgh Business Times, Nov. 18, 2002.
Mercy Hospital chief of surgery Charles Bannon, MD, has watched numerous physicians leave Scranton and Lackawanna Countycreating a shortage of surgeons, fewer medical school applications and residencies. ''It will take generations to get back the quality of medicine in Philadelphia.'' Scranton Times, Nov. 20, 2002.
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Physicians across the ''Keystone State'' have left, retired, and stopped performing high-risk procedures. Those who have stayed face skyrocketing premiums, extremely nasty legal climate. Methodist Hospital in South Philadelphia closed its maternity ward and prenatal program last year because of unaffordable medical liability insurance rates. Mercy Hospital of (South) Philadelphia announced June 19, 2002 it would closed its ob ward August 23rd.
Pennsylvania has the second highest payouts in the country for medical liability lawsuits. Pennsylvania's total in 2000 was $352,309,905nearly 10 percent of the national total despite having less than five percent of the national population.
Orthopedic surgeons in Pennsylvania face insurance premiums of nearly $100,000. In California, which has strong tort reforms, orthopedic surgeons pay an average of $36,310 for yearly liability insurance coverage.
A recent poll, conducted by Susquehanna Polling Research, shows that 31 percent of doctors participating in the study had their existing liability insurance cancelled or non-renewed for 2002.
72% of Pennsylvania doctors have deferred the purchase of new equipment or hiring of new staff because of out-of-control liability costs.
270 employees at the Jefferson Health System in Philadelphia have recently lost their jobs to skyrocketing liability insurance costs. The Einstein Network laid-off 127 workers and eliminated 52 vacant positions in April 2002, citing rising liability costs as the prime factor.
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Philadelphia County, which has one of the worst liability climates in the nation, has seen its surgical specialist population decrease 13.4% from 1995 to 1999. The average jury award in Philadelphia County is $970,000 while the rest of state's average is $420,000.
A shortage of radiologists willing to read mammograms has increased the wait time for screening mammograms at most major hospitals to two to three months, according to the Pennsylvania patient advocacy group Concerned Citizens for Care.
The Level-II trauma center at Brandywine Hospital in Coatesville closed June 10th, because of rising malpractice insurance rates. Area trauma patients are now being transported more than 30 miles away to hospitals in Philadelphia and Lancaster. The Washington Times, July 17, 2002.
''As I look around and see my friends retiring early or leaving Pennsylvania, I wonder who will be next,'' Meadville physician Tom Arno, MD, wrote in USA Today.
414 medical liability lawsuits were filed in Philadelphia County in February 2002five times the average number filed during the month over the previous decade, reported the Philadelphia Inquirer.
One-quarter of respondents to an informal poll conducted by the American College of Obstetricians and Gynecologists say they have stopped or are planning to stop practicing obstetrics.
Page 77 PREV PAGE TOP OF DOC Statistics compiled for the Pennsylvania Medical Association by Caso Consulting indicate it costs $96,199 to cover an orthopedic surgeon in Pennsylvania, compared with $37,783 in Delaware, and $36,291 in New Jersey. Best's Insurance News, January 7, 2002.
Howard A. Richter, a neurosurgeon and president of the Pennsylvania Medical Society, said a 2001 survey by the medical society showed that 72% of doctors have either deferred the purchase of new medical equipment or have not hired needed staff because of ''sudden and sharp increases'' in insurance rates. Best's Insurance News, January 21, 2002.
''To lower their risk and insurance premiums, doctors who normally would take on high-risk medical procedures are opting not to do so. For example, we've seen obstetrician/gynecologists give up delivering babies. Virtually every medical liability insurance carrier increased their rates in recent years. From the beginning of 1997 through September 2001, major liability insurance carriers writing in Pennsylvania increased their overall rates between 80.7 percent and 147.8 percent.'' York Daily Record, January 20, 2002.
Driving premiums through the roof are excessive sums awarded in malpractice suits. Medical liability payments for physicians in 2000 totaled $3,908,113,303. York Daily Record, January 20, 2002.
In the ''Lone Star State'' medical liability insurance premiums for physicians have skyrocketed as much as 300 percent in some regions and for some specialties, acccording to the Texas Medical Association. As a result, there is only one neurosurgeon serving 600,000 people in the McAllen area.
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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. As reported in a July 10, 2002, article in The Courier, a community family practice clinic in Conroe (just north of Houston) was recently forced to turn away half of its normal patient load because its liability insurance provider would not provide coverage while ''highly lawsuit-risky obstetrics training was conducted.''
Even though the Texas legislature has passed medical liability reforms, the Texas Supreme Court has regularly overturned them.
Medical liability premiums were expected to increase by at least 20 percent and perhaps as much as 75 percent in 2002, according to the Texas Department of Insurance. San Antonio Express-News, April 8, 2002.
In 1999, 17 companies offered malpractice coverage to doctors in Texas. Today, the field has dwindled to only four, and Texas is considered the least profitable state for liability carriers. The Dallas Morning News, September 1, 2002.
Moreover, premiums this year have climbed at triple-digit rates for many of Texas' 36,000 physicians. That's on top of double-digit increases in prior years. Now it's not uncommon for doctors in high-risk specialties such as trauma surgery, emergency medicine, and orthopedic surgeries and obstetrics to pay more than $ 100,000 annually for coverage. This means that some 6,100 Texas physicians are scrambling to find liability insurance.
The Doctor's Company, a national insurer, told the Dallas Morning News the company is selective about which types of physicians it will cover. ''Texas is a very dangerous venue, and we don't really encourage . . . [growth] from therenot without tort reform,'' said senior vice president Jack Myer.
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In South Texas, one jury awarded $43 million to a woman who claimed a diabetes drug damaged her liver, while another gave $15 million to three women who received faulty hip implants. The Wall Street Journal, May 1, 2002.
6 of every 7 medical liability claims in Texas are closed with no fault found on the doctor's part. Nonetheless, tens of millions of dollars are spent fighting these cases.
Family physician Marissa Iniga, MD, has been sued 12 times in the past 13 years. All of the lawsuits were dropped but her insurance premiums still went up 200 percent. Her situation is mirrored by many physicians throughout Texas.
Several physicians in Corpus Christi have been sued by patients they have never seen, but it required thousands of dollars to have the cases dismissed.
Currently obstetrician/gynecologists in Cameron, El Paso and Hidalgo Counties are paying one carrier a premium of $102,584 annually compared to their counterparts in Dallas County who pay $59,221. Another carrier charges thoracic surgeons in Cameron, El Paso and Hidalgo Counties $79,218 annually compared to $57,395 for those practicing in Dallas County.
70% of Texas physicians who practice near the U.S.-Mexico border have had medical liability claims filed against them, and 60% have been sued, according to the Texas Medical Association. 55% of physicians there are inclined to leave the border and practice elsewhere or retire during the next 12 months; 71% to 76% of border doctors say they cannot recruit new doctors to the border due to lawsuit crisis, and 1 out of 3 border physicians have had insurance carriers decide to stop writing coverage.
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The high cost of malpractice insurance for local doctors is driving them away from Laredo. The three main issues for this exodus are the high price of malpractice insurance for border area physicians, tort reform and the fact that Medicaid and Medicare do not reimburse border area physicians proportionate to what they do farther north, director of Community education/Physician Relations Mindy Casso said. Laredo [Texas] Morning Times.
The second-highest premiums for obstetricians/gynecologists are paid in Houston, Dallas and Galveston, Texas, where the bills amounts to some $160,746 a year. Orlando Sentinel, January 20, 2002.
''Dr. William F. Tucker, an orthopedic surgeon, figured he'd try to curb the cost of his malpractice insurance premium by abandoning spinal surgeries and reducing his emergency room calls. Both decisions cut down on his income but provided him with a greater sense of security as malpractice lawsuits against doctors become more common in Texas and the nation. Then came the shocking news that his premium would rise by 63 percent to $38,000.'' The Dallas Morning News, January 20, 2002.
The problem is particularly acute in Texas, where 51.7 percent of all physicians in 2000 had claims filed against them, according to the Texas Medical Examiners Board. Although no concrete numbers are available as a comparison, several industry experts say the frequency is twice the national average. The Dallas Morning News, January 20, 2002.
In Texas, about 85 percent of cases are closed without payment to plaintiff, yet they still cost money to resolve, said Texas Medical Liability Trust president W. Thomas Cotton. The Dallas Morning News, January 20, 2002.
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Insurance carriers in Texas paid more than $381 million in claims in 2000, according to the Texas Department of Insurancecosts passed on to policyholders. That's an 87 percent increase since 1995. Nationally, the median malpractice award more than doubled from 1994 to 1999, to $800,000. The Dallas Morning News, January 20, 2002.
Texans filed 4,501 claims in 2000, up 51 percent from 1990, according to the Texas Medical Examiners Board. More troublesome is the rise in expenses involved in resolving a case. Each claim cost an average of $68,681 to litigate in 2000, compared with $46,079 in 1995. The figure does not include the amount of settlement or award. The Dallas Morning News, January 20, 2002.
Meanwhile, physicians in the Rio Grande Valley are in crisis, said Texas Medical Liability Trust president W. Thomas Cotton. An Ob-Gyn in North Texas pays $47,500 annually for $500,000 in coverage, while his Rio Grande Valley counterparts pay $82,300. Neurosurgeons pay even higher premiums. The Dallas Morning News, January 20, 2002.
Seven in 10 Rio Grande Valley doctors have had medical liability claims filed against them. A February 2001 survey by the Texas Medical Association found that 1 in 3 Valley doctors say their insurance providers have stopped writing liability insurance. The Dallas Morning News, January 20, 2002.
In Rio Grande Valley, half of the physicians admitted to being inclined to leave the area or to retire, according to a survey conducted in February 2001 by the Texas Medical Association. Many doctors in the Valley said they profile patients and refuse to treat some, because they fear the patients are prone to sue. They said they deny care for people who pay with cash, because the patients are most likely poor and may look at a lawsuit like a lottery opportunity. Some physicians are even hesitant to respond to a ''code blue,'' which indicates a medical crisis, in a hospital. Dr. Carlos Cardinez, a gastroenterologist in McAllen, said he doesn't want to respond anymore because of the legal uncertainty. The Dallas Morning News, January 20, 2002.
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Increases in medical practice costs have outstripped revenue increases over the last 10 years, according to the Medical Group Management Association's 2000 cost survey. Operating costs for multispecialty groups went up an average of 35 percent over the past 10 years, while revenue increased 21 percent over that same period. The Dallas Morning News, January 20, 2002.
''There is a growing crisis in medical malpractice in Washington state and nationally,'' state insurance commissioner Mike Kriedler said in an April 2002 news release.
'Patients in many communities are finding that their physicians have either started limiting their services or have closed their doors completely due to rising malpractice premiums,'' said Dr. Maureen Callaghan, president of the Washington State Medical Association. PR Newswire, Feb. 3, 2003.
''I went through my mourning and my grieving, and now I have to find a place for my  patients,'' said a South Send internist who has not been sued but can no longer afford liability insurance coverage.
The cost of medical malpractice insurance has soared so high that Mount Vernon obstetrician Robert Pringle, MD, has stopped delivering babies, according to the Puget Sound Business Journal.
So have his two colleagues at the North Cascade Women's Clinic, and so have others. ''Of the nine obstetricians in our community, six have stopped delivering babies or left the area,'' Pringle said.
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When he began his practice 20 years ago, Pringle paid a premium of $1,000 for medical malpractice insurance, which covers physicians against claims of injury resulting from negligent medical care. ''Now it's in the neighborhood of $60,000,'' he said. ''From an economic standpoint, you would have to be a lunatic to continue private practice of obstetrics.'' Puget Sound Business Journal.
The severe premium hikes besetting many doctors ''could not come at a worse time,'' said Dr. Sam Cullison, president of the Washington State Medical Association. Cullison said the high cost of malpractice insurance has combined with low reimbursement rates from Medicaid, Medicare and private insurers to clamp many doctors in a financial squeeze. As a result more physicians are retiring early, or leaving the State, he said. Also, it's increasingly difficult to recruit doctors from other states.'' Puget Sound Business Journal.
''Everyone is in the same situation in terms of increasing premiums, increasing overhead and decreasing reimbursement,'' said Olympia neurologist Maureen Callaghan, MD. ''The final end point,'' she added, ''is that people are not to be able to get in to see a doctor.'' Puget Sound Business Journal.
During the past five years, medical liability premiums paid by orthopedic surgeons increased 30 percent, to nearly $40,000, and premiums paid by family physicians who neither deliver babies nor do surgery rose 29 percent, to almost $10,000. Washington State Medical Association.
In Washington, from 1999 to 2000, the median jury award rose 43 percent. Last year, seven medical malpractice verdicts or settlements exceeded $1 million. They totaled $44.7 million, and ranged from $1.2 million to $16.2 million.
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Washington's Supreme Court overturned the state's tort reform law in 1989. As a result skyrocketing medical liability insurance premiums are forcing physicians to limit patient loads and services. Some physicians are choosing to move out of State and retire early as well.
In the past five years, the average medical liability premium for a family physician has increased a staggering 74 percent, according to the Washington State Medical Association. For obstetricians, the increase has been more alarming79 percent since 1997.
The departure of liability insurers St. Paul and Washington Casualty Company from Washington have left thousands of physicians scrambling to find coverage.
The Steck Medical Group, which serves 60,000 patients in mostly rural Washington, was forced to close its doors for a few days this year because it could not find liability insurance coverage. It re-opened only after the state insurance commissioner intervened, but the new policy was at a 160% increase.
Clinics in Lewis County and Waterville also have been forced to close temporarily according to The Olympian.
Recent large jury awards in Washington State include $13 million and $16 million verdicts.
The ''Mountaineer State'' was one of the first states to experience wide-spread medical liability insurance problems.
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According to the West Virginia State Medical Association, some 100 doctors have already retired early or moved out of the state within the previous two years.
That has helped drive 1 out of every 20 doctors out of West Virginia or into early retirement in the past two years. CNN, Jan. 2, 2003.
General surgeon Gregory Saracco, MD, only 49 years old, was forced to borrow money twice in 2002 to pay $73,000 for his liability insurance. His premiums for 2003 are expected to rise to $100,000. He is considering leaving West Virginia and while he has taken time away from his practice this year to decide what his options are, he said ''my job is to help peopleI couldn't drive past an accident on the road and not stop. I don't know any doctor that could.'' Associated Press, Jan. 2, 2003.
Although orthopedic surgeon George Zakaib, MD, was raised and went to school in Charleston, WV, he and his family left because of the state's medical liability crisis. Dr. Zakaib's premiums had increased to $80,000 plus $94,000 in ''tail'' coverage. Charleston Daily Mail, July 27, 2002.
Fourth-year medical school student Jennifer Knight isn't sure she'll stay in West Virginia. The Charleston Area Medical Center says fewer medical students are applying to its residency programs, and fewer students are applying to Marshall University's medical school. ''I think the problem is, we have too many frivolous lawsuits,'' said Ms. Knight. Sunday Gazette-Mail, Nov. 24, 2002.
Page 86 PREV PAGE TOP OF DOC The state legislature has been trying for more than a year to come up with a solution that will prevent more physicians from curtailing services or leaving the state. A state medical association poll found that 40% of the State's doctors are considering similar action to stop practicing or leave the State.
''It's a 'code blue' emergency'' threatening the state's trauma centers and other health care services in the state, WVSMA President Ahmed D. Faheen, MD, told The New York Times.
Wheeling, West Virginia, has no remaining neurosurgeons, forcing closure of its only trauma center. Trauma patients must be flown by helicopter for care elsewhere.
Across the State, the pattern is the same, trauma centers are closing or headed in that direction, and there is incredible difficulty in recruiting high-risk specialty residents.
Earlier this year, in the State Capital, the Charleston Area Medical Center (CAMC) was able to keep its level-I trauma center open only after agreeing to help surgeons pay their liability premiums. The one part-time and three full-time surgeons are paying $800,000 in liability premiums this year, according to a report in the April 25, 2002 Charleston Gazette.
Now, after the loss of several orthopedic surgeons, CAMC can no longer offer 24-hour coverage seven days a week. That means patients with serious multiple injuries, usually car wreck victims, must be transported to other cities. Precious time that could mean the difference between life and death will be lost. The Charleston Daily Mail, August 29, 2002.
Page 87 PREV PAGE TOP OF DOC The Medical Liability Monitor reported that West Virginia surgeons paid premiums of $36,094 to $56,371 a year in 2001the seventh highest in the nation. This year these premiums have continued climbing dramatically. The Charleston Daily Mail, August 29, 2002.
As the The New York Times has reported, the Bluefield Regional Centera rural hospitalhas lost 12 physicians in the previous two years but only has been able to find two physicians to replace them.
A survey of state Ob-Gyn residents by the American College of Obstetricians and Gynecologists found more than half plan to leave when they finish training.
Without action, the future is not bright. The Charleston hospital faces an 11%41% drop in residency applications this year. ''We are concerned that students will not think the residency opportunities in West Virginia favorable in light of the recent problems with malpractice insurance,'' Dean James Griffith, MD, told the Charleston Gazette.
MEDICAL LIABILITY CRISIS AFFECTS ACCESS TO CARE
SELECTED STATES SHOWING PROBLEM SIGNS
THE MEDICAL LIABILITY CRISISA NATIONWIDE PROBLEM
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The severe liability crisis in the neighboring States of Mississippi, Georgia and Florida has not left Alabama untouched.
Atmore Community Hospital has had to close its maternity ward because of soaring medical liability premiums, forcing pregnant mothers to travel 15 miles to the nearest hospital with an obstetrics department.
Arizona has not been immune to the medical liability crisis. Serious access problems are already developing.
The Copper Queen Community Hospital, was forced to stop delivering babies in January after a group of family physicians said they could no longer afford medical liability insurance.
Pregnant mothers in this part of Arizona must now travel over 35 miles to the nearest hospitalthe only hospital left in that County that is still delivering babies.
The crisis may be spreading to Connecticut as evidenced by the recent decisions of 28 OB/GYNs to stop delivering babies.
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Some OB/GYNs in Connecticut are now paying between $120,000160,000 per year in insurance premiums, according to state medical society executive Tim Norbeck.
Connecticut already is on a ''watch'' list issued by the American College of Obstetricians and Gynecologists. Hartford Courant, Jan. 3, 2003.
The average payment made by one of Connecticut's major insurers to resolve a claim rose from $271,000 in 1995 to $536,000 in 2001.
OB/GYN Jose Pacheco, MD's, insurer stopped offering medical liability insurance, and he had to seek another carrier. However, because of the high cost of new insuranceestimated around $60,000combined with ''tail'' coverage of $80,000, Dr. Pacheco retired after a 27-year career. Hartford Courant, Nov. 17, 2002.
Health care access problems will worsen in the ''Blue Grass State,'' as medical liability premiums continue moving rapidly upward.
Based on a survey by the Kentucky Medical Association, physicians in Kentucky have faced a recent average increase in medical liability premiums of 78 percent.
Kentucky emergency department physicians have reported an average increase of 204 percent, with orthopedists facing a 122 percent increase; general surgeons facing an 87-percent average increase, and Ob-Gyns seeing an average increase of 64 percent.
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Deep in Appalachia, the only provider of obstetrical services in Barbourville soon may have to close its practice due to the liability crisis. Previously, this physician group had liability insurance coverage through St. Paul Company, the nations second largest malpractice insurer that pulled out of the market last year.
This same 9-physician practice also has an office in Corbin, where two resident physicians from the University of Kentucky College of Medicine train in conjunction with Baptist Regional Medical Center. If the physicians are forced to close the practice, the residents will have to be placed out of State for the remainder of their training. leaving a tremendous access problem for the Kentucky women they treat.
In the Bay State, eight of 55 OB/GYNs in Springfield, Massachusetts, a state which has broad exceptions to the state limits on non-economic damages, will no longer be offering Obstetrics care to their patients because of sharply escalating liability insurance costs. ''I got into obstetrics because it's a very happy specialty. But there comes a point where you can't make ends meet,'' said James Wong, MD, one of two OB/GYNs at a western Massachusetts clinic giving up delivering babies. Boston Globe, Jan. 8, 2003.
''The real issue is runaway juries,'' according to Barry Manual, MD, who serves as insurer ProMutual's chairman, and said the number of $1 million-plus claims paid out doubled between 1990 and 2001. Boston Globe, Jan. 8, 2003.
Page 91 PREV PAGE TOP OF DOCMissouri
The State of Missouri is starting the slide into a full-blown medical liability crisis.
Missouri Ob-Gyns are routinely seeing premium increases of 200300 percent and even upwards of 1,000 percent in some cases, forcing some physicians to close part or all of their practice.
A recent survey completed by the Missouri State Medical Association found that 31.4 percent of the responding physicians were considering leaving their practice, and 28.6 percent said they would consider limiting their practice because of rising liability insurance premiums.
This same survey showed an average premium increase for medical liability insurance of 61.2 percent for 2002, on top of a 22.4 percent average increase last year.
Neurosurgeons in Kansas City are facing an increase in premiums of $12,000 to $42,000 this year, with further increases expected next year.
The 2002 premiums for Ob-Gyns have increased by as much as $50,000 from 2001. Again, further increases are expected next year.
According to a separate survey by the Metropolitan Medical Society of Greater Kansas City, 40% of practices are looking for new coverage because their insurer has stopped writing medical liability coverage.
Page 92 PREV PAGE TOP OF DOC Predictably, an access crisis to needed health care is developing. The St. Joseph Health Center in Kansas City recently lost another trauma doctor. It is now down to three. The situation is even worse because a local nearby trauma center has been virtually shut down, meaning St.Joseph's must treat double the number of patients, and it is having trouble finding other surgeons willing to cover trauma.
According to the St. Louis Business Journal, access issues are spreading. Dr. John Anstey, an obstetrician/gynecologist, recently faced a difficult choice. He knew he had to cut expenses after learning his medical malpractice insurance premium, which cost about $26,000 this year, would jump to $50,000 next year. Consequently, he closed his office in St. Ann effective July 30th. Previously, Anstey and his partner, Dr. Fred Monterubio, Jr., deliver about 400 babies a year through their practice, St. Ann OB/GYN. As a stopgap measure, Drs. Anstey and Monterubio were forced to move their practice to a hospital-based setting where they await news of their 2003 premium by October.
The current medical liability insurance market in Missouri is extremely tight, with at least three insurers having pulled out of the market over the past year.
Intermed Insurance Company, based in Springfield, is the largest provider of medical liability insurance coverage in Missouri. The Missouri Department of Insurance said the company had a 34 percent market share in 2001. The company imposed an 18 percent hike, effective July 1, and also put a moratorium on writing new business in Missouri.
Andy Bennett, president and chief executive of Intermed, said rates went up because the severity, or average amount paid per settlement or verdict, has continued to go up fairly dramatically in Missouri. St. Louis Business Journal.
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The ''Tar Heel'' state is on the verge of lapsing into a full-scale medical liability crisis that could seriously endanger access to needed health care.
Hospitals in the Charlotte area are currently facing liability insurance premium increases of up to 400% this year.
Dr. Harold Pollard, a physician with Lyndhurst Gynecological Associates, said ''North Carolina is on its way to being one of those crisis states.'' Dr. Pollard has said that liability costs are creating a shortage of necessary health care services. ''What that results in is a lack of good obstetricians. We have counties in this State that have no obstetricians.''
Recently, Dr. John Schmitt, an Ob-Gyn whose insurance premiums tripled from $17,000 to $46,000, causing him to give up his practice to join the medical school faculty at the University of Virginia. Former patient Laurie Peel said, ''he was a great doctor. When you are a woman, you try to find a gynecologist who will take you through lots of things in life. I suffered a miscarriage. You develop a relationship with your doctor. To lose someone like that is very hard.'' Charlotte Observer, Jul. 25, 2002.
According to the North Carolina State Administrative Office of the Courts, the number of medical malpractice lawsuits filed has increased 18 percent in the past five years.
A greater number of medical malpractice lawsuits are ending in multi-million jury awards or settlements across North Carolina. In 2001, 21 lawsuits in North Carolina resulted in multi-million awards or settlements. According to N.C. Lawyers Weekly, the top five recoveries ranged from $4.5 million to $15 million.
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Facing a 660% increase in medical liability premiums from $53,000 to $350,000 a year, a practicing physician who runs a chain of six North Carolina urgent care clinics fears that soon he will have to stop practicing medicine and close his clinics' doors. He needs liability coverage for both himself and nine other physicians employed by the clinics. For this year, the insurer agreed to renew at a 79 percent increase, allowing the clinics to stay open for now. Increases like this will make staying in business and treating patients very difficult if not unsustainable.
Oklahoma physicians are beginning to face problems in obtaining affordable medical liability coverage. The Oklahoman, July 17, 2002
According to The Tulsa World, that makes Oklahoma one of 30 states with a problem in this area.
The World cites the example of a Tulsa pediatrician whose malpractice insurance doubled this year. The Oklahoman, July 17, 2002
Oklahoma pediatricians have far less to worry about than the State's obstetricians and surgeons, whose rates in Oklahoma in 2003are expected to rise by 25 percent to 30 percent, says the Oklahoma State Medical Association.
Page 95 PREV PAGE TOP OF DOC The medical liability crisis is rapidly spreading to the Palmetto State.
A 10-physician OB/GYN group in Columbia had to take out a $400,000 loan this year to continue to provide OB services and pay malpractice premiums.
In rural Oconee County, just four physicians deliver babies now, down from 11 physicians one year ago.
A family practice group in Seneca was forced to drop OB coverage for four of their six physicians because of skyrocketing premiums. There are currently a total of four physicians in Seneca treating pregnant women.
A solo practitioner practicing geriatrics in Charleston has had to quit treating patients in nursing homes because of high premiums.
Professional liability premiums for physicians in Tennessee have been steadily rising in recent years.
According to State Volunteer Mutual Insurance Company, which covers most practitioners in Tennessee, premiums have increased by 45% over the past three years, in order to keep up with rapidly escalating losses in medical liability lawsuits.
Only approximately 4% of this 45% increase was related to lower investment yield, with the remainder being due to increasing medical malpractice losses. (State Volunteer Mutual Insurance Company is a policyholder owned mutual company with no outside investors).
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In recent years both juries and judges in Tennessee have made multi-million dollar awards for non-economic damages, over and above a patient's actual economic losses.
In one recent case, a jury awarded only $25,000 in economic damages but awarded non-economic damages of $1.6 million.
Another case resulted in a jury award of $100,000 economic loss and $1.9 non-economic damages.
A judge in another cases awarded $1,062,080 in economic loss and gave $4.5 million in non-economic damages. Yet another court awarded $687,691 in economic loss and gave $3 million in non-economic damages. One other jury awarded $7,811 in economic loss and a staggering $2.65 billion in non-economic damages.
Award in PI and wrongful death cases are dramatically increasing. Tennessee's Administrative Office of the Courts reported that in FY 2001, even though fewer cases were disposed of in Tennessee than in the previous fiscal year, damages awarded statewide were more than $94 million, representing an increase of more than $51 million over the previous year. These totals were the largest since the courts began reporting these statistics.
According to the same report, the average award for FY01 was $209,284 up $95,064 from the previous year.
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The current medical liability insurance crisis continue to show that events in one State can have a devastating effect and cause severe problems elsewhere.
The failure of medical liability insurer, PHICO, which was shut down by the Pennsylvania Insurance Department on February 1 of this year, left more than a quarter of Vermont's physicians scrambling for medical liability insurance.
Whenever medical liability insurance becomes too expensive or difficult to obtain, access to needed health care is threatened and typically results.
Physicians in Virginia are starting to see the warning signs of a full-blown medical liability crisis that has engulfed their neighbors to the north in West Virginia, Pennsylvania and other States. The telltale sign is a sharp upswing in liability premiums. Over the past two years physician premiums have increased on average over 30 percent.
For some specialists, medical liability premiums in Virginia have increased upwards of 60 percent for this same recent two-year period.
A case in point is Manuel Belandres, MD, a general surgeon who was is in the twilight of his career but still practicing until recently when he was unable to obtain tail coverage. He subsequently closed his practice rather than expose himself to open-ended future liability.
Page 98 PREV PAGE TOP OF DOC In Virginia's western border, many physicians are no longer treating West Virginia patients who cross the State-line due to aggressive personal injury attorneys attempting to bring suit against Virginia physician in West Virginia courts. This has further aggravated the access problem for pregnant West Virginia Medicaid patients, in particular, and their access to needed care.
Mr. SMITH. Mr. Smarr.
STATEMENT OF LAWRENCE E. SMARR, PRESIDENT, PHYSICIAN INSURERS ASSOCIATION OF AMERICA
Mr. SMARR. Thank you, Mr. Chairman. I am Larry Smarr, president of the Physician Insurers Association of America. The PIAA is an association comprised of professional liability insurance companies owned and/or operated by physicians, dentists, hospitals and other health care providers.
The PIAA members can be characterized as health care professionals caring for the professional liability risks of their colleagues; doctors insuring doctors, hospitals insuring hospitals. But we believe that the physician-owned/operated insurance company membersthat PIAA insures over 60 percent of America's doctors.
Over the past 3 years, medical liability insurers have seen their financial performance deteriorate substantially, due to the rapidly rising costs of medical liability claims. According to A.M. Best, the leading insurance industry rating agency, the medical liability insurance industry incurred $1.53 in losses for every dollar of premium it collected in 2001. The industry data for 2002 is not yet available, but we expect this to be a losing year as well.
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The primary driver of the deterioration in the medical malpractice insurance performance has been paid claims severity, or the average cost of a paid claim. This has been confirmed by the president of the National Association of Insurance Commissioners in his February 7, 2003, letter to Senator Gregg, which is attached to my written testimony. Exhibit A, and you have these exhibits before you, shows the average dollar amounts paid in indemnity to plaintiffs on behalf of individual physicians since 1988. The mean payment amount has risen by a compound annual growth of 6.9 percent over the past 10 years, as compared to 2.6 percent for the Consumer Price Index.
The data for this exhibit comes from the PIAA data-sharing project, a medical cause of loss database which was created in 1985 for the purpose of identifying common trends among malpractice claims, which are used for patient safety purposes by the PIAA member companies.
To date over 180,000 claims and suits have been reported. One very troubling aspect is the proportion of those claims and suits filed which are ultimately determined to be without merit. As shown on Exhibit B, 61 percent of all claims closed in 2001 were dropped or dismissed by the court. An additional 5.7 percent were won by the doctor at trial. Only 33 percent of all claims were found to be meritorious, with most of these being paid through settlement. When claims were concluded at verdict, the defendant prevailed an astonishing 80 percent of the time.
As shown on Exhibit C, the mean settlement amount on behalf of an individual defendant was just over $299,000. Most medical malpractice cases have multiple defendants, and thus these values are below those which may be reported on a case basis. The mean verdict amount last year was almost $497,000.
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Exhibit D shows the mean expense payment for claims by category of disposition. As can be seen, the cost for taking a claim for each doctor named in a case all of the way through trial is fast approaching $100,000.
Exhibit E shows the distribution of claims payments at various payment thresholds. It can be readily seen that the number of larger payments, represented by the top segments on this exhibit, are growing as a percentage of the total number of payments. This is especially true for payments at or exceeding $1 million, which comprise almost 8 percent of all claims paid on behalf of individual doctors in 2001, as shown on Exhibit F. This percentage has doubled in the past 4 years.
Investment income is very important to insurers. We rely on it to offset premium needs. Medical malpractice insurers are 80 percent invested in high-grade bonds and have not lost large sums in the stock market. Brown Brothers Harriman, a leading investment and asset management firm, in a recent investment research report states that over the last 5 years the amount medical malpractice companies have invested in equities has remained fairly constant.
In 2001, the equity allocation was 9 percent. As Exhibit G shows, medical liability insurance companies invested significantly less in equities than did all property casualty insurers. While insurers' interest income has declined due to falling market interest rates, when interest rates declined, bond values increased. This has had a beneficial effect in keeping total investment income level when measured as a percentage of total assets. This is shown on Exhibit H. Thus the assertion that insurers have been forced to raise their rates because of bad investments is simply not true.
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The PIAA firmly believes that the adoption of effective Federal health care liability reforms as embodied in H.R. 5 will have a demonstrable effect on professional liability costs. The keystone of these reforms is the $250,0000 cap on noneconomic damages as passed in California over 25 years ago. These reforms are similar to the provisions of H.R. 4600 passed by the House last year and scored by the CBO as providing over $14 billion in savings to the Federal Government, an additional $7 billion to the States, because tort reforms works.
Using annual data published by the NAIC, Exhibit I documents the savings California practitioners and health care consumers have enjoyed since the enactment of MICRA over 25 years ago. As noted by the Chairman at the opening, total malpractice premiums reported to the NAIC since 1976 have grown in California by 167 percent, while premiums for the rest of the Nation have grown by 505 percent. These savings are clearly demonstrated in the rates charged to California doctors as shown on Exhibit J.
Successful experience in California and other States with tort reform, such as Wisconsin makes it clear that MICRA style tort reforms do work without lowering health care quality or limiting access to care.
The PIAA strongly urges Members of the Committee to support and adopt H.R. 5, which will ensure full payment of a truly injured patient's economic losses, as well as up to a quarter of a million dollars in noneconomic damages, thereby assuring fair compensation for patients, and also assuring Americans that they will be able to receive necessary health care services. Thank you.
Page 102 PREV PAGE TOP OF DOC Mr. SMITH. Thank you, Mr. Smarr.
[The prepared statement of Mr. Smarr follows:]
PREPARED STATEMENT OF LAWRENCE E. SMARR
Chairman Sensenbrenner, Congressman Conyers and Committee Members, I am Lawrence E. Smarr, President of the Physician Insurers Association of America (PIAA). Thank you for allowing me the opportunity to appear before you today and speak about the need for the enactment of H.R.5, The Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2003.
As we all know, professional liability insurance premiums for doctors and hospitals are rapidly rising in many states to levels where they cannot afford to pay them. These increased premiums are caused by the ever-increasing size of medical liability insurance payments and awards. The unavoidable consequence is that physicians are moving away from crisis states, reducing the scope of their practices, or leaving the practice of medicine altogether. Likewise, hospitals are being forced to close facilities and curtail high-risk services because they can no longer afford to insure them.
DOCTORS INSURING DOCTORS
The PIAA is an association comprised of professional liability insurance companies owned and/or operated by physicians, dentists, and other health care providers. Collectively, our 43 domestic insurance company members insure over 300,000 doctors and 1,200 hospitals in the United States and our nine international members insure over 400,000 health care providers in other countries around the world. The PIAA member insurance companies can also be characterized as health care professionals caring for the professional liability risks of their colleaguesdoctors insuring doctors, hospitals insuring hospitals. We believe that the physician owned/operated company members of the PIAA insure over 60% of America's doctors. Unlike the multi-line commercial carriers, medical liability insurance is all that the PIAA companies principally do, and they are here in the market to stay.
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The PIAA was formed 26 years ago at a time when commercial insurance carriers were experiencing unanticipated losses and exited the market, leaving doctors, hospitals and other health care professionals no choice other than to form their own insurance companies. A quarter century has passed, and I am proud to say that the insurers who comprise the PIAA have become the driving force in the market, providing stability and availability for those they insure.
When the PIAA and many of its member companies were formed in the 1970's, we faced a professional liability market not unlike that which we are experiencing today. At that time, insurers, all of which were general commercial carriers, were experiencing rapidly increasing losses, which caused them to consider their continuance in the market. Many of the major carriers did indeed exit the market, leaving a void that was filled by state and county medical and hospital associations across the country forming their own carriers. Again we see the commercial carriers, such as St. Paul, exiting the market. But, this time, the provider owned carriers are in place and are indeed providing access to insurance and stability to the market.
Unfortunately, the recent exodus from and transformation of the market is of such magnitude that the carriers remaining do not have the underwriting capacity to take all comers. Facing ever-escalating losses of their own, many of the carriers remaining in the market are forced to tighten their underwriting standards and revise their business plans with regard to their nature and scope of operations. This includes the withdrawal from recently expanded markets, which adds to the access to insurance problem caused by carriers exiting altogether.
My goal here today is to discuss what the PIAA sees as the underlying causes of the current medical liability crisis. I want to stress that I believe that this situation should be characterized as a medical liability crisis, and not a medical liability insurance crisis. The PIAA companies covering the majority of the market are in sound financial condition. The crisis we face today is a crisis of affordability and availability of insurance for health care providers, and more importantly, the resulting growing crisis of access to the health care system for patients across the country.
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INSURANCE INDUSTRY UNDERWRITING PERFORMANCE
Medical liability insurance is called a long-tail line of insurance. That is because it takes on average two years from the time a medical liability incident occurs until a resulting claim is reported to the insurer, and another two and one-half years until the average claim is closed. This provides great uncertainty in the rate making process, as insurers are forced to estimate the cost of claims which may ultimately be paid as much as 10 years after the insurance policy is issued. By comparison, claims in short-tail lines of insurance, such as auto insurance, are paid days or weeks after an incident.
Over the past three years medical liability insurers have seen their financial performance deteriorate substantially due to the rapidly rising cost of medical liability claims. According to A.M. Best (Best), the leading insurance industry rating agency, the medical liability insurance industry incurred $1.53 in losses and expenses for every dollar of premium they collected in 2001. While data for 2002 will not be available until the middle of this year, Best has forecast that the industry will incur $1.41 in losses and expenses in 2002, and $1.34 in 2003. The impact of insurer rate increases accounts for the improvement in this statistic. However, Best also calculates that the industry can only incur $1.14 1/2 in losses and expenses in order to operate on a break-even basis. This implies that future rate increases can be expected as the carriers move toward profitable operations.
The physician owned/operated carriers that I represent insure a substantial portion of the market (over 60%). Each year, an independent actuarial firm (Tillinghast Towers-Perrin) provides the PIAA with a detailed analysis of annual statement data filed by our members with the National Association of Insurance Commissioners (NAIC). This analysis is very revealing with regard to the individual components of insurers financial performance.
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Exhibit 1 below details the operating experience of 32 physician owned/operated insurance companies included in the analysis. A widely relied upon insurance performance parameter is the combined ratio, which is computed by dividing insurers' incurred losses and expenses by the premiums they earn to offset these costs. For these companies, this statistic has been deteriorating (getting larger) since 1997, with major increases being experienced in 2000 and 2001.
For calendar year 2001, the combined ratio (including dividends paid) was 141, meaning that total losses and dividends paid were 41% more than the premiums collected. Even when considering investment income, net income for the year was a negative ten percent. This follows a meager 4 percent net income in 2000. This average experience is indicative of the problems being experienced by insurers in general, and demonstrates the carriers' needs to raise rates to counter increasing losses. All of the basic components of the combined ratio calculation (loss and loss adjustment expense, underwriting expense) have risen as a percentage of premium for all years shown. The only declining component has been dividends paid to policyholders.
To compare this group of PIAA companies with the industry, Exhibit 2 is taken from the 2002 edition of Best's Aggregates and Averages. This shows that medical malpractice is the least profitable property and casualty line of insurance in 2001, following reinsurance, which has been greatly impacted by the World Trade Center losses. The adjusted combined ratio for the entire industry is 153, as compared to 141 for the PIAA carriers represented on Exhibit 1.
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THE ROLE OF INVESTMENT INCOME
Investment income plays a major role for medical liability insurers. Because medical liability insurance is a ''long tail'' line of insurance, insurers are able to invest the premiums they collect for substantial periods of time, and use the resulting investment income to offset premium needs. As can be seen on Exhibit 3, investment income has represented a substantial percentage of premium, and has played a major role in determining insurer financial performance. However, investment income as a percentage of premium has been declining in recent years primarily due to historic lows in market interest rates.
Contrary to the unfounded allegations of those who oppose effective tort reforms, medical liability insurers are primarily invested in high grade bonds and have not lost large amounts in the stock market. As can be seen in Exhibit 4, the carriers in the PIAA survey have been approximately 80% invested in bonds over the past seven years.
As shown on Exhibit 5, stocks have averaged only about 11% of cash and invested assets, thus precluding major losses due to swings in the stock market. Unlike stocks, high grade bonds are carried at amortized value on insurer's financial statements, with changes in market value having no effect on asset valuation unless the underlying securities must be sold.
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The experience of the PIAA carriers is confirmed on an industry-wide basis through data obtained from the NAIC by Brown Brothers Harriman, a leading investment and asset management firm. Brown Brothers reports that ''Over the last five years, the amount medical malpractice companies has invested in equities has remained fairly constant. In 2001, the equity allocation was 9.03%.'' As Exhibit 6 shows, medical liability insurers invested significantly less in equities than did all property casualty insurers.
Brown Brothers states that the equity investments of medical liability companies ''. . . had returns similar to the market as a whole. This indicates that they maintained a diversified equity investment strategy.
The Brown Brothers report further states:
Since medical malpractice companies did not have an unusual amount invested in equities and what they did was invested in a reasonable market-like fashion, we conclude that the decline in equity valuations is not the cause of rising medical malpractice premiums.
While insurer interest income has declined due to falling market interest rates, when interest rates decline, bond values increase. This has had a beneficial effect in keeping total investment income level when measured as a percentage of total invested assets. This is shown in Exhibit 7 below. Thus, the assertion that insurers have been forced to raise their rates because of bad investments is simply not true.
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THE INSURANCE CYCLE
Opponents of effective tort reform claim that insurance premiums in constant dollars increase or decrease in direct relationship to the strength or weakness of the economy, reflecting the industry's investment performance. The researchers at Brown Brothers also tested this theory, and found no correlation between changes in generally accepted economic parameters (Gross Domestic Product (GDP) and 5-year treasury bond rates) with direct medical liability premiums written. In fact, Brown Brothers conducted 64 different regression analyses between the economy, investment yield, and premiums, and found no meaningful relationship. The report produced by Brown Brothers states:
Therefore, we can state with a fair degree of certainty that investment yield and the performance of the economy and interest rates do not influence medical malpractice premiums.
A key measure of financial health is the ratio of insurance loss and loss adjustment expense (amounts spent to handle claims) reserve to surplus. This ratio has deteriorated (risen) for the PIAA carriers since 1999 to a point where it is approximately two times the level of surplus, as shown on Exhibit 8 below.
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The relationship between reserves (amounts set aside to pay claims) and surplus is important, as it is a measure of the insurer's ability to contribute additional amounts to pay claims in the event that original estimates prove to be deficient. At the current approximately two-to-one ratio, these carriers in aggregate are still in sound financial shape. However, any further deterioration in surplus due to underwriting losses will cause a deterioration in this important benchmark ratio indicating an impairment in financial condition. Under current market conditions, characterized by increasing losses and declining investment interest income, the only way to increase surplus is through rate increases.
Net premiums written as compared to surplus is another key ratio considered by regulators and insurance rating agencies, such as A.M. Best. This statistic for the companies in the PIAA survey has also been deteriorating (rising) since 1999, showing a 50% increase in the two years ending in 2001. The premium-to-surplus ratio is a measure of the insurer's ability to write new business. In general, a ratio of one-to-one is considered to be the threshold beyond which an insurer has over-extended its capital available to support its underwritings.
As can be seen on Exhibit 9, this statistic has also deteriorated, and the carriers in aggregate are approaching one-to-one. As the carriers individually approach this benchmark, they will begin to decline new risks, causing further availability problems for insureds. Rate increases the carriers are taking also have an impact on this important ratio as well as new business written.
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THE CAUSE OF THE CRISIS
The effects described in the previous pages were caused by the convergence of six driving factors making for the perfect storm, as follows:
Dramatic long term paid claim severity rise
Paid claim frequency returning and holding at high levels
Declining market interest rates
Exhausted reserve redundancies
Rates becoming too low
Greater proportion of large losses
The primary driver of the deterioration in the medical liability insurance industry performance has been paid claim severity, or the average cost of a paid claim, and their associated expenses. The National Association of Insurance Commissioners (NAIC) confirmed this in a February 7, 2003 letter to Senator Judd Gregg, which states in part: ''The preliminary evidence points to rising loss costs and defense costs associated with litigation as the principal drivers of medical malpractice prices.'' (letter attached)
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Exhibit 10 shows the average dollar amount paid in indemnity to plaintiffs on behalf of individual physicians since 1988. The mean payment amount has risen by a compound annual growth of 6.9% during this period, as compared to 2.6% for the Consumer Price Index (CPIu). The data for Exhibit 10, as well as that for slides which follow, comes from the PIAA Data Sharing Project. This is a medical cause-of-loss database, which was created in 1985 for the purpose of identifying common trends among malpractice claims. PIAA member companies use the database for risk management and patient safety purposes. To date, over 180,000 claims and suits have been reported to the database.
Allocated loss adjustment expenses (ALAE) for claims reported to the Data Sharing Project have also risen at alarming rates. ALAE are the amounts insurers pay to handle individual claims, and represent payments principally to defense attorneys, and to a lesser extent, expert witnesses. Average amounts paid for three categories of claims are shown below. As can be seen, the average amount spent for all claims in 2001 has risen to just under $30,000.
One very troubling aspect of medical malpractice claims is the proportion of those filed which are ultimately determined to be without merit. Exhibit 12 shows the distribution of claims closed in 2001 as reported to the PIAA Data Sharing Project. Sixty-one percent of all claims filed against individual practitioners were dropped or dismissed by the court. An additional 5.7% were won by the doctor at trial. Only 33.2% of all claims closed were found to be meritorious, with most of these being paid through settlement. Of all claims closed, more than two-thirds had no indemnity payment to the plaintiff. When the claim was concluded at verdict, the defendant prevailed an astonishing 80% of the time. This data clearly shows that those attorneys trying these cases are woefully deficient in recognizing meritorious actions to be pursued to conclusion.
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Analyses performed by the PIAA have shown that of all premium and investment income available to pay claims, only 50% ever gets into the hands of truly injured patients, with the remainder being principally paid to attorneys, both plaintiff and defense. Something is truly wrong with any system that consumes 50% of its resources to deliver the remainder to a small segment of those seeking remuneration.
A review of the average claim payment values for the latest year reported to the PIAA Data Sharing Project (2001) is revealing. As shown on Exhibit 13, the mean settlement amount on behalf of an individual defendant was just over $299,000. Most medical malpractice cases have multiple defendants, and thus, these values are below those, which may be reported on a per case basis. The mean verdict amount last year was almost $497,000 per defendant.
Exhibit 14 shows the mean expense payment for claims by category of disposition. As can be seen, the cost of taking a claim for each doctor named in a case all the way through trial is fast approaching $100,000.
Exhibit 15 shows the distribution of claims payments at various payment thresholds. It can be readily seen that the number of larger payments are growing as a percentage of the total number of payments.
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This is especially true for payments at or exceeding $1 million, which comprised almost eight percent of all claims paid on behalf of individual practitioners in 2001 (Exhibit 16). This percentage has doubled in the past four years, and clearly demonstrates why insurers are facing dramatic increases in the amounts they have to pay for reinsurance. While medical liability insurers are reinsured by many of the same companies having high losses from the World Trade Center disaster, their medical liability experience was rapidly deteriorating prior to September 11, 2001.
In addition to rising claim severity, like all other investors, medical liability insurers have faced declining market interest rates. Eighty percent of PIAA insurers' investments are placed in high-grade bonds. Exhibit 17 shows the long-term decline in high-grade bond earnings. As can be seen, this is not a recent phenomenon, but a long term trend.
Critics of the medical liability insurance industry say that insurers' reliance on investment income to offset premiums has caused turmoil in the marketplace, implying that the use of investment income is a bad thing. Nothing could be further from the truth. If insurers did not ever use investment income to offset premium needs, then rates would always be 3040% higher than otherwise necessary. The role market interest rates play in determining pricing in medical liability insurance (and other lines as well) is a fact of life which we cannot control.
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Medical liability insurers and their insureds have faced dramatic long-term rises in paid claim severity, which is now at historically high levels. Paid claim frequency (the number of paid claims) is currently remaining relative constant, but has risen significantly in some states. While interest rates will certainly rise and fall in future years, nothing has been done over the past three decades to stem the ever-rising values of medical malpractice claim payments or reduce the number of meritless claims clogging up our legal system at great expenseexcept in those few states that have effective tort reforms. In many states not having tort reforms, costs have truly become excessive, and insurers are forced to set rates at levels beyond the abilities of doctors and hospitals to pay. States having tort reforms, such as California, provide a compelling example that demonstrates how such reforms can lower medical liability costs and still provide adequate indemnification for patients harmed as a result of the delivery of health care.
The following reforms are those which the PIAA advocates be adopted at the federal level, which we also feel should be the standard for any state reforms enacted. They are based on the reforms found in the Medical Injury Compensation Reform Act (MICRA) which became effective in California in 1976 and which have been successful in compensating California patients and ensuring access to the health care system since their enactment.
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The keystone of the MICRA reforms is the $250,000 cap on non-economic damages (pain and suffering) on a per-incident basis. Under MICRA, injured patients receive full compensation for all quantifiable damages, such as lost income, medical expenses, long-term care, etc. In addition, injured patients can get as much as one-quarter million dollars for pain and suffering. Advising juries of economic damages that have already been paid by other sources serves to reduce double payment for damages. An important component of MICRA is a reasonable limitation on plaintiff attorney contingency fees, which can be 40% or more of the total amount of the award. Under MICRA, a trial lawyer must be satisfied with only a $220,000 contingency fee for a $1 million award.
A Gallup poll published on February 5, 2003 by the National Journal indicates that 57% of adult Americans feel there are too many lawsuits against doctors, and 74% feel that we are facing a major crisis regarding medical liability in health care today. Seventy-two percent of respondents favored a limit on the amount that patients can be awarded for their emotional pain and suffering. Only the trial lawyers and their front groups disagree, seeing their potential for remuneration being reduced. Especially displeasing to them is MICRA's contingency fee limitation, which puts more money in the hands of the injured patient (at no cost reduction to the insurer).
The U.S. House of Representatives adopted legislation containing tort reforms similar to MICRA, including a $250,000 cap on non-economic damages, for the seventh time in September of last year. HR 4600, known as the HEALTH Act, was introduced and adopted on a bi-partisan basis. The Congressional Budget Office (CBO) conducted an extensive review of the provisions of HR 4600, and reported to Congress that if the reforms were enacted, ''. . . premiums for medical malpractice insurance ultimately would be an average of 25 percent to 30 percent below what they would be under current law.''
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The CBO found that HR 4600 reforms would result in savings of $14.1 billion to the federal government through Medicare and other health care programs for the period 20042012. An additional $7 billion of savings would be enjoyed by the states through their health care programs. The CBO's analysis did not consider the effects that federal tort reform would have on reducing the incidence of defensive medicine, but did acknowledge that savings were likely to result.
The US Department of Health and Human Services published a report on July 24, 2002, which evaluated the effects of tort reforms in those states that have enacted them. As stated in Exhibit 20, HHS found that practitioners in states with effective caps on non-economic damages were currently experiencing premium increases in the 1215% range, as compared to average 44% increases in other states.
Annual data published by the National Association of Insurance Commissioners (NAIC) also documents the savings California practitioners and health care consumers have enjoyed since the enactment of MICRA over 25 years ago. As shown in Exhibit 21, total medical liability premiums reported to the NAIC since 1976 have grown in California by 167%, while premiums for the rest of the nation have grown by 505%. These savings can only be attributed to MICRA.
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These savings are clearly demonstrated in the rates charged to California doctors as shown in Exhibit 22. Successful experience in California and other states makes it clear that MICRA style tort reforms do work without lowering health care quality or limiting access to care.
PROP 103 HAD NO EFFECT ON CALIFORNIA MEDICAL LIABILITY PREMIUMS
In an effort to derail desperately needed tort reforms as described above, the Association of Trial Lawyers of America and related individuals and groups have stated that the beneficial effects of MICRA as shown on Exhibit 21 are due to Proposition 103, a ballot initiative passed in 1988 aimed primarily at controlling auto insurance costs. The ballot initiative passed by a 51% majority vote, with voters in only 7 of California's 58 counties approving the measure. The major changes made by Prop 103 include:
Making the insurance commissioner of California an elected, rather than appointed, official;
Giving the insurance commissioner authority to approve rate changes before they can take effect;
Requiring insurers to reduce rates by 20 percent from their levels on November 8, 1987;
Page 118 PREV PAGE TOP OF DOC Requiring auto insurance companies to offer a 20 percent ''good driver discount.''
Requiring auto insurance rates to be determined primarily by four factors;
Allowing for payment of ''intervenor fees'' to outside groups that intervene in hearings conducted by the Department of Insurance.
Medical liability insurers were not the intended target of Prop 103, but were covered by the resulting regulations. However, Prop 103 did not have any substantive effect on reducing medical liability insurance rates. Prop 103 did have the effect of freezing most insurance rates in California until as late as 1994. This all came at a time when medical liability insurers across the nation were seeing their rates level off or even decline.
Prop 103 added a provision to the California Insurance Code at Section 1861.01, which required insurers to roll back their rates to 20 percent lower than those in effect on November 8, 1987. However, this is not what happened to medical malpractice insurers.
One major California insurer, the NORCAL Mutual Insurance Company reached the very first consent agreement of any insurer with the California Department of Insurance in November of 1991. To satisfy the requirements of Prop 103, NORCAL was specifically permitted to declare a one-time 20% return of premium for policyholders insured between November 8, 1988 and November 8, 1989 as a dividend by March 31, 1992. NORCAL was not required to roll back its rates as a result of Prop 103. As NORCAL was already paying dividends exceeding 20% per year during the period in question, no additional monies were returned to policyholders as a result of Prop 103. The experience of other California physician owned companies, such as The Doctors' Company and the Medical Insurance Exchange of California, was similar to that of NORCAL. Even if California medical liability insurers had been required to reduce rates by 20%, this in no way could explain the wide gap in experience shown on Exhibit 21.
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Increasing medical malpractice claim costs, on the rise for over three decades, have finally reached the level where the rates that insurers must charge can no longer be afforded by doctors and hospitals. These same doctors and hospitals cannot simply raise their fees, which are limited by government or managed care companies. Many doctors will face little choice other than to move to less litigious states or leave the practice of medicine altogether.
Legislators are now challenged with finding a solution to the medical liability insurance affordability and availability dilemmaa problem long in coming that has truly reached the crisis stage. The increased costs being experienced by insurers (largely owned/operated by health care providers) are real and documented. It is time for Congress to put an end to the wastefulness and inequities of our tort legal system, where only 50% of the monies available to pay claims are paid to indemnify the only 30% of claims filed with merit and the expenses of the remainder. The system works fine for the legal profession, which is why trial lawyers and others fight so hard to maintain the status quo.
The PIAA strongly urges members of the House to pass effective federal health care liability reform, thereby stopping the exodus of health care professionals and institutions which can no longer afford to fund an inequitable and inefficient tort system which benefits neither injured plaintiffs or the health care community.
Mr. SMITH. And thank you all again for your testimony.
Page 120 PREV PAGE TOP OF DOC Mr. Smarr, let me direct my first question to you, and it is this: We know for a fact, for example, that jury awards have doubled in the last 5 years. We also know that 70 percent of all lawsuits filed against health care providers result in no payment; they may be frivolous. Those are going to have a dramatic impact on insurance premiums. So my question is this: If we enact the HEALTH Act, if that becomes law, do you expect the medical malpractice insurance premiums to at least not increase as projected, to increase as fast as expected?
Mr. SMARR. Yes. We expect that if the HEALTH Act is adopted, and it stands constitutional challenge, that we will see medical malpractice stop their increase, and we will ultimately see medical malpractice premiums go down. The Congressional Budget Office in its scoring of H.R. 4600 stated that if that bill were passed into law, that malpractice premiums would be 25 to 30 percent lower than they would otherwise have been.
Mr. SMITH. Dr. Palmisano, if the HEALTH Act becomes law, what impact will that have on health care available to Americans generally, and also specifically to health care available to women, lower-income individuals, and those who live in rural areas?
Dr. PALMISANO. Passage of H.R. 5 would have a favorable effect on access to care. And the States that have stable liability climates, California, Louisiana, Indiana, New Mexico, Colorado and Wisconsin, are States that have patients who have access to care. So it would be very favorable.
Mr. SMITH. Thank you, Dr. Palmisano.
Mrs. Dyess, you today were speaking not only on behalf of your husband, but on behalf of thousands and thousands of other individuals who might not have received proper care because of a broken health care system, and you obviously feel that it is not the fault of the doctors that a specialist was not available to help your husband when he needed help. A lot of people would have suggested that you file suit against the hospital. Why did you not think this was the proper action to take?
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Ms. DYESS. Never entered my mind. It nevermy husband's care was of utmost importance to me. I felt like the hospital did everything they possibly could do in order to get him the help that he needed to have.
Mr. SMITH. You feel it wouldn't solve the problem for you to file suit because a specialist wasn't available?
Ms. DYESS. Filing a suit is not going to bring back my husband's brain. It is not going to help anything. It is not the right thing to do. It is not their fault.
Mr. SMITH. And again, though, your point is that you want to make proper care available to more people, and the way to do that is not to have doctors' insurance premiums go up so much that they are either priced out of the market, they don't practice medicine, or they reduce their practice.
Ms. DYESS. Absolutely.
Mr. SMITH. Thank you, Mrs. Dyess.
Mrs. Keller, it is my understanding that no settlement or award has been determined in your case yet; is that right?
Ms. KELLER. That is correct. Still in the court system.
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Mr. SMITH. I also recognize that whatever the amount might be, you would gladly trade it to have your health back and a normal life back as well?
Ms. KELLER. Exactly.
Mr. SMITH. You also, I assume, want the victims of medical malpractice to be compensated, and I would have to say that we all do. If physicians have made a mistake, the victims ought to be compensated. But I just wanted to also make you aware that in the HEALTH Act that we are considering today, a lot of the expenses that you thought were not going to be covered will, in fact, be covered. Any expense you have a receipt for, any health care provider that helps you with chores, all of those individuals, you will be reimbursed for the cost of all of those individuals. So it is maybe not as limited as you might think.
I also wanted to point out, in the time that I have left, that just because there is a cap on noneconomic damages doesn't mean there can't be fair and sufficient and adequate awards. The three examples that occurred in California just in the last year, you had a 5-year-old boy who received the $84 million that I mentioned in my statement, a 3-year-old girl received $59 million, and a 30-year-old homemaker with brain damage received over $12 million.
In other words, you do get compensated for lost wages, for all medical care, for all rehabilitation expenses and so forth. Obviously that can amount to tens of millions of dollars. So I don't want you to think that you are going to be left with an inadequate amount under the HEALTH Act that we are having a hearing on today. There can oftentimes be very substantial compensation, and that is simply the point I wanted to make.
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But, again, thank you for your very compelling testimony here today. That concludes my questions.
The gentleman from Michigan, the Ranking Member of the Judiciary Committee.
Mr. CONYERS. I will yield to Mr. Berman.
Mr. SMITH. The gentleman from California, Mr. Berman, is recognized for his questions.
Mr. BERMAN. Well, thank you very much, Mr. Chairman.
Dr. Palmisano, what this legislation does is essentially takes a number of the changes made in California law in 1975 and seeks to provide it as a Federal law that would preempt any less strict limits that now exist in the other 49 States; is that a fair statement?
Dr. PALMISANO. It is my understanding, sir, that this law hasthat this bill, H.R. 5, has a flexibility provision. So if the State of Florida, Michigan, Colorado, whatever, that if they wanted to have a cap of $500,000, the legislature could do that. It also provides
Mr. BERMAN. What, if they have a cap of $500,000 now?
Page 124 PREV PAGE TOP OF DOC Dr. PALMISANO. It would remain in place.
Mr. BERMAN. What if they don't have a cap?
Dr. PALMISANO. The Federal law, H.R. 5, if it was enacted into law, would be the cap for that State. They would have the flexibility to change it.
Mr. BERMAN. And if it were a $5 million cap on pain and suffering?
Dr. PALMISANO. If it was a $5 million cap in that State, it would remain a $5 million cap in that State.
Mr. BERMAN. You are telling States who may not like the $250,000 cap on pain and suffering, if you can put a bill through and get it signed into law prior to the effective date of this law, that cap is okay?
Dr. PALMISANO. No, sir. They can do it after the law, too. If this becomes law, they
Mr. BERMAN. The only thing you can't do is be uncapped? You can have a cap that has never been reached, but you can't be uncapped; is that what you are saying?
Dr. PALMISANO. Yes, sir. For instance
Page 125 PREV PAGE TOP OF DOC Mr. BERMAN. Okay. Good.
When California passed its billfirst, I think we should just note for the record that the Majority staff report incorrectly states, not intentionally, I think they picked up a Health and Human Services Department report, I guess isthe Department of HHS, in order to sort of stick it to them in a way, said that while Henry Waxman, Chairman of the Select Committee on Medical Malpractice in 1973 and 1974, proposed the limits that became MICRA that are now this law. And specifically the cap on pain and suffering of $250,000, Health and Human Services got it wrong, and as a result of that, this Committee analysis is in error in that sense, because the select Committee never proposed a limit on pain and suffering of $250,000.
But that law at that time created a whole series of other changes, strengthened medical discipline, made it easier to discipline bad doctors, provided higher levels of immunity to physicians on a hospital committee who could then testify about the practices of a doctor that they felt should have his privileges revoked, and protect those people against being sued by that doctor, far greater reporting requirements. In other words, there was a notion, yes, we are going to put some limits on the liability system, but we recognize the problem of doctors who aren't performing up to a reasonable standard, and we are going to make it tougher for them to practice medicine.
I notice nothing in this bill that dealsseeks to federalize the program or compel States to have certain standards of discipline and reporting for doctors who are not meeting the appropriate standard of care.
And I guess aren't you a little embarrassed that you are cherry-picking a series of provisions here, claiming that California has had great success? You have produced charts, you point out those limits, you claim you are taking those limits and putting them in Federal law, collateral source rule, periodic payments, cap on pain and suffering, limitations on contingency fees, and then totally ignoring any efforts to try and strengthen regulation of the medical profession such as was done in California, including even things like allowing other physicians to have immunity if they seek to revoke a bad physician's malpractice. Aren't you a little embarrassed by that?
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Dr. PALMISANO. Well, the California MICRA law has the elements that you mentioned, the periodic payments, the contingency fee
Mr. BERMAN. Tougher medical discipline, tougher immunity provisions to protect doctors who want to testify, requirements that every hospital report to the State board of medical quality assurance acts of negligence and malpractice suits. Aren't you embarrassed that those aren't in this bill?
Dr. PALMISANO. I am not embarrassed, because the Health Care Quality Improvement Act, which was a Federal law, which was passed later than that, requires that any dollar paid on behalf of a physician gets reported to the Federal Government, and also gets reported to the State board of medical examiners.
And so we strongly support State boards of medical examiners being adequately funded to do the proper investigation so that every case is looked at by the State board to make sure if there is any disciplinary situation that needs to be done or anyone's license revoked
Mr. BERMAN. Would you be willing to incorporate thosethe reporting requirements, to the extent that they are stronger than that exists at Federal law now, the reporting requirements, the immunity provisions, and the disciplinary authorities mandating that any State that wants to take advantage and have these limits apply also adjust their laws to provide that level of protection against malpracticing physicians? Would you be willing to accept that kind of an amendment to this legislation?
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Dr. PALMISANO. Well, the AMA policy would be to look at any language that was offered. We do know that we support the
Mr. BERMAN. How about a top-of-the-head reaction?
Dr. PALMISANO. Well, I am not speaking for myself. I am speaking for the American Medical Association. The American Medical Association believes in strong physician discipline, and we have policy on that. It is all on the AMA Website in Policy Finder. We also strongly support patient safety. That is why we founded the National Patient Safety Foundation.
Mr. BERMAN. And where State law doesn't meet the kinds of requirements that exist in MICRA, could I thenwould it be logical to conclude that it would be appropriate for the Federal Government to mandate that each State meet that minimum standard of discipline, regulation, immunity, encouraging testimony by other physicians?
Dr. PALMISANO. Again, anything that would be offered would be reviewed by the AMA to see how it fits for policy.
Mr. BERMAN. Thank you for your helpful advice.
Mr. SMITH. Thank you, Mr. Berman. The gentleman from Florida, Mr. Keller, is recognized for his questions.
Page 128 PREV PAGE TOP OF DOC Mr. KELLER. Thank you, Mr. Chairman.
I can tell you there absolutely is a medical liability crisis in my home State of Florida. Just this week our major hospital in my district, Orlando Regional Medical Center, announced it will close its Level 1 Trauma Center, which is the only center within 3 or 4 hours to treat head injuries such as those suffered by Mrs. Dyess' husband because the neurosurgeons can no longer pay the medical liability premiums. So it is a real problem facing a lot of physicians throughout this country.
I appreciate you, Mrs. Keller. I especially like your last name. I appreciate your courage, which it took quite a bit to come here and testify today. I know everybody is very sympathetic to your case.
The Chairman pointed out that we don't yet have a verdict or settlement amount in your case, but you said if you had Bill Gates' money, you wouldn't trade it for your injuries. I agree. You seem like a straightforward person. The challenge facing those of us in Congress, though, is if we allowed a jury to give you Bill Gates' money, which is approximately $40 billion, then you are still not going to be made whole, that hospital is going to be shut down, and thousands of people are going to be denied access to medical care.
Ms. KELLER. And so what we have got to do is find the strike zone somehow, so that you are at least fairly compensated and yet we still have access to health care and us to of people who need it, and so we are trying to sort our way through this to make sure we get the fairest result.
Page 129 PREV PAGE TOP OF DOC I would like to play devil's advocate a little bit, Mr. Smarr, to you and ask you a few questions here. Some say that if Congress passes this $250,000 cap on noneconomic damages, the insurance companies aren't going to pass on these savings to the doctors. They are just going to put it in their pocket and they won't lower premiums. What do you say to that?
Mr. SMARR. I don't believe that that is correct. As I have testified, the majority of doctors in America are insured by companies that are owned and are operated by doctors. These companies operate largely for the benefit of their insureds and are dedicated to providing a stable market and charging a fair price for their insurance. And once this law goes into effect, this is going to enhance competition. The insurers that have gotten out of the market are going to come back in; and that competition, if for no other reason, that competition is going to drive prices down.
Mr. KELLER. To the best of your knowledge the insurance companies you represent will lower their premiums?
Mr. SMARR. I believe they will once they can be assured that the law sticks.
Mr. KELLER. Let me ask you something else that opponents of this legislation point out. They say insurance companies are just jacking up doctors' premiums this year because they lost a bunch of money in the stock market, not because of any medical liability crisis. What do you say to that?
Mr. SMARR. There are two comments here. First of all, insurers have not lost large amounts in the stock market; they are primarily invested in bonds. And secondly, the State insurance departments which approve rates will not allow an insurer to take any type of prior-year losses, whether it be from underwriting or investment, and impute those values in their future rates. It would be illegal for them to do that.
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Mr. KELLER. So when you say ''a small percent in the stock market,'' give me an idea; for example, one of your major companies, what percent?
Mr. SMARR. Ten percent of their investments are in equities.
Mr. KELLER. Okay. And over 90 percent aren't, then.
Mr. SMARR. Ninety percent aren't. That is correct.
Mr. KELLER. Okay. Another thing opponents say is that that 1975 California law, MICRA, that capped the noneconomic damage at 250 really didn't have anything to do with the malpractice premiums being stabilized in California. It was really Prop 103, a constitutional amendment which dealt mostly with car insurance, I guess. But they are saying that is what held medical liability insurance premiums down. What are your thoughts on that?
Mr. SMARR. Well Prop 103 had nothing to do with it. As you state, it was an auto initiative primarily. However, all property and casualty insurance conditions were covered by its provisions. Prop 103 required that insurers roll back their rates to 20 percent below those in effect on, I believe it was, November 8 of 1987. Prop 103 was passed in 1988. This was immediately challenged by the insurance industry. And not until 1991 was some progress made in this regard. The very first insurance company that reached agreement with the California insurance commissioner about how to handle Prop 103 was one of my members called NorCal Mutual Insurance Company. NorCal reached a consent agreement with the commissioner whereby they were required to refund 20 percent of 1 year's premiums, which they could then pay as a normal dividend, but they were not required to roll back their rates at all. At that point in time, NorCal was paying far in excess of 20 percent annual dividends per year.
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Mr. KELLER. So if it had any effect, it would have only been for 1 year.
Mr. SMARR. And really had no effect. It was part of the normal dividend cycle. Same thing true for other carriers.
Mr. KELLER. Let me ask one more question. Dr. Palmisano, some say that this sort of tort reform, this 250 cap on noneconomic damages should be left up to the States; that the Federal Government shouldn't be meddling. Let me close by asking your thoughts. Is this an appropriate bill for Congress to be considering?
Dr. PALMISANO. Yes, sir, we believe it is. We believe that it affects Medicare beneficiaries. It affects the major health programs that I mentioned earlier, and we know that there is a crisis in 18 States now. And some States have not been able to make changes, and we are concerned about access to care for patients. So we believe it is a Federal question.
Mr. SMITH. Thank you, Mr. Keller. The gentleman from New York, Mr. Nadler, is recognized for his questions.
Mr. NADLER. Thank you. Thank you, Mr. Chairman. I think it was Dr. Palmisanoyou were testifying or answering the questions of the gentleman from California a few moments ago about noneconomic damages. You testified that under this bill, it would not preemptthat the bill, the limit of $250,000 for pain and suffering for noneconomic damages would not preempt State laws that were more permissive; is that correct?
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Dr. PALMISANO. That is correct.
Mr. NADLER. So if a State nowtraditionally State laws leave it up to the jury and the courts and have no dollar limit in the bill or in the law. Is it your testimony that this wouldthat that would prevail over the $250,000 limit in this bill?
Dr. PALMISANO. No. The intent of my statement is that if there is noif there is a cap, then that cap would prevail in that particular State.
Mr. NADLER. If there is a specific money cap listed in the law.
Dr. PALMISANO. Yes. If there is no cap, then this would become the level.
Mr. NADLER. Okay. Thank you. Let me ask you the following: A number of studies have shown over the yearsI particularly remember the Harvard study when I was in the New York Legislature in 1985 and we put some rather, I don't remember what they were, but major changes in the law at that time. They were supposed to keep malpractice rates down. And we also ordered a study by Harvard which turned out to say that the major problem, or a major problem, was that a very small proportion of doctors unpoliced by any discipline system were causing a very large proportion of the awards, and that the premiums were high because this very small number of doctors were not properly disciplined.
This morning, in this morning's New York Times, Dr. Sidney Wolfe of the Public Citizen Health Research Group brings up some more modern statistics. He says from 1990 to 2002, 5 percent of doctors were involved in 54 percent of the payouts, including jury awards and out-of-court settlements, according to the National Practitioner Data Bank of the Department of HHS. Of the 35,000 doctors with two or more payouts during that period, only 8 percent were disciplined by State medical boards in any way. Of the 2,80027,744 doctors who have made payments in five or more cases, five or more judgments or settlements in which they had to make payments, only 463, or less than about 20 percent, 1 out of 6, less than 20 percent had been disciplined.
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Would you comment on the assertion, the finding of the Harvard study, the assertion currently that one of the major problemsone of the major jobs, real causes, of what we all agree are high medical insurance premium rates are the failures of the States or the medical societies perhaps to crack down on the relatively small numbers of doctors who perhaps shouldn't be practicing?
Dr. PALMISANO. Well, Mr. Nadler, first off, the American Medical Association supports strong State medical boards, and we know that any payments paid on behalf of a doctor goes before the State medical board. The National Practitioner Data Bank, the problem with the dataand the Government Accounting Office when they studied the National Practitioner Data Bank pointed this outis that a physician can be listed as having multiple claims, when in reality the physicianit may only be one incident. And so if differentif different entities such as an excess carrier pays on behalf of the physician, that gets counted as a claim. If the primary carrier pays some money or if the physician also has to pay some money, that will all get counted as a claim.
Mr. NADLER. As a separate claim.
Dr. PALMISANO. It gets counted.
Mr. NADLER. And there is no way of culling the data to see how many actual claims there were.
Dr. PALMISANO. That is what the Government Accounting Office criticized the National Practitioner Data Bank. The other thing, sir, about that is that it doesn't differentiate. It doesn't list the specialties. We were very much interested when we heard about that. We wanted to find out who these individuals were, their specialties and so on. And we know, for instance, in south Florida, a recent study done in South Florida points out that every neurosurgeon has been sued in this study and the average number of suits against neurosurgeons is five in south Florida.
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And so we certainly
Mr. NADLER. But that is not the average number of payouts.
Dr. PALMISANO. No, sir. No, an average number of suits. And we know in the Harvard study that you mentioned, that one of the lead authors, Dr. Troy Brennan, a very respected researcher at Harvard, Dr. Brennan wrote in that study that what they found in that study, that there was no statistical correlation with payment, either as a result of a jury award or the insurance company, and negligence. What they did find a direct correlation with was disability. And I had the privilege to be on a panel, a roundtable Secretary Thompson called a couple of months ago, and Dr. Brennan was on the panel with me. And I asked him if he still agreed, believed that; and he said yes, he did.
Mr. NADLER. All right. Let me, before my time runs out, ask you one more quick question because this goes to the heart of this.
Mr. SMITH. Mr. Nadler. Without objection, the gentleman is recognized for an additional minute.
Mr. NADLER. Thank you, sir. Thank you, Mr. Chairman. We have any number of statements here which I am not going to read for interest of time, by all kinds of insurance companies, saying that tort reform that specifically limits noneconomic damages would not result in lowerthat they could not promise lower rates, they could not promise that rates wouldn't go up as fast as otherwise. The bill does not require any accountability by insurance companies, and in fact we know that the truly severe cases where there are large noneconomic damages are a small percentage of all claims and the medical liability premium dollar that pays the compensation is dwarfed by the portion that pays for a lot of other things.
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Given this, why are you so certain that even if we were tothat a limit on noneconomic damages would in fact result in a solution or any major part of a solution to the premium problem?
Dr. PALMISANO. Thank you, Mr. Nadler. The reason we believe that is we have observed a quarter of a century of history, looking at California, looking at my State of Louisiana, and looking at Wisconsin, looking at Indiana, and looking at New Mexico, and that is exactly what happened. In 1975 California was among the highest. If you went to Los Angeles as an obstetrician or you went to Miami as an obstetrician, what happened was over these 25, 27 years, now they are paying $210,000 in south Florida and the obstetricians in Los Angeles will pay anywhere from 57 to 60 or $70,000 per premium. So we believe it works. It certainly worked in our case in Louisiana. Once the law was passed, my premiumsI didn't have to carry excess insurance anymore. My premiums dropped in half.
Mr. SMITH. Thank you, Mr. Nadler.
The gentleman from North Carolina, Mr. Coble, is recognized for his questions.
Mr. COBLE. Thank you, Mr. Chairman. Thank the witnesses. Mr. Chairman, last Congress I voted for this med/mal bill in Committee because I felt like it deserved full House floor attention. When it came to the House floor, you may recall, I voted against it because I have problems with legislatures imposing caps. I believe when we insert legislative oars into those waters, we are invading waters that ought to be more or less exclusively reserved for juries. That is my philosophical hang-up.
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Now, am I not concerned? You bet I am. When I see that specialists are forced to terminate their practices, as you pointed out at the outset, Mr. Chairman, that results in a crisis and that does bother me. I am also informed by the coalition supporting the bill that most of the malpractice cases are either dismissed or settled prior to trial. Well, even if that is the case, I recognize that defendants incur costs even if it never goes to a jury.
But Dr. Palmisano, if you know, of those that are finally litigated and jury awards are forthcoming, do you have any idea what the average jury award would be? And if you don't, you can get back to us.
Dr. PALMISANO. We will be glad to supply any data we have, but I believe Mr. Smarr has some figures that would answer that.
Mr. COBLE. Mr. Smarr, do you have that?
Mr. SMARR. Yes, sir, I do. The mean verdict against an individual practitioner
Mr. COBLE. Oh, you may have said that earlier but repeat it for me, if you will.
Mr. SMARR. It is $496,726 in 2001, and there is usually more than one defendant in any case.
Page 137 PREV PAGE TOP OF DOC Mr. COBLE. Mrs. Keller, the physician you mentioned in your testimony, does she continue to practice medicine?
Ms. KELLER. Yes, sir, she does. With more malpractice lawsuits filed this year against the same doctor.
Mr. COBLE. In what State does she practice?
Ms. KELLER. Georgia.
Mr. COBLE. Dr. Palmisano, you indicated that the crisis Stateshave been 8 or 10 additional States added to that list if I am not mistaken in recent days, in fact, and the total is now how many?
Dr. PALMISANO. It is 18, sir. Six additional States were added. We will be glad to leave a map with the Committee.
Mr. COBLE. Yeah. In fact I am familiar with that.
Dr. PALMISANO. Yes, sir.
Mr. COBLE. And even though, folks, I have problems with the capping and I hope you all understand that, I just think that ought to be a jury question. Not to say that I am uncaring or insensitive, Mrs. Dyess, for example, about your situation. My gosh, you and Mrs. Keller have brought compelling arguments that support either side of this issue. And if there was ever an issue before us, Mr. Chairman, that invites compelling arguments supporting each side, I think it is the matter that we have before us today, and I very much appreciate you all being here.
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Mr. Chairman, I appreciate the very precise manner in which you are conducting this hearing and I yield back my time before the red light appears.
Mr. SMITH. It is much appreciated, Mr. Coble. Thank you.
The gentleman from Virginia, Mr. Scott, is recognized for his questions.
Mr. SCOTT. Thank you, Mr. Chairman.
Mr. Smarr, what portion of your income is investment income as opposed to the difference between the premium and the expected payments?
Mr. SMARR. In 2001, the insurers that I represent collected 31 cents for every dollar in investment income for every dollar of premium which they collected. They incurred losses in the neighborhood of, and Iit is in my written testimony, actually.
Mr. SCOTT. Well let meyou said $1.53 for every dollar you collected in premium. Are those the numbers you said?
Mr. SMARR. That is for the industry as a whole, yes. That includes the commercial carriers.
Mr. SCOTT. Now, were you making money doing that?
Page 139 PREV PAGE TOP OF DOC Mr. SMARR. Absolutely not.
Mr. SCOTT. How long were you charging onlyhow long were you charging only a dollar for $1.53 in premiums in payouts?
Mr. SMARR. How long?
Mr. SCOTT. Yes.
Mr. SMARR. That statistic is called the ''combined ratio,'' and we have seen that deteriorate over the past 4 or 5 years. The industry turned to negative profitability last year.
Mr. SCOTT. I mean you makeI mean you can collect less than you pay out and still make money, isn't that right?
Mr. SMARR. Because we have investment income; that is correct.
Mr. SCOTT. Okay. And you are collecting, knowing you were collecting a dollar for $1.53 in expenses, you are going to make up the rest in investments; isn't that right?
Mr. SMARR. That is the intent, yes.
Mr. SCOTT. Okay. Now you mentioned 6.9 percent inflation.
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Mr. SMARR. The average cost of a paid claim is going up by 6.9 percent per year.
Mr. SCOTT. And you compared that to the Consumer Price Index.
Mr. SMARR. 2.6 percent.
Mr. SCOTT. Did you compare it to the Health Consumer Price Index?
Mr. SMARR. No, I did not.
Mr. SCOTT. Wouldn't that be a more accurate figure to compare it to?
Mr. SMARR. I don't believe it would, sir.
Mr. SCOTT. Okay. On the collateral source rule, if a wrongdoer has created the problems, the plaintiff has paid a premium for the benefit of insurance. Why shouldn't either the plaintiff get benefit for that payment or at least get a lower premium because Blue Cross/Blue Shield will get their money back?
Mr. SMARR. In health insurance, claims are paid relatively soon after the incident, if you will, occurs. Oftentimes they are paid withinwell, we would hope within a week or a month or within the same year. It takes over 5 years to conclude a medical malpractice case after the time of the incident. And the various flows of cash to pay for the premiums actually through the market, adjust themselves to accommodate the true costs of the insurance.
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Mr. SCOTT. So you are saying that the wrongdoer ought to get benefit from the plaintiffstwo equal plaintiffs, one with health insurance and one without, the benefit of the health insurance ought to go to the wrongdoer and not to the plaintiff, or Blue Cross/Blue Shield getting the money back?
Mr. SMARR. No, sir I am not; I don't look at it in
Mr. SCOTT. Under this bill, who gets the benefit of the insurance? The wrongdoer, isn't that right?
Mr. SMARR. The wrongdoer pays for the insurance.
Mr. SCOTT. No, the wrongdoer, if there is aif you caused a million dollars' worth of damage and the plaintiff has a million dollars' worth of health insurance, who gets the benefit of the health insurance? There are three possibilities. One, the wrongdoer gets the benefit. Two, the plaintiff gets the benefit. And third, Blue Cross/Blue Shield can get their money back after the wrongdoer has paid. Your idea is that the wrongdoer should get the benefit.
Mrs. Keller, can you state with specificity what portion of your damages were caused by the physician, the hospital, the hospital personnel and the ambulance personnel?
Ms. KELLER. Well
Page 142 PREV PAGE TOP OF DOC Mr. SCOTT. I guess not. That would be an impossible burden for you to fulfill, wouldn't it.
Ms. KELLER. Correct. There is nohowever, I cannot legally hold the ambulance liable even though I was given the bill to pay.
Mr. SCOTT. And if everybody pointed at the ambulance as the cause for your problem, you wouldn't know one way or the other.
Ms. KELLER. Exactly. I also cannot
Mr. SCOTT. Wait a minute. Mr. Smarr, can you explain what the rationale is to force the plaintiff to go all over to figure out who did what and have a separate duty of care, violation of duty of care, and proximate cause for each of what in her case could be any number of different persons?
May I ask for 1 additional minute, Mr. Chairman.
Mr. SMITH. The gentleman from Virginia is recognized for an additional minute.
Mr. SMARR. I am not a lawyer but it is my understanding that the courts routinely do apportion fault.
Mr. SCOTT. Now, on a joint and several, and you know thison a joint and several, if you get one of them good, they are responsible for the full damage. And if they want to get contribution then they go chasing after everybody on their dime, not on the plaintiff's dime. Can you explain to me what the rationale is to force the plaintiff, who doesn't knowall they know is they went in and an operation was botched. Why is it their responsibility to apportion how much of it was the anesthesiologist, how much of it was the surgeon, how much of it was the nurse; having to call in extra witnesses to prove each and every step of the way, and if they miss 5 percent, then all the rest just pay 95 percent? What is the purpose of that?
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Mr. SMARR. Well, first of all, plaintiff attorneys normally name many defendants in a case, many who were not even involved in the case sometimes. Secondly, it is not the plaintiff's responsibility to apportion fault. That is the duty of the court. The court does that.
Mr. SCOTT. Well the court does it based on the evidence. Mr. Chairman, the witness is not being
Mr. SMITH. Mr. Scott
Mr. SCOTT. Can I make
Mr. SMITH. I think the witness has done the best he can to answer the question. But the gentleman is recognized for one last question.
Mr. SCOTT. He did the best he could because he didn't want to answer the question.
The court makes the decision based on the evidence that is presented. If no evidence is presented then the plaintiff, with the burden of proof, loses. And if you have got 5 percent over here and 10 percent over there and 8 percent over here, and if you don't prove the 3 percent over there, then you lose on the 3 percent. If everybody is pointing to an empty chair or a bankrupt or uninsured person, then the plaintiff will lose that little 3 or 5 percent. The normal law is under joint and several, and this is how you apportion insurance anywayif you get one you have got them all. And if they want contribution then they go chasing after everybody. But you put that burden where the plaintiff doesn't know anything about what happened. Isn't that an unfair claim?
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Mr. SMARR. I don't understand. If somebody is not responsible, then why should they have to pay?
Mr. SCOTT. If they are not responsible, they don't have to pay at all.
Mr. SMARR. I believe that is true, yes.
Mr. SMITH. And, Mr. Scott, the gentleman's time has expired.
Mr. SCOTT. But they don't have to apportion it.
Mr. SMITH. The gentleman from Ohio, Mr. Chabot, is recognized for his questions.
Mr. CHABOT. Thank you, Mr. Chairman. I think we all appreciate you holding this very important hearing on a topic that is clearly timely.
While the issues of rising health care cost and dramatic increases in medical malpractice rates are a national problem, families in my district back in Cincinnati, they have been especially hard hit by this crisis. I have spoken with dozens of families who are not only facing large increases in their insurance premiums, but who are finding it increasingly difficult to find specialists to treat their families. I have also met with many doctors in my district and they are extremely concerned about the rising cost of medical malpractice insurance and the potential long-term effects on patient care.
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Excessive medical liability costs have had a serious impact on the health care system in Cincinnati. Medical malpractice insurance rates have skyrocketed in recent years and patients are paying the price, unfortunately. And insurance costs rise to astronomical levels. Health care providers have been forced to pass those costs on to their patients and cut back on services and even taken the drastic step in many instances of closing their practices. And I have had a number of doctors that have told me that is what they have had to do as a result of this.
Today Dr. Palmisano has testified that patient access to care had reached the crisis level in Ohio and in 17 additional States, due to unrestrained medical malpractice litigation. According to the October 2002 Medical Liability Monitor, Ohio ranked among the top five States for premium increases.
In Cincinnati, in my district, physician groups have experienced premium increases between 20 and 100 percent in recent years. But Cincinnati is not the only community confronting this issue, as we know. This rising cost of medical liability insurance is a growing national problem and it requires a national solution, and that is why we are here today.
Just a couple of questions. Dr. Palmisano, and Mr. Smarr, you had a chart up here before, ''America's Medical Liability Crisis: A National View.'' I wonder if somebody could put that chart back up for a moment. The white States which are at this point currently okay according to the chart. Now obviously, California is one in which the reform has already been underin effect for 25 years now. Could you touch on the other States. Are there any similarities? Why the other States; Colorado, New Mexico, Louisiana, Wisconsin and Indiana also seem to be in better shape than the other States?
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Dr. PALMISANO. Yes, sir. Those are all States with caps. My State of Louisiana is a State that passed a cap in 1975. It is a total cap on damages, but future medicals as incurred vary similar to New Mexico's law. Colorado has a cap on noneconomic damages. Indiana has a total cap and Wisconsin has a cap on noneconomic damages.
Mr. CHABOT. Okay. Do any of the other States that are either in trouble, or the yellow States which it says they are showing problem signs but aren't necessarily in crisis like the red States, have any of those enacted any caps?
Dr. PALMISANO. Yes, sir, they have. Some of the States, for instance, Missouri, which has now become a crisis State, it has a cap. But the cap is a cap per individual, per claimant. So you could have multiple caps in one case. Nevada, which closed its level one trauma center on July 3, 2000 for 10 days, it went into special session and passed a cap but its cap is also per claimant and per doctor. So what we have found is that the caps that are fixed caps per incident are the ones that have resulted in stability.
Mr. CHABOT. Okay, thank you. Could you identify which physician specialties are most affected by the medical malpractice crisis that we are discussing today and why those particular areas would be in difficulty?
Dr. PALMISANO. Yes, sir. The obstetricians, the neurosurgeons, the emergency physicians, because these are the ones thatthe physicians who are involved with complicated procedures, with more risky cases, and the outcome sometimes is not theis not a complete cure. The neurologically impaired newborn, for instance, canif a baby is born with neurological impairments there can be multiple suits filed as a result of babies being born that way.
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A recent study by the AmericanACOG, the obstetricians, gynecologists, and the pediatricians, their recent studies show that the majority of these had nothing to do with events surrounding the birth of the child, but were for other reasons, in utero, when the baby was in the uterus.
Mr. CHABOT. Thank you. Mr. Chairman, I ask unanimous consent for 1 additional minute.
Mr. SMITH. Without objection, the gentleman from Ohio is recognized for an additional minute.
Mr. CHABOT. Thank you. Opponents of the HEALTH Act have claimed that capping noneconomic damages prevents patients from adequately recovering from their injuries. And as you have already discussed to some degree, there are still clearly some things which are not capped which there are no limits on. Would you discuss briefly, again, what you can recover for and where there are no limits?
Dr. PALMISANO. The only limit on the damages in H.R. 5 is the noneconomic damages, the ones that can't be quantified.
Mr. CHABOT. You are talking about pain and suffering.
Dr. PALMISANO. Pain and suffering-type damages. But certainly all medical costs, all rehabilitation, child care, and anything that can be economically documented. And I think Chairman Smith has pointed out cases in California where multiple millions of dollars have been awarded to an individual for the rehabilitation, medical expenses, and so on.
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Mr. CHABOT. Thank you very much.
Mr. SMITH. Thank you, Mr. Chabot. The gentlewoman from Texas, Ms. Jackson Lee, is recognized for her questions.
Ms. JACKSON LEE. Thank you very much, Mr. Chairman. I appreciate all of the witnesses' testimony this morning because this is an extremely painful process, particularly for the victims that are here. And certainly, Dr. Palmisano, I appreciate very much the concerns that physicians have. I interact extensively with my local medical community and realize the importance of having physicians based in the community, in the neighborhoods. And representing a particularly poor district in this Nation, we face the crisis of health care every day. And so I know this is an important hearing.
Let me start with Mrs. Keller, and I want to thank you very much. I am not sure if that is a picture of you behind you. Maybe I need to put onit is not yours. Thank you very much. I see that. But let me just raise this point with Mrs. Keller. As I understand it, you had initially a botched surgery that caused you to be in the doctor's office, and you were being examined. Is that correct? You were in the doctor's office?
Ms. KELLER. Yes, I was in the doctor's office. Whether or not the surgery itself was botched would be argumentative. No sutures were used underneath the layers, which is no longer substandard of care.
Ms. JACKSON LEE. So you were in there for an examination; is that correct? You were in there for an examination?
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Ms. KELLER. No, ma'am. I wasthe initial surgery, they did not use complete and total suturing procedures, which is what caused my wound adhesion there in the office a week later.
Ms. JACKSON LEE. Okay. And so you were inside an examining room. That is what I am trying to understand.
Ms. KELLER. Yes, ma'am.
Ms. JACKSON LEE. And then you lost consciousness and you fell.
Ms. KELLER. Yes, ma'am.
Ms. JACKSON LEE. Okay. The reason why I wanted to just get that clear is I wanted to sort of track the scenario. With that in mind, let me sort of call the roll of the many people that might be involved. I am not in any way suggesting that we have all these names, but the doctor whose examining room you were in, the nurses, the hospitals, and the surgical individuals who may have done the surgery, the nurses, as I said in the doctor's office, the ambulances, the ambulance drivers, the emergency room staff, physicians and doctors. Ultimately there is a long list that may have had some impact on your present condition.
Ms. KELLER. Exactly.
Ms. JACKSON LEE. During part of that time you were in great pain and during part of that time you were unconscious; is that correct.
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Ms. KELLER. Correct.
Ms. JACKSON LEE. So part of the legislation that we are now talking about would require you to have been at the fullest peak of your health, to have a notepad, taking notes, maybe even a camera, taking pictures through the entire process of this terrible tragedy that has befallen you; is that correct? Would that have had to be the case for you to be knowledgeable about who you would point the finger at if this legislation we are now having a hearing about would pass?
Ms. KELLER. Precisely.
Ms. JACKSON LEE. And let me offer to you my appreciation for your courage for being here. I want to cite for the record, Mr. Chairman, my State, the State of Texas, approximately 3 to 7,000 preventable deaths in Texas each year due to medical errors. The preventable medical errors in Texas cost between 1.3 billion to 2.2 billion. Medical malpractice insurance is 421.2 million. And we have found that medical malpractice claims have dropped in the last 2 consecutive years.
At the same time, we find that Texas is 49 in the quality of care. We find that Louisiana is 51, and California is 44. So it is interesting to note that States that have had an impact by medical malpractice changes or law changes are still at the bottom of the totem pole in terms of access to medical care or quality of care. And Texas, of course, remains at the bottom of the totem pole as well.
Page 151 PREV PAGE TOP OF DOC My question, then, is to Dr. Palmisano, to simply ask this one question. If, through the devices of the insurance companies, they could devise an investment formula or a pricing formula that would eliminate or bring down the costs of premiums across the Nation, would that be acceptable to the American Medical Association?
Dr. PALMISANO. Well, thank you for the question. The American Medical Association wants to make sure that patients have physicians, and so it is the escalating rates that cause us problems. We also are concerned about the number of cases that are filed.
Ms. JACKSON LEE. Doctor, you are not answering my question. If the insurance companies devise a formula that would bring down the rates, would that be acceptable to the American Medical Association?
Dr. PALMISANO. If they were reasonable rates and we didn't have a crisis, then the American Medical Association wouldn't be here today.
Ms. JACKSON LEE. Thank you. Mr. Chairman
Mr. SMITH. Thank you, Ms. Jackson Lee. The gentleman from Virginia, Mr. Goodlatte, is recognized for his questions.
Mr. GOODLATTE. Thank you, Mr. Chairman.
Gentlemen, I support this legislation because I believe that the caps are effective. I think the evidence points to that. We have a different type of a cap in Virginia and I think it has had some effect in Virginia, and I like the fact that that legislation provides some flexibility to the States to adjust the amount of the cap on noneconomic losses. But I am concerned that I don't think this legislation does a great deal to screen out the most frivolous and fraudulent lawsuits.
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If you open up the Yellow Pages here in Washington or any other city in the country, you will see ad after ad after ad and they have one common theme: It says, ''No fee if no recovery'' meaning, no risk to you. So, you know, if you think you have got a case, go ahead and take it. Now, the attorney has got to impose some screening because they are not going to want to take a lot of cases in which they get no recovery. However, given the pressures that are on insurance companies to settle these cases and given the fact that physicians hate to have cases settled that are essentially harmful to their reputation if they don't believe that any real malpractice has occurred, why isn't there something in this legislation to penalize those who bring truly frivolous or fraudulent lawsuits?
Right now in our Federal courts and I imagine in many State courts that mirror the rule 11 sanctions in Federal courts, those are very weak, they are very rarely applied, and why aren't there some greater sanctions in here; for example, some form of a loser-pays type of mechanism imposed upon those who bring frivolous cases that would encourage insurance companies, encourage doctors to be able to defend their case and if they win, recover some attorneys' fees and know that because of that risk, attorneys on the other side are going to be even more diligent in screening out those cases that have no merit?
Dr. PALMISANO. Thank you, sir. Well, certainly, the American Medical Association has policy regarding loser pays. It is not in this particular bill but we will be glad to submit to the Committee our policy on loser pays. We have policy on medicalI will read it to you just briefly.
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''Implementation of the Loser-Pays Rule in Medical Liability Litigation. Responsibility for prevailing party's legal expenses including attorneys' fees should not be shifted to a losing party in medical liability litigation unless (a), some provision is made for retrieving fees owed to a prevailing party from the losing party's attorney in the event the losing party has no available assets; (b), some provision is made to calculate fees owed to a plaintiff's attorney on the basis of a reasonable value of time expended regardless of the existence of a contingency fee arrangement.''
Mr. GOODLATTE. I would love to have a copy of that and I would suggest to you that the modified loser-pays provision that this Committee has passed out attached to other legislation, Y2K liabilities and tort reform passed during the Contract With America, would meet those criteria. And I would commend to you an examination of that, because I think that is a weakness in this matter.
The second thing that concerns me about this is on the other hand, I am not a strong believer in the Government stepping in and with regard to an individual's right to contract with somebody else, to interfere with that. And this bill does put caps on attorneys' fees. Every case is different and the merit of whether or not a particular case should be taken by an attorney based upon how much work is going to have to go into the case is measured into what kind of a contingent fee they will charge. And when you start capping that, you are, in my opinion, being unfair.
Now, I understand that the reason for doing that, at least one of the reasons is that you are in effect having the opportunity to reduce your overall costs if the overall amount of money that is paid out by insurance companies is reduced. But the samethe same standard applies, it seems to me to defense attorneys. Why aren't we capping that? So in my opinion, I would not cap defense attorneys' fees. I would also not cap plaintiffs' attorneys' fees, and I think that is a provision in here that I would prefer not to see.
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And I would welcome Mr. Smarr or Dr. Palmisano's response to that.
Mr. SMARR. Well, insurers try their best, I can assure you, to cap defense attorneys' fees. In fact, we pay very close attention to that. The plaintiff attorney fees in this bill are capped on a sliding scale such that the smaller amounts of indemnity amounts that might be paid, the plaintiff attorney gets a larger percentage of it. But even so, in a million dollar case, the plaintiff attorney still gets $220,000 in fees.
Mr. GOODLATTE. But, Mr. Smarr, there are million-dollars' cases and there are million-dollars' case. One might be a very open-and-shut type of case where you might think the attorney has been unjustly enriched with their fee, and there might be another million-dollar where it is $900,000 worth of economic loss, and the fact of the matter is that that attorney had to go to tremendous additional efforts to prove the case and to bring in a multitude of witnesses. There might be a multiple number of defendants in the case. And you are arbitrarily setting that fee based simply on the dollar amount in the case without recognizing the fact that there is different amounts of work in different cases; just like the defense attorney who in an open-and-shut million-dollar case will probably submit a small bill because the attorney didn't spend a lot of time on it, but another million-dollar case, the attorney might have a very substantial bill because a tremendous amount of time was put into it.
Mr. SMARR. I agree that there can be outliers, as you are describing. But I think the legislation is intended to treat the majority of cases that come forward in some rational manner, and this system has worked well in California for over 25 years.
Page 155 PREV PAGE TOP OF DOC Mr. SMITH. Thank you Mr. Goodlatte.
The gentleman from Massachusetts, Mr. Delahunt, is recognized for his questions.
Mr. DELAHUNT. Mr. Smarr, how do you feel about capping CEOs' salaries? You wouldn't.
Mr. SMARR. I don't think that would apply here.
Mr. DELAHUNT. Okay. I see it doesn't apply in this case. This legislation also benefits HMOs; is that correct? Mr. Smarr.
Mr. SMARR. Would you say that again, sir?
Mr. DELAHUNT. This particular proposal before us benefits HMOs; is that correct?
Mr. SMARR. To the extent that they are included in the malpractice claim, yes.
Mr. DELAHUNT. Thank you. There have been crises in the past, haven't there, in the mid-1970's and the mid-1980's?
Mr. SMARR. There have been periods where we have seen more rapid escalation of multi
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Mr. DELAHUNT. Let's call them crises. Would you agree with me there have been crises in the past.
Mr. SMARR. Not to the extent we are seeing today. But if you wish, yes.
Mr. DELAHUNT. Okay. Is part of the problem the factand you are correct in your statement in terms of percentage of bond holdings that various insurers and insurance companies hold, the interest rates have gone down.
Mr. SMARR. That is true.
Mr. DELAHUNT. And is that a significant piece of the problem?
Mr. SMARR. It is a piece of the problem, but at the same time bond values have gone up.
Mr. DELAHUNT. All right. I understand bond values, but in terms of the flow of cash and income, you know when we are getting 1, 1 1/2 percent as opposed to 6 or 7 percent, it creates a significant cash flow problem.
Mr. SMARR. We are getting 4 to 5 percent instead of 7.
Mr. DELAHUNT. I want to know where you are getting that 4 or 5 percent and I will change my portfolio accordingly.
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Mr. SMARR. Long-term corporate bonds.
Mr. DELAHUNT. Okay. But, again, those long-term corporate bonds, presumably 4 or 5 years ago you'd be getting 9 or 10 percent. What I am saying is that you know there is great disagreement in terms of what is causing this particular spike. But there have been crises in the past and we have worked our way out of them.
Let me ask you this. Your association, PIAA, is it a for-profit organization, oryou said it is owned by physicians and other stakeholders in the health care system.
Mr. SMARR. The PIAA is an association, is a 501(c)(6) nonprofit. The insurance company members are insurance companies, for-profit companies.
Mr. DELAHUNT. Okay. And those insurance companies were for profit. To a large degree, they are owned by physicians and other health care providers.
Mr. SMARR. Correct.
Mr. DELAHUNT. So they are making a profit obviously on the return of their investment.
Mr. SMARR. Yes, sir. It is necessary that they make a profit. Especially
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Mr. DELAHUNT. Okay. Thank you. That is all, I just wanted to know.
Why 250,000? How was that calculated in terms of a cap?
Mr. SMARR. Two hundred fifty thousand is the cap, as you know, that was enacted in California.
Mr. DELAHUNT. But wasn't that enacted back in 1975?
Mr. SMARR. Yes, it was.
Mr. DELAHUNT. Okay. That is all. I am justI just want to continue because, again, we don't have too much time. I have seen various studies, and maybe you could help me with this, that indicate that deaths as a result of medical malpractice vary from 48,000 annually to 98,000 annually. Which is the right figure? Mr. Smarr.
Mr. SMARR. Well, the 98,000 figure comes from an extrapolation of data of the Harvard medical practice study. In that study, 171 people were determined to have died partially because of
Mr. DELAHUNT. Which figure do you accept?
Mr. SMARR. I don't accept either one of them, sir.
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Mr. DELAHUNT. You don't?
Mr. SMARR. No. There is some number. I agree that there is some number, but I don't accept
Mr. DELAHUNT. Is it closer to 48,000 or closer to 98,000?
Mr. SMARR. I do not know.
Mr. DELAHUNT. You don't know. Okay. In terms of confidentiality agreements, I understand most of these settlements that are made are subject to a confidentiality agreement. Would you have any objection to an amendment to the bill that would allow confidentiality agreements be at the discretion or at the option of the patient?
Mr. SMARR. I can't comment on that because I am just not aware of the nature of those agreements.
Mr. DELAHUNT. Okay. And the statute of limitations, why 3 years? What iflet me give you a hypothetical. What if, for example, the injury is not discovered during the course of a 3-year period?
Mr. SMARR. It's my understanding it is 3 years from the time the injury manifests itself.
Page 160 PREV PAGE TOP OF DOC Mr. DELAHUNT. No, you are wrong. It is from the time the injury occurred. Would you be willing to change that, 3 years from the date that the injury manifests itself?
Mr. SMARR. I would have to go and look at the legislation, sir.
Mr. DELAHUNT. Okay. I just have one final question if I may. If 1 year after you found outand, Mrs. Dyess, I know, believe me.
Mr. SMITH. Will the gentleman from Massachusetts yield and I will read to him from the legislation?
Mr. DELAHUNT. Iwhat I would like to do is have an additional minute because I know my questions, and I just want to
Mr. SMITH. Let me read from the legislation and I will be happy to grant you an additional minute.
Mr. DELAHUNT. Thank you.
Mr. SMITH. The time for the commencement of a health care lawsuit shall be 3 years after the date of manifestation of injury or 1 year after claimant discovers, or, through the use of reasonable diligence, should have discovered the injury.
Now the gentleman is granted an additional minute.
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Mr. DELAHUNT. Well, I thank my friend, the Chairman. I reallyand I know we all sympathize with what you are saying, and it really is a problem that has to be addressed in terms of access to health care. I recently met a woman who had a son; his name, Steve Olsen. He is a 12-year-old from San Diego who is blind and brain damaged because of medical negligence. It was proven. When he was 2 years old, he fell on a stick in the woods. Steve's doctor gave Steve steroids and sent him home. Although his parents asked for a CAT scan, the doctor refused. The following day Steve returned to the hospital in a coma because of the growing brain abscess he had developed which would have been detected had the CAT scan been performed. At trial, the jury concluded that the doctor had committed medical malpractice and awarded $7.1 million in noneconomic damages. Remember, this is a 12-year-old. One of the jurors later explained that they saw Steve as a boy doomed to a life of darkness, loneliness, and pain. He would never play sports, work, or enjoy normal relationships with his peers. He would have to endure a lifetime of treatment, therapy, prosthesis fitting, and around-the-clock supervision. The judge, however, was forced to reduce that damage award to $250,000 because of the cap in California. What do you say to that mother? What do we say to that mother?
Ms. DYESS. Do we ever hear about the good cases? Do we ever hear anything good about what doctors do? No, we are here to hear all the bad. We never hear about the good.
Mr. DELAHUNT. No, I am not here to bash or criticize doctors. And I even think Mrs. Keller in her testimony indicated that it was her neurosurgeon who worked a miracle. But this is aboutit is not about doctors. It is not about lawyers. It is not about anything. And it ought to be about potential victims and patients like your husband.
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I yield back.
Mr. SMITH. Thank you, Mr. Delahunt. The gentlewoman from Pennsylvania, Ms. Hart, is recognized for her questions.
Ms. HART. Thank you, Mr. Chairman.
Mr. Smarr, you noted in your testimony that 61 percent of medical malpractice claims are dropped or dismissed. Do you find that this is typical across the spectrum of tort claims in all different States? I am interested especially in Pennsylvania which is my home. Our insurance rates in Pennsylvania have increased over 125 percent over the last 4 years. Have the dropped or dismissed cases impacted our rate jump differently and is that a number that changes from State to State?
Mr. SMARR. It is a number that varies slightly from State to State. I spent 13 years working in the Pennsylvania market and the numbers there are very similar.
Ms. HART. Do you think that the dropped or dismissal rate is different in States, you know, some of the like white States, for example?
Mr. SMARR. I don't know. I would have to find out.
Ms. HART. I would be interested in knowing that.
Page 163 PREV PAGE TOP OF DOC Mr. SMARR. I can get that for you.
Ms. HART. If you could possibly find that out for us.
Ms. HART. Okay. Dr. Palmisano, I happen to be a graduate of a liberal arts college and as a result have a lot of friends who practice medicine now. They are all in pretty much a good spot in their careers, beginning to take over and beginning their own practices. One of my best friends is an OB-GYN who told me in November that she was going to cease practicing by the end of the year because she had lost insurance coverage and didn't see any hope of being able to regain it. Aside from that problemfortunately she found insurance at the very last minute and is still practicing, but at a much higher rate. Eighty percent of the doctors in Pennsylvania, according to the Pennsylvania Medical Society, say they can't even recruit new physicians for their practices. Do you see that trend in other States? Is it more acute in the red States such as mine?
Dr. PALMISANO. Yes, Ms. Hart. We see that in the States that are designated as red States in crisis. In Wheeling, West Virginia, for instance when I visited there and I met with the family practice residents, every one that Ithey brought the whole residency crew to meet me and every one of them said that they were not going to stay in West Virginia because of the liability situation. They were going to go somewhere where it was more stable.
Ms. HART. Okay. Then, as far as this issueand you say it is actually reaching pretty deeply into health care provision. Do you findand it seems to me, from what I have heard about Pennsylvania, for example, the Uniontown Hospital, which is in Fayette County, which is a very poor area, now doesn't provide any obstetric services. It seems that health care for the poor has actually been made significantly worse by this crisis. Do you see that happening in other regions across the country? Is it adversely affecting the poor even more?
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Dr. PALMISANO. Yes. We find that people who would volunteer to work in clinics are saying that they are unable to do this because of the liability problems and some of these clinics are closing. We have heard people come forward and say that they wouldn't be able to continue their services because of the liability for the clinic. We have had physicians come and give statements regarding volunteer work that they wanted to do as retired physicians and go into areas where they could help, where there was no available physicians in that area, that they arebecause of the liability climate they are unable to do that, and they want to do that. So there are a number of people that are willing to do that but they are just concerned about the liability system.
Ms. HART. I read recently in that vein, a story of a physician who had wanted to volunteer, had been consistently volunteering like 6 months at a time on Indian reservations providing medical services, and just recently, just couldn't do it because of the liability costs.
I have one quick final question, and that isactually I think probably both Mr. Palmisano and Mr. Smarrregarding the claim that California's success in this area is not really due to MICRA but due to Prop 103. Do either of you have a comment on that?
Mr. SMARR. Yes, I do. Prop 103, as I testified earlier, was an auto initiative that also included malpractice insurers. But the crux of this matter is that the malpractice insurers reached agreements with the insurance commissioner, and I have them here and I would like to present them to be included in the record, if you would, that they did not have to roll back their rates. They made a one-time return of premium equal to 20 percent of annual premium to be paid as a dividend. This happened at a time when the California malpractice carriers were paying dividends in excess of 20 percent. And so it was a way to break the logjam to get these unintended targets, or nontargets rather, out of the way and to go on and deal with the auto carriers which were the real focus of the issue. So that isit just didn't have an effect.
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Mr. SMITH. Thank you, Ms. Hart.
The gentleman from California, Mr. Schiff, is recognized for his questions.
Mr. SCHIFF. I thank the Chairman and in particular want to thank Mrs. Keller and Mrs. Dyess for coming today and sharing your personal stories with us. I am from California and very familiar with the MICRA law out there, and MICRA did impose $250,000 limits but that was a quarter of a century ago.
Doctor, why wouldn't it be appropriate in this bill to remedy what many in California see as a flaw of the MICRA bill, that MICRA never had a cost-of-living adjustment? Two hundred fifty thousand dollars in California a quarter of a century ago was very different than today. Why not add a COLA to this bill?
Dr. PALMISANO. That question comes up on a number of occasions and what we note is that the California market is stable. It is a proven treatment. We know that the Medical Society of New Jersey wanted some advice on some bills that were introduced in New Jersey and they called in Tilling Haas in the last couple of months, and they said that those particular bills would not lower rates. But, they did comment on caps. They said that a $250,000 fixed cap would stabilize the market and decrease the insurance rates, and they said as you increase the noneconomic cap to the point that when this reaches $500,000 it no longer has any effect. So, that is a recent study done by Tilling Haas.
Page 166 PREV PAGE TOP OF DOC Mr. SCHIFF. That really doesn't answer my question. If you put a COLA in this bill, then it doesn't get to $500,000 until so many years of cost-of-living increases have gone up. Why not have a cost-of-living adjustment in this? Plainly it would have the same effect on the insurance premiums. It might not be quite as dramatic as without the COLA, but isn't what really is going on here is that in California there has been an inability to pass a COLA because of the institutional difficulty of really changing anything in this area? And isn't the lack of a COLA in this bill really premised on the same presumption of inaction in Congress, that if we pass this bill with no COLA in it, it will be at least another quarter of a century before a COLA can be provided? What would be unfair about having a cost-of-living adjustment so that this amount is not static over the years?
Dr. PALMISANO. Well, you know, Missouri didthe State of Missouri did pass a cap withthat could increase the cost-of-living. And now they have becomethey are now over $500,000 with their cap and now have turned into a red State, a crisis State. Also in H.R. 5
Mr. SCHIFF. Doctor, is your contemplation, then, that this cap should go on indefinitely at this amount?
Dr. PALMISANO. It depends what the future holds. What we do know it has a flexi-cap provision.
Mr. SCHIFF. Well let me ask you, then, another question. I do think there is a crisis and a problem here. What I want to make sure is that the solution is one that works over time but also addresses the problem. And if I could, Mr. Smarr, the presumption is if we pass this bill, insurance premiums go down, correct?
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Mr. SMARR. Correct.
Mr. SCHIFF. Would you be willing to support a sunset provision, that if we pass this bill and, in fact, insurance premiums do not go down, that rather than the difference is merely pocketed by the insurance companies, that the bill will be sunsetted?
Mr. SMARR. I can't speak to that because I am speaking for my organization. I don't know.
Mr. SMITH. Would the gentleman from California yield for a second? A few minutes ago Mr. Smarr testified that they may not go down. They just may not increase as quickly as projected. So you might want to incorporate that into your question. Thank you for yielding.
Mr. SCHIFF. Well, I mean this is really a part of what I am trying to wrestle with, which is are we merely going to be enhancing the bottom line of the insurance firms without doing anything for the patients that are really at the core of this? This seems to be a struggle between the doctors, the lawyers, and the insurance companies. And I am not clear that the outcome is going to really benefit the patients yet, at least from what I have learned thus far.
Let me ask about one other point, Doctor, if I could, on the preemption question. Because after your testimony I went through the bill because I wasn't sure I understood the preemptive impacts. As I read the language of the section now, it provides that State limits on compensatory or punitive damages would be allowed to maintain, unless there were no such limits, whether you passed them before this bill or after this bill. They would continue on and not be preempted. But other than that, and defenses that are available to hospitals or HMOs or health care providers which would also not be preempted, everything else would be preempted. So the rules about statutory limitations in States would be preempted. Fair share rules would be preempted, contingent fees would be preempted, collateral source rule would be preempted.
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Mr. SCHIFF. The standard for punitive damages might be preempted; is that your reading? If the bill says that only the amounts will not be preempted, does that mean that this Federal law would change the standard for when punitive damages can be demonstrated in the 50 States, such that if one State felt that to protect its patients, it needed to make it easier for people to prove the punitive damages standard, that that would not be preempted by what we are doing now?
Mr. SMITH. The gentleman is recognized for an additional minute to get an answer to his question.
Dr. PALMISANO. Let me make sure. I will talk to counsel to make sure that I know how to answer this properly.
Thank you for your patience. If there are punitive damagesif there are no punitive damages, for instance, in Louisiana there are no punitive damages unless someone is killed. There are two exceptions, but it has nothing to do with medical malpractice; it has to do with someone who is drunk and kills someone while driving intoxicated.
So it would not give punitive damages in the State of Louisiana. What it would do is, itif the State had a lesser standard, this would preempt it as far as the punitive damages, the way I understand it.
Mr. SCHIFF. So that while a State could continue to maintain a certain limit on punitive damages, the standard of proof that you would have to meet would be preempted by this bill?
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Dr. PALMISANO. If it was lesser.
Mr. SCHIFF. If it was less rigorous. In other words, if California or any other State
Dr. PALMISANO. If it was a less rigorous State law.
Mr. SCHIFF. So it is not only the naked amounts of the damages that are not preempted, but the level of protection that a State wishes to give in terms of how it defines when punitive damages should be awarded, that would be preempted, as well as all of the other provisions that I mentioned?
Dr. PALMISANO. That is correct, talking to legal counsel, yes.
Mr. SMITH. Thank you.
The gentleman from Michigan, the Ranking Member of the Judiciary Committee, Mr. Conyers, is recognized for his questions.
Mr. CONYERS. Thank you, Mr. Chairman.
I want to thank Mrs. Keller and Mrs. Dyess for being here today. Their testimony was very important. We appreciate you helping us out.
Page 170 PREV PAGE TOP OF DOC Now, I want to talk to the President-elect of the AMA, who is a renowned jazz aficionado from New Orleans. And I appreciate my earlier talks with him.
But this conversation is about a board of trustees of the American Medical Association, Report 35, that responds to Resolution 212 instructing the board of trustees to make professional liability reform the association's highest priority and to report back to the House of Delegates on the activities initiated.
And here is the part that we have to talk about. For several years, insurers kept prices artificially low while competing for market share and new revenue to invest in a booming stock market. As the bull market surged, investments by these historically conservative insurers rose to 10.6 percent in 1999, up from a more typical 3 percent in 1992.
With the market now in a slump, the insurers can no longer use investment gains to subsidize low rates.
The industry reported realized gains of $381 million last year, down 30 percent from the high point in 1998, according to the A.M. Best Company, one of the most comprehensive sources of insurance industry data. Remember that?
Dr. PALMISANO. Yes, sir.
Mr. CONYERS. Okay. And this phrase, or this sentence, ''Insurers now acknowledge their miscalculation. 'We should have raised prices sooner,' said Mike Miller, the senior executive in charge of liability coverage at the St. Paul Companies.''
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Dr. PALMISANO. Yes, sir.
Mr. CONYERS. Okay. But in your testimony, Mr. President, you made no reference to the economic circumstances that have caused malpractice insurance premiums to rise.
Is thatwell, you tell me why there was no reference made.
Dr. PALMISANO. Well, whenthis was in the annual report 2002, Mr. Conyersand it is good to see you again, sir. We did cite the latest information that we could get in our written testimony, which talks about the investment income being stable. We continue to gather information and knowledge.
But even if you take this statement, asthe statement that the insurers failed to raise the rates sooner, we would have had the crisis sooner, because the rates are determined, according to these experts, by frequency and severity in the defense costs.
Mr. CONYERS. So that is why you left it out?
Dr. PALMISANO. We didn't leave it out intentionally. We are just trying to give you something that is the latest information that we have.
Page 172 PREV PAGE TOP OF DOC Mr. CONYERS. I appreciate it.
If you get any new information along these lines, would you make it personally available to me?
Dr. PALMISANO. Yes, sir.
Mr. CONYERS. I am not able to make too many of those meetings.
Dr. PALMISANO. Thank you, I will.
Mr. CONYERS. Now, Mr. Smarr, this is known as true or false: A comparison of States that have enacted severe tort restrictions and those that have not reformed found no correlation between tort reform and insurance rates?
Mr. SMARR. I am not aware of the study.
Mr. CONYERS. But are you aware of the statement?
Mr. SMARR. I am aware of
Mr. CONYERS. Is it true or false?
Mr. SMARR. If it is the statement that I am aware of, then that statement is false.
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Mr. CONYERS. Okay. Are you aware of the Center for Justice and Democracy?
Mr. SMARR. I am.
Mr. CONYERS. They are the ones that did the report.
Mr. SMARR. Then the statement is false.
Mr. CONYERS. Because of who it came from?
Mr. SMARR. Because I have reviewed the work of the Center for Justice and Democracy, and I do not agree with it.
Mr. CONYERS. Okay. I see.
Number two: Some of the resisting States have experienced lower increases in rates while some States that enacted tort reforms experienced higher rate increases relative to national trends. True or false?
Mr. SMARR. If the source is the Center for Justice and Democracy, I do not agree.
Mr. CONYERS. Well, suppose it wasn't from them.
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Mr. SMITH. The gentleman is recognized for an additional minute.
Mr. CONYERS. But, I mean, in your experience, we are not testing the Center for Justice and Democracy, we are testingwe are trying to seek your experience in this market, of which you are a professional, to determine whether you agree with these, regardless of where it came from.
Do you want me to read it again?
Mr. SMARR. Please.
Mr. CONYERS. Some of the resisting States experienced lower increases in insurance rates, while some States that enacted tort reforms experienced higher rate increases relative to the national trends.
Mr. SMARR. That statement could be true depending on the context and the States.
Mr. CONYERS. All right.
Mr. SMITH. If you will yield, I will grant the gentleman 2 additional minutes and hope he can conclude.
Page 175 PREV PAGE TOP OF DOC Mr. CONYERS. I thank you for your kindness.
In the practice of internal medicine, States with caps on damages in some States had higher premiums than States without caps.
Mr. SMARR. Again, sir, it would depend upon the analysis. I have seen studies that show that those are not truthful analyses.
Mr. CONYERS. Uh-huh. So what do you think about this as a general proposition?
Mr. SMARR. I think, in general, sir, that States that have adopted tort reforms have lower rates and have lower rates of increase than States that have not adopted tort reforms.
Mr. CONYERS. Good. Thank you very much.
Okay. Two more and we are through.
For general surgeons, insurance premiums have been 2.3 percent higher in States with caps on damages.
Mr. SMARR. I don't know that that is true.
Mr. CONYERS. Okay. And here is the last one. On average, malpractice premiums have been no higher in the 27 States that have no limitations on malpractice damages than in the 23 States that do have such limits.
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Mr. SMARR. Again, I don't know that that is true.
Mr. CONYERS. All right. Well, you have done very well on this true and false test. I want to compliment you.
And I want to thank the Chairman for the additional time.
Mr. SMITH. Thank you, Mr. Conyers.
Before we adjourn, I want to recognize two Members so that they can each ask an additional question. And what I would ask them to do is to keep the exchange short out of fairness to the Members who have already left, because they were not expecting to be able to ask additional questions.
The first person to be recognized is the gentleman from Virginia, Mr. Scott.
Mr. SCOTT. Thank you, Mr. Chairman. And, I will just ask a somewhat brief question. We are talking on the joint and several problem.
If Mr. Smarr could indicate what the costs would be in terms of expert witness fees to prove all of the casesin Mrs. Keller's case, against the physician, a nurse, an ambulance driver, hospital, the neurologist, emergency room at the hospital. About what kind of expert witness fees are we talking about, and whether or not, under the bill, those fees would be covered bywithin the attorneys' fees limitation, or would the plaintiff just have to pay these out of whatever was left of the settlement?
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Mr. SMARR. Those feesexpenses are not paid, generally, out of the contingency portion of an award; they are in addition to the award.
As to the level of those fees, I have never seen any data on plaintiff expert witness fees and the like. I don't know that it is published.
Mr. SCOTT. You have expert witness fees on the defense side?
Mr. SMARR. Yes, we do.
Mr. SCOTT. How much do you pay your doctors to testify?
Mr. SMARR. I can't give you an accurate answer. But I do have that data, and I will provide it to you and to the Committee.
Mr. SMITH. Thank you, Mr. Scott.
The gentlewoman from Texas, Ms. Jackson Lee, is recognized for her question.
Ms. JACKSON LEE. As I indicated, I read some numbers into the record that show that whether or not you are in a crisis or not, the quality of care, or the quality of care in terms of a particular State is no better, no worseTexas, 49th in quality of care; Louisiana, 51; and California, 44. In those States, those last two States have implemented some sort of reform.
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Mr. SMITH. Are those figures, are they quality of care or expenditures, median expenditures?
Ms. JACKSON LEE. Quality of care.
Mr. SMITH. Who did the rankings of those?
Ms. JACKSON LEE. Quality of care, it was reported in the Journal for the American Medical Association. It wasthe source is the American Health Quality Association on Care Delivered to Medicare Beneficiaries.
Mr. SMITH. Thank you.
Ms. JACKSON LEE. I don't have a quarrel, Dr. Palmisano, with you and the victims that are here in this room. I think the important point is, how can we resolve you being able to do your job weeding out bad doctors, promoting good doctors and saving the lives and helping these victims? So, Mr. Smarr, let me ask you these questions regarding who my quarrel actually is with.
First of all, I would like you to provide us with a 5-year reading of the profits of your organization. I don't know if it is in your documentation. I did not see it. But I would like to know whether you would accept amendments regarding the idea that if a physician has had a clean record, as many of the physicians in my congressional district have had, that they will be guaranteed not only a, if you will, tabling or staying of their rates, but a decrease in their rates and, as well, that we would put in the language that those rates would remain in place for 5 years.
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In addition, I would like to ask you the question as to how serious is the considerationI know you are a corporation, and I am not sure what the incorporation status isof your need for profits over the ability to ensure those who are seeking insurance?
My understanding isfrom the physicians in my community is that basically no matter how well they practice medicine the insurance rate goes up, up and up, regardless of whether they are making profits or not, and mostly it goes up because you are attempting to make profits as opposed to serving as physicians and helping victims.
Mr. SMARR. Well, most of the doctors in Texas are insured by the Texas Medical Liability Trust, which is a physician-owned
Ms. JACKSON LEE. Let us not speak to the Texas issue. I just used them as an example.
I want to ask whether your organization would accept those amendments of stayingof decreasing the cost of any physician who could show that they have not been sued and, as well, staying those costs for 5 years; and also to give me your record of profits over the last 5 years.
Mr. SMARR. The record of profits, I will be glad to provide to you. In fact, that is stated in my written testimony, the first exhibit.
Secondly, in terms of freezing rates for physicians that do not have claims experience, I can't commit to the members of my association that that would do that. But I
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Ms. JACKSON LEE. Wouldn't that be reasonable, that if you are not a problem, that your rates should not go up?
Mr. SMITH. We have been generous in allowing you extra time. But we will need to conclude our
Ms. JACKSON LEE. I appreciate it, Mr. Chairman. I will let him answer the question.
Isn't that reasonable, Mr. Smarr?
Mr. SMARR. It is reasonable. It is being done now. Because insurers do employ merit rating plans where doctors that havedo not have significantly adverse loss experience either receive discounts, or those doctors that do have significantly adverse loss experience receive surcharges.
Ms. JACKSON LEE. So you wouldn't mind its being federalized in this bill?
Mr. SMITH. The gentlewoman's time has expired.
Ms. Jackson Lee, your time has expired.
Ms. JACKSON LEE. Thank you.
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Mr. SMITH. I would like to thank all Members for their participation today, and also our witnesses for their input. You have been instructive and revealing, which will be helpful to us as we consider the HEALTH Act.
The Judiciary Committee stands adjourned.
[Whereupon, at 11:30 a.m., the Committee was adjourned.]
A P P E N D I X
Statements Submitted for the Hearing Record
PREPARED STATEMENT OF THE ALLIANCE OF SPECIALTY MEDICINE
ASSESSING THE NEED TO ENACT MEDICAL LIABILITY REFORM
Chairman Sensenbrenner, and Members of the Committee, the Alliance of Specialty Medicine, a coalition of 13 medical organizations representing over 160,000 specialty care physicians in the United States, appreciates the opportunity to comment on the impact that our current medical litigation system is having on patient access to medical care and the need to enact medical liability reform legislation. The Alliance would also like to take this opportunity to thank you for the leadership that you and your committee have shown on this issue. We believe that the reforms contained in HR 5, the Help, Efficient, Accessible, Low Cost, Timely Health Care Act, which were approved by your Committee last year, will go a long way to solve the current medical liability crisis.
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And it is a crisis. The media now report on a daily basis that the situation has become so critical that many physicians are forced to limit services, move to other states where the medical liability system is more stable, or retire altogether. Much of the ''face'' of this crisis has centered around the great difficulties that pregnant women are having in finding obstetricians to deliver their babies, but the simple truth is that this is a problem that potentially affects all of our citizens: the mother whose little boy has fallen off of the jungle gym and needs an orthopaedic surgeon to fix his broken arm; the teenager who has been in a serious car accident and needs a neurosurgeon to treat his severe head injury; the woman who needs a pathologist to evaluate her Pap smear to screen for cervical cancer; the elderly man who has a poor heart and needs a cardiologist or cardio-thoracic surgeon to unblock a clogged artery or replace a failing valve; the woman who has a family history of breast cancer and needs a radiologist to perform a mammography to make sure she is cancer free; the business man who needs a gastroenterologist to treat his ulcer; the man who needs a urologist to screen for prostate cancer; and the list goes on and on.
Cause of the Crisis: The Current Medical Litigation System is Out of Control
The root cause of this problem is quite simple: the unrestrained escalation of jury awards and settlements, in even a small number of medical liability cases, is driving up doctors' liability insurance premiums and is forcing some insurance companies out of business altogether. This problem is making it difficult, and sometimes impossible, for doctors to obtain affordable liability insurance so they can remain in practice. Adding to this is the fact that doctors distrust and fear the medical litigation system, causing them to alter the way they deliver medical care to their patients, and in some cases this fear is causing doctors to cease practicing altogether. There is a wide body of evidence to substantiate these conclusions:
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Medical Liability Awards are On the Rise
Medical liability awards have been growing steadily, and according to Jury Verdict Research data, from 1994 to 2000 the median jury award rose by 176 percent. The number of mega-verdicts is also on the rise, with the proportion of million dollar plus awards increasing dramatically over this same time period. In 1996, 34 percent of all jury awards exceeded $1 million. Four years later, the number of million dollar awards increased to 52 percent, and the average jury award in 2000 was nearly $3.5 million.
Medical Liability Insurance Premiums are Skyrocketing
It is clear that the increasing number of multi-million dollar jury awards is driving up the costs of medical liability insurance and insurance companies are now paying out approximately $1.40 for every premium dollar collected. Obviously, this is not sustainable, and this trend is therefore forcing insurance companies, which must set their rates based on anticipated future losses, to steeply increase doctors' medical liability premiums to ensure adequate reserves to pay future judgments. As a result, over the past several years, physicians across the country have faced double, and sometimes triple, digit rate increases. Alliance members, including high-risk specialists like neurosurgeons, orthopaedic surgeons and emergency physicians, have been disproportionately affected by these premium increases. For example:
According to a national survey of neurosurgeons, between 2000 and 2002 the national average premium increase was 63%, from $44,493 to $72,682. In some states, neurosurgeons are now paying medical liability insurance premiums in excess of $300,000 per year.
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Utah orthopaedic surgeons have seen medical liability rate increases of 60% since last year and in Texas they are rising by more than 50 percent. In Pennsylvania, a survey conducted in June 2002 revealed rate increases as high as 59 percent. In other areas of the country, orthopaedic surgeons are finding that their premiums have risen by over 100 percent, even if they have never had a claim filed against them.
Over the past several years, over 95 percent of emergency medicine physicians have experienced medical liability premium increases, with approximately 69 percent facing increases between 60 to 500 percent. This is attributed to the fact that emergency medicine physicians are almost always named in any litigation that arises from a patient encounter that begins in the emergency department. Since most hospital admissions now come through the emergency department, these doctors are experiencing steep premium rises even though the lawsuits against them may have no merit and result in either dismissal or a defendant's verdict.
Even those specialists who are not in high-risk categories are affected by this upward trend in premium costs. For example, 80 percent of recently surveyed dermatologists reported that their premiums increased last year and those dermatologists who were insured by a state plan were paying nearly double what their colleagues were paying in the private market.
Medical Liability Insurance is Unavailable
Not only are medical liability insurance premiums rising at astronomical rates, but many doctors are also finding it increasingly difficult to obtain medical liability insurance at any price. Citing the increases in liability losses, several companies, including, St. Paul, MIXX, PHICO, Frontier Insurance Group and Doctors Insurance Reciprocal, have recently stopped selling medical liability insurance or have gone out of business, leaving thousands of doctors scrambling to find replacement coverage. Of the companies that have remained in the market, many are no longer renewing insurance coverage for existing policyholders and/or they are not issuing new insurance policies to new customers. This is particularly true in states that have no effective medical liability reform laws in place, where, for instance, in Mississippi fifteen insurers have left the market in the past five years. Alliance members have witnessed the impact of this problem first hand. For example:
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In 2002, nearly 40 percent of orthopaedic surgeons in Pennsylvania were not able to renew their medical liability coverage with the same carrier and 31 percent did not find new coverage. Close to 50 percent of Pennsylvania orthopaedic surgeons have reported that their liability policies will not be renewed for 2003.
In 2002, 15 percent of dermatologists experienced difficulties securing their liability insurance. In some cases, dermatologists in solo practice who have never even been sued were forced to turn to the state for coverage because the remaining insurers in their area made a blanket decision to no longer insure solo practice physicians, regardless of specialty.
Today in Mississippi, the only way a neurosurgeon can even be considered for coverage is if he or she joins an existing group that already is covered by the state medical society's insurance company. The other two companies providing insurance coverage in Mississippi will not issue new policies for neurosurgeons at all. In addition, neurosurgeons in Florida have been unable to obtain medical liability insurance at any cost, forcing them to ''go bare'' or self-insure.
Recently one internationally-recognized pathologist, who has never had a claim filed against him, was turned down by three insurers and a fourth offered him a policy that was simply too expensive.
Three of four insurance carriers with the largest market share in Missouri have stopped writing policies in that state. This means that physicians can often obtain a quote from only one company. For example, one group of 12 cardiologists could get only one quote with an 80 percent increase for 2003.
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Medical Litigation System Breeds Fear in Doctors
Given the litigious nature of our society, every physician faces the reality that he or she may at some time be named in a medical liability lawsuit, whether meritorious or not, and the current medical litigation system breeds fear in all doctors. This fear of litigation, particularly among high-risk specialists, is a contributing factor in doctors' decisions to change the way in which they are practicing medicine. Data from a 2002 Harris Interactive study conducted for the Common Good, a bipartisan legal reform organization, validates this point. According to the data, nearly all physicians feel that unnecessary care is provided because of fear about litigation. To protect themselves in the event that they might be sued:
91 percent of doctors are ordering more tests than are medically needed;
85 percent of doctors refer patients to specialists more often than is necessary; and
73 percent of doctors suggest that patients have invasive procedures to confirm medical diagnoses
The report aptly concludes: ''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.''
Page 187 PREV PAGE TOP OF DOCResult of the Crisis: Patient Access to Medical Care is in Jeopardy
There are many casualties of the current medical liability crisisbut those affected the most are patients. Because the medical litigation system is broken, across the nation patients are finding it harder and harder to get access to the care they need, when they need it. As medical liability insurance becomes unaffordable or unavailable, more and more doctors, especially specialists, are no longer performing high-risk procedures, or they are being forced to move their practices to states with stable medical liability systems, or they are simply retiring from medical practiceall of which seriously impede patient access to care. Once gone, these doctors are hard to replace, and those states currently facing a medical liability crisis are having a difficult time recruiting new physicians to their communities adding to the shortage of doctors in many parts of the country. The combination of these factors is also now severely straining our nation's already stressed emergency medical system, as patients who have no access to doctors inevitably end up on the emergency department's doorsteps, further exacerbating the hospital emergency department overcrowding problem. A growing list of examples demonstrates just how serious this crisis is becoming:
Doctors are No Longer Performing Complex and High-Risk Medical
According to a nationwide survey conducted last year, 43 percent of neurosurgeons reported that they are no longer performing high-risk surgery such as treating brain aneurysms, removing brain and spinal tumors, or complex spinal surgery. In addition, many neurosurgeons are no longer serving on-call to hospital emergency departments or operating on children.
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A recent survey found that 55 percent of orthopaedic surgeons nationwide have reduced the type of operational procedures they perform, with 39 percent avoiding performing spine surgery and 48 percent altering their practice in other ways, including eliminating emergency room call or trauma call.
The elderly are particularly affected, as decreases in reimbursements for complex medical procedures have declined to the point where Medicare no longer even covers the cost of medical liability insurance. Specialists with a high volume of Medicare patients, such as cardiologists and cardio-thoracic surgeons, and their patients who need high-tech, lifesaving heart therapy, will feel the effects the most.
Doctors, Trauma Centers and Other Medical Providers are
Closing their Doors
In the case of neurosurgery, in 2001 alone, 327 board certified neurosurgeons retired, representing an alarming 10 percent of the neurosurgical workforce in the United States. Recently, the only neurosurgeon practicing at Cottonwood Hospital in Salt Lake City, Utah quit practicing following a steep insurance premium increase.
Recent press accounts are replete with stories about the closure of trauma centers in Pennsylvania, West Virginia, Nevada, Mississippi, Missouri and Florida because of a shortage of orthopaedic surgeons, neurosurgeons and other specialists available to provide emergency medical care. Chicago's trauma centers are also now vulnerable to closing or downgrading their status.
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In the last 18 months, nearly 700 mammography facilities have closed nationwide. The continued and steady closing of mammography facilities throughout the country has led to increased waiting times for women seeking both screening mammograms and diagnostic mammograms. The longer waiting times are now on the brink of affecting clinical outcomes for those women who must wait for a possible diagnosis of breast cancer.
Doctors are Moving to States with a More Favorable Medical Liability
Every state that is experiencing a medical liability crisis reports that doctors are leaving in droves in search of another location in which to practice where the medical litigation climate is more favorable. The list of states experiencing the exodus of doctors continues to grow, and as with other elements of this crisis, specialists are most likely to ''hit the road'' in search of a safe haven state. For instance:
Pennsylvania has been especially hard hit, and some counties no longer have any practicing orthopaedic surgeons. For example, Bedford County's only orthopaedic surgeon left the state in October 2001, and Pike and Monroe Counties are down from nine to five orthopaedic surgeons. Huntingdon County has just one orthopaedic surgeon remaining to take trauma call at two hospitals. The situation is the same in West Virginia, and a number of orthopaedic surgeons either have left the state or are scaling back their practices. At the end of 2002, five orthopaedic surgeons in Parkersburg moved their practice to Ohio.
Page 190 PREV PAGE TOP OF DOC Neurosurgery's survey data show that nearly 19 percent of practicing neurosurgeons either plan to, or are considering, moving their practice to another state where the medical liability costs are relatively stable. Mississippi, for instance, has lost 35 percent of its neurosurgeons in the past two years, and the flight of neurosurgeons from Pennsylvania and West Virginia mirrors the Mississippi experience.
The State of America's Health Now and in the Future is at Risk
The combination of all the above factors is clearly placing the health of our nation's citizens at considerable risk. Because of the medical liability crisis, more and more people are finding it difficult to get the specialized medical attention they need, when they need it. This is causing a national health care emergency. Thus:
When patients can't find a specialist close to home, they must sometimes travel great distances, often going out of state, to get their medical care.
When fewer specialists are available, hospital emergency departments and trauma centers must shut their doors, and patients with emergency medical conditions lose critical life-saving time searching for an available emergency room.
When specialists stop performing high-risk medical services, patients are often referred to academic medical centers, and these medical facilities are already overburdened and are ill equipped to handle the increase in patient volume.
When specialists retire at an early age, the looming shortage of doctors is accelerated, which, if left unchecked will place additional burdens on the health care system as the population ages and requires more medical care from an increasingly shrinking pool of practicing doctors.
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When the practice of medicine becomes so uninviting, fewer and fewer of our nation's best and brightest will want to become doctors, thus jeopardizing our country's status as one of the finest health care systems in the world.
Scope of the Crisis: A National Problem that Requires a Federal Solution
Those who oppose federal legislation to address this crisis cite various reasons to support their contention that this is not a national problem that merits a federal solution. In particular, they note that the regulation of insurance and health care are generally state issues, and therefore principles of Federalism preclude federal legislation to address this problem. They are, however, wrong. The undisputed truth is that this problem now touches nearly every American and a federal solution is therefore a national imperative. As the following demonstrate:
Nearly All States are Facing a Medical Liability Crisis
The AMA has identified 12 states that are in a medical liability crisis for all physicians. These include: Florida, Georgia, Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington and West Virginia. However, for many high-risk specialties, like neurosurgery and orthopaedic surgery, the situation is even more widespread than the AMA reports. A 2002 national survey of neurosurgeons identified 25 states that are in a severe medical liability crisis, with an additional 12 states in potential crisis. In addition to those identified by the AMA, the crisis states for neurosurgery include: Alabama, Arkansas, District of Columbia, Illinois, Kentucky, Missouri, New Hampshire, North Carolina, South Carolina, Rhode Island, Tennessee, Utah and Virginia.
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Every American Pays for the Costs of the Current Medical
According to the U.S. Department of Health and Human Services (HHS), in its report entitled, ''Confronting the New Health Care Crisis: Improving Health Care Quality and Lowering Costs by Fixing our Medical Liability System,'' the current medical litigation system imposes enormous direct and indirect costs on the health care system. These costs are passed on to all Americans in the form of increased health insurance premiums, higher out-of-pocket medical expenses and higher taxes. The report estimates that enacting federal medical liability legislation could save between $60108 billion in health care costs each year. These savings would in turn lower the cost of health insurance and make health care more affordable and available to many more Americans.
Federal Medical Liability Reform Will Save the Federal Government
Each year, the Federal Government pays for the increased costs associated with the current medical litigation system through various health care programs, including Medicare, Medicaid, Community Health Centers and other health care programs for veterans and members of the armed forces. The Department of Health and Human Services estimates that the direct cost of medical liability insurance coverage and the indirect cost of defensive medicine, increases the Federal Government's costs of these health programs by $28.6 to $47.5 billion each year. In the above referenced report, HHS estimates that if reasonable limits were placed on non-economic damages, it would reduce Federal Government spending by $25.3 to $44.3 billion per year. The Congressional Budget Office (CBO), in its cost estimate of HR 4600, the HEALTH Act of 2002, confirms that passage of federal medical liability reform legislation that includes a cap on non-economic damages will increase federal tax revenues, and at the same time reduce the costs of federal health care programs.
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States Face Significant Barriers to Implementing Medical Liability
Many states face barrierssome legal and some politicalto enacting effective medical liability reform laws. Some states, including Texas, Florida, Ohio and Pennsylvania, have enacted medical liability reform laws, only to have their state Supreme Courts strike them down as unconstitutional. New laws passed by Mississippi and Nevada face certain court challenge, and it will be years before it is determined whether these laws pass state constitutional muster. Finally, in some other states, the issue has become a political one, effectively killing any chances for passage. As a consequence, despite the increasing medical liability crisis in many of these states, they are effectively powerless to act to effectively solve the problem.
Solution to the Crisis: Medical Liability Reform Legislation Patterned After California's MICRA
Fortunately, Congress does not need to start from scratch and identify and implement a solution that is untested. Faced with a similar crisis in the early 1970's, the state of California, with bipartisan support, enacted the Medical Injury Compensation Reform Act or MICRA. The key elements of MICRA include:
Providing full compensation for all economic damages, including medical bills, lost wages, future earnings, custodial care and rehabilitation;
Placing a fair and reasonable limit of $250,000 on non-economic damages, such as pain and suffering;
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Establishing a reasonable statute of limitations for filing a lawsuit;
Allowing for periodic payments of damages rather than lump sum awards; and
Ensuring that the bulk of any award goes to the plaintiffs, not attorneys
The clear and simple truth is that MICRA works. For nearly three decades, this law has ensured that legitimately injured patients get unfettered access to the courts and receive full compensation for their injuries, while at the same time providing stability to the medical liability insurance market to ensure that doctors can remain available to care for their patients. In a similar manner, the HEALTH Act will ensure that patients and doctors nationwide will reap the benefits of this rational approach to solving the professional liability crisis.
Consider the following points about the effectiveness of MICRA:
MICRA Fully Compensates Injured Patients
First and foremost, under MICRA, patients receive full compensation for legitimate injuries resulting from medical negligence. Detractors of federal reform legislation are attempting to obfuscate the facts by scaring the public and policymakers into believing that injured patients will only receive a maximum of $250,000 to compensate them for their injuries. This is simply not the case. Patients receive full compensation for all of their quantifiable needs, with up to an additional $250,000 for non-economic damages, such as pain and suffering. To demonstrate this fact, the Californians Allied for Patient Protection recently compiled a sample of total awards (including both economic and non-economic damages) provided to injured patients. For example:
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$84,250,000 total award
5-year-old boy with cerebral palsy and quadriplegia because of delayed treatment of jaundice after birth.
$59,317,500 total award
Contra Costa County
3-year-old girl with cerebral palsy as a result of birth injury.
$12,558,852 total award
Los Angeles County
30-year-old homemaker with brain damage because of lack of oxygen during recovery from surgery.
$27,573,922 total award
San Bernardino County
25-year-old woman with quadriplegia because of failure to diagnose a spinal injury.
MICRA Significantly Minimizes Premium Increases
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Opponents of reform cite statistics that over the past several years, premiums for doctors in California have also been rising; thus proving that MICRA does not have any impact in holding down the costs of medical liability insurance. While it is true that premiums are on the rise in nearly all states, including California, the rate of increase of premiums for California doctors is significantly lower than in other states, and over time, MICRA has, in fact, stabilized medical liability insurance premiums as compared to the rate of increase in the rest of the country. As the following chart demonstrates, from 1976 to 2000, premiums for physicians in California have risen only 167 percent as compared to an increase of 505 percent for the entire United States.
Data collected from high-risk medical specialties from 2000 to 2002 also validate these trends. For example, according to a nationwide survey of neurosurgeons, the national average premium increase for California neurosurgeons was 39 percent as compared to 63 percent for neurosurgeons in the entire country. In addition, the same survey clearly demonstrated that the rate of increase for an individual neurosurgeon in Los Angeles, California, as compared to other neurosurgeons who practice medicine in crisis states where there are no reforms in place, is significantly lower. The average rate of increase for the neurosurgeons in these non-reform states was 143 percent as compared to just 8 percent in Los Angeles, CA.
The Alliance does acknowledge that despite the successful reforms contained in MICRA, the average medical liability claim in California has outpaced the rate of inflation. This is in large part due to the fact that economic damages are not limited under MICRA and have grown as a component of medical liability claims. Notwithstanding this, however, the undisputed fact remains that MICRA prevents runaway juries from awarding outrageous awards for subjective, arbitrary and often unquantifiable non-economic damages, which allows insurance companies to adequately predict future lawsuit awards, bring stability the health care delivery system.
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Federal Government Validates that MICRA Works
U.S. Government experts agree that MICRA does in fact hold down the costs of medical liability insurance, and over the years there have been a number of studies that have identified MICRA's $250,000 cap on non-economic damages as a critical element in stabilizing premium costs. For example, dating back to September 1993, the former U.S. Office of Technology Assessment (OTA), in a report entitled, ''Impact of Legal Reforms on Medical Malpractice Costs,'' concluded that caps on damages were consistently found to be an effective mechanism for lowering medical liability insurance premiums. Most recently, the previously referenced HHS report, ''Confronting the New Health Care Crisis'' and the CBO cost estimate report of the HEALTH Act, came to the same conclusion.
Justification for Federal Reform Legislation: Americans Overwhelmingly Support a MICRA-Style Solution
Americans are becoming acutely aware of the impact that this crisis is having on our nation's health care system, and overwhelmingly favor having Congress pass legislation to reform the current medical liability system and create one that balances the rights of patients to seek and obtain appropriate compensation for injuries caused by medical negligence against the right of all our citizens to have continued access to medical care. Two recent polls clearly demonstrate this support. In January 2003, Gallup conducted a poll on this issue and found the following:
Americans believe that the medical liability insurance issue is either a major problem (56%) or a health care crisis (18%);
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72 percent favor passing a law that would limit the amount that patients can be awarded for their emotional pain and suffering; and
57 percent responded that they think patients bring too many lawsuits against doctors
This Gallup poll confirms the findings of last year's Wirthlin Worldwide study conducted for the Health Care Liability Alliance (HCLA), which found that:
78 percent of Americans are concerned that skyrocketing medical liability costs could limit their access to care;
73 percent favor a federal law that guarantees injured patients full payment for lost wages and medical costs and reasonable limits on awards for ''pain and suffering'' in medical liability cases; and
48 percent believe the number of medical liability lawsuits against doctors is higher than justified
We have reached a very important juncture in the evolution of the U.S. health care system. At a time when lifesaving scientific advances are being made in nearly every area of health care, patients across the country are facing a situation in which access to health care is in serious jeopardy. Thus, as the Congress deliberates the many facets of this issue, the Alliance urges you to continue to keep in mind that this issue is not about doctors, lawyers and insurance companies. Rather, it is about patients and their ability to continue to receive timely and consistent access to quality medical care. By reforming the medical litigation system, the crisis will ultimately be abated. Patients are calling for reform. Doctors are calling for reform. President Bush is calling for reform. And the Alliance urges the Congress to heed these calls and, at a minimum, pass the HEALTH Act so all Americans are able to find a doctor when they most need one. Ultimately, when the question ''Will your doctor be there?'' is asked, the answer must be an unqualified yes.
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Thank you for considering our comments and recommendations. The Alliance of Specialty Medicine, whose mission is to improve access to quality medical care for all Americans through the unified voice of specialty physicians promoting sound federal policy, stands ready to assist you on this and other important health care policy issues facing our nation.
PREPARED STATEMENT OF MARY R. GREALY
Our liability system is broken. If it is not fixed soon, it will break our health care system as well.
One of the founding principles of the Healthcare Leadership Council (HLC) B which represents the CEO's of the nation's leading health care companies and organizations B is that patients should have access to high quality health care. Skyrocketing liability costs threaten patient access to quality care. This is no longer simply about lawyers and doctors. This is about patients.
The cost of excessive jury awards is causing staggering increases in medical liability premiums. Between 1996 and 1999, average jury awards in medical liability cases have increased by 76 percent. These spiraling increases add directly to the cost of health care, contributing significantly to premium costs and the growing number of uninsured Americans.
Just as harmful to patients and consumers, however, are the indirect costs of the crisis. Patients are increasingly Apaying@ for excessive litigation by losing access to medical specialists such as obstetricians and surgeons. An estimated 1 in 11 obstetricians/gynecologists say they have strictly limited their services solely to gynecology due to the malpractice crisis. In some areas, the situation is far worse. In Miami, average annual malpractice premiums for Ob-Gyns are $210,578, while the average salary for an Ob-Gyn in Florida is $118, 435. In Wyoming, premiums average $116,000, while average salaries for Ob-Gyns are $108,700.
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As medical malpractice insurance rates skyrocket B or become unavailable B medical specialists such as neurosurgeons, orthopaedic surgeons and obstetricians/gynecologists are leaving states such as Pennsylvania, Mississippi, West Virginia, New Jersey, Florida and others. While these states have been in the news lately, the crisis goes far beyond the 13 Acrisis@ states. It is estimated that as many as 30 other states are in Anear crisis@ and will soon join the ranks of states where patient access is endangered.
Patients also are losing access to nearby hospitals, trauma centers, and other facilities as a result of the crisis. Patients are subjected to, and pay for, unnecessary tests and procedures as physicians must practice Adefensive medicine.@ In addition, patients ultimately are the ones who suffer when new drug therapies and medical technologies are not developed due to litigation or the fear of it.
The cause of the liability crisis is clear. Medical malpractice insurance rates are set prospectively. These rates are set primarily on the basis of projections of jury awards. This trend line is in one direction: straight up. Solving the cost problem requires dealing with the size and unpredictability of these awards. The bottom line is that medical malpractice premiums cannot keep up with claims. A typical state is Oregon, where a Governor's task force reported that medical liability insurers paid out $71 million in losses and defense costs, while receiving $50 million in premiums over the same period. In Ohio, medical malpractice insurers are losing $1.62 for every $1 in premiums. Clearly these trends are unsustainable and will drive more physicians out of practice.
The only proven way to bring these costs under control B while actually enhancing patients' ability to recover economic damages for injuries B are reforms which include capping non-economic and punitive damages, establishing reasonable levels for attorneys' fees, and setting fair share rules for joint and several liability.
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HLC strongly supports these and other reforms embodied in the Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 2003 (H.R. 5). We urge that the Committee favorably report H.R. 5 to the full House for consideration. We stand ready to work with you to address this growing crisis.
PREPARED STATEMENT OF FRANK CLEMENTE
On behalf of Public Citizen's 125,000 members, I am pleased to provide this testimony to the Judiciary Committee for the hearing record on H.R. 5, the HEALTH Act of 2003.
Public Citizen strongly opposes H.R. 5. We sympathize with the plight of some medical specialists who are experiencing a large spike in malpractice insurance premiums. But that is a temporary problem caused by the insurance cycle. Yet, H.R. 5 proposes a permanentand draconianreduction in patients' access to the courts, which plays no role in this temporary ''crisis.'' It would be a travesty of justice for Congress to take away patients' legal rights in the name of protecting insurance company profits and doctors' income. Caps on damages hurt those most seriously injured. The fact is that the legal system is all patients have to ensure just compensation for injury and to force improvements in patient safety. It's clear that the current regulatory system is not up to the task.
This testimony consists of four elements:
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A summary of the key facts about the medical malpractice issue, as reported by reputable government and private sources.
A summary of Public Citizen's objections to this anti-consumer and anti-patient legislation.
A briefing book prepared by Public Citizen entitled ''Medical Misdiagnosis: Challenging the Malpractice Claims of the Doctors' Lobby.'' Perhaps the greatest malpractice in this debate has been the promulgation of phony facts from the medical lobby. This report cites numerous government studiesmany from the Bush Administrationand reputable academic studies to challenge the claims of H.R. 5's proponents.
Summaries of Public Citizen reports on the medical malpractice ''crisis'' in nine statesArkansas, Florida, Mississippi, Nevada, New Jersey, Pennsylvania, Rhode Island, Texas, and West Virginia. The American Medical Association has declared most of these states ''crisis'' states. The striking thing about the government data contained in these reports is that they provide concrete evidence that the ''crisis'' is not a result of the legal system.
In conclusion, we encourage the committee to focus on the true medical malpractice crisisthe 50,000 to 100,000 Americans who are killed each year from preventable medical errors, and the many more people who get injured each year and whose lives have often been shattered.
It is very unfortunate that rather than reducing the real threats that current medical care poses to their patients, the doctor's lobby has proposed to shift the costs of injuries onto innocent individuals, their families, voluntary organizations and taxpayers. Doctors, patients and consumers should be allies on this issuewhich fundamentally comes down to improving the quality of medical care in the U.S.not be pitted against each other.
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FACTS ABOUT MEDICAL MALPRACTICE
The facts do not support the contention that our tort system needs radical change. Here is a summary of findings from key government reports and academic studies. They are explored in more detail in the attached briefing book.
Costs of Medical Negligence to Patients
Between 44,000 to 98,000 Americans die in hospitals each year due to preventable medical errors. (Institute of Medicine, To Err Is Human: Building a Safer Health System, 2000.)
The annual costs to society for medical errors in hospitals at $17 billion to $29 billion. (Institute of Medicine, To Err Is Human: Building a Safer Health System, 2000.)
The total amount spent on medical malpractice insurance in 2000 was $6.4 billionat least three to five times less than the Institute of Medicine's estimate of the costs of malpractice to society. (National Association of Insurance Commissioners, Statistical Compilation of Annual Statement Information for Property/Casualty Insurance Companies in 2000, (2001).)
Frequency of Medical Malpractice Claims
Only one in eight preventable medical errors committed in hospitals results in a malpractice claim. (Harvard Medical Practice Study Group, Patients, Doctors and Lawyers: Medical Injury, Malpractice Litigation, and Patient Compensation in New York, 1990.)
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From 1996 through 1999, Florida hospitals reported 19,885 incidents but only 3,177 medical malpractice claims. In other words, for every 6 medical errors only 1 claim is filed. (The Agency for Health Care Administration; Division of Health Quality Assurance. Reported malpractice claims by district compared to reported adverse incidents 1996, 1997, 1998, 1999.)
The number of new medical malpractice claims declined by about four percent between 1995 and 2000. There were 90,212 claims filed in 1995 and 86,480 claims filed in 2000. (National Association of Insurance Commissioners, Statistical Compilation of Annual Statement Information for Property/Casualty Insurance Companies in 2000, 2001.)
Punitive Damages are awarded in less than 1 percent of medical malpractice cases. (Bureau of Justice Statistics, 1996.)
Physicians' Costs of Medical Malpractice Insurance
Malpractice insurance costs amount to only 3.2 percent of the average physician's revenues. (Official Transcript, Medicare Payment Advisory Commission, Public Meeting, December 12, 2002.)
While medical costs have increased by 113 percent since 1987, the total amount spent on medical malpractice insurance has increased by just 52 percent over that time, less than half of medical services inflation. (Bureau of Labor StatisticsMedical Services CPI; Best's Aggregates and Averages.)
The median medical malpractice payout by a physician to a patient rose 35 percent from 1997 to 2000, from $100,000 to $135,000. (National Practitioner Data Bank Annual Reports, 1997 through 2001.) But during the same time, the average premium for single health insurance coverage has increased by 39 percent. (Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits Surveys, 19982002; National Practitioner Data Bank Annual Reports, 1997 through 2001.)
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Medical Malpractice Award Trends
The size of damage awards has been steady since 1991. The mean payout was $135,941 in 2001, up 8.7 percent from $125,000 in 2000. Over ten years, malpractice payouts have grown an average of 6.2 percent per year. That's almost exactly the rate of medical inflation: an average of 6.7 percent between 1990 and 2001. (National Practitioner Data Bank and the Journal of Health Affairs, as quoted by Lorraine Woellert, Commentary: A Second Opinion on the Malpractice Plague, Business Week, March 3, 2003.)
Malpractice payouts by physicians and their insurers were a mere $4.5 billion in 2001less than 1 percent of the country's overall health care costs of $1.4 trillion. (National Practitioner Data Bank, as quoted in Business Week, March 3, 2003.)
In 2001, only 895 out of 16,676 payouts, or about 5 percent, topped $1 million. (National Practitioner Data Bank, as quoted in Business Week, March 3, 2003.)
Insurance Industry Economics Have Caused the Premium Price Spike
''For several years, insurers kept prices artificially low while competing for market share and new revenue to invest in a booming stock market. As the bull market surged, investments by these historically conservative insurers rose to 10.6% in 1999, up from a more typical 3% in 1992. With the market now in a slump, the insurers can no longer use investment gains to subsidize low rates.'' (American Medical Association Report 35 of the Board of Trustees (A02), available at http://www.ama-assn.org/ama1/upload/mm/annual02/bot35a02.rtf.)
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Premiums charged do not track losses paid, but instead rise and fall in concert with the state of the economy. When the economy is booming and investment returns are high, companies maintain premiums at modest levels; however, when the economy falters and interest rates fall, companies increase premiums in response. (J. Robert Hunter, Americans for Insurance Reform, ''Medical Malpractice Insurance: Stable Losses/Unstable Rates,'' October 10, 2002. See also: http://www.insurance-reform.org/StableLosses.pdf.)
Small Number of Dangerous Doctors Commit Most Malpractice
Only 5 percent of doctors (1 out of 20) are responsible for 54 percent of malpractice payouts. (National Practitioner Data Bank, Sept. 1, 1990-Sept. 30, 2002.)
Only 8 percent of doctors (1 out of 12) with 2 or more malpractice payouts have been disciplined by their state medical board. (National Practitioner Data Bank, Sept. 1, 1990-Sept. 30, 2002.)
Only 17 percent of doctors (1 out of 6) who have made 5 or more malpractice payouts have been disciplined by their state medical board. (National Practitioner Data Bank, Sept. 1, 1990-Sept. 30, 2002.)
THE UNFAIRNESS OF H.R. 5
H.R. 5 would do nothing to reduce the incidence of medical errors. Instead, it would reduce compensation to victims of malpractice and make it harder for them to seek justice. Public Citizen's objections to H.R. 5 include:
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Broad scope: not just doctors are let off the hook. While sponsors say that H.R. 5 is intended to benefit doctors, other special interests are along for the ride. Nursing home operators, medical device manufacturers, pharmaceutical companies, hospitals, and even HMOs are all covered by the bill's definition of ''health care liability claim'' and would be equally insulated from liability.
Reckless conduct no longer subject to punitive damages. Punitive damages are rarely awarded in medical malpractice cases, but the threat of punitive damages is important to deterring reckless disregard for patient safety by HMOs, nursing homes, and drug and medical device manufacturers. H.R. 5 would reward these special interests with a benefit that even the conservative 104th Congress rejected-a complete ban on punitive damages for reckless conduct.
$250,000 cap on non-economic damages. Awards for non-economic loss (pain and suffering resulting from injuries such as lost childbearing ability, disfigurement, and paralysis) compensate for the human suffering caused by medical negligence and defective medical products. Typically, such damages exceed $250,000 only in cases of NAIC Level 6 injury severity or higher(see footnote 1)that is, cases involving permanent significant injuries. Thus, the cap will not affect patients with minor injuries; instead, it targets only victims of injuries such as deafness, blindness, loss of limb or organ, paraplegia, or severe brain damage. Since the cap makes no allowance for inflation, its arbitrary limits become more unjust as each day passes.
Caps on attorney fees. Conservatives often say that ''price controls reduce supply.'' In H.R. 5 they practice what they preach. By limiting attorney fees, the sponsors hope to reduce the supply of representation for victims. These price controls will almost certainly succeedthey reduce the potential rewards of litigation that already carries with it high risks in terms of the expenses attorneys must advance and the sympathy that juries have for doctors. By drastically altering the risk/reward formula, H.R. 5 will prevent many victims from obtaining legal counsel.
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Leaves patients holding the bag when a doctor is insolvent. The doctrine of joint and several liability says that when two defendants, such as a doctor and a hospital, are both found liable for negligence, a plaintiff may collect the entire award from either of them if necessary. H.R. 5 would change this rule, and leave patients with no recovery for the share of damages assigned to an uninsured, underinsured, or bankrupt defendant.
Lets defendants control payouts for future damages. By instituting a ''periodic payment rule'' for future damages over $100,000, the bill would allow defendants and insurance companies to string out payments for future damages over the life expectancy of the victim, rather than have to pay up front. This is money the jury has determined rightfully belongs to the plaintiff, yet defendants and insurers would be able to invest and earn interest on the vast majority of a plaintiff's damage award. Victims would be left to cope with unexpected needs or changing medical costs and increased transportation and housing costs. The bill would provide no protection to the victim if his or her needs change, or if the insurance company becomes insolvent.
Shortened statute of limitations to one year after discovery of the injury. This severe limitation will extinguish many meritorious claims. Although in most cases an injury is immediately apparent, a victim may not know until much later whether the injury was caused by malpractice. The law in most states starts the limitation period running from the discovery of the malpractice, not discovery of the injury.
Page 209 PREV PAGE TOP OF DOCPREPARED 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 studentsis the largest medical specialty society and the second largest medical organization in the United States. We congratulate the House Committee on the Judiciary for holding this important hearing on a subject matter that has more relevance today than ever before. Of the College's top priorities for 2003, addressing the health care liability crisis and its impact on access to care is one of the most critical to our members. ACP-ASIM wishes to thank Committee Chairman Jim Sensenbrenner, Jr., Committee Ranking Member John Conyers, Jr., and other members, for holding this important hearing to discuss the immediate need to enact meaningful medical liability reform.
Doctors across the country are experiencing sticker shock when they open their medical malpractice insurance renewal noticesif 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 20002003. 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. Unfortunately, rates continue to rise dramatically with no sign of the market beginning to stabilize.
While obstetricians, surgeons and other high-risk specialists have been hit hard, internists have been one of the hardest hit specialtieshaving seen a record nearly 50 percent average increase over the last two years. In some cases, physicians, even those without a track record of lawsuits, cannot 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.
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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.
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: Florida, Georgia, Illinois, Michigan, Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington, and West Virginia. Several other states are just beginning to feel the impact.
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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 carea 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.
RELIEF FOR PHYSICIANS FROM SOARING MALPRACTICE PREMIUMS
Federal legislation has been introduced in the 108th Congress to help curb the spiraling upward trend in malpractice premiums. H.R. 5, the ''Help Efficient, Accessible, Low Cost, Timely Health Care'' (HEALTH) Act of 2003, 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 the 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.
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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.
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:
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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.
These common sense recommendations have been proven to work. The HEALTH Act is largely 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 an 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. ACP-ASIM strongly supports the elements contained in MICRA. Further, we believe that any legislation proposed must include these basic, proven elements in order to assure the stabilization of malpractice premiums.
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ACP-ASIM is pleased that the House Committee on the Judiciary agreed to conduct this important hearing to address the serious problem of soaring medical malpractice premiums that physicians are facing across the country. We strongly urge the House Judiciary Committee to pass common sense reform contained in the HEALTH Act that would allow for greater access to care, while adequately compensating injured patients. We thank the Committee and appreciate the opportunity to present our views.
PREPARED STATEMENT OF THE COLLEGE OF AMERICAN PATHOLOGISTS
The College of American Pathologists (CAP) is pleased to submit this statement for the record of the Committee on the Judiciary hearing on H.R. 5, the Help Efficient, Accessible, Low-Cost, Timely Healthcare Act of 2003. The College is a medical specialty society representing more than 16,000 board-certified physicians who practice clinical or anatomic pathology, or both, in community hospitals, independent clinical laboratories, academic medical centers and federal and state health facilities.
Pathologists, like all physicians, face severe hardships resulting from the worsening medical liability insurance crisis. For many, just finding coverage has been an arduous task at best and, for some, nearly impossible. Those who have found willing insurers are paying substantially higher premiumsin some cases, several times the previous year's ratesfor coverage plans, regardless of their claims history.
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The realities of this crisis are clear: Pathologists and other physicians can no longer offer certain procedures or are leaving their practices altogether because of the exorbitant costs of malpractice premiums. These are desperate decisions brought on by a tort system with no mechanism to restrain runaway ''pain and suffering'' and punitive awards. Damages rise beyond reason and, in the end, all patients and providers suffer as the nation's health care costs soar and access to quality care declines.
Real-world examples in the laboratory community highlight the problem:
The chief executive of a small, rural Pennsylvania hospital recently told a Senate Appropriations subcommittee that he nearly was forced to close the facility when an insurer declined to renew a malpractice policy for his pathologist, a 17-year practice veteran with no claims history. Only through a last-minute joint underwriting agreement was the pathologist able to retain insurance coverage, which allowed the hospital to continue offering laboratory, blood banking and surgical pathology services and remain open, the executive said.
A pathology group that provides services to all Hawaii's outer island hospitals and five facilities on Oahuabout 20 pathologists, in allis, like many physician practices, shopping for a new insurance carrier. The group's current insurer recently sent a renewal notice quoting a four-fold increase in premiums compared with 2002 rates.
In general, malpractice insurance premiums for pathologists have doubled in the past year, reports JLT Services Corp., the College's member insurance broker. In some locations, particularly urban areas, the increases have been significantly higher. Pathologists have been particularly hard hit by The St. Paul Companies' December 2001 decision to leave the medical liability insurance marketplace. The St. Paul, which provided about 9 percent of all malpractice insurance nationwide at the time, had been the underwriter of the CAP-endorsed Professional Liability plan.
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Pathologists and other physicians are increasingly hard-pressed to continue providing services, given the heavy burden rising insurance premiums have placed on their practices. Insurance rates of $200,000 or more for some high-risk specialties have forced many physicians to limit services, retire early or move to states where reforms have brought greater stability to premiums. The skyrocketing cost of liability insurance comes at a particularly critical time for physicians, who also face a widening gap between Medicare reimbursements and practice costs.
Severe patient access problems brought on by the liability insurance crisis have been documented in at least a dozen states and it is expected that 30 more soon will join that list. In the crisis states, obstetrician-gynecologists have been forced to stop delivering babies, trauma centers have closed and many physicians are grappling with how they can continue to provide other high-risk procedures.
Congress must act now to bring commonsense reforms to America's medical liability system. The CAP strongly supports the approach contained in the HEALTH Act of 2003. This critically important bill, introduced by Rep. Jim Greenwood, R-Pa., would:
place a reasonable limit ($250,000) on non-economic damages and no limit on economic damages;
create mechanisms to ensure that only justifiable punitive damages are paid, with a guideline to limit punitive damages to two times economic damages or $250,000, whichever is greater;
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structure settlements to be paid in increments, rather than lump-sum payments, so that expenses are reimbursed as they occur and earnings, as they would have accrued;
establish a three-year statute of limitations, with special provisions for minors.
establish criteria to ensure that defendants would pay damages in proportion to their fault;
ensure that states with damage caps in place would be permitted to retain them; and
set a sliding scale for attorney contingency fees to discourage frivolous lawsuits.
The HEALTH Act can work because it is modeled on a California law that has worked well for nearly three decades. It was enacted in circumstances much like those the nation faces today. California suffered a meltdown of its health care system in the early 1970s and physicians saw their premiums soar more than 300 percent. Liability carriers left the state and some physicians closed their office doors. The Medical Injury Compensation Reform Act, or MICRA, which came into effect in 1976, provided a $250,000 limit on non-economic damages, unlimited economic damages, a statute of limitations on claims, sliding-scale limits on contingency fees, advance notice requirements before claims were filed, binding arbitration of disputes and periodic payment of future damages.
The effect of this legislation was dramatic. The average liability premiums decreased 40 percent in the 25-year period ending in 2001 (expressed in constant dollars). In 2001, the Medical Liability Monitor published data that demonstrated that the average premium paid by California physicians practicing internal medicine, general surgery and obstetrics/gynecology ranged from 43 percent to 51 percent of the average premiums of their counterparts in Florida, Illinois, New York, Texas and Michigan. This was supported by a 53 percent lowering in the dollar amounts of settlements in California, compared with the nation as a whole.
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Our current liability crisis is not one of increasing litigation, but one of unreasonably high judgment amounts. Patients are not eager to sue their doctors. In fact, in 1991, the New England Journal of Medicine reported that only 1.53 percent of those injured by possible medical actions even file a claim. Severity of awards is the problem, and that is what the HEALTH Act of 2003 is designed to address.
The College supports such reforms to promote the basic goal of ensuring access to a wide range of health care services and promoting patient safety and quality medical care. In particular, the College strongly supports the bill's establishment of limits on non-economic and punitive damages. These provisions, combined with a sliding scale limit on contingency fees, make for a strong, positive step toward reforms that benefit the whole health care system and protect patient access to affordable, quality care.
The CAP appreciates the opportunity to present its views to the Committee on the Judiciary and offers its support and continued assistance as Congress works to meet the challenge posed by the nation's liability insurance crisis.
PREPARED STATEMENT OF THE AMERICAN ACADEMY OF FAMILY PHYSICIANS
This statement is submitted to the Judiciary Committee on behalf of the 93,400 members of the American Academy of Family Physicians. This hearing, concerning
Page 219 PREV PAGE TOP OF DOC H.R. 5, The Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act, is especially timely. The current lack of professional liability insurance does threaten patient access to care in some states. The continued trend of increasing insurance premiums drives up the cost of health care and forces physicians to drop certain services when they cannot afford professional liability insurance.
PATIENTS AFFECTED BY THE LACK OF MEDICAL LIABILITY INSURANCE
Medical liability insurers have left the medical insurance market in the past year in alarming numbers. One major reason for this exodus is the unpredictable rise in jury awards that exists in states without adequate tort reforms. According to the Physician Insurers Association of America (PIAA), the last decade has seen a dramatic increase in awards in excess of $1 million even while the number of suits filed has remained the same. As a result of the steady rise in record-breaking awards, most insurers find it more difficult to predict their risk. The remaining insurers have raised rates or refused new applications for insurance. Family physicians are beginning to experience difficulty in finding insurance companies to provide liability insurance or are receiving renewal notices with anywhere between 60 percent and 200 percent increases for the second year in a row.
Stories of family physicians closing their practices because of liability insurance premiums are turning up across the U.S. Recently, for example, AAFP Direct reported
that AAFP Past President Neil Brooks, M.D., sent a letter recently to the Hartford Courant, saying that he was giving up his practice of thirty-two years because the liability premiums had become too expensive.
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In rural Morrow County, Ohio, Brian Bachelder, M.D., President of the Ohio Academy of Family Physicians, decided to stop delivering babies after his liability premium increased by $21,000 last year. Dr. Bachelder was the only Morrow County physician providing prenatal and obstetrical care.
In rural Chipley, Florida, Greg Sloan M.D., found his malpractice premium has risen from $4,500 to $13,600 in one year. This was in spite of a 24-year career without a suit being filed against him. Dr. Sloan said it has reached the point that he cannot pay his staff and the liability premiums.
Most state laws, hospital accreditation requirements and managed care contracts mandate that physicians carry medical liability insurance. If family physicians cannot afford insurance coverage, they must choose between shutting down their practice altogether or restricting the range of services they provide. For family physicians in rural settings, this usually means being forced to stop delivering babies or providing prenatal care due to mounting liability premiums.
The tools needed to counteract this alarming trend are derived from state experiences. Last year, the Department of Health and Human Services released a report entitled, ''Improving Health Care Quality and Lowering Costs by Fixing Our Medical Liability System.'' According to this study, liability premiums have been growing rapidly in states that have failed to place reasonable limits 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.
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Over the previous two years, states without caps on these non-economic damages have experienced a 44-percent increase in liability premiums. In contrast, states with caps on non-economic damages of $250,000 experienced on average an increase of only 15 percent in medical liability insurance premiums.
The reforms contained in California's Medical Injury Compensation Reform Act of 1975 (MICRA) 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, 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 the ensuring 27 years, medical liability insurance premiums have risen 505 percent nationwide compared with California's increases of 167 percent.
AAFP SUPPORT FOR H.R. 5, THE HEALTH ACT
But the states cannot, by themselves, resolve this national crisis. The House of Representatives addressed this issue by passing, H.R. 4600, The Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act in the 107th Congress. The HEALTH Act has been reintroduced into the 108th as H.R. 5. The Academy supports H.R. 5, which would bring the same rational reforms contained in MICRA to all states' professional liability systems. The AAFP supports federal legislation to stabilize the medical tort reform systems in the states since spiraling insurance premiums mean increasing numbers of pregnant women in rural areas of the U.S. will not be able to find a physician to deliver their babies.
Page 222 PREV PAGE TOP OF DOC There is an important additional reason that the AAFP supports The HEALTH Act. H.R. 5 requires that a party pay damages only to the extent that the party was liable for the harm caused. Family physicians provide primary care which is comprehensive and coordinated care for all life stages and both genders. Because 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.
The Academy appreciates the opportunity to support passage of H.R. 5 out of the Judiciary Committee. We look forward to working with the Committee to find a workable solution for patients and physicians.
PREPARED STATEMENT OF RODNEY C. LESTER
Chairman Sensenbrenner, Jr. and Congressman John Conyers, Jr., I am Rodney C. Lester, CRNA, PhD, President of the American Association of Nurse Anesthetists (AANA). I appreciate the opportunity to submit for the record a statement on issues surrounding medical liability reform, which are the most challenging facing healthcare today.
For those of you who may be unfamiliar with the AANA, we represent approximately 30,000 Certified Registered Nurse Anesthetists (CRNAs) across the United States. In the administration of anesthesia, CRNAs perform virtually the same functions as anesthesiologists and work in every setting in which anesthesia is delivered including hospital surgical suites and obstetrical delivery rooms, ambulatory surgical centers, health maintenance organizations' facilities, and the offices of dentists, podiatrists, ophthalmologists, and plastic surgeons. Today, CRNAs administer approximately 65% of the anesthetics given to patients each year in the United States. CRNAs are the sole anesthesia provider in at least 65% of rural hospitals, which translates into anesthesia services for millions of rural Americans.
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CRNAs have been a part of every type of surgical team since the advent of anesthesia in the 1800s. Until the 1920s, nurses almost exclusively administered anesthesia. In addition, nurse anesthetists have been the principal anesthesia provider in combat areas in every war the United States has been engaged in since World War I. CRNAs provide anesthesia services in the medical facilities of the Department of Defense, the Public Health Service, the Indian Health Service, the Department of Veterans Affairs, and countless other public and private entities. Given the current state of affairs with Iraq and Afghanistan, it is not surprising that our deployed forces depend greatly upon the services and skills of CRNAs.
You may be aware of the widely publicized nursing shortage. While we do not have enough rank and file nurses there is an increasingly acute shortage of CRNAs. Quite simply, there are not enough CRNAs to fulfill the demand. Our News Bulletin tends to be chock full of advertisements for vacant positions. Quite simply if the rest of the economy was similar to the employment situation for CRNAs, our nation would be at full employment.
Hardly a day goes by for most anesthesia practices when a CRNA is not called by an employment recruiter attempting to entice them into seeking additional pay at another group or hospital. Practices are offering bonuses, attractive benefits, and higher pay in order to recruit CRNAs.
We graduate approximately 1,000 students per year and it is not enough to fill the demand. Our Foundation has recently funded a manpower shortage study and its results are expected shortly.
Page 224 PREV PAGE TOP OF DOCHow are CRNAs different from anesthesiologists?
The most substantial difference between CRNAs and anesthesiologists is that prior to anesthesia education, anesthesiologists receive medical education while CRNAs receive a nursing education. However, the anesthesia part of the education is very similar for both providers, and both professionals are educated to perform the same clinical anesthesia services. CRNAs and anesthesiologists are both educated to use the same anesthesia processes and techniques in the provision of anesthesia and related services. The practice of anesthesia is a recognized specialty within both the nursing and medical professions. Both CRNAs and anesthesiologists administer anesthesia for all types of surgical procedures, from the simplest to the most complex, either as single providers or in a ''care team setting''.
What is our experience on malpractice insurance?
For the past several years, CRNAs have relied largely on two main major malpractice carriersSt. Paul and TIG. On December 12, 2001, AANA Insurance Servicesa wholly owned subsidiary of the AANAwas notified by the St. Paul Companies that it would exit this market and would seek to sell their malpractice book and eventually transition out of the medical malpractice market. We were advised that this difficult decision was based upon ''its anticipated worst annual loss in its 148-year old history.'' The St. Paul further stated that the decision is part of an overall plan ''that will put St. Paul on sound financial footing so that they can continue serving their thousands of customers in their other businesses.'' Their news release goes into more detail concerning losses relative to its losses in malpractice, other insurance lines and those associated with the September 11 terrorist attack.
Page 225 PREV PAGE TOP OF DOC AANA Insurance Services worked to prepare and assist its policyholders in this transition period and kept them informed of developments relative to their continuing insurance coverage.
The AANA and AANA Insurance Services Staff prepared strategies to respond to this situation proactively to assure a smooth transition for our members insured through St. Paul. We contacted our other carrier at the time, TIG Insurance, to seek support from them and assessed other potential medical malpractice carriers to assure that our members have more than one choice for professional liability insurance as we have in the past.
While we were aware that St Paul Companies were experiencing difficulties along with the rest of the insurance industry, wealong with many other providers and perhaps the general publicwere surprised by the sudden decision to withdraw completely from the medical malpractice market. St Paul stated that they would do everything possible to make the transition smooth. We had an excellent relationship with the St. Paul and this transition continues.
Following this announcement, we worked even closer with TIG Insurance Company to ensure a smooth transition for the policyholders of AANA Insurance Services. A few months ago, TIG Insurance Company announced it would no longer be providing medical malpractice insurance. Coverage for CRNAs through TIG will not be available after June 30, 2003. TIG's announcement comes almost exactly a year after St. Paul's announcement that it was withdrawing from the medical malpractice marketplace.
On Monday, December 16, 2002, Fairfax Financial Holdings Limited announced that it would be restructuring TIG. Fairfax, the parent company of TIG, is a financial services holding company which, through its subsidiaries, is engaged in property, casualty and life insurance, reinsurance, investment management and insurance claims management.
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As part of the restructuring, TIG indicated that it will be discontinuing its program business. Program business, a specialty of TIG's that represents a majority of its business, is defined as insuring large groups of insured with very similar characteristics. According to Fairfax, TIG's program business was not meeting Fairfax's financial expectations. Unfortunately, all of TIG's medical malpractice business, including the coverage it provides to CRNAs, falls into this program business category.
It should be noted that medical malpractice only accounted for 25% of TIG's program business and TIG's CRNA program was only a small part of the medical malpractice business. Fairfax representatives have informed AANA that the decision to restructure TIG was based neither on the performance of its medical malpractice business in general or its CRNA business in particular.
It is no secret that the number of insurance companies willing to offer medical malpractice coverage has shrunk dramatically over the past few years. Although it's of little consolation, there are many classes of healthcare providers who are facing even greater insurance challenges than CRNAs. While TIG's decision is disappointing, it is not surprising considering the current medical malpractice environment.
Unlike when St. Paul exited from the medical malpractice marketplace, TIG's withdrawal won't be as immediate. TIG will continue to offer both new and renewal policies to AANA members through June 30, 2003. After June 30, 2003, TIG will not provide coverage to new applicants.
Page 227 PREV PAGE TOP OF DOC Currently AANA Insurance Services provides coverage for members through CNA Insurance Company. It is our understanding that CNA has been approved to do business in 43 states and the District of Columbia. CNA is awaiting approval in the states of Alaska, Nebraska, Nevada, New Hampshire, New York, Vermont and Washington. AANA Insurance Services expects CNA to have approval in all these states by June 30, 2003.
Obviously this has become extremely troubling to our members. While we have an excellent relationship with CNA Insurance Company, CRNAs are increasing concerned that with only one major medical malpractice carrier remaining, issues of coverage could become problematic. It should be noted that unless a CRNA had a particular issue with claims or licensure, coverage could easily be found, whether it was with St. Paul or TIG. That remains relatively true today with the CNA Insurance Company. But with more carriers leaving the marketplace, what does that do to providers? More importantly, what does it mean to patients and consumers? How do we attract more carriers to this market? Without major reforms, will carriers have any reason to go into the market?
Given the strong safety record of CRNAs, we had no reason to believe then, nor do we now, that there was any nexus between the decision of either St. Paul or TIG to exit the medical malpractice market due to bad claims from CRNAs.
America's CRNAs are committed to advancing patient safety so that actual instances of malpractice are reduced. These commitments including active membership in the cross-disciplinary National Quality Forum (NQF) and the National Patient Safety Foundation (NPSF), closed-claims research that transforms tough cases into educational and practice improvements, and the most stringent continuing education and recertification requirements in the field of anesthesia care. With CRNAs providing two-thirds of all U.S. anesthetics, the Institute of Medicine reported in 1999 that anesthesia is 50 times safer today than 20 years ago.
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Educational programs that prepare nurse anesthetists rely solely on hospitals, surgery centers and even office based surgical practices to provide students with the required clinical experiences to enable them to become competent anesthesia providers. These healthcare facilities rely on surgeons and other high-risk specialties for their patient admissions. As these high-risk specialties leave, operating rooms close and patients have less access to needed care, and students have less access to patients for clinical training.
Looking at Pennsylvania as an example, the hospitals and surgeons who are part of a healthcare system located in Southeast Pennsylvania have seen their primary premiums increase more than 60%, their CAT fund increase more than 30%, and their excess premiums increase more than 600%, all within the last year.
The Medical Professional Liability Catastrophe Loss Fund (commonly
referred to as the CAT Fund) was established to ensure that victims of medical malpractice are compensated and that medical malpractice insurance is available to health care providers. Health care providers (physicians, surgeons, podiatrists, hospitals and nursing homes) are required to carry a set minimum amount of primary coverage. The health care providers then must pay a surcharge to the CAT Fund in order to fund a layer of insurance above the primary insurance coverage. Failure to comply with this requirement may result in revocation of one's license.
Page 229 PREV PAGE TOP OF DOC This is reflective of what other healthcare systems in Pennsylvania are experiencing. In addition that system has seen its high-risk specialty physicians relocate out of Pennsylvania or give up the surgical part of their practice. Each time a physician closes his/her office or reduces practice, employees of their practice lose their job. Fewer high-risk specialists mean fewer cases requiring anesthesia are performed. These are exactly the specialties that nurse anesthesia educational programs rely on to provide their students with the required clinical cases.
As surgeons leave the state or reduce surgery because they can not afford the malpractice insurance there are fewer surgical cases, operating rooms are closed, daily operating room schedules are prolonged, overtime costs increase, hospitals' earn less money, layoffs occur and hospitals close. This directly affects patients' access to needed and timely care, and the ability of our educational programs to provide the necessary clinical experiences to educate nurse anesthetists. If this trend continues unabated, nurse anesthesia educational programs (and other healthcare educational programs) will face accreditation issues, declines in student enrollment and delays in graduation as they struggle to find enough clinical experiences for their students. All of this occurring during a time when there is a critical shortage of anesthesia providers nationwide to provide care to an older and sicker population.
The medical malpractice crisis affects all levels of society. Unlimited individual awards for pain and suffering will severely limit the availability and access to care for the majority. The value we place on timely and complete access to care for all our citizens is reflected in our allowance of an individual's unlimited right to take precedence over the needs of all our people. To insure a healthy society, we must insure access to health care even if it means we place limits on a single category of damages to the individual.
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If carriers continue to leave the market and if there should be in difficulty obtaining coverage, it could ultimately mean a slow down for hospitals in providing surgeries. In addition, when CRNAs are employed by hospitals or group practices, these entities have to pick up the tab. If increasing rates continue to become an issue, hospitals will increasingly have to make difficult choices. In those rural hospitals where CRNAs are the sole anesthesia provider, hospitals have no choice if they wish to keep their doors open.
That is why the AANA supports medical liability reform. Many can point an accusatory finger as to why carriers exit the market. However, it makes no sense for an insurer to remain in a market if it cannot do so profitably. High costs and runaway juries and large malpractice awards have become unrealistic and disproportionately high. This is not to say that providers, be they nurses or physicians, should not be held responsible for their actions. All providers must take responsibility. And those providers who may be disproportionately responsible for rate hikes because they have had more than one claim must increasingly take responsibility for their actions as do the nursing and medical boards regulating providers. But by the same token, awards have become too high and many insurers have decided that with the unpredictability of determining how to insure a risk that is seems to be increasingly incalculable, they simply exit the market.
In the 108th Congress, the AANA is pleased to support Rep. Jim Greenwood's (R-PA) legislation, H.R. 5. The HEALTH Act would permit individuals to recover unlimited economic damages and allow for non-economic damages or ''pain and suffering'' up to $250,000. The states would have the flexibility to establish or maintain their own laws on damage awards. Other provisions in the HEALTH Act address the percentage of damage awards and settlements that go to injured patients as well as allocate damage awards fairly and in proportion to a party's degree of fault and works to decrease the time it takes for a case to settle or go to trial.
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Ultimately, it will be incumbent upon insurers, providers, and yes the trial lawyers to work together to find a common solution that works for consumers and patients.
Again, thank you for the opportunity in allowing us to share our views on medical liability reform with the members of this committee.
PREPARED STATEMENT OF THE AMERICAN COLLEGE OF OBSTETRICIANS AND GYNECOLOGISTS
On behalf of the American College of Obstetricians and Gynecologists (ACOG), an organization representing more than 45,000 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.
ACOG resoundingly supports HR 5, the bipartisan HEALTH Act of 2003, and we urge this Committee, and the House of Representatives as a whole body, to pass this meaningful medical liability reform legislation, which protects women's access to health care.
Across the country, the meteoric rise in medical liability premiums is threatening women's access to health care. Faced with the unaffordability and unavailability of insurance coverage, ob-gyns are forced to stop delivering babies, reduce the number of deliveries, scale back their practices by eliminating high-risk procedures, or close their doors entirely.
Page 232 PREV PAGE TOP OF DOC This statement will also highlight how the medical liability crisis is acutely affecting a growing number of states, explaining how access to basic and important women's health care in those states is severely jeopardized because of a liability system gone awry.
I. MEDICAL LIABILITY REFORM: SAFEGUARDING PATIENTS' ACCESS TO CARE
The common sense provisions of the HEALTH Act safeguard patients' access to health care and address the health care crisis:
PROMOTES SPEEDY RESOLUTION OF CLAIMS
The Act balances the needs of all parties involved in litigation and promotes a fair result. Health care lawsuits can be filed no later than 3 years after the date of injury. Additionally, the bill acknowledges that in some circumstances, it is important to guarantee patients additional time to file a claim. Accordingly, the Act extends the statute of limitations for minors injured before age 6.
FAIRLY ALLOCATES RESPONSIBILITY
Under the current system, defendants who are only 1% at fault may be held liable for 100% of the damages. This bill eliminates the incentive for plaintiffs' attorneys to search for ''deep pockets'' and pursue lawsuits against those minimally liable or not liable at all.
COMPENSATES PATIENT INJURY
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HR 5 ensures injured patients are compensated. The Act does not limit the amount a patient can receive for physical injuries resulting from a provider's care, unless otherwise restricted by state law. The Act only limits unquantifiable non-economic damages, such as pain and suffering, to no more than $250,000.
MAXIMIZES PATIENT RECOVERY
Patients will receive the money needed for their health care. HR 5 discourages baseless lawsuits by limiting the incentive to pursue merit-less claims. Without this provision, attorneys could continue to routinely pocket large percentages of an injured patient's award.
PUTS REASONABLE LIMITS, NOT CAPS, ON THE AWARD OF PUNITIVE DAMAGES
The Act provides for reasonable punishment without unnecessarily jeopardizing a defendant's fundamental constitutional rights or risking the defendant's bankruptcy. It does not cap punitive damages, rather, it delineates a guideline, allowing for punitive damages to be the greater of two times the amount of economic damages awarded or $250,000.
ENSURES PAYMENT OF MEDICAL EXPENSES
HR 5 ensures that injured patients will receive all of the damages to which they are entitled in a timely fashion without risking the bankruptcy of the defendant. Past and current expenses will continue to be paid at the time of judgment or settlement while future damages can be funded over time through the purchase of an annuity or other instrument of secured payment.
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ALLOWS STATE FLEXIBILITY
The HEALTH Act establishes a ceiling on non-economic damages, and guidelines for the award of punitive damages, only in those states where the state legislature has failed to act. A state legislature may also act at any time in the future to impose a cap the limits of which differ from those provided for in the HEALTH Act.
II. HOW THIS CRISIS COMPROMISES THE DELIVERY OF OBSTETRIC CARE
Obstetrics-gynecology is among the top three specialties in the cost of professional liability insurance premiums. Nationally, insurance premiums for ob-gyns have increased dramatically: the median premium increased 167% between 1982 and 1998. The median rate rose 7% in 2000, 12.5% in 2001, and 15.3% in 2002 with increases as high as 69%, according to a survey by Medical Liability Monitor, a newsletter covering the liability insurance industry.
A number of insurers are abandoning coverage of doctors altogether. The St. Paul Companies, Inc., which handled 10% of the physician liability market, withdrew from that market last year. 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 filed 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 firstalong with family physicians-general practitionersin 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).
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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, ob-gyns won more than 65% of the cases resolved by court verdict, arbitration, or mediation, meaning only 10% of all cases filed against ob-gyns were found in favor of the plaintiff. Enormous resources are spent to deal with these claims, only 10% of which are found to have merit. The costs to defend these claims can be staggering and often mean that physicians invest less in new technologies that help patients.
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 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.
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 yearsand 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.
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This high rate of suits does not equate malpractice. Rather, it demonstrates a lawsuit culture where doctors are held responsible for less than perfect outcome. And in obstetrics gynecology, there is no guarantee of a perfect outcome, no matter how perfect the prenatal care and delivery.
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 backor eliminatecare 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.
Limitless litigation also threatens women's access to gynecologic care. Ob-gyns have, until recently, routinely met women's general health care needsincluding 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.
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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 patientsthe majority of them women and childrenwho 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.
As ob-gyns, our primary concern is ensuring women access to affordable, quality health care. It is critical that we maintain the highest standard of care for America's women and mothers.
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Thank you, Mr. Chairman, for your leadership on this important issue and for the Subcommittee's attention to this crisis. ACOG appreciates the opportunity to present our concerns for the panel's consideration and again urges the passage of HR 5, the HEALTH Act of 2003. The College looks forward to working with you as we push for a solution.
Material Submitted for the Hearing Record
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(Footnote 1 return)
Institute for Legislative Practice, Jury Verdicts in Medical Malpractice Cases and the MICRA Cap (1999); ''Jury Awards for Medical Malpractice and Post-verdict Adjustments of Those Awards,'' 48 DePaul L. Rev. 265 (1998)