Articles

(April 2006) For decades, medical malpractice has been a major concern in Pennsylvania. Why? It impacts the cost of health care because malpractice insurance costs and, more importantly, the costs of defensive medicine are paid, in part, through higher insurance rates. It impacts access because medical malpractice may drive physicians away from high-risk specialties. It impacts quality to the extent the medical malpractice climate affects how health care practitioners do their job.

The most recent malpractice insurance crisis – one of availability and affordability – arrived in 2000. Mirroring national trends, insurance companies which had been enjoying high investment earnings during the 1990s and were able to offer attractive premium pricing to build market share encountered serious financial difficulty as equity markets weakened. The number of paid physician claims per 100,000 Pennsylvanians grew 23% between 1990 and 2001, compared to nationwide growth of about 11%. Three of the 5 major private medical liability insurers ceased writing policies in Pennsylvania after 2001. And insurance premiums rapidly increased in certain high risk specialties such as neurosurgery and orthopedic surgery, if coverage was available at all except through the state’s insurer-of-last-resort.

How has state government responded?

In 2002, a coalition of stakeholders and state government leaders developed legislation that became the “MCARE Act.” The goals were to make the medical malpractice insurance system more stable and less prone to destructive cycles, to make coverage more available and affordable, and to improve patient safety. The Council of State Governments commented, “Pennsylvania is unique in that the MCARE Act reform package addresses all three aspects of the problem, patient safety, legal reforms to reduce the number of frivolous lawsuits and excessive rewards, and financial reforms initiating insurance restructuring.”
After the MCARE Act, other significant legislative pieces followed. And, in 2004, the Pennsylvania Supreme Court implemented changes to the rules of civil procedure to both reinforce the MCARE legislation and to effect reforms of its own.

Some of the significant reforms of the early 21st century:

• Pennsylvania became the first state in the nation to require reporting of adverse events and near misses. 
• To help reduce the number of medical errors and improve patient safety, the state created a Patient Safety Authority to review medical error data and make recommendations on how to avoid errors. 
• The courts implemented changes to reduce the number of frivolous lawsuits and excessive rewards and to make the system more predictable and stable. 
• There’s now a restriction on “venue shopping” in Pennsylvania: a lawsuit must be filed where treatment actually occurred. 
• New rules of civil procedure address pretrial procedures and litigation and require lawyers for the plaintiff obtain a “certificate of merit” establishing the medical work in a case falls outside acceptable standards. 
• Another new law provided abatements for MCARE assessments owed by physicians and nurse-midwives. Originally targeted to cover calendar years 2003 and 2004 – approximately $220 million per year – the abatement has been renewed annually at the same subsidy level.

Although they’ve been discussed and debated, “caps” on non-economic damages have never been legislated.

What are the results?

It’s too early to know for sure. Determining progress requires three measures: payouts from the MCARE fund, premiums for physicians, and the availability of liability insurance. So far the results are mixed. To learn more, read this IssuesPA Article.

MCARE payouts: According to the Pennsylvania Department of Insurance, which administers the MCARE fund, MCARE payouts were lower in 2004 than in 2002 and 2003 – $318.9 million in 2004 compared to $348.1 million in 2002 and $376.8 million in 2003. Payouts for 2005 were lower again. The assessment fees charged to doctors to support the fund dropped significantly for 2006.
Premium costs for physicians: Despite the recent good news from the MCARE Fund regarding lower claims payouts and assessment levels, the real question is whether total costs – both primary insurance premiums and MCARE assessments – are under control. In 2005, total costs for most physicians did not decrease significantly. Major insurers didn’t request a rate increase for 2006, but the medical community says premiums still are much too high. And the Governor and legislature still must decide in future years whether to continue to MCARE abatements – a $200 million relief package for physicians.

Availability of liability insurance: Non-traditional insurers continue to enter the market – many of them risk-retention groups that are exempt from state rate-setting and other important market controls. Traditional insurers, however, have not returned, suggesting that Pennsylvanian’s liability insurance market does not have the predictability and stability that insurers prefer. In some cases, the traditional insurers that remain have reduced their business in Pennsylvania over the last few years through non-renewals and limitations on new business they’ll cover.

While the formation of risk-retention groups is good news that there are more insurance options for some physicians, the good news may be offset by the risk. The exemptions the non-traditional insurers enjoy may expose those insured to personal risk for the insurer’s liabilities in the event of insolvency.

Because of the unstable market, over 1,900 physicians (out of approximately 34,000) now are forced to obtain coverage – expensive coverage – from the Joint Underwriting Association (JUA), the state-operated insurer-of-last-resort. While 1,900 may seem to be a relatively small number, it reflects a 450% increase since 2001.

Bottom line?

Moving forward, lawmakers and advocates must strike a careful balance: 

• First, determine the impact of current reforms and allow time for them to work. 
• Second, monitor them carefully to make sure they’re being implemented appropriately. 
• Third, continue to seek more ways to help assure long-term access to a high-quality health care system for all Pennsylvanians.

In 2006, policymakers and candidates would be wise to monitor this volatile issue.