Pennsylvania's Medical Liability Crisis

The POS Agenda for a Balanced System

PAOrtho: Advocates for Reform
The Pennsylvania Orthopaedic Society has served as one of the key medical professional organizations advocating for solutions to Pennsylvania’s medical liability crisis in order to preserve world-class orthopaedic care for patients in every community across the state.

In 2000 and 2001 orthopaedic surgeons were some of the first specialty doctors to see skyrocketing medical liability insurance premiums. Most national insurance carriers stopped writing policies in Pennsylvania due to an unpredictable and excessively litigious environment.

In 1999, jury awards in Philadelphia alone exceeded the total of jury awards for the whole state of California.

Many experienced orthopaedic surgeons were unable to find affordable medical liability insurance coverage and were forced to leave Pennsylvania to practice in another state or retire early or limit their practice to non-surgical procedures.

Hospitals had difficulty maintaining and recruiting the specialty surgeons needed for emergency rooms and trauma units.

PAOrtho worked with elected officials to push for meaningful tort reforms such as those enacted in California to bring balance to Pennsylvania’s legal system and therefore make medical liability insurance more affordable and more available.

In California, legislation enacted in the late 1970’s limiting awards for "pain and suffering" or so-called non-economic damages at $250,000 had the effect of maintaining predictability and avoided the jackpot jury awards allowed in Pennsylvania. As a result medical liability insurance remains affordable and available in California. To learn more about California’s laws on medical liability go to: https://micra.org//#micra

PAOrtho has been represented on several state government committees, commissions, and PAOrtho staff have participated in independent research and other reports addressing the medical liability issue.

In 2002, several key reforms were enacted: Act 13 and Venue being the most critical. However, these reforms would take three to five years to have an effect on the medical liability insurance crisis in Pennsylvania.

The state-mandated, state run insurance program (MCARE Fund) for physician and hospital catastrophic medical liability insurance coverage remained one of the most pressing burdens on doctors and hospitals. The cost for this coverage represented 45% of most high-risk specialists medical liability premiums.

Governor Ed Rendell provided immediate relief to doctors by first delaying the payments to this state insurance program and then enacting a cigarette tax to pay for the doctor’s premiums and providing high-risk specialists such as orthopaedic surgeons 100% abatement from the excess insurance cost. This alone allowed hundreds of specialty surgeons to continue practicing in Pennsylvania.

About Medical Liability and the Reforms Enacted
Physicians in Pennsylvania are required by law to purchase $1 million of insurance coverage. They obtain the first $500,000 in coverage though the commercial insurance market. The second $500,000 in coverage is assessed as a surcharge by the private insurance carrier and then remitted to the state-run MCARE Fund (formerly the CAT Fund). The CAT Fund (Medical Professional Liability Catastrophe Loss Fund) was a Pennsylvania state-managed insurance fund created by a 1975 law into which Pennsylvania doctors were required to pay. The goal was to ensure money was available to compensate patients. When a doctor paid a claim, generally, the first $500,000 was covered by the doctor’s primary insurance, a commercial carrier, and then, generally, the rest was picked up by the CAT fund. The CAT Fund was replaced by the MCARE Fund in the 2002 MCARE Act, also known as Act 13. Act 13 began to address liability reform in Pennsylvania and contained significant provisions aimed at patient safety. To learn more about the state’s MCARE program go to: https://www.insurance.pa.gov/SpecialFunds/Pages/MCARE.aspx

In 2004, Act 44 was passed in response to Pennsylvania’s deepening medical liability insurance crisis. Act 44 was an amendment to the state’s Public Welfare Code which established the MCARE Abatement Program for 2003 and 2004. In late 2004 the program was extended for an additional year to cover 2005. Again in 2005, the program was extended to cover 2006.

During the past four years, MCARE abatement has saved orthopaedic surgeons an average of $109,000 in insurance premiums. Extending abatement into 2007 and beyond, will give physicians partial relief from the heavy burden of medical liability insurance costs.

Since 2003, Pennsylvania Orthopaedic Society, and various county and specialty medical societies have all been advocating for continued MCARE abatement as it represents a critical component to a long-term medical liability solution.

MCARE abatement is funded primarily through a 25-cent-per-pack tax on cigarettes. Our lobbyist, along with PAOrtho leadership, proposed the idea of using an increased cigarette tax to fund MCARE to the Governor in 2003. Through our diligent efforts in the General Assembly, the state’s cigarette tax was raised (by a total of 35 cents per pack) in the 2004 budget, providing sufficient funds to support the program without dipping into revenues earmarked for other programs. The 25-cent portion of the cigarette tax generates approximately $180 million per year.

We supported inclusion of language in Act 13 recognizing that the insurance market was so volatile that there needed to be some avenue to at least postpone the termination of the MCARE Fund if it was for the good of physicians and the market overall. We are still committed to the long-term goal of eliminating the MCARE Fund.

In Act 13, the goal was to slowly decrease the amount of financial obligation for malpractice insurance at the MCARE level, while increasing the financial obligation at commercial insurance level, with the goal of eventually terminating the MCARE level entirely and having a physician or hospital obtain all of the required insurance from the commercial market. But realizing the severity of the liability crisis even when Act 13 was adopted, there was precautionary language put in the bill that, at each stage when the MCARE level was to go down another $250,000 while the primary level was to up an equal amount, the Insurance Department was to conduct a thorough study to determine whether or not there was enough capacity in the commercial private market to successfully bring up the primary level. That first study was to be completed by July 1st of 2005 to determine whether or not the MCARE level would be reduced in 2006 to $250,000 from the current $500,000 – bringing the primary level up to $750,000.

The Insurance Department's study made the determination that increasing the primary limits and decreasing the MCARE level should be postponed for two years, as per Act 13, after which the Insurance Department is to study again whether or not there are improvements in capacity to allow the increase to occur at the primary level. If in 2007 the Insurance Department continues to feel that the market capacity is not there, it can be postponed yet another two years, and so on.

The Insurance Department's conclusion was that, although there has been some improvement in capacity, it has not come primarily from the commercial carriers at all. There has been a significant decline in the amount that commercial carriers are writing, and much of the capacity has been met by self-insured plans and risk retention groups, while the market is still uncertain about the long-term viability of risk retention groups. Most of them are brand new in Pennsylvania, so they’ve not had any large payouts yet. Over the last five years, while the commercial insurance market has diminished, there have been no new commercial companies of any magnitude that have been attracted to Pennsylvania.

Our goal is to obtain MCARE abatement through 2007 and beyond and to eliminate the unfunded liability. Pennsylvania Orthopaedic Society is once again lobbying for MCARE abatement in 2006. Each year, interest groups throughout the state compete for the cigarette tax funds which currently support the MCARE abatement program. Without consistent grass-roots lobbying efforts, the cigarette tax money stands a chance of being usurped by another group.

In order for physicians to receive abatement for 2007, the General Assembly must take action to extend MCARE abatement by the end of December 2006. Through our grass-roots lobbying efforts, we will encourage the House and Senate to vote for another year of extension to the MCARE abatement program.

However, the bigger question is how the unfunded liability will be paid, because it continues to be an enormous barrier, particularly in bringing younger physicians to Pennsylvania if they are going to have responsibility for that unfunded liability – which is now in the billions of dollars. So, as long as there is a commitment on the part of state to continue to use public funds through the cigarette tax to provide financial relief at that level; or to pay down the unfunded liability, we continue with a status quo. Phasing out the MCARE Fund must be done responsibly because of the huge market implications and costs associated with it, as well as the question how the unfunded liability is going to be paid once the MCARE Fund is no more. The decision of the Insurance Department to postpone permits the market to at least remain on a bit more of a stable level.

House Bill 2041 (the vehicle which passed MCARE Abatement for 2005) also included development of a commission that will analyze ways in which the unfunded liability will be paid. PAOrtho has successfully placed two orthopaedic surgeons on this commission, our president, Joshua Port, has been appointed as well as former Board member, Joseph Cesare. The commission is expected to report their findings in November 2006.

Patient Safety

Today doctors are doing more than ever before to employ best practices, medical technology and simple common sense solutions to improve patient safety at every level of care. Patient safety and risk management is a top priority for health care providers in the Commonwealth. During the past decade, an emphasis has been placed on patient safety and what doctors can do to improve methods that protect patients. In most states, including Pennsylvania, CME credits are required in the area of patient safety/risk management for license renewal.

The Patient Safety Authority is an independent state agency established under Act 13 of 2002, the Medical Care Availability and Reduction of Error ("MCARE") Act. It is charged with taking steps to reduce and eliminate medical errors by identifying problems and recommending solutions that promote patient safety in hospitals, ambulatory surgical facilities, birthing centers and certain abortion facilities.

Today's Medical Liability Environment Remains Critically Unstable

Nearly every orthopaedic practice and every hospital in Pennsylvania is actively seeking to recruit and retain orthopaedic surgeons. Pennsylvania’s high medical liability insurance costs and out-of-balance legal system remains the highest hurdle for attracting surgeons to practice in the Commonwealth.

PAOrtho continues to fight for affordable medical liability insurance premiums for orthopaedic surgeons and for an environment to practice the highest quality orthopaedic medicine without the constant threat of frivolous lawsuits.

PAOrtho works with other advocacy groups on medical liability reforms that include The Pennsylvania Medical Society (www.pamedsoc.org) and The Hospital & Healthsystem Association of Pennsylvania (www.haponline.org).

The PAOrtho Agenda for a Balanced System

PAOrtho is advancing an ambitious and reasonable agenda to bring balance to Pennsylvania’s medical liability system so that Pennsylvania can better attract the best orthopaedic and other specialty surgeons for patients in Pennsylvania.

PAOrtho is working with the Governor and key legislators in the House and the Senate to enact the following common sense tort reforms:

Medical Liability Reform – To ensure appropriate compensation for truly injured individuals, provide predictability for liability insurers, and protect physicians from excessive payouts, PAOrtho has several goals related to caps on awards.

• secure passage (in two consecutive legislative sessions) of a joint resolution amending the Pennsylvania Constitution to authorize the General Assembly to adopt caps on awards for non-economic damages.
• secure passage of constitutional amendment referendum authorizing General Assembly to adopt caps on awards for non-economic damages.
• secure legislative passage of caps of $250,000 on awards for non-economic damages.

• Lower Mandatory Malpractice Insurance Coverage Levels - To provide an incentive for liability insurers to return to the Pennsylvania market and to lower costs for physicians, mandatory malpractice insurance coverage levels would be lowered to $250,000 per occurrence and $750,000 per annual aggregate.
• No Fault Medical Liability Proposal - Similar to Act 6 of 1990, which limits auto accident lawsuits to cases involving death, serious impairment of bodily function, or permanent disfigurement, this proposal would apply those same limitations to lawsuits filed in medical malpractice cases.

MCARE Fund Elimination – To ensure high risk specialty surgeons can remain in Pennsylvania, PAOrtho will work toward permanent MCARE abatement.

Patient Protection – To ensure that patients receive the benefits of awards, PAOrtho will advocate for legislation guaranteeing at least 80% of an award or settlement be paid to the patient.