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Prepared Witness Testimony The House Committee on Energy and Commerce
The Medical Liability Insurance Crisis: A Review of the Situation in Pennsylvania
Subcommittee on Oversight and Investigations
Edwards H. Dench Jr., MD
Chairman
Greenwood and members of the United States House Energy and Commerce Committee.Thank you for conducting this important hearing and allowing the
Pennsylvania Medical Society to describe how lawsuit abuse is negatively
impacting patient care in Pennsylvania. I
am Edward H. Dench, Jr., President of the Pennsylvania Medical Society and a
practicing anesthesiologist from State College.The Pennsylvania Medical Society represents more than 20,000
physician members and the millions of patients our members care for.In addition, we pay close attention to the concerns and thoughts of our
1,400-member patient advisory board.This
board consists of a demographic cross-section of patients from throughout the
commonwealth. Let
me start by reinforcing what you already know:There is a serious liability insurance crisis that is driving a wedge
between patients and their doctors.This
crisis in our commonwealth, which the Pennsylvania Medical Society has termed a
"Code Blue Emergency," can be traced to 1996 when medical liability
insurance rates started climbing.In
1996, there was a 100 percent emergency surcharge by the state's Medical CAT
Fund.Then, from 1997 until
September 11, 2001, rates for major private insurance carriers in Pennsylvania
rose between 80.7 and 147.8 percent.Well
before problems with the stock market and the terrorist attacks, there were
signs of a brewing crisis.Then in
2002,the increase in filed rates ranged from 40 to 50.3 percent.For 2003, similar rate increases were filed. Any
businessperson knows that when expenses increase and revenue remains stagnant,
drastic changes must be made to survive. A
2001 study by the Pennsylvania Medical Society indicated that 72 percent of
doctors had deferred the purchase of new equipment or the hiring of new staff
due to skyrocketing medical liability insurance costs. Of
course, there are countless anecdotal stories about doctors retiring early,
giving up high-risk procedures, or moving out of the state as a result of the
liability insurance crisis.For
those interested in statistics, the Pennsylvania Medical Society used
state-provided data from March 2002 to conduct a survey of high-risk specialists
during the summer of 2002.The
survey found that 17 percent of obstetricians/gynecologists and 18 percent of
neurosurgeons had changed to non-operative status, changed to part-time surgery,
decided to move the majority of their practice out of state, left Pennsylvania,
or retired early.A survey by the
Pennsylvania Orthopaedic Society found similar results for orthopedic surgeons. I
should also mention that the liability insurance crisis has been linked to
defensive medicine, which drives up the cost of health care.Studies from the Pennsylvania Medical Society in 2001 showed that 89
percent of physicians are practicing defensive medicine to avoid frivolous
lawsuits.The American Association
of Health Plans has linked defensive medicine to increases in health insurance. So,
without a doubt, there is direct evidence that the liability insurance crisis is
negatively impacting patients. We
all agree that this crisis is very complex.You've heard the arguments during the past several years as to what
caused the crisis.One area that
must be addressed is lawsuit abuse reform. Just
recently, Governor Ed Rendell claimed that the new certificate of merit would
weed out 25 percent of bad lawsuits.That
seems like proof of a high level of lawsuit abuse in Pennsylvania.But, when you consider that seven out of 10 malpractice claims are
dropped, dismissed, withdrawn, or found in favor of the defendant, there's
proof that more work needs to be done.When
70 percent of all claims result in no payment to the plaintiff, it's clear
that the system urgently needs to be fixed. The
Pennsylvania Medical Society is currently compiling a list of meritless claims,
and early in our efforts, we have collected hundreds of examples, such as the
one in which a female patient sued her doctor claiming she couldn't get
pregnant due to a treatment he recommended for her.The suit was later dropped when she got pregnant.Another good example is the one in which a female patient branded herself
with a hot iron after having a cast removed from her arm.She then tried to blame her doctor for the burn mark.Luckily, the patient's husband turned her in.Interestingly, a lawyer filed each of these frivolous cases.These ridiculous cases must be stopped in their tracks before thousands
of dollars are wasted along with many hours of lost time that could be better
spent in patient care. In
addition to the 70 percent of meritless claims, more than 28 percent of medical
liability claims are settled, and we suspect there are a significant percentage
of claims settled due to "legal blackmail."One recent example happened at Holy Spirit Hospital in Camp Hill.An inmate at the Camp Hill Prison committed suicide after taking himself
off psychotropic medicines, which were prescribed through the hospital.Holy Spirit Hospital was sued and ended up settling for about $20,000 to
get rid of the case, simply because it would be less expensive to do so.If they had fought the case to a jury verdict, they would have not only
wasted their time, but also wasted more money.According to the Physician Insurers Association of America, in 2000 the
median cost for a defendant to win a case in front of a jury was $66,767.Likely, it's higher today. Only
one explanation can be given for these types of lawsuits-personal gain.Personal injury lawyers often take up to 40 percent of awards as part of
their fees.Sadly, they have no
incentive to clean up lawsuit abuse. Ultimately,
the Pennsylvania Medical Society believes that it would be helpful to look at
California as a model to correct the problems in our state.California's MICRA law, that has gained so much national attention, has
kept rates in California lower than states without similar laws. For
the sake of comparison, the independent Medical Liability Monitor based in
Chicago reported in their October 2002 rate trends study that an
obstetrician/gynecologist in Los Angeles could have expected to pay $65,389 for
$1 million worth of coverage through NORCAL.It appears from the report that Los Angeles is the most expensive market
in California for liability insurance. That
same doctor in Philadelphia would first pay $64,314 for the first $500,000 of
coverage through PMSLIC, which is owned by NORCAL, then another $35,731 for the
next $500,000 worth of coverage through the Mcare Fund.In other words, for $1 million worth of liability insurance coverage, a
doctor would pay about $35,000 less in Los Angeles than in Philadelphia. Furthermore,
if you look at the percentage of change, as reported in the 2002 Medical
Liability Monitor study, obstetricians/gynecologists in California saw their
rates change between a minus three (-3) to plus fourteen (+14) percent.In Pennsylvania for the same period, rates for an
obstetrician/gynecologist increased about 40 percent. Since
there is no restriction on economic loss and lost wages, and cost of living in
Los Angeles is greater than Philadelphia, this lower premium is even more
significant. Clearly,
MICRA is doing its job. The
two parts of the California MICRA law that are not in place in Pennsylvania
include limiting attorney contingency fees on a sliding scale and placing a
reasonable limit on non-economic awards after a person has been fully
compensated for financial losses. That's
what Pennsylvania is missing, and that's what we still desperately need. Ultimately,
Pennsylvania and the rest of the country needs to learn what Californians
learned in the 1970s-limiting
attorney contingency fees on a sliding scale and placing reasonable limits on
non-economic awards after a person has been fully compensated for financial
losses are necessary to keep trauma centers open, hospital units functioning,
ambulance crews operating, and simply to preserve our world-renowned health care
system. MICRA
does not limit economic recovery.It
does not deprive injured individuals of full economic compensation.Instead, it provides fair compensation in a timely manner with lower
legal expenses.In a nutshell,
MICRA proved that providing fair and equitable compensation for those
negligently injured can stabilize the insurance marketplace and maintain access
to quality health care. We
believe that the most significant changes that can be enacted from the federal
level are limiting attorney contingency fees on a sliding scale and placing
reasonable limits on non-economic awards after a person has been fully
compensated for financial losses. Thank you.
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