2010 Testimony

2009 Testimony

Mr. Chairman and members of the House Judiciary Committee, my name is Jim Redmond, and I am senior vice president, Legislative Services, The Hospital & Healthsystem Association of Pennsylvania (HAP). HAP represents more than 250 member hospitals, health systems, and other health related organizations serving patients across Pennsylvania. Mr. Chairman, thank you for seeking our views on medical liability.

Medical liability reform is necessary to support patient access to health care and to help reduce health care costs.

Patient Access to Medical Care

Pennsylvania faces a potential significant shortage of physicians. Studies demonstrate that Pennsylvania needs to take steps now to ensure an adequate supply of physicians. Physician workforce levels in Pennsylvania are not nearly sufficient to meet the increase in demand for physician services that will result from our aging population. The fact that there is evidence that the nation faces a shortage makes the challenge for Pennsylvania even greater.

• About one of every four physicians in Pennsylvania is 60 years or older; only one of every five physicians in Pennsylvania is under the age of 40.
• The average age of physicians engaged in direct patient care in Pennsylvania is 48.9 years.
• Nearly 20 percent of the physicians who practice primary care say they will leave Pennsylvania in five years or less.
• Despite being home to almost 12 percent of the state’s population, only about seven percent of the state’s physicians practice in rural counties.
• Only one of every three physicians who completed their medical degree in Pennsylvania remained in the state to practice, ranking Pennsylvania 32nd among all the states.
• Only about two of every five physicians who completed their graduate medical education in Pennsylvania remained in the state to practice, ranking Pennsylvania 35th among all the states.

If physician supply and use stay the same, the United States will experience a shortage of 124,000 full-time physicians by 2025, according to the Association of American Medical Colleges. While U.S. medical schools are increasing their enrollment, it will not be sufficient to meet future patient needs and demand. With this nationwide shortage, Pennsylvania will compete with other states.

We must lower the cost of medical liability insurance in order to attract new physicians to Pennsylvania. We cannot continue to maintain a system where an obstetrician pays a $169,000 annual medical liability premium in Delaware County, yet just across the Delaware River in the state of Delaware that same physician pays $68,000 annually for the same medical liability coverage.

Containing Health Care Costs

The cost of our medical liability system is borne by everyone as defensive medicine adds billions of dollars to the cost of health care each year, which means higher health insurance premiums and medical costs for all Americans. Physicians and hospitals who win at trial still have large fees to pay for their legal defenses. The average defense costs for these cases average nearly $94,000. And, in cases where the claim was dropped or dismissed, costs to physicians average nearly $19,000.

The Congressional Budget Office estimates that the direct costs that providers incurred in 2009 for medical liability coverage will total approximately $35 billion, or about two percent of total health care expenditures. The Congressional Budget Office concluded that judicial reform would lower costs for health care both directly, by reducing medical liability costs, and indirectly, by reducing the use of health care services through changes in the practice patterns of providers. The agency estimates that medical liability reforms could lower premiums for medical liability insurance by 10 percent.

For Pennsylvania’s hospitals, the total cost (primary premiums, Mcare assessment, and excess premiums) of medical liability insurance coverage for Pennsylvania’s hospitals has stabilized since 2007, but still remains two times higher than in 2000 (119 percent increase in nine years).

The Medical Liability Environment in Pennsylvania

The medical liability insurance market in Pennsylvania has undergone significant changes during the past decade.

• Liability insurance carriers have left the Pennsylvania medical liability market and have not returned. There are only two major medical liability insurers left in the state.
• Almost all hospitals (90 percent) rely on self-insurance for primary medical liability coverage.
• Mcare Fund paid claims peaked in 2003 at nearly $379 million and declined to $174 million during 2008. Payouts in 2009 rose to $191 million. The reduction from 2003 is primarily the result of legislative reforms that began in 1997 that decreased the Mcare Fund coverage from $1 million to $500,000 per occurrence.
• The Pennsylvania Supreme Court reports that there has been a 41.4 percent decline in filed medical liability claims since the enactment of HAP-supported reforms during 2002.

To help bring a degree of predictability and fairness to the civil justice system, which is critical to solving the growing medical access and affordability crisis, HAP recommends the following:

Repeal of Joint and Several Liability—Ensure that Pennsylvania adheres to the basic premise that liability equals fault, and a defendant should only pay their fair share in a lawsuit.

Apology Rule—Permit medical professionals to express empathy for, and take ownership of, an unforeseen outcome without the risk of retaliatory litigation based solely on statements made at the time of an apology.

Caps on Non-Economic Damages—Establish the first step in the process to amend the Constitution to allow the General Assembly to debate limits for non-economic damages in all civil litigation cases.

Expert Witness Qualifications—Tighten rule to assure the expert has the same or similar expertise of the accused physician, adopt ethical standards for expert witnesses, allow cross-examination as to compliance, and impose sanctions for non-compliance.

Retire the Mcare Fund—HAP has a long-standing position to seek retirement of the Mcare Fund based on over 30 years of hospital and health system experience with the claims administration practices of the Fund. The Fund is viewed to create administrative inefficiencies and add costs. The Pennsylvania Medical Society and the Pennsylvania Podiatric Medical Society share the same position. Any phase-out of the Fund must be done in a manner that avoids making health care providers pay an assessment for past claims, while at the same time funding the primary layer for future claims. HAP and the Medical Society have two major objectives in seeking legislation to retire the Mcare Fund:

• Minimize the financial impact on health care providers of increasing the primary coverage limits by phasing out the Mcare Fund over several years.
• Use existing Health Care Provider Retention Account (HCPRA) funds to pay the unfunded liabilities of the Mcare Fund and eliminate having any health care provider pay any future Mcare assessment.

Unfortunately, state budget pressures last year impacted any plans to retire the Mcare Fund. Funds from the Health Care Provider Retention Account (HCPRA) that were not used to fully fund the Mcare abatement program, and the Mcare Fund were used to help balance the state’s budget. Specially, the Governor and General Assembly:

• Transferred $708 million from the HCPRA to the General Fund.
• Redirected cigarette tax revenues ($170 million/year) from the HCPRA to the General Fund.
• Redirected Auto CAT Fund surcharge ($44 million/year) from the Mcare Fund to the General Fund.
• Transferred $100 million from the Mcare Fund to the General Fund.

These actions leave insufficient funds to address the retirement of the Mcare Fund at this time.

In 2008 and 2009, HAP initiated several legal actions regarding the Mcare Fund that if successful would help to provide funds to retire the Mcare Fund and lower medical liability costs.

Mr. Chairman and members of the committee, thank you for the opportunity to comment on this important matter. We appreciate your help in trying to ensure that affordable health care is available to all Pennsylvanians. I would be happy to answer any questions you may have.

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