Advocacy
Testimony of Senator Karl W. Turner Presenting
L.D. 1378, AN ACT TO PRESERVE THE MEDICAL LIABILITY CLIMATE IN MAINE BY CAPPING NON-ECONOMIC AND PUNITIVE DAMAGES
Joint Standing Committee on Judiciary
Room 438, State House
Friday, May 13, 2005, 9:30 a.m.
Good morning, Senator Hobbins, Representative Pelletier-Simpson, and Members of the Joint Standing Committee on Judiciary. I am Senator Karl Turner and I represent Senate District 11 in Cumberland County. I am pleased to be here this morning to present for your consideration, L.D. 1378, An Act to Preserve the Medical Liability Climate in the State by Capping Non-economic and Punitive Damages. Also, I would like to thank the bi-partisan co-sponsors of the bill for joining me to bring this important issue to your attention.
I acknowledge that this is going to be a difficult day for the Committee. Some consumers or patients, and consumer or patient advocates, will argue that there is no medical malpractice crisis in Maine and that limits in the medical liability system are unfair to patients. Physicians and other health care providers, on the other hand, will argue just as strenuously that, despite the recent Bureau of Insurance report suggesting that Maine's medical liability climate is better than most states, the recent quotes they are seeing from medical liability carriers doing business in Maine indicate that we are on the verge of a medical liability crisis in our state.
Recent rate filings by Maine’s medical liability insurance carriers suggest that Maine’s health care providers have good reason for concern. In 2004, Maine’s largest carrier, Medical Mutual Insurance Company of Maine (MMICOM), filed for an 8% increase for the second year in a row - - although the company’s actuarial memorandum suggested that it could justify a 28% increase! Also, I understand that MMICOM soon will file a 2005 rate request that will be more consistent with the actuarial memorandum in its 2004 filing.
Maine’s second largest physician insurer, Promutual of Massachusetts, filed for an average 18.8% rate increase in 2004 and another 8.5% increase took effect May 1, 2005.
Maine's third largest physician insurer, The Doctor’s Company of Napa, California, filed for an average 29% increase in 2004.
In mid-April 2005, a fourth physician insurer, The Medical Protective Company of Ft. Wayne, Indiana, filed a rate request for a 12.1% premium increase effective August 1, 2005.
These professional liability premium rate increases are alarming to all health care providers in Maine and should be alarming to all of us as health care consumers. Why should you and I care about medical liability insurance costs? I suggest two principal reasons:
- Access to medical care, particularly high-risk specialty care such as obstetrics, neurosurgery, orthopaedic surgery, and emergency medicine, depends on recruiting and retaining sufficient numbers of these specialists to Maine and there is ample evidence that these practitioners carefully consider a state's medical liability climate when choosing a place to practice.
- The high cost of health care services and health insurance for all of us is attributable in part to increasing medical liability costs.
Access to Medical Care
A physician's medical liability insurance premium is near the top of a practice's overhead costs and Maine physicians, who are not compensated as highly as their counterparts in other parts of the country, cannot continue to sustain double-digit premium increases without changing their practice by stopping high-risk procedures, retiring early, or moving to another state with a more favorable liability climate. The problem is acute in rural areas such as northern and eastern Maine where recruitment and retention of physicians, and specialists in particular, is always difficult. Some parts of rural Maine would not have high-risk specialty care right now if the local hospital was not subsidizing costs including liability premium costs. Maine must maintain a favorable medical liability climate in order to ensure that patients have access to a full range of medical care throughout the state and this legislature should act before the medical liability crisis that is sweeping the country comes to Maine.
Medical Liability Costs' Impact on Health Insurance Costs
All of us who are purchasers of health insurance or consumers of medical services pay for this country's expensive and inefficient system for compensating those injured in the health care system. According to a leading analysis of the U.S. tort system by Tillinghast - Towers Perrin, total medical malpractice costs were nearly $25 billion in 2002 or $85 per person. The U.S. tort system is highly inefficient at compensating injured people as it returns less than 50 cents on the dollar to injured people and only 22 cents to compensate for actual economic loss. Those who argue that we have no medical malpractice problem say that liability premium costs are a very small percentage, under 5%, of total health care costs. Liability premium costs, however, are only one component of the costs of our medical liability system that we all bear. The indirect costs, such as the cost of "defensive medicine," in the system are far greater than premium costs. Because physicians and other health care providers fear being sued, they order more tests than they might if our system was more rational. The federal government has estimated that $70 to $126 billion per year could be saved on defensive medicine by enacting reasonable medical liability reforms ("Addressing the New Health Care Crisis," U.S. Department of Health & Human Services, March 2003).
The medical liability reforms proposed in L.D. 1378 will not "let bad doctors off the hook," nor will they deny fair compensation to individuals injured in our health care system. During the past decade, the health care system has taken positive steps to improve patient safety and reduce medical errors. Much of this work in Maine now is taking place in the Maine Quality Forum established by the Dirigo health legislation, but Maine long has been a leader in improving outcomes in the health care system through the work of the Maine Medical Assessment Foundation. L.D. 1378 proposes reforms that strike a balance between the individual's interest in the maximum possible compensation for injuries sustained in the health care system and reasonable limits needed to ensure access to care and affordable health care for all of us.
L.D. 1378 has the following four sections:
- Cap on non-economic and punitive damages. The bill would ensure full recovery of economic damages including employment-related damages and medical expenses, both current and future. It would, however, cap non-economic damages at $250,000 and punitive damages at $75,000. A cap on these two types of damages is important from an insurance underwriting standpoint because they are far more likely to be inflated because of emotion than economic damages and insurance actuaries must develop premium rates for the "worst case scenario." The $250,000 cap on non-economic damages is based on California's Medical Injury Compensation Reform Act (MICRA) adopted in 1975, a law that has restricted medical liability premium growth in California to 182% from 1976 to 2001 compared with 569% for the rest of the country according to the National Association of Insurance Commissioners. The $75,000 cap on punitive damages is the same as the punitive damage cap in Maine's wrongful death statute.
With the recent passage of caps in Georgia and South Carolina, more than half the states cap either non-economic or total damages in medical liability cases. Also, damage caps have ample precedent in Maine law with a $400,000 non-economic damage cap in the wrongful death statute and HMO liability statute, a $400,000 total cap in the Maine Tort Claims Act, and a $250,000 non-economic damage cap in the liquor liability statute.
Damage caps have been proven effective in reducing insurance costs in numerous studies around the country including the recent Bureau of Insurance study, Medical Malpractice Insurance in Maine (March 2003). The Bureau study suggests that "a $250,000 cap on non-economic damages could reduce expected loss and allocated loss adjustment expense by 15-22%." Physicians do consider states with damage caps in their choice of practice location. A 2003 study by the Agency for Healthcare Research & Quality in the U.S. Department of Health & Human Services found that states with a cap on non-economic damages have about 12% more physicians per capita than states without a cap (Hellinger & Encinosa, The Impact of State Laws Limiting Malpractice Awards on the Geographic Distribution of Physicians, July 3, 2003).
- Elimination of Joint and Several Liability. The bill as drafted would eliminate joint and several liability in all civil actions in Maine, not just medical liability cases. I am primarily concerned about the impact of this concept on the health care system and leave it to the Committee's discretion whether it makes sense to apportion liability according to fault in all civil cases. Joint and several liability can have especially harsh effects on physicians who sometimes must act aggressively to treat patients. For example, a patient who experiences an adverse outcome can file a lawsuit against health care providers who cared for the patient at any stage of the patient's treatment and any facility where the patient received treatment. Any of these defendants could be financially responsible for the entire judgment, even if they are found only partially at fault. This rule increases the indirect costs of defending lawsuits and, therefore, increases overall health care costs. It also may discourage physicians from intervening in a complicated medical situation because they fear potential liability that is disproportionate to their role in the situation. A 1993 study by the U.S. Congress Office of Technology Assessment, Impact of Legal Reforms on Medical Malpractice Costs, concluded that joint and several liability reforms would significantly reduce medical liability premiums.
- Modifying the Screening Panel Findings in Cases Involving Multiple Defendants. This part of the bill is closely related to the issue of joint and several liability. The Committee will want to redraft this section of the bill because I am suggesting that the pre-litigation screening panels should include in their findings the apportionment of fault they find attributable to each defendant in cases involving multiple defendants. I do not believe it is appropriate for the panels to make recommendations on damages, something they do not do under current law.
- So-called "I'm sorry" law. The bill would prevent a physician's or other health care provider's statement of sympathy or apology to a patient who has suffered an unanticipated medical outcome from being used against the physician or provider in a later legal action. This type of law first passed in Colorado, has passed in about a half dozen states, and is pending in many state legislatures in 2005. The Bureau of Insurance study suggests that "effectively implemented 'I'm sorry' programs are estimated to generate a 3.5% to 5.9% savings in total claim costs and potentially an increase in actual indemnity payments received by patients after attorney fees."
Thank you for considering L.D. 1378, An Act to Preserve the Medical Liability Climate in the State by Capping Non-Economic and Punitive Damages. I urge you to ensure continued access to medical care and to help contain the growth of health care costs in Maine by recommending passage of this bill. It is important that Maine stay ahead of the medical liability crisis that is affecting more than 20 other states because a favorable medical liability climate is perhaps the most important attraction Maine can offer to physicians and other health care providers when considering where to locate their practices.