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January 9, 2003

Governor-elect’s plan is not a solution to malpractice cost problem, UPP head says

Governor-elect Ed Rendell’s proposal for controlling the cost of medical malpractice insurance promises, at best, a short-term fix, says the head of the physician practice plan that includes more than 1,200 Pitt School of Medicine faculty members.

Rendell’s proposal “doesn’t really, in our opinion, solve the underlying problems that have created this current malpractice crisis,” said Marshall W. Webster, president and CEO of University of Pittsburgh Physicians (UPP).

Malpractice insurance charges constitute anything from a “crisis” to a “problem,” depending on whether you talk to physicians, hospital administrators, insurers or lawyers who represent patients in malpractice lawsuits. But everyone agrees that premiums are soaring — in Pennsylvania, they increased by 40 percent from 2001 to 2002.

Rendell, set to be sworn in as governor on Jan. 21, has said he will seek legislative approval to levy a one-time tax on the collective financial surpluses of health insurers operating in Pennsylvania. The estimated $220 million raised from the tax would go toward helping physicians to pay their malpractice insurance premiums this year.

But Rendell opposes caps on jury awards for pain and suffering. The national median for such awards has more than doubled in the last five years and now exceeds $1 million, according to the legal research firm Jury Verdict Research. In Pennsylvania, juries have awarded malpractice awards as high as $25 million-to-$30 million, even $49.5 million in one case.

“Unless these runaway judgments are curtailed by some sort of a cap on non-economic damages, such as the one that California has had, I don’t think that we’ll ever really see significant reform,” said Webster.

He noted that California has capped pain-and-suffering awards at $250,000, and maintains a graduated fee scale for plaintiff attorneys in such cases. (Nonetheless, Rendell has pointed out, malpractice insurance premiums in California increased by 40 percent last year.)

The Pennsylvania Trial Lawyers Association, which opposes caps, argues that insurance companies’ bad investments and price cutting during the 1990s — rather than jury awards — are really to blame for today’s runaway malpractice premiums.

Webster noted that Rendell’s proposal is subject to legislative approval, “so it could get substantially modified or even killed by the legislature. But as it’s now being proposed, the plan would just transfer the payment of some portion of the malpractice premiums to insurance companies rather than having physicians paying it directly. So, it doesn’t really solve anything.”

Webster suggested that if Rendell’s plan is approved and insurance companies are forced to cough up $220 million from their financial reserves, the companies may simply pass those costs along to consumers through premium hikes.

Pennsylvania ranks second in the nation, behind New York, in total malpractice payouts, according to the National Association of Insurance Commissioners.

“It’s the specialists who get hit the hardest [by malpractice premiums], rather than general practitioners,” said Webster. “It’s not unusual, especially in the eastern part of the state, for the annual premiums for a single surgeon or obstetrician or neurosurgeon to hit $150,000 or more. That’s for one physician, for one year. You can imagine what impact that has, particularly with the declining reimbursements that physicians are receiving from Medicare and other carriers.”

—Bruce Steele

Filed under: Feature,Volume 35 Issue 9

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