Out of Crisis, a Proven Course Is Found

Abstract

IGNAGNI DOES A thorough job of documenting the very real crisis in our nation with the out-of-control medical malpractice liability system. Her call for action on necessary tort reforms is well grounded. Having devoted more than 33 years to hospital administration, I personally have witnessed the ebbs and flows and cycles of periodic crisis of the medical malpractice system in the 1970s and 1980s. By far, the current crisis is the most severe I have experienced. GENESIS OF THE CURRENT CRISIS Insurance analysts attribute the current crisis to a combination of perform storm drivers, including rapidly rising severity and frequency of claims and declines in the investment returns of the portfolios of insurance carriers, consistent with the recent three-year decline of the equity market. The medical malpractice insurance field pursued the 1990s with gusto and rapidly expanded by acquiring other medical liability insurance companies and entering into volatile environments, underpricing premiums, and knowingly underwriting poor risks. Those states that had enacted meaningful tort reform have fared much better in weathering the storm, as demonstrated by viable commercial insurance markets and more moderate increases in premiums. Three reforms are viewed as essential in any comprehensive legislative action: limitations on noneconomic damages along the California model; elimination of joint and several liability (thereby making each defendant potentially liable for all damages, regardless of degree of fault, because of the deep pocket concept); and limitations on attorney's fees, which now account for 33 percent of all malpractice costs (Auden and Glombicki 2003). PENNSYLVANIA'S EXPERIENCE Pennsylvania arguably is among the worst states for maintaining a stable market that is conducive for the private, commercial insurance field to underwrite the liability needs of healthcare providers. Over a mere six-month period from August 2001 through January 2002, the commercial market for hospitals and physicians in Pennsylvania virtually evaporated. The failure of the phico Insurance Company initiated a disastrous stampeding of longstanding insurers to leave the state and, in the case of The St. Paul, another insurance company, getting out of the medical malpractice insurance business nationally. Seventy-five hospitals reported shutting down specific services because of chronic underfinancing of hospitals and the onslaught of the doubling of malpractice premiums. Pennsylvania led the nation in 2001 with the highest per capita payments for liability insurance of $40.23 (Redmond 2003). The Pennsylvania legislature mobilized to enact a series of much-needed tort reforms. The reform bills focused on measures to control excessive awards and dissuade frivolous lawsuits. One law requires the reporting of serious incidents to a newly established state commission and requires all medical facilities to have state-approved patient safety plans. Moreover, the law requires the medical facilities to notify patients who are affected by serious events. These actions have been steps in the right direction but have not been enough to convince the commercial insurance market to reenter the state. The missing lynch pin in the necessary array of tort reform is a cap on noneconomic damages. The Pennsylvania Constitution prohibits limitations on such damages. The imposition of caps, similar to those that have been in place in California and several other states, would be a monumental task in Pennsylvania; required would be a constitutional amendment through the enactment of enabling legislation by the state legislature over two successive legislative sessions, followed by an affirmative public referendum by the voters of the Commonwealth. The process could take three to five years. In the meantime, we are surely seeing the disintegration of services. The number of licensed physicians in Pennsylvania dropped by more than 1,000 from 2001 through 2002, as physicians decided to retire early or leave the state. …