Changing Medical Malpractice Cap Will be Difficult
By Ted Griggs
Any effort to change Louisiana’s medical malpractice cap will face a number of obstacles, not the least of which is finding a way to close the gap between the Patient Compensation Fund’s (PCF) assets and its exposures.
Although the difference has flattened in recent years, the PCF’s 2008 annual legislative report still describes the gap as “astounding.” At the end of 2007, the PCF had estimated exposures of $915 million and funds on deposit and investments of $481.7 million.
The funds available are well above the 30 percent required by state law, said Clark CossÃ© III, who chairs the PCF Oversight Board. The fund is in no danger of running out of money and has stockpiled a lot of money over the last five years.
PCF records show the funds assets climbed from $172.4 million in 2003 to $481.7 million in 2007.
People should remember that while the PCF would not meet the state insurance department’s requirements to sell insurance, the PCF is not an insurance company and must meet different regulations, CossÃ© said. The fund has been attacking the shortfall by increasing its rates by 5 percent each year than what actuaries have determined is needed to handle that year’s claims.
“The gap will close, if not completely, at least substantially in the next several years,” CossÃ© said.
Unless, that is, the courts decide that Louisiana’s medical malpractice cap is unconstitutional because it no longer represents an adequate remedy, he added.
“That’s the elephant in the room that nobody wants to talk about,” CossÃ© said.
CossÃ© said he did not think the state Supreme Court would toss out the cap, but anything is possible.
“The message we’re getting from judges is that we ought to thoughtfully address this issue of the cap legislatively,” CossÃ© said.
Letting the state Legislature design the malpractice cap rather than the courts would be the preferred solution, he said. However, there are some problems with that approach.
Last year, a coalition of healthcare industry members, including the Louisiana State Hospital Association and Louisiana State Medical Society, tried and failed to find a legislative remedy, CossÃ© said.
One proposal would have raised the cap to $750,000, with healthcare providers’ share of liability upped to the first $250,000, and the PCF’s to $500,000. The measure failed to garner broad-based support.
The Louisiana Medical Mutual Insurance Co. (LAMMICO) opposed the legislation. At the time, Dr. Thomas Grimstad, the insurer’s CEO cited a number of problems with the proposal.
There was no guarantee that raising providers’ liability would result in lower rates from the PCF, one of the things supporters predicted, he said. There was also a good chance that a higher malpractice cap would generate even more lawsuits; Louisiana, after all, already has nearly twice the number of malpractice claims per 100 policyholders that insurers see in Arkansas, Alabama and Texas.
LAMMICO’S efforts to enact some form of the Texas malpractice model, which caps non-economic damages at $250,000, also failed.
In his annual report to the Louisiana State Medical Society, Dr. Russell Klein, the group’s former president, said the Texas model might not be the solution. For one thing, the legislation would do away with the state’s current malpractice cap, he said. For another, the Texas model would require paying off the PCF’s liabilities, and there is no clear source of funding for the decades-long process.
“I think a majority of the trial lawyers don’t want any cap at all, and a majority of the physicians don’t want any more liability,” CossÃ© said.
Both of those groups can stop legislative remedies of the issue, he said. Doctors can stop an increase in the cap, and plaintiff attorneys can stop any reduction of the cap.
Still some type of action is needed, CossÃ© said. Physicians in Louisiana pay the highest malpractice insurance rates in the South, with the exception of Florida.
Florida’s malpractice market is in crisis, and doctors there pay nearly three times the regional average for coverage, he added.
The premiums for an OB/GYN in Louisiana can be $80,000 a year, CossÃ© said, with some surgeons paying similar amounts.
CossÃ© said he would like to see Louisiana move away from the current two-tiered system, where providers or their insurers are responsible for the first $100,000 with the PCF on the hook for the next $400,000, plus medical costs and judicial interest.
If the physician, for whatever reason, admits liability for the first $100,000, the PCF is stuck with an admission of liability, CossÃ© said, and can only defend the amount of the damages.
“That’s one of the frailties of the two-tiered system that makes it inefficient,” he said.
The first, smaller layer of coverage can commit the second, larger layer to responsibility, CossÃ© said. A better idea might be to make the underlying carrier cover the entire cap, with the PCF responsible for future medical costs.
With insurers able to sell policies covering the entire $500,000, competition could increase, which could lead to lower rates, CossÃ© said. Right now, there’s little competition for the first $100,000 of coverage, although LAMMICO is doing a good job with that business.
CossÃ© said it’s too early to tell whether the upcoming fiscal session, in which legislators can offer only five bills apiece, will provide a solution to the medical malpractice cap problem.
Members of the Legislature don’t want to choose between their friends in the healthcare industry and the legal profession, CossÃ© said. The Legislature apparently would prefer that physicians and trial lawyers come up with a compromise, and until that happens little legislative action is likely to take place.