Medical Malpractice Insurance

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Medical Malpractice Insurance

• Randy Jenkins, Esq., Coordinator of Insurance and
  Risk for UF Self-Insurance Program
• Introduction Patch Adams Video Clip
• See Health Law Cases, Materials and Problems, 3rd
  edition by Barry Furrow et.al. for additional
  information and specific cites.

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I. Sources of the Malpractice Crisis

• Nature of the Insurance Industry
• Insurance Availability and Cost

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Nature of the Insurance Industry

• 1970s crisis increased premiums
• Legislature response Physician owned insurance
  companies
• 1980s crisis large jury verdicts increased
  premiums

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Nature of Insurance Industry- Insurance Types

• Occurrence v. claims made policy
• Tail coverage- covers claims filed after
  claims-made policy expires
• Dollar limit per occurrence and in aggregate for
  policy period

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Nature of Insurance Industry-Layers

• First layer of coverage basic coverage
• Coverage above basic excess coverage

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Nature of Insurance Industry- Rates

• Rates must generate funds to cover losses during
  the period, the administrative costs of running
  company, and amount for unknown contingencies
• Past experience predicts severity of losses and
  frequency of claims
• Varies by specialty and geographic location

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Nature of Insurance Industry- Reserves and
Reinsurance

• Reserves are liabilities based on estimates of
  future amounts needed to satisfy claims-include
  indemnity payments and legal expenses
• Reinsurance allows insurance companies to buy
  reinsurance from other insurers to cover
  potential losses to large for an individual
  company to absorb

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Insurance Availability and Cost

• Florida physicians experienced substantial
  increases in premiums due to increase in loss
  payments to claimants not the frequency of claims
  payments
• For surgical specialties and obstetrics the
  malpractice premiums consume a large portion of
  gross income

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II. Responses to the Crisis

• Benchmarks for Evaluating Reforms
• 1) Do reforms improve the operation of the Tort
  system for compensating victims?
• 2) Do reforms create incentives for the reduction
  of medical error and resulting injury to
  patients?
• 3) Do reforms encourage insurers to make
  malpractice more available and affordable?

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Improving Insurance Availability for Physicians

• Multiple new sources of insurance such as Joint
  underwriting associations, reinsurance exchanges,
  hospital self-insurance programs and provider
  owned insurance companies
• Insurers writing policies on a claims-made basis
  rather than occurrence basis

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Altering the Litigation Process Common Tort
Reforms

• 1) Reducing the filing of claims
• a. Reduced statute of limitations
• b. Controlling legal fees
• c. Payment of costs for frivolous claims

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Altering the Litigation ProcessCommon Tort
Reforms

• 2) Limiting the plaintiffs award
• a. Elimination of the ad damnum clause- states
  the total monetary claim requested
• b. Periodic Payments- convert awards for future
  losses from lump sum to periodic
• c. Collateral Source Rule-prevents jury from
  learning of sources of compensation
• d. Limits on Liability-Noneconomic cap

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Altering the Litigation ProcessCommon Tort
Reforms

• 3)Altering the Plaintiffs Burden of Proof
• a. Res Ipsa loquitur- Modified to require
  expert testimony to establish negligence
• b. Expert Witness rules- Expert qualified in
  particular specialty to reduce hired guns
• c. Standards of care- From locality rule to
  National Standard

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Altering the Litigation ProcessCommon Tort
Reforms

• 4) Changing the judicial role
• a. Pretrial screening- panels rule on merits of
  case before it can proceed to trial and promote
  settlement by pricing case
• b. Arbitration- intended to replace jury
  trials rather than supplement

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Altering the litigation ProcessJudicial
Responses

• 1) Equal Protection
• Challenges based on denial of EP or DP guarantees
  of 14th amendment
• Medical malpractice claimants signaled out as a
  class
• Courts may discriminate as long as rational
  relationship between classification and state
  objective (e.g. reforms rational relationship to
  valid St. purpose of reducing insurance cost and
  assuring health care delivery

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Altering the litigation ProcessJudicial Responses

• 2) Due Process
• U.S constitution insures State action will not
  deprive a citizen of life, liberty, property
  without due process
• A cause of action property
• Compensation schemes eliminating/restricting
  patients ability to bring suit can be challenged
  as a taking of the patients property (right to
  sue)

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Altering the Litigation Process Judicial
Responses

• 3) State Constitutional Provisions
• - Challenge administrative mechanisms that
  supplant or replace right to a jury trial
• - Caps on damages as invading the province of
  the jury

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Altering the Litigation ProcessJudicial Responses

• 4) Common Law Arguments
• - Engalla v. the Permantente Medical Group
  Arbitration system involving K between provider
  and patient re method of resolution if injury
• - Appellate court reversed trial court and
  upheld arbitration system

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III. Alternative Compensation Approaches for
Patient Injury

• A. The rationale for an alternative system
• 1. The Tort System fails to compensate injured
  patients
• 2. The Tort System sends an inaccurate
  deterrence signal
• 3. The administrative/social costs of the
  Malpractice System
• 4. Patient access impaired by Malpractice costs

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Rationale for an Alternative System

• 1) Tort system fails to compensate injured
  patients
• - The current system compensates far fewer
  patients than actually suffer injury
• - Fewer than 2 of negligent adverse events
  resulted in claims
• - Current system functions for larger claims-
  e.g. bad baby case

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Rationale for an Alternative System

• 2) The Tort System sends and inaccurate
  deterrence signal
• -Random jury awards bearing little relationship
  to physician negligence fail to influence
  providers to reform their practice
• -Anesthesia related injuries study found
  payment made in more than 80 of claims where pt
  received substandard care but payment also made
  in 40 of claims when anesthesia care
  appropriateIs the false positive rate fair?

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Rationale for an Alternative System

• Physicians overreactions to the fear of liability
  results in defensive medical practices which
  creates an inflationary cost in healthcare (e.g.
  CT scans in ED)
• Tort litigation has a substantial psychological
  impact on physicians and can determine a
  physicians choice of specialization

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Rationale for an Alternative System

• 3) The administrative and social costs of the
  Malpractice System
• - Excessive costs of Tort system leaves little
  of the malpractice premium dollar going to the
  plaintiff

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Rationale for an Alternative System

• 4) Patient access impaired by rising Malpractice
  costs
• - Rising malpractice exposure, such as in
  obstetrics has driven physicians out of state
  leaving rural communities without
• -Rising premium costs have altered physician
  practice patterns

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B. Reforms- Medical Practice Guidelines

• -Guidelines treated as standard of care and could
  be treated as negligence per se or treated as
  rebuttable presumption
• AMA has opposed adoption as a legal standard
• A clinical standard may be presumptive evidence
  of due care but expert testimony still required
  to introduce the standard and establish relevancy

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B. Reforms- Alternative Dispute Resolution

• ADR decision is comparable to jury verdict
• Mediation v. Arbitration
• Mediation is voluntary and agreement reached by
  parties alone without judge
• Arbitration is binding and requires an
  independent third party who serves as judge

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B. Reforms- No Fault Systems

• NICA- Neurological Injury Compensation Act
  creates a compensation fund for neurologically
  damaged newborns and excludes all other Tort
  remedies
• Compensation is for net economic loss only
  including medical expenses, rehabilitation
  expenses, loss wages No compensation for
  non-economic losses or pain and suffering

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Reforms- No Fault Systems

• NICA physicians pay 5,000 into the fund annually
  and may elect not to participate Hospitals may
  50 per delivery per year into the fund and may
  elect not to participate
• Each claim filed is automatically referred to the
  State Board of Medicine to decide if injury
  resulted from substandard care

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Reforms-Enterprise Liability

• Clintons health reform proposal of 1993 called
  for Health Plans to bear liability for medical
  malpractice
• Enterprise liability changes to the locus of
  liability for patient injuries without other
  significant alterations to existing rules
• Exculpates physicians for liability and forces
  hospitals to assume liability

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Reforms-Enterprise Liability

• Benefits of Enterprise Liability
• 1)Insurers have improved ability to price
  insurance since problems with high risk
  specialties eliminated
• 2) Physicians no longer face fluctuating
  premiums
• 3) Physicians freed from psychological stress
  inflicted by being a defendant

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Reforms- Enterprise Liability

• Benefits continued
• 4) Administrative and litigation costs reduced
  by only having one defendant
• 5) Patterns of poor medical practice deterred by
  placing liability on institutions rather than
  individuals since institutions have better
  management tools for managing risks

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Reforms- Social Insurance

• General Tax revenues fund a pure social insurance
  system
• E.g. New Zealands Accident Compensation Act
  removed all damage claims for accidental injuries
  from the Tort system
• Compensation includes loss of earnings,
  reasonable costs of medical treatment

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Reforms- Social Insurance Cont.

• Injured person files claim with Accident
  Compensation Corporation which decides if a claim
  is covered and how much is paid
• 40 of claims for medical injury are denied
• The decision may be appealed to the courts

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Reforms- 2003 Medical Malpractice Legislative
Changes

• See attached article
• Highlights include
• 1. Caps in Routine medical malpractice
  casesbut do exceptions swallow the rule?
• 2. Caps in Emergency Room Situations
• 3. Good Samaritan Immunity
• 4. Pre-suit reforms and much more!