Legislature(2005 - 2006)BELTZ 211

02/08/2005 01:30 PM LABOR & COMMERCE

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01:31:09 PM Start
01:32:58 PM SB67
02:30:08 PM Overview by Greg O’claray, Commissioner, Department of Labor and Workforce Development
02:57:34 PM SB52
03:02:49 PM SB25
03:26:29 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Commissioner Greg O'Claray
Department of Labor & Workforce
Development: Update on Training Programs
For Alaskans in Oil/Gas/Mining Industries
Moved CSSB 52(L&C) Out of Committee
Moved SB 25 Out of Committee
Heard & Held
           SB  67-CLAIMS AGAINST HEALTH CARE PROVIDERS                                                                      
BRIAN HOVE,  staff to Senator Seekins,  sponsor of SB 67,  said it                                                              
amends AS  09.55 by adding  a new section  that places  a $250,000                                                              
limit on non-economic awards for health care providers.                                                                         
1:32:58 PM                                                                                                                    
It intends to  alleviate a growing two-pronged  crisis in Alaska's                                                              
health care industry.  First is the dearth of  liability insurance                                                              
carriers  and second,  the  declining  number of  practicing,  not                                                              
just licensed, physicians.                                                                                                      
1:34:32 PM                                                                                                                    
Liability  coverage  is  necessary   for  health  care  providers.                                                              
Medical  malpractice   insurance   companies  have  found   Alaska                                                              
uneconomic  and  have  left  the market.  This  has  created  much                                                              
uncertainty  and  opened  the  door to  higher  rates  across  the                                                              
board.  A   more  critical   problem  is   Alaska's  shortage   of                                                              
physicians.  Alaska  ranks  near  the  bottom  in  the  number  of                                                              
physicians  per capita and  over half  of them  exceed the  age of                                                              
50.  It is  difficult to  recruit  new entries  when other  states                                                              
have capped non-economic damages at or near $250,000.                                                                           
     The bottom  line is Alaska  is viewed as an  undesirable                                                                   
     place  for medical  insurance  carriers  to do  business                                                                   
     and as  a result  there are fewer  physicians to  set up                                                                   
Mr. Hove  said that SB 67  follows the national trend  and doesn't                                                              
affect  awards for  quantifiable damages  such as  lost wages  and                                                              
medial expenses  and does not  affect awards for  gross negligence                                                              
or reckless behavior.                                                                                                           
     Furthermore, it  is not intended  to be a silver  bullet                                                                   
     solution  to  an  entire  range  of  issues  facing  our                                                                   
     health care  industry. However,  it does provide  a step                                                                   
     in  the right  direction  in  terms of  stabilizing  the                                                                   
     medical  insurance market  here in  Alaska and  boosting                                                                   
     our   efforts  to   attract  the   next  generation   of                                                                   
1:35:23 PM                                                                                                                    
CHAIR  BUNDE   asked  what  other   states  have   passed  similar                                                              
MR. HOVE replied  California and others, but he would  have to get                                                              
the list.                                                                                                                       
SENATOR ELLIS  asked what  "significant losses"  means on  page 1,                                                              
line 14.                                                                                                                        
MR.  HOVE  explained  that  referred   to  the  losses  that  were                                                              
substantially  greater  in  2003 than  in  prior  years. It  is  a                                                              
1:37:52 PM                                                                                                                    
Public testimony                                                                                                                
1:38:09 PM                                                                                                                    
MR.  JIM   JORDAN,  Executive   Director,  Alaska  State   Medical                                                              
Association (ASMA), supported SB 67.                                                                                            
     It's  critical to  help  us turn  around  our acute  and                                                                   
     critical  and chronic shortage  of physicians....  It is                                                                   
     entirely  unfair to  Alaska  citizens if  SB  67 is  not                                                                   
     enacted. It is  needed so that we have  sufficient well-                                                                   
     trained physicians available when we need them....                                                                         
     Some  will no doubt  say that  to set  damages for  non-                                                                   
     economic awards  at $250,000 is unfair. I  submit to you                                                                   
     that life  is unfair and if  it's your loved one  who is                                                                   
     injured  or who dies,  there's no  amount of money  that                                                                   
     can compensate you for that loss.                                                                                          
     Society  and  the  Legislature  will never  be  able  to                                                                   
     determine what  is fair to each person. What  we have to                                                                   
     decide as  a society is  not what is  fair, but  what is                                                                   
     equitable.  The Legislature  has made similar  decisions                                                                   
     of  equity. Mr.  Hove  mentioned driving  an  automobile                                                                   
     requires  $50,000 of  liability insurance  - keeping  in                                                                   
     mind  that $50,000  minimum  required  is to  cover  not                                                                   
     only economic  damages, but  also non-economic  damages.                                                                   
     The  same  holds true  with  the  workers'  compensation                                                                   
     system where  there is no specific recognition  for pain                                                                   
     and suffering.  Two hundred  and fifty thousand  dollars                                                                   
     is  a  lot  of  money  to  compensate  someone  for  the                                                                   
     impossible-to-quantify  category of pain  and suffering,                                                                   
     even  for those  with small  economic  damages. We  feel                                                                   
     that this was an equitable solution.                                                                                       
     Passage  of SB 67  is a critical  element in  attracting                                                                   
     doctors  to Alaska.  We  need a  gold  standard in  this                                                                   
     state.  We will not  prosper unless  we have the  needed                                                                   
     medical infrastructure  and it  will be unfair  to those                                                                   
     who  die because  of not  having a  doctor available  to                                                                   
     care for them when care is needed.                                                                                         
1:41:21 PM                                                                                                                    
CHAIR BUNDE asked how many doctors per hundred thousand should                                                                  
Alaska aspire to have.                                                                                                          
1:41:50 PM                                                                                                                    
MR. JORDAN  replied that  the national average  per capita  is 286                                                              
per  hundred  thousand   compared  to  Alaska's   72  per  hundred                                                              
thousand,  which translates  to about 470  physicians short.  That                                                              
leads to the question of how many we really need.                                                                               
1:42:39 PM                                                                                                                    
Providence Medical System did a workforce study for their                                                                       
service area in 2002. It was short 200 physicians.                                                                              
1:42:59 PM                                                                                                                    
Projections indicate in 2009 a shortage of 261.                                                                                 
1:43:18 PM                                                                                                                    
CHAIR BUNDE  said he has heard  discussions that Alaska  is unique                                                              
by not having many  hospitals and would be better  served by nurse                                                              
practitioners  and   physician's  assistants.  He   asked  if  the                                                              
insurance problem applies to them as well.                                                                                      
1:43:52 PM                                                                                                                    
MR.  JORDAN replied  that he  has heard  that nurse  practitioners                                                              
face similar challenges.                                                                                                        
1:44:08 PM                                                                                                                    
SENATOR SEEKINS said  there are two categories  of physicians that                                                              
are measured - the  number of licensed physicians in  the State of                                                              
Alaska and  the number  of practicing  physicians. There  seems to                                                              
be a large disparity between those numbers.                                                                                     
1:44:50 PM                                                                                                                    
MR.  JORDAN  responded   that  he  is  talking   about  practicing                                                              
physicians, not licensed physicians.                                                                                            
1:45:03 PM                                                                                                                    
SENATOR  SEEKINS  asked him  to  elaborate  on  why there  is  the                                                              
disparity between the two.                                                                                                      
1:45:15 PM                                                                                                                    
MR.  JORDAN explained  the disparity  is  created when  physicians                                                              
get out  of medical school  and get licensed  in a lot  of states,                                                              
but  don't know  where they  will want  to practice.  That is  the                                                              
largest category.  A smaller  category is part-time  practitioners                                                              
who  are called  locum  tenans. They  are  substitute doctors  who                                                              
fill in for physicians who are ill or want to go on vacation.                                                                   
1:46:04 PM                                                                                                                    
SENATOR  SEEKINS said  he called  a  doctor who  is practicing  in                                                              
Montana, but is  also licensed in Alaska, but  had never practiced                                                              
here. That is fairly common.                                                                                                    
1:46:48 PM                                                                                                                    
MR. JORDAN  added that Dr. Molly  Southworth in her  public health                                                              
thesis  did an extensive  review  of the physicians  in the  state                                                              
and how  many are  actually practicing  is one  of the  issues she                                                              
looked at.  She went  through nearly all  the licensing  files and                                                              
found a lot were licensed, but not practicing.                                                                                  
1:47:13 PM                                                                                                                    
SENATOR ELLIS  said that AARP  opposes the legislation  saying its                                                              
real goal is medical  error reduction. He asked if  Mr. Jordan had                                                              
any recommendations on that matter.                                                                                             
1:47:51 PM                                                                                                                    
MR.  JORDAN  replied  that  depends  on  how  the  error  rate  is                                                              
measured.  According  to  one  of   the  two  major  insurers  for                                                              
physicians in the  state, the number of claims is  constant over a                                                              
long  period  of  time. The  American  Medical  Association  (AMA)                                                              
embarked on a  rigorous patient safety campaign  and has supported                                                              
legislation at the  federal level - looking at a  system the looks                                                              
at systemic problems as opposed to playing the blame game.                                                                      
1:49:10 PM                                                                                                                    
SENATOR ELLIS asked  if insurers had represented to  Mr. Jordan if                                                              
this bill  were to become law  insurance rates would be  frozen or                                                              
reduced for doctors in Alaska.                                                                                                  
1:49:39 PM                                                                                                                    
MR.  JORDAN  replied no.  All  the  variables keep  changing.  For                                                              
instance, the  cost of  defending claims  over the last  five-year                                                              
period was 33% higher than the previous five-year period.                                                                       
1:50:33 PM                                                                                                                    
California  adopted  a $250,000  cap  in  1975 and  premium  rates                                                              
increased 182% there compared to 570% in the rest of country.                                                                   
1:51:16 PM                                                                                                                    
SENATOR BETTYE  DAVIS asked if any  other states that  have passed                                                              
a  similar  bill  have  had  premiums  lowered  and  more  doctors                                                              
practicing there.                                                                                                               
1:51:52 PM                                                                                                                    
MR.  JORDAN  identified  Texas  is a  state  that  experienced  an                                                              
increase in  insurers. The first  year after the law  was enacted,                                                              
the  major  carrier  reduced  its  rates  by  12%  -  although  he                                                              
couldn't say whether that was attributable to the law only.                                                                     
1:52:37 PM                                                                                                                    
CHAIR BUNDE asked him to get that data.                                                                                         
1:52:48 PM                                                                                                                    
SENATOR  SEEKINS said  of the two  major carriers  in this  state,                                                              
both have said if  one pulls out, they don't want  to insure other                                                              
half.  He asked  if  both are  for-profit  insurance companies  or                                                              
mutual insurance companies  that pay dividends back  to the owners                                                              
of the company  if there is a  savings, in effect, a  reduction in                                                              
1:53:37 PM                                                                                                                    
MR.  JORDON replied  that both  are mutual  insurance companies  -                                                              
one is a  reciprocal and the  other is a mutual.  Essentially they                                                              
are self-insured.                                                                                                               
     These  are just  mechanisms  through the  various  state                                                                   
     insurance  laws  that  allow   them  to  do  that  in  a                                                                   
     particular manner.  Yes, they do pass back  any savings.                                                                   
     So, there is no profit motive...                                                                                           
1:54:20 PM                                                                                                                    
DR. MICHAEL  NORMAN, Anchorage  Anesthesiologist, opined  that new                                                              
physicians are  being trained in  mostly large metropolitan  areas                                                              
and feel  secure being  close to  those centers.  If you  can even                                                              
get  them  to come  to  Alaska  for  an interview,  one  of  their                                                              
concerns is the remoteness of the state.                                                                                        
1:56:34 PM                                                                                                                    
The only  significant thing  that helped  recruiting in  Alaska in                                                              
the  last 15  years  was the  organized  HMO medical  system  that                                                              
drove people  to Alaska  because it had  no organized  health care                                                              
systems. That system is gone now.                                                                                               
1:57:02 PM                                                                                                                    
Young   medical  students'   main   concern   is  their   practice                                                              
environment. One of  the concerns they all talk about  is how much                                                              
is malpractice,  if it's  even available,  what the referral  base                                                              
is   and  things   like   that.  The   biggest   problem  is   its                                                              
The company  that recently withdrew  from Alaska  withdrew because                                                              
its  losses   exceeded  premiums  for   three  years  in   a  row.                                                              
California  has  a non-economic  damage  cap  and at  present  the                                                              
company from there is still able to do business in Alaska.                                                                      
MR. NORMAN  said he  couldn't afford  to practice  any more  if he                                                              
didn't  have malpractice  insurance,  because  it  would risk  his                                                              
whole life  of work.  He mentioned that  Colorado has  a favorable                                                              
working environment - the scenery and medical centers, too.                                                                     
MR. ROD BETIT,  President, Alaska State Hospital  and Nursing Home                                                              
Association  (ASHNHA), strongly  supported SB  67. His concern  is                                                              
about access to  care at a reasonable cost now and  in the future.                                                              
This  bill is  only trying  to change  one area  of the  liability                                                              
laws that prevents  recruiting of physicians; it  does not attempt                                                              
to   limit  attorney   fees.   Alaska  already   has   significant                                                              
outpatient  shortages   in  family  practice,   general  practice,                                                              
internal  medicine and  pediatrics.  There are  also shortages  in                                                              
psychiatry,  allergy, immunology,  neurosurgery, rheumatology  and                                                              
gastro-endocrinology. He  said in general Alaska is  doing okay in                                                              
ER, pulmonary,  OBGYN, general  surgery, hematology,  oncology and                                                              
Physicians also  look at salary.  Figures indicate that  Alaska is                                                              
losing ground in  the gap it used to have in  salaries compared to                                                              
the West  Coast for all health  care professionals. It used  to be                                                              
in the double digits and its now in the low single digits.                                                                      
2:05:18 PM                                                                                                                    
Alaska also  has one of the  highest uninsured rates in  country -                                                              
approaching  20%.   But  it  gets  exceptionally   high  marks  in                                                              
lifestyle.  The  cost  of  medical   liability  insurance  is  the                                                              
biggest  issue  and  he thought  dealing  with  just  non-economic                                                              
damages was a good start.                                                                                                       
2:07:16 PM                                                                                                                    
MR.  MIKE  HAUGEN,  Executive  Director,   Alaska  Physicians  and                                                              
Surgeons,  said if the  system breaks  and Alaska  loses a  lot of                                                              
doctors, it  will take us  years to recover.  He gave  the example                                                              
of what  happened in Medicare.  Anchorage had about  30 internists                                                              
two years  ago who  treated senior  citizens and because  Medicare                                                              
rates were so  low, a lot of  the doctors could not make  a living                                                              
at it  and 11  of them left.  While Senator  [Ted] Stevens  got an                                                              
Alaska  supplemental  appropriation,  which helped  stabilize  the                                                              
market,  Anchorage  still  hasn't  recovered  from  that  loss  of                                                              
     My point is  that doctors don't grow on trees.  It takes                                                                   
     a long  time to recruit  them and a  long time to  train                                                                   
     them.  The other  point I'd  like to make  is that  even                                                                   
     with passage  of this legislation, the  uncertainty will                                                                   
     remain  for  insurance  companies  for  years  into  the                                                                   
     future. If history  is any indication, there  will be an                                                                   
     appeal of this  law and it will take three  to six years                                                                   
     to   work  its  way   through  the   court  system   and                                                                   
     ultimately be resolved in the Supreme Court.                                                                               
He  concluded saying  that  passage  of this  bill  is a  starting                                                              
2:09:18 PM                                                                                                                    
DR.  PAUL WORRELL,  President, Alaska  State Medical  Association,                                                              
reiterated that 50%  of Alaska doctors are over 50  years old. Our                                                              
current system is chasing doctors away.                                                                                         
     Recruitment  of new  physicians  needs  to be  seriously                                                                   
     dealt  with....  I can  tell  you when  you  run out  of                                                                   
     doctors and  nurses, the people  just quietly  die.... I                                                                   
     can  tell our  problematic  legal  system in  Alaska  is                                                                   
     making  it  harder for  us  to  recruit new  doctors  to                                                                   
He said the problematic  legal system is also making  it harder to                                                              
keep the  existing doctors.  One  of the smartest  doctors  in the                                                              
state  told him  he had so  many lawsuits  that he  no longer  had                                                              
time to  see patients. Another sees  only patients with  colds and                                                              
runny noses.                                                                                                                    
He closed supporting SB 67.                                                                                                     
2:11:37 PM                                                                                                                    
SENATOR  ELLIS asked  if  he saw  any  positive  results from  the                                                              
round  of tort  reform  a couple  of  years ago  with  legislation                                                              
sponsored by Representative Brian Porter.                                                                                       
DR. WORRELL said  he helped work on passing that  bill, but in the                                                              
last  week before  it passed  it was  stripped of  the parts  that                                                              
dealt with the  medical profession's needs. "Basically,  our needs                                                              
were  traded for  the bill  to pass....  That's  partly why  we're                                                              
back now."                                                                                                                      
2:12:57 PM                                                                                                                    
SENATOR  ELLIS  thanked  him  for  his  explanation,  although  he                                                              
hadn't heard it described that way by other people.                                                                             
2:13:14 PM                                                                                                                    
MS. KATHY  DALE opposed  the $250,000 cap  saying this  bill won't                                                              
help her  family. She related  the story  of how her  husband, who                                                              
passed away,  was misdiagnosed until  he went to the  Mayo Clinic.                                                              
Her point was that:                                                                                                             
     The doctors  in Alaska are  not willing to  police their                                                                   
     own  ranks. They're  not willing  to  speak out  against                                                                   
     the physicians  that aren't  qualified.... Lowering  the                                                                   
     cap  protects  the  negligent   doctors,  but  it  harms                                                                   
     Alaskan  families and those  are the  ones who are  most                                                                   
     severely injured.                                                                                                          
2:15:13 PM                                                                                                                    
At  the  time of  his  death,  she  was told  that  her  husband's                                                              
economic  lifetime  was  over  and,   therefore,  it  was  not  an                                                              
economic  loss. She was  only eligible  for non-economic  damages.                                                              
She  added that  lowering  the  cap prevents  low-income  families                                                              
from  filing  a  suit  and  limits  the  recovery  that  Medicare,                                                              
Medicaid and  the PERS  system can receive  if someone  is treated                                                              
by a negligent doctor.                                                                                                          
She  pointed out  that  the California  cap  adjusted  for CPI  is                                                              
really  greater   than  $820,000  in  today's  dollars   and  that                                                              
insurance  companies   can  adjust  their  risk   pools  based  on                                                              
$400,000  just  as they  can  on  $250,000.  The big  losses  they                                                              
sustained in 2002  were not due to claims, but to  the drop in the                                                              
stock market  where their risk pools  were invested. The  only way                                                              
they can make that up is to raise premiums.                                                                                     
2:16:53 PM                                                                                                                    
MR.  LES  SYREN,  Alaska  Action  Trust, opposed  SB  67.  He  was                                                              
concerned about allegations  that all the doctors  are leaving the                                                              
state because of  insurance premiums. He noted that  the state has                                                              
caps in place already  and suggested waiting to see  if they bring                                                              
down  premiums  first.  "We  don't  need  to  subsidize  insurance                                                              
companies on the backs of helpless injured patients."                                                                           
CHAIR BUNDE  asked him  to provide  a list of  the members  of the                                                              
Alaska Action Trust.                                                                                                            
2:21:10 PM                                                                                                                    
MR.  MIKE  POWERS,  Hospital  Administrator,   Fairbanks  Memorial                                                              
Hospital, supported  SB 67 and said a cap on  non-economic damages                                                              
is important  because it  relates to access  to health  care. Four                                                              
national studies  have indicated it  leads to increased  access to                                                              
health  care services.  A poll  released  in April  by the  Health                                                              
Care Coalition on  Liability and Access reveals  Americans believe                                                              
the growing  crisis in health care  liability is pushing  costs up                                                              
and forcing  good doctors out  of medical practice.  Another study                                                              
by the US  Agency for Health  Care Research in Quality  found that                                                              
states  with  damage  caps  have about  12%  more  physicians  per                                                              
capita than  states without  such a cap.  Finally, the  Center for                                                              
Studying  Health  System  Change  found  as a  result  of  rapidly                                                              
rising  malpractice insurance  premium, physicians  in some  areas                                                              
are  referring   more  patients   to  emergency  departments   and                                                              
refusing  to provide  on-call  and declining  elective  referrals.                                                              
Nationwide the  advantage is  being seen of  having a cap  on non-                                                              
economic damages.                                                                                                               
In  response to  Ms.  Dale's comment  about  doctors not  policing                                                              
themselves,  he  said  that  Fairbanks  Memorial  Hospital  has  a                                                              
rigorous  peer   review  process   in  place,  which   results  in                                                              
corrective actions,  and suspension  or denial of  privileges when                                                              
2:24:51 PM                                                                                                                    
MR. RICHARD  COBDEN, Chairman,  Alaska Health  Care Network,  said                                                              
he  also represents  the Alaska  Orthopedic Association.  He is  a                                                              
doctor at  Fairbanks Memorial  Hospital. They  all support  SB 67.                                                              
He  related how  premiums  are going  up  and how  hard  it is  to                                                              
recruit doctors because  of it. Accessibility to health  care at a                                                              
reasonable cost  is the key issue  for patients who even  now must                                                              
wait to be seen.                                                                                                                
     In Alaska  it's difficult, if  not impossible,  for some                                                                   
     people to get  immediate care when they need  it.... Mr.                                                                   
     Powers  has  already  stated  that  it  is  increasingly                                                                   
     difficult to  get internists to come to Alaska.  At Town                                                                   
     and   Valley  Clinic   where  I  work,   we  have   been                                                                   
     recruiting  internists  for  two  years.  This  year  we                                                                   
     finally got one.  Unfortunately he comes from  Nome. So,                                                                   
     it doesn't  change the  demographic much  for the  State                                                                   
     of Alaska  for internists  and we're  still looking  for                                                                   
     three others....                                                                                                           
He concurred  that most  physicians in this  state are  nearing or                                                              
over 50 and as  premiums come due, they think more  and more about                                                              
early retirement.  "We're  going to  go away quietly,  not  with a                                                              
big noisy bang.... And we're not getting new physicians in."                                                                    
2:28:12 PM                                                                                                                    
Thirteen  months  ago  Northwest  Mutual  and CNA  pulled  out  of                                                              
Alaska  with 30  days notice.  The remaining  two companies  don't                                                              
want the entire burden.                                                                                                         
CHAIR  BUNDE thanked  him for  his  testimony and  said this  bill                                                              
would be held for further testimony.                                                                                            

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