Legislature(1993 - 1994)
03/10/1994 03:00 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
Number 372
DAN HENSLEY, Member, Trial Lawyers, testified in support of
HB 492 and HB 493. He stated that HB 492 and HB 493 were
introduced as a courtesy to the trial lawyers organization
and thanked the committee for hearing the testimony. He
gave a brief history of the legislation and indicated that
it might lend perspective to the issue of arbitration. He
said critics of the liability system focus on access to the
court system, limiting access altogether, or reducing the
amount of compensation an individual can recover. He said
the legislation could address the problem areas. He
addressed arbitration and said at times the process is too
expensive and it takes too much time. He explained that
people with small legitimate claims never get into the
system because it is too costly to prosecute a case. He
indicated that a study done on the New York malpractice
system by Harvard reports that only one out of every eight
people who are injured by "bad medicine" ever files a claim.
Only half of those who do claim ever recover anything. He
also said the more cost and expenses to litigation, the less
the injured individual can recover. He further stated that
Section 5 of HB 492 only applies to cases that values
$200,000 or less.
MR. HENSLEY said the reason for the proposal was to provide
some type of forum for those individuals who have small
claims. He explained that the purpose for the arbitration
was not to supplant the entire liability litigation but to
apply those smaller cases. He felt that both the federal
and state courts have made great strides in the last 1-1/2
years in changing the rules to speed up the process and to
make it more efficient.
Number 575
CHAIR BUNDE asked Mr. Hensley if he had any suggestions
regarding how indigents will be afforded the option of
arbitration.
MR. HENSLEY responded by saying that he felt parties should
have to pay for the arbitration, not the court system. It
is still cheaper for the person with a small claim to pay
for arbitration than it is to pay for a case from the
beginning to a "full blown jury trial."
CHAIR BUNDE asked about the indigent that insists on being
able to use the arbitration system.
MR. HENSLEY said in a civil case the indigent person cannot
insist on anything.
CHAIR BUNDE said, "You're not anticipating growth in the
public defender kind of...?"
MR. HENSLEY interjected and said there is no law or
precedence that requires that a person who is indigent be
provided with arbitration.
Number 607
REP. VEZEY asked if Mr. Hensley believed in nonbinding
arbitration.
MR. HENSLEY said yes.
REP. VEZEY asked if Mr. Hensley believed that clients and
providers have a right to enter into a contract that would
call for arbitration for dispute resolution.
MR. HENSLEY said currently a provider can request but not
demand that a patient enter into voluntary arbitration.
REP. VEZEY indicated that within in a contract it is no
longer voluntary.
MR. HENSLEY said there is a provision for voluntary
arbitration.
REP. VEZEY said once the person enters into the voluntary
contract, it's no longer a voluntary procedure.
MR. HENSLEY stated that "conditioning my right or the right
of any citizen to obtain medical care, on that citizen's
giving up his or her right to a jury trial..."
REP. VEZEY asserted that Americans still have a choice as to
which medical provider they would like to see, and said it
is a free market in that regard. He said that as long as
there is choice, it's a free competition system.
MR. HENSLEY pointed out that the reason there is only one
hospital in Fairbanks is because under the Certificate of
Need Program it specifies that it must be evidenced that
there is a need to have a second hospital before a
competitor would even be allowed in Fairbanks.
REP. VEZEY maintained that a large number of people go to
Seattle and Minneapolis for their health care and that their
travel expenses can be justified because treatment is
considerably less costly. He further stated that the cost
of arbitration is split evenly among the parties involved.
The arbitrator can mandate that the party that does not
prevail must pay the full cost. He said the arbitrator is a
contractor.
(Chair Bunde indicated for the record that Rep. Nicholia
arrived at 3:32 p.m.)
CHAIR BUNDE asked if Mr. Hensley preferred voluntary and
opposed binding arbitration.
MR. HENSLEY said he outright opposes binding arbitration
because it would be difficult to uphold a statute which
conditions people's rights to go to any physician or
hospital and that it would be giving up a person's right to
a jury trial.
CHAIR BUNDE asked if there were any questions for Mr.
Hensley pertaining to arbitration. There were none. He
then asked Mr. Hensley to continue with his testimony.
Number 712
MR. HENSLEY stated that another criticism of the liability
system relates to defensive medicine that implies that
doctors are looking over their shoulders because they are
afraid they will be sued and subsequently they order more
unnecessary medical tests to protect themselves from
litigation. He asserted that all the blame should not rest
on the liability system and indicated that there is ample
studies that show that doctors who own their own X-ray
machines order four times more X-rays than physicians who
don't. He said that is just one of the many reasons that
doctors request unnecessary tests. He further maintained
that HB 492 and HB 493 would protect doctors from having to
look over their shoulders. He also said the legislation
provides for mandatory insurance for physicians and
restricts an injured person from recovering anything beyond
that which is available as insurance.
MR. HENSLEY indicated that the liability system is also
criticized because it currently contains no real deterrent
for filing frivolous lawsuits. He referred to page 6 of HB
492 and explained that it is required that a lawyer must
include with their malpractice filing a certificate from a
qualified physician who is practicing in that area and is a
subject of the lawsuit. He said the provision ensures that
the lawyers do their homework before going to court.
Number 730
MR. HENSLEY cited another significant criticism of the
liability system is that there are some doctors (i.e.,
OB/GYN) that are not practicing or choosing not to do some
high risk procedures because they can't afford the liability
insurance. He questioned again whether the liability system
is responsible. He mentioned that a Wall Street Journal
article cited that the United States is graduating more
doctors from medical school than ever before and referred it
as a glut. He indicated that those graduating are
specialists, not general practitioners that go to rural
communities. Mr. Hensley stated that traditional tort
reforms do not address the problem and the advocates of
traditional tort reform suggest that those changes in the
law might reduce liability insurance rates, but research
indicates otherwise. He said a 10% reduction in insurance
rates could not guarantee that there would be another doctor
in Haines, Cordova or Valdez.
MR. HENSLEY stated that the legislation requires mandatory
insurance for all physicians and is similar to the Medical
Indemnity Corporation of Alaska (MICA) organization which
allows physicians to shop and pool and to have access to
other insurance buying arrangements. Also, it would provide
insurance at low rates in areas where there is no
availability because of lack of insurance. He said no other
tort reform addresses these concerns.
MR. HENSLEY asserted that it was the goal of both proposals
to address the criticisms of the liability system. He then
suggested that he could give a section by section analysis
of both HB 492 and HB 493 to underline what the provisions
will accomplish.
Number 875
CHAIR BUNDE said it was not his intention to move the bills
out of committee as the HESS Co-Chair, Rep. Toohey, who was
instrumental in having the bills drafted, was not yet
present. He thanked Mr. Hensley for being proactive and
part of the solution. He asked for a sectional analysis.
MR. HENSLEY stated that it would help his presentation to
address HB 493 first.
HB 493 - MEDICAL LIABILITY INSURANCE CORPORATION
Number 895
MR. HENSLEY indicated that Section 2 of HB 493 requires
health care providers to have liability insurance. Section
3 establishes a state medical insurance corporation. He
stated that the corporation is not a government agency, but
is similar to the MICA agency and would ensure that the
provisions of Section 2 are fulfilled.
Number 925
CHAIR BUNDE indicated there was no fiscal note and suggested
that the agency would be a quasi-state agency, nonprofit
organization, that does not involve general funds.
MR. HENSLEY stated that funds may be needed to establish the
agency. He said the idea is that it will not be continually
funded by the state.
MR. HENSLEY further stated that the medical insurance
corporation would have the authority to mandate that all
health care providers carry insurance and would provide the
insurance through the corporation through pooling
arrangements, self-insurance, competitive bids, and other
plans that would allow for the lowest possible rates. He
also stated that within Section 3, subsection 6, there is a
mechanism that provides insurance to those in limited areas
where needed services are not being provided because of the
lack of availability of insurance.
(Chair Bunde indicated for the record that Rep. Toohey
arrived at 3:45 p.m.)
CHAIR BUNDE explained to Rep. Toohey that the committee was
hearing the sectional analysis from Mr. Hensley on HB 492
and HB 493. He indicated that the focus of discussion was
on page 4, subsection 6. He then noted that someone from
the Department of Commerce and Economic Development was
supposed to be at the meeting, but for whatever reason they
did not attend.
Number 995
MR. HENSLEY stated that Section 3 also establishes the
maximum liability under mandatory insurance would be $5
million, and the amount includes catastrophic cases. He
said regardless of the extent of the damages, $5 million
would be the maximum that anyone person could recover.
CHAIR BUNDE asked Mr. Hensley how the establishment of those
guidelines will mesh with the current insurance system and
insurance rates and if it will save money, cost money, or be
a wash.
MR. HENSLEY said he did not know the answer. He indicated
that there are some aspects of the legislation that save
money, citing the reduction of overlap in coverage and the
increase of size in insurance pools that will subsequently
increase bargaining power. He felt those aspects would work
in favor of reducing costs.
CHAIR BUNDE stated that the proposal includes not only
physicians but all health care providers.
MR. HENSLEY said the health care providers are defined in HB
492. He said HB 493 essentially establishes the
organization and HB 492 allows for change in the liability
system.
MR. HENSLEY then began a sectional analysis on HB 492 and
said he would skip the introductory section and start on
page 4, subsection 4. He indicated that the section
requires that a person cannot recover damages against a
health care provider in excess of the insurance coverage.
CHAIR BUNDE asked about the constitutionality of the state
setting limits on what a person can recover.
MR. HENSLEY explained that there have been Supreme Court
cases around the country where caps on recovery have been
litigated. He said some of the caps were upheld and some
were thrown out. He said the lower the cap the more likely
it will be thrown out, hence taking the decision-making
function from the jury. He felt a $5 million cap has a
substantially greater chance of passing muster than
$500,000. He also said that a noneconomic cap of $500,000
is different from an overall cap on all recovery of $5
million. He said there are very few cases where there would
be damages in excess of the overall cap. In some cases the
economic loss -- lost wages -- might be the significant
portion of the case, or the amount of medical care required
over a lifetime of an injured infant.
MR. HENSLEY further stated that Section 5 addresses
mandatory arbitration.
Number 128
CHAIR BUNDE noted that the arbitration within Section 5 is
"mandatory nonbinding."
REP. OLBERG said he assumed that mandatory arbitration is
tied to the medical insurance corporation. A claim against
a person insured by the medical insurance corporation is
mandatorily arbitrated if it's less than $200,000.
MR. HENSLEY said yes.
TAPE 94-43, SIDE B
Number 000
REP. OLBERG said the language says "an action against a
health care provider..."
MR. HENSLEY asserted that the defense of the health care
provider and the insurance coverage for the provider is
provided by the medical insurance corporation.
REP. OLBERG said, "...the mandatory arbitration, now, makes
a little bit of sense."
MR. HENSLEY stated that there is criticism of the
arbitration provision that alleges that the process is not
very thorough, citing that claims would not be resolved and
there would be an increase in cost and delays. He explained
that the purpose of the arbitration is to allow for smaller
claims, less than $200,000, to be heard.
Number 063
REP. TOOHEY stated for the record that she has heard the
testimony before and she would review the tapes of the
meeting at a later date.
MR. HENSLEY continued with his analysis. He indicated that
Section 6 would offer measures that would decrease the
amount of frivolous lawsuits. The provision requires a
lawyer to attach a certificate of merit from a qualified
health care provider to the lawsuit that says the case has
merit.
CHAIR BUNDE stated that Mr. Hensley had previously indicated
that most all proficient lawyers currently practice that
procedure and asked if it would serve any purpose to have
two health care providers sign the certificate of merit. He
supposed that a certificate of merit factory could be set
up.
MR. HENSLEY said that most medical malpractice lawyers are
prepared before they file a lawsuit resulting from
consultation from an expert. The intent of the provision is
for the certificate of merit to encourage those lawyers who
are not prepared to get prepared before they go to the court
house.
Number 162
CHAIR BUNDE said he was unsure as to how the provision would
unclog the courts or would make recovery more efficient.
MR. HENSLEY indicated that the provision was included to
address the criticism that there are too many frivolous
lawsuits.
MR. HENSLEY further stated that another criticism of the
liability system relates to an Alaskan Supreme Court case
called Jackson vs. Power, which is a case where the Alaska
Supreme Court held that if a hospital is required by law to
have an emergency room, then the hospital should be
responsible for negligence in the emergency room regardless
of whether the services of the emergency room are contracted
out. He related the scenario of a case where he represented
the plaintiff in a case where there was negligence in the
emergency room of the Fairbanks hospital. The patient was
severely injured and lost both kidneys. When the patient
went to seek compensation, he was told that it was not the
hospital's responsibility, it was the emergency room's
responsibility. He said the emergency room was known as
Emergency Room, Incorporated and they did not have enough
insurance coverage to pay for the medical coverage for the
18 year old boy. The Alaska Supreme Court then ruled that
full service hospitals are required to have emergency rooms
and that they should be responsible for any negligence in
the emergency rooms. He further stated that one of the
criticisms of that rule is that there is overlapping
coverage, citing that the hospital has coverage and the
contracted doctors in the emergency room have their own
coverage. He pointed out that with the universally required
insurance, there would be no overlap of insurance.
Number 250
REP. TOOHEY asked if there is a contract between a hospital
and the contracted emergency room that requires the
emergency room to have a specific amount of liability.
MR. HENSLEY responded that as a business practice the
hospital can require anything they want but do require that
the emergency room have insurance. He said the question is
whether they require enough insurance.
REP. TOOHEY said that is the problem.
MR. HENSLEY suggested that the problem could be solved
commercially by providing emergency room coverage through
the hospital policy rather than having double coverage. He
said he thought there may be other solutions than
legislatively reversing a unanimous Alaska Supreme Court
decision.
REP. TOOHEY thanked Mr. Hensley for his answer.
MR. HENSLEY thanked the committee for granting him the
courtesy of introducing the legislation that is intended to
be a proactive response to problems within the liability
system.
Number 314
CHAIR BUNDE indicated that the sweeping changes provided for
in the proposals would necessitate continued discussion. He
said he hoped to hear from the medical and insurance
communities, as well as the Department of Commerce and
Economic Development and the Division of Insurance. He said
that he would appreciate their interpretation of the
legislation.
MR. HENSLEY thanked the committee again.
CHAIR BUNDE thanked Mr. Hensley for striving to be part of
the solution.
Number 343
Seeing no further business before the committee, CHAIR BUNDE
ADJOURNED the meeting at 4:04 p.m.
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