Legislature(2005 - 2006)BUTROVICH 205
03/17/2005 08:30 AM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB67 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| = | SB 67 | ||
| = | SJR 10 | ||
SB 67-CLAIMS AGAINST HEALTH CARE PROVIDERS
9:05:31 AM
CHAIR SEEKINS announced SB 67 as the first item of business
before the committee. He introduced a committee substitute (CS),
which removes legislative findings.
SENATOR GENE THERRIAULT joined the committee.
SENATOR THERRIAULT moved to use Version \G as the working
document. Hearing no objections the motion carried.
9:07:50 AM
CHAIR SEEKINS reiterated that the CS removes the findings
section and shortens SB 67 to two pages.
9:08:26 AM
MR. MIKE HOGAN, executive director, Alaska Physicians and
Surgeons, testified in support of SB 67. He said public access
to doctors in Alaska is predicated on doctors getting medical
malpractice insurance. Alaska is now down to only two carriers.
Insurers see Alaska as an unfriendly environment in which to do
business. If the state loses another carrier, present doctors
would have to retire, move, or cut out high-risk procedures.
9:10:24 AM
DR. HOGAN said society and the Legislature have to recognize
what is fair. In the auto insurance industry there are $50,000
minimum requirements for coverage. In the workers' compensation
system the most a disabled worker can claim is $800 a month. It
is arguable whether those two examples are fair, but as a
society we have determined that is what we can afford. As for
medical malpractice insurance, $250,000 is a lot of money since
lost wages and punitive damages would still be covered. The two
insurance carriers in Alaska are California based. They will do
constant evaluations for risk factors. It is critical to keep
them and attract new carriers.
9:12:40 AM
SENATOR FRENCH asked DR. HOGAN whether the Alaska Physicians and
Surgeons have done an analysis on what role fraud might play in
the high price of insurance.
DR. HOGAN replied it has not. Premiums are based on the doctors'
claims history. The ability to commit fraud is limited.
SENATOR FRENCH mentioned a news report last week from California
about a group of physicians that were defrauding insurance
companies.
DR. HOGAN clarified that medical insurance and medical
malpractice insurance constitute separate claims. Fraud would
not compute similarly.
CHAIR SEEKINS noted medical malpractice claims are normally
adjudicated.
9:15:47 AM
CHAIR SEEKINS added if any fraud occurred it would be between
the parties settling the claim.
SENATOR GUESS joined the committee.
SENATOR FRENCH voiced his concern about lowering the cap. He
stated Alaska would be taking away from the people who are hurt
the most.
DR. HOGAN presented the flip side and asked whether it is fair
to all Alaskans to risk the healthcare system.
9:18:57 AM
DR. HOGAN further stated there are limits beyond which people
can afford to do business and Alaska doctors have reached that
limit.
SENATOR HUGGINS asked Dr. Hogan to explain how much money the
representing attorney gets from the settlement.
DR. HOGAN informed him the injured person generally receives
less than fifty percent. The rest of the settlement is eaten up
by the system.
9:20:36 AM
SENATOR GUESS stated that during previous testimony, committee
members have heard that a review panel process exists in statute
that occurs prior to access to the court system. She said the
solution presented seems to pit fairness to victims against
access to health care instead of trying to figure out a
different way to do business. She asked Mr. Hogan to comment on
the review panel and why it isn't used prior to court, or why
mediation isn't used often.
DR. HOGAN said if a plaintiff does not get the verdict it wants
of the review panel, it ignores that opinion and goes to court
anyway. It turns into another expense insurance companies have
to go through.
9:22:40 AM
SENATOR GUESS noted for the record that attorneys have testified
to the contrary. Previous testimony suggests other solutions are
out there and the truth is, the solution probably lies somewhere
in the middle.
DR. HOGAN said they have talked about systemic changes beyond
the scope of the bill. SB 67 is critical and will stop the
bleeding. To heal the whole problem would require big changes,
which takes time. If SB 67 passes it will be challenged in
court. The appeals process takes between 3-6 years. During this
time uncertainty will remain for the insurance carriers. They
will have to decide whether to continue to do business in
Alaska. A long-term fix will require a great deal of study.
9:24:50 AM
SENATOR GUESS asked Dr. Hogan to present some ideas in written
form. She asked whether he has heard about other insurance
companies entering the market and driving down rates.
DR. HOGAN responded the issue is not about rates. It is about
access of insurance.
9:25:45 AM
SENATOR THERRIAULT said he wanted clarification on how the
arbitration language works.
CHAIR SEEKINS commented any contract could have arbitration. It
is common in large ticket items.
9:28:03 AM
CHAIR SEEKINS commented that 22 other states have a cap on non-
economic damages.
9:28:46 AM
MR. PAT LUBY, advocacy director, AARP, testified the committee
should realize that mistakes happen. The AARP believes the
Legislature should focus on preventing mistakes and error
reduction, not on damages. The current system encourages
providers to cover up mistakes to avoid lawsuits rather than
report errors. He said citizens who are hurt by a medical
mistake are entitled to fair compensation. Errors should be
reported so that others can learn from the mistakes. The AARP
believes $250,000 is too low for non-economic damages. The
Institute of Medicine has proposed to the court system testing
non-judicial no fault alternatives for medical errors. If Alaska
would adopt one of the IOM recommendations, it would provide
compensation and error reduction, which should be the real goal.
9:30:47 AM
MR. LUBY added that providers would be required to report errors
and make prompt compensation payments. This method would result
in fewer errors and overall costs would decline.
9:31:25 AM
CHAIR SEEKINS stated SB 67 does not suggest covering up medical
errors.
9:31:41 AM
MS. DONNA MCCREADY, member, Alaska Action Trust, addressed Mr.
Hogan's testimony regarding access to medical care in Alaska and
said SB 67 denies Alaskans access to justice. Economists do not
put a large amount of value on children and the aged.
9:33:54 AM
MS. MCCREADY stated she is uncertain as to what the problem is.
The number of medical malpractice cases and payouts throughout
the state has been steady. Mr. Hogan testified there is an
infinitesimal amount of claims. She wondered why Alaska has not
gone back to the Medical Indemnity Corporation Act (MICA).
Alaska has always had a dominant carrier. She pointed out there
has been no testimony from the insurance companies.
9:36:04 AM
MS. MCCREADY said, typically, medical malpractice attorneys
charge up to 33 percent of recovery plus costs because of the
risks. Verdicts are generally in favor of the physicians.
9:37:57 AM
SENATOR FRENCH commented 22 percent of California medical
malpractice trials resulted in favor of the plaintiffs. He asked
Ms. McCready whether it is the same in Alaska.
MS. MCCREADY responded that a smaller percentage comes out for
the plaintiffs. It is very risky for a patient to take a claim
to trial.
9:39:30 AM
CHAIR SEEKINS asked Ms. McCready the number of medical
malpractice cases she has tried.
MS. MCCREADY responded one.
CHAIR SEEKINS asked Ms. McCready the number of medical
malpractice claimants she has represented.
MS. MCCREADY responded less than 100. She added she receives
many calls about medical malpractice claims and takes on
approximately 2 percent. Even if a case has merit, it is
sometimes impossible to prove.
9:40:47 AM
MS. MCCREADY said she investigates 25 to 50 percent of the cases
she takes on and then would dismiss those she has determined
cannot be won.
9:42:51 AM
MS. MCCREADY advised the committee they could reference the
State Medical Board to find information on physicians who have
performed surgeries recklessly.
9:44:56 AM
MR. MICHAEL SCHNEIDER stated in the history of Alaska there have
been only 15 verdicts for plaintiffs in medical negligence
cases. It is not a huge problem in Alaska. He said SB 67 and the
goals of the Legislature are a poor fit. The insurance industry
accounts for 10 percent of the gross domestic product. That
industry would be the sole benefactor of SB 67.
9:47:40 AM
MR. SCHNEIDER added that SB 67 would give away the rights of
Alaska citizens to ask a jury for a fair settlement. SB 67 would
give the farm away to an unregulated industry. The fix proposal
of forming an insurance pool is proven.
9:49:53 AM
MR. SCHNEIDER added none of the statistics support the ethics of
capped legislation. He claimed if SB 67 passes, physicians would
face the same crisis in the future because it's a cyclical
phenomenon driven by fluctuations in the insurance industry's
return on reserve income. It has nothing to do with premiums and
claims.
9:51:54 AM
SENATOR HUGGINS asked Mr. Schneider the name of the insurance
pool formed by the attorneys.
MR. SCHNEIDER answered the Attorney Liability Protection Society
(ALPS).
SENATOR HUGGINS questioned how many suits were filed against him
in the last two years.
MR. SCHNEIDER responded none and said, in fact, he has had none
over the last 29 years and nine months.
SENATOR HUGGINS suggested Mr. Schneider presented a case of
apples and oranges. He said a number of doctors have had suits
brought against them yet Mr. Schneider should not be concerned
about being sued.
MR. SCHNEIDER respectfully disagreed and said Senator Huggins
might completely misunderstand the playing field. He explained
that a plaintiff's attorney must evaluate a case from the
standpoint of what a jury will think. He stated, "Attorneys, I
am sad to report, are up there with car salesmen and - no
offense - politicians and you guys have all read the same
studies I have."
CHAIR SEEKINS jested, "Mr. Schneider, this is Chairman Seekins.
I am both a car salesman and a politician..."
9:54:16 AM
MR. SCHNEIDER stated attorney malpractice claims are easier
cases than medical malpractice claims.
9:55:19 AM
CHAIR SEEKINS stated for the record he has looked at the MICA
program and has spoken with Senator Robin Taylor at length. He
has looked at the structure of both insurance companies, which
are both basically insurance pools. The MICA system has not
escaped the view of the Legislature.
9:57:59 AM
CHAIR SEEKINS asked Mr. Schneider to explain the problem with
capping.
MR. SCHNEIDER said it denies the most seriously and unfairly
injured persons their constitutional right to have a jury of
their peers review their claims. Denying that essential freedom
would bring the state nothing in return.
9:59:58 AM
CHAIR SEEKINS asked Mr. Schneider what falls under the category
entitled "costs."
MR. SCHNEIDER informed the committee that expert testimony for
both parties is required to debate the case. Costs include fees
for the expert witnesses, copies of documents, airplane tickets,
court recorders and more. He said the amount can be significant
and noted that his out-of-pocket cost for one-half of a
deposition in one case cost $45,000.
MR. SCHNEIDER explained that if he has to retain an expert that
would be a cost. Document copies are costs. Airplane travel to
talk to a witness would be a cost.
10:01:41 AM
CHAIR SEEKINS asked whether costs include everything other than
the direct legal expense.
MR. SCHNEIDER said the fee is for the value of the time spent by
his staff, an expert, and his own time.
10:02:33 AM
CHAIR SEEKINS asked, if Mr. Schneider charged $200 per hour,
what that pays for.
MR. SCHNEIDER said on the defense side, people who represent
doctors that are sued charge for everybody. Support staff,
attorneys, and out-of-pocket expenses are billed out of the
rate. On the plaintiff's side, the client can't afford to help
with many of those costs so the plaintiff's attorney gets paid
for his time and his overhead by the percentage fee. His direct
litigation costs associated with that file are an additional
cost. If he charges one-third of the gross recovery, that covers
his fee, the cost of his paralegal assistant, his secretary, and
his overhead cost. If he has a specific expense, such as
obtaining an expert witness that would be an additional amount
of money taken out of his client's gross recovery if he is
successful.
10:04:21 AM
CHAIR SEEKINS said Mr. Schneider mentioned a $75,000 recovery,
and asked how much he took.
MR. SCHNEIDER said that was an interesting case that illustrates
the problem. The person he represented was terminally ill with
Alzheimer's disease. She suffered severe burns by an act of
abject medical stupidity. He took the case because the case made
him very angry. He tried to settle the case for $75,000 but the
other party would not settle. He took the case to court and won.
His out-of-pocket costs amounted to $25,000. In order to give
the family half of that, he reduced his fee. He said that
illustrates the problem in which one can see injustices but
economically cannot make them fly.
10:05:54 AM
MR. MIKE POWERS, administrator, Fairbanks Memorial Hospital,
told members this is an extremely difficult issue. He cautioned
members that it is important to remember this matter does not
pertain to gross negligence, incompetence, or poor performance,
whose victims surely must be compensated fairly. He indicated
that studies in states with a $250,000 cap show the need to
explore this issue as well as other systemic issues. Voters in
Texas recently enacted a $250,000 cap, which has resulted in a
17% decrease in rates. The general sense is that access issues
are close to being addressed as well. In California, the
$250,000 cap has resulted in the highest reported rate for an OB
GYN being $89,953. In Illinois where the state supreme court
recently struck down caps, the highest rate was $230,000.
10:08:11 AM
MR. POWERS noted that physicians in Nebraska pay some of the
lowest premiums in the country. That state credits tort reform,
which was enacted in the 1970s.
SENATOR FRENCH asked Mr. Powers if Nebraska has the lowest
premiums in the nation.
MR.POWERS said that is correct.
SENATOR FRENCH asked whether Nebraska has caps.
MR.POWERS said Nebraska does have caps.
SENATOR FRENCH noted that the January 2005 chart distributed
earlier does not list Nebraska.
MR. POWERS said that could be correct but he added that other
tort reforms dating back to the 1970s have been important.
10:09:34 AM
MR. POWERS said in addition, Pennsylvania, with its $250,000
cap, has reduced losses and defense costs by 18%. He said the
issue of caps around the country is very important to creating
additional access for physicians that is conducive to practice.
Fairbanks currently has a shortage of ten internal medicine
physicians, four psychiatrists, three OBGYNs, two cardiologists
and two ophthalmologists. Fairbanks is undergoing an aggressive
recruiting campaign but it has no active leads for internal
medicine physicians. He pointed out that the Illinois Senate
Judiciary Committee took this same issue up two weeks ago. That
committee's objective was to compute the reduction of medical
malpractice in loss expenses that would result from capping non-
economic damages. Its consultants evaluated reductions for
physicians in hospitals. They found that with the $250,000 cap,
a reduction in losses of 24 percent in New York, 17 percent in
Florida, 15 percent in Wyoming, and 11 percent in Pennsylvania.
He offered to pass that study on to members.
10:12:19 AM
MR. POWERS said regarding Senator Guess's question about whether
this is an issue of fairness against creating access, he is
having a hard time trying to get positions on that question. He
asked members to carefully consider the study and the $250,000
as an important part of a systemic fix.
SENATOR GUESS said Mr. Hogan said earlier that this is not about
rates but about access, yet a lot of the statistics have been
about rates going down rather than access. She asked him whether
the recruitment problem is about rates and/or access.
MR. POWERS said it is both. He noted Fairbanks Memorial Hospital
recruits potential applicants who are concerned about medical
malpractice insurance. There is no single solution. If rates
dropped by 50 percent, there would not be a flood of applicants.
10:14:26 AM
SENATOR GUESS asked Mr. Powers if he has had any conversations
with insurance companies that say they will do business in
Alaska if it caps damages. She said her concern is that the
Alaska market is just too small.
MR. POWERS said he has not talked with them.
SENATOR THERRIAULT said with regard to attracting doctors, he
asked what is happening as far as the number of applicants going
through medical schools in the nation.
10:15:45 AM
MR. POWERS said the number is holding steady, but the concern is
that lifestyle is very important to younger physicians. They
want a work environment that is conducive to raising families.
He noted that making Alaska attractive to those who might not
first think of Alaska is very important in recruitment efforts.
SENATOR THERRIAULT said in regard to rates, information in
members' packets speaks to insurance rates during the 1980s and
1990s. Premiums actually went down because Alaska was very
competitive. New entrants to the market were pricing the
insurance product below what was reasonable. There was some talk
of a shakeout in the market and that rates would become more
realistic. He asked what kind of history Fairbanks Memorial
Hospital has with regard to premiums paid by the hospital and
its doctors.
10:17:51 AM
MR. POWERS said the Fairbanks numbers indicate a tremendous run
up in the late 1980s and early 1990s, but the rates flattened in
the mid-1990s because Fairbanks was self-insured and had
reserves. During the last 5 years, malpractice insurance has
increased about 276 percent.
SENATOR FRENCH asked about the effect of inflation and its
upward pressure on costs. He referred to the Rand study and
asked him to speak to the effect of inflation on California's
$250,000 cap in the 1970s and whether patients should be able to
index their claims for inflation.
10:19:54 AM
MR. POWERS thought allowing patients to do so seems reasonable.
Michigan has indexed premiums to inflation and its non-economic
cap is now over $350,000. The Michigan State Medical Society is
very concerned about it so it is looking at expert witness
standards and other mechanisms. He said that to create access a
reasonable cap level is necessary. He also believes some type of
index is important.
CHAIR SEEKINS asked how long he has been with the hospital.
MR. POWERS replied 19 yrs in July.
CHAIR SEEKINS asked if he has been involved in medical
malpractice lawsuits.
MR.POWERS said yes.
CHAIR SEEKINS asked how many.
10:21:25 AM
MR. POWERS said about 5-10 legal issues arise each year. More
recently, many of those cases would be characterized as nuisance
cases.
CHAIR SEEKINS asked how many of those have gone to court.
MR. POWERS said about 25%.
CHAIR SEEKINS asked if the hospital usually tries to settle the
cases out of court.
MR. POWERS said his opinion over the last five years has been to
not settle because the hospital has to draw a line in the sand.
Somebody has to say no and take a tougher stand so the hospital
has absorbed some additional costs.
CHAIR SEEKINS asked if the ones the hospital takes to court are
the ones that have no merit.
MR. POWERS said that is correct. If a case does have merit, the
hospital attempts to work with the individual.
10:23:17 AM
SENATOR FRENCH asked whether the cases go to court because they
have no merit or because the hospital just can't come to terms
to settle.
MR. POWERS said the answer is not black and white. Some cases
have absolutely no merit. In the past year, the hospital has
spent $35,000 defending something with absolutely no merit and
the decision was made in 15 minutes. He said the recent increase
in the level of nuisance lawsuits has been very noticeable.
SENATOR FRENCH asked his experience with the Fairbanks juries
and whether they typically shell out money against the hospital.
MR.POWERS said the Fairbanks juries tend to be tough.
10:24:33 AM
SENATOR GUESS asked Mr. Powers his opinion of the current review
panel and whether it works.
MR.POWERS said he did not have an opinion.
CHAIR SEEKINS said he noticed a member of the review panel is
paid a maximum fee of up to $150 per day. He asked if any doctor
could be hired for $150 per day.
MR. POWERS said every hospital in the state is concerned about
what they are doing to pay physicians for sharing medical staff
departments, for taking emergency room calls and other things.
The burden on physicians is incredible. He said many physicians
are advising their children against moving into the medical
field because of the onerous regulatory environment. Physicians
must be in their practices taking care of patients in order to
earn a reasonable living.
10:26:09 AM
CHAIR SEEKINS said one wouldn't find a lot of volunteers to
review medical malpractice cases.
MR.POWERS said it would be very difficult to find such
volunteers.
10:26:34 AM
MS. KATHY DALE, Anchorage, testified in opposition to SB 67. She
was testifying on behalf of her husband and other family members
who are victims of medical malpractice. She said SB 67 will not
harm her family but it will harm future victims and
constituents. She said the only reason she found out about her
husband's permanent brain damage and the cause was because she
was found an attorney to take her case. She found out what
happened to her husband by listening to expert witnesses and
testimony. She cautioned that lowering the cap would protect
negligent doctors. SB 67 will not help bring qualified
physicians into the state and it will not lower medical
malpractice premiums. She reminded members that Alaska already
has a cap of $400,000 on non-economic damages. Lowering the cap
will prevent lower income people from being able to file suit.
It will keep Medicaid, Medicare, and PERS from recovering
medical costs because suits will never be brought. She said that
people have already told members how much the $250,000 cap
established in 1976 is worth in current dollars. She noted that
although the premiums have gone down in California that is due
to the voters and Proposition 103.
10:29:43 AM
SENATOR THERRIAULT asked CHAIR SEEKINS if the existing $450,000
cap is an absolute cap or if the amount could be higher under
certain circumstances.
CHAIR SEEKINS said the cap can be up to 1 million for a severe
injury, which was loosely defined in a recent Supreme Court case
as something that would cause embarrassment. He said that is,
therefore, a soft cap. This would establish a hard cap.
SENATOR FRENCH asked for the citation of that decision.
CHAIR SEEKINS did not have it with him but said the case was not
a medical malpractice case but a tort case in Western Alaska. A
woman slipped in a shower in a community center. She is now bow-
legged in one leg and reverse bow-legged in the other leg. The
court decided the word "severe" is not defined in statute so the
court loosely defined it as anything that would cause
embarrassment.
10:32:04 AM
CHAIR SEEKINS apologized for the late start of the meeting,
which prevented those wishing to testify from doing so. He would
have staff contact those people about the next meeting.
SENATOR THERRIAULT asked Chair Seekins to distribute copies of
the case he cited for members and for the study about research
done in different states.
CHAIR SEEKINS said he would investigate getting that
information.
SB 67 was held in committee.
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