02/25/2004 01:04 PM House JUD
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
February 25, 2004
1:04 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Tom Anderson, Vice Chair
Representative Jim Holm
Representative Dan Ogg
Representative Ralph Samuels
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 472
"An Act relating to claims for personal injury or wrongful death
against health care providers; and providing for an effective
date."
- HEARD AND HELD
HOUSE BILL NO. 367
"An Act relating to the licensing and regulation of sex-oriented
businesses and sex-oriented business entertainers; relating to
protection of the safety and health of and to education of young
persons who perform in adult entertainment establishments; and
providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 424
"An Act relating to review of regulations under the
Administrative Procedure Act by the Legislative Affairs Agency;
and providing for an effective date."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 385
"An Act relating to awarding child custody; and providing for an
effective date."
- BILL HEARING POSTPONED
PREVIOUS COMMITTEE ACTION
BILL: HB 472
SHORT TITLE: CLAIMS AGAINST HEALTH CARE PROVIDERS
SPONSOR(S): REPRESENTATIVE(S) ANDERSON
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) JUD
02/25/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 367
SHORT TITLE: LICENSING SEX-ORIENTED BUSINESSES
SPONSOR(S): REPRESENTATIVE(S) MCGUIRE, GARA
01/12/04 (H) PREFILE RELEASED 1/9/04
01/12/04 (H) READ THE FIRST TIME - REFERRALS
01/12/04 (H) L&C, JUD, FIN
01/30/04 (H) L&C AT 3:15 PM CAPITOL 17
01/30/04 (H) Heard & Held
01/30/04 (H) MINUTE(L&C)
02/02/04 (H) L&C AT 3:15 PM CAPITOL 17
02/02/04 (H) Moved CSHB 367(L&C) Out of Committee
02/02/04 (H) MINUTE(L&C)
02/05/04 (H) L&C RPT CS(L&C) NT 2DP 3NR 2AM
02/05/04 (H) DP: DAHLSTROM, ANDERSON; NR: CRAWFORD,
02/05/04 (H) LYNN, GATTO; AM: ROKEBERG, GUTTENBERG
02/09/04 (H) JUD AT 1:00 PM CAPITOL 120
02/09/04 (H) <Bill Hearing Postponed to 2/16/04>
02/16/04 (H) JUD AT 1:00 PM CAPITOL 120
02/16/04 (H) Heard & Held
02/16/04 (H) MINUTE(JUD)
02/23/04 (H) JUD AT 1:00 PM CAPITOL 120
02/23/04 (H) Scheduled But Not Heard
02/25/04 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
JAMES JORDAN, Executive Director
Alaska State Medical Association (ASMA)
Anchorage, Alaska
POSITION STATEMENT: Testified that HB 472 is an important and
necessary element to create the practice environment that will
help Alaska recruit the doctors it needs.
ALEX MALTER, MD, MPH; President
Alaska State Medical Association (ASMA)
Juneau, Alaska
POSITION STATEMENT: Related ASMA's support of HB 472.
GEORGE RHYNEER, MD
Alaska Heart Institute
Anchorage, Alaska
POSITION STATEMENT: Encouraged the committee to favor HB 472.
JOHN DUDDY, MD; President
Alaska Physicians and Surgeons
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 472, reviewed how
Alaska's practice environment has changed and is on the brink of
crisis.
RICHARD COBDEN, MD
Tanana Valley Clinic
Fairbanks, Alaska
POSITION STATEMENT: Testified in regard to the importance of HB
472.
RON NEUPAUER, President
Medical Underwriters of California;
Medical Insurance Exchange of California (MIEC)
California
POSITION STATEMENT: During discussion of HB 472, discussed the
medical malpractice environment in Alaska.
LAURIE HERMAN, Director
Government Affairs
Providence Health System in Alaska
Anchorage, Alaska
POSITION STATEMENT: Announced Providence's wholehearted support
of HB 472.
PAULA JACOBSON, Attorney and Nurse
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 472, testified that
the $250,000 cap would severely penalize the elderly, rural
Alaskans, and children.
DONNA McCRADY, Past President
Alaska Academy of Trial Lawyers
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 472, related the
realities of practicing in the area of medical malpractice.
KATHY DALE
Anchorage, Alaska
POSITION STATEMENT: Speaking as a victim of malpractice,
implored the committee not to pass the cap proposed in HB 472.
RAY BROWN, Attorney
Dillon & Findley, PC
Anchorage, Alaska
POSITION STATEMENT: Testified that those medical malpractice
cases involving people who have been catastrophically injured
wouldn't be litigated under the $250,000 cap proposed by HB 472.
MIKE HAUGEN, Executive Director
Alaska Physicians & Surgeons, Inc.
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 472, discussed the
medical malpractice environment in Alaska.
ACTION NARRATIVE
TAPE 04-24, SIDE A
Number 0001
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 1:04 p.m. Representatives
McGuire, Anderson, Ogg, and Samuels were present at the call to
order. Representatives Holm, Gara, and Gruenberg arrived as the
meeting was in progress.
HB 472 - CLAIMS AGAINST HEALTH CARE PROVIDERS
Number 0068
CHAIR McGUIRE announced that the first order of business would
be HOUSE BILL NO. 472, "An Act relating to claims for personal
injury or wrongful death against health care providers; and
providing for an effective date."
Number 0164
REPRESENTATIVE ANDERSON, speaking as the sponsor, said that HB
472 is an important piece of legislation that proposes to modify
the current policy regarding how much a person can get for pain
and suffering in medical liability cases. Specifically, HB 472
proposes a hard cap of $250,000. Currently, for most injuries,
AS 09.17.010 allows for the greater of $400,000 or $8,000 times
the life expectancy of the claimant. For severe physical
impairment or severe physical disfigurement, the [current] cap
is the greater of $1 million or $25,000 times the life
expectancy of the claimant. Because these awards "ratchet" to
the higher amount they are known as soft caps.
REPRESENTATIVE ANDERSON said he believes that a $250,000 cap
will improve the "medical liability risk" environment in Alaska.
When medical-liability insurance carriers examine a market for
the purpose of [underwriting] policies, they take into account
many factors, one of which is the likelihood of big payouts. He
opined that because the current situation in Alaska regarding
big payouts is uncertain many insurance carriers have "departed
from our state." Establishing a hard cap of $250,000
establishes certainty, he stated. Representative Anderson
informed the committee that beyond the committee packet, each
member should have a black three-ring binder of relevant
information. He explained that the desire is to place
[Alaska's] health care in line with other states' health care
while also ensuring affordable health care.
Number 0423
REPRESENTATIVE ANDERSON turned to medical liability coverage and
pointed out that in order to protect their assets most doctors
indemnify themselves with insurance. Furthermore, health care
facilities require that doctors carry insurance. He pointed out
that this insurance also protects the patient. However,
restrictions or mandates placed on medical practitioners will
extrapolate out to the public, he emphasized.
REPRESENTATIVE ANDERSON said that it's critical that medical
liability insurance be available for doctors, which he opined is
difficult at this point [in Alaska]. He informed the committee
that just a few months ago four carriers offered medical
liability insurance in Alaska. However, now there are only two
carriers. If one of the remaining two carriers leaves, he
predicted disaster because the remaining carrier wouldn't be
able to handle all the physicians in the state. Alaska is also
experiencing a shortage of doctors. As a result of all this,
the number of claims on these insurance policies is rising. He
related that the Physician Insurance Association of America
reports that nearly 8 percent of all awards exceed $1 million.
Without a hard cap, which this legislation proposes, there is no
reason to think this trend will change. Representative Anderson
pointed out that [Alaskans] depend on Alaska's health care
professionals for quality health care, which is why he sponsored
HB 472. Furthermore, these health care professionals need to be
indemnified to provide that care. In conclusion, Representative
Anderson said that his constituents and their health care
providers are depending upon the legislature to create an
environment in which insurance carriers have confidence to write
these policies.
Number 0717
JAMES JORDAN, Executive Director, Alaska State Medical
Association (ASMA), informed the committee that he also serves
on the Board of Directors for the Medical Underwriters of
California, which is the "attorney in fact," the operating
company, for the Medical Insurance Exchange of California
(MIEC). He explained that he will first discuss the practice
environment and the environment in Alaska with regard to the
recruitment of new physicians. Mr. Jordan paraphrased from the
following written testimony [original punctuation provided]:
I would like to tell you a short story about medical
care in Alaska. This story is about a patient who had
a routine physical last summer done by a general
internist in Anchorage. That doctor, during the
course of the examination discovered a suspicious
tumor in the patient's lower GI tract. A hastily
arranged colonoscopy, along with a biopsy, confirmed a
very rare cancerous tumor - and one that is normally
without symptoms. As a matter of fact, this type of
cancer is typically not discovered until it has spread
to the brain, heart, and/or lungs. The good news is
that it was caught at a very early stage by a skilled
doctor and was successfully treated by surgical
removal. So, you may wonder why I am relating this
story to you that has a happy ending.
For one reason, this story is very personal. The
patient referred to is my wife. For another, it
highlights the need in Alaska for well-trained
physicians in sufficient numbers to provide the care
that our citizens need and deserve. The general
internist who saw my wife is Dr. Richard Neubauer, who
happens to be about my age as well as my own personal
physician. Dr. Neubauer graduated from Yale Medical
School and did graduate medical education at the
University of Michigan. As I previously mentioned, he
is a general internist. General internists are in
very short supply in Alaska. A Fall 2002 Providence
study shows a shortage of 43.25 full time experienced
general internists in Anchorage alone. I believe you
will hear testimony that the number of general
internists continues to drop. Those remaining are
overtaxed in their practices, in their emergency room
call and coverage schedules, and, in some cases, have
simply left the state to pursue a practice that allows
them to have a family life.
What would have happened had Dr. Neubauer not been
around for my wife? Or for that fact, the surgeon,
Dr. June George, who is one of only two board
certified colo/rectal surgeons in the entire state?
Perhaps a general surgeon could have treated her, but
that same Providence study also shows a deficiency in
Anchorage alone of 19.8 full time equivalent general
surgeons. The shortages are real. Dr. Neubauer and
I, being contemporaries, often muse, "Who will be
around to care for us?"
HB 472 is an important element necessary to create the
practice environment that will help us recruit the
doctors we need in Alaska.
MR. JORDAN said that the $250,000 hard cap on noneconomics will
set the standard that will help Alaska recruit physicians. Mr.
Jordan informed the committee that there are two supreme court
cases that address the process of informed consent. Alaska
statute, he explained, requires that any time a health care
provider suggests a course of treatment, the patient must be
provided with sufficient information to make an informed
decision with regard to the proposed care. In 1993 Korman v.
Mallin was the first seminal case involving informed consent.
The aforementioned case established some requirements for the
process of informed consent. However, it didn't provide any
guidelines for the physicians. Later, there was the Marsingill
v. O'Malley case in which the Alaska Supreme Court rendered a
judgment in the fall of 2002. The Marsingill v. O'Malley case
followed the same course as Korman v. Mallin and again, didn't
provide any guidelines for the physicians. Additionally, Korman
v. Mallin involved a phone call in the middle of the night from
a patient to the surgeon. The surgeon recommended that the
patient go to the emergency room, which prompted the patient to
ask whether a tub would be put down the nose to the stomach.
The patient choose not to go to the emergency room, and
therefore several hours later the patient collapsed and ended up
with a cerebral event. In the Marsingill decision the court
gave specific directions to the lower court to rehear the
[Korman v. Mallin] case involving the informed consent issue
with regard to calls in the middle of the night. Mr. Jordan
pointed out that [the committee packet should include] a rather
extensive analysis by Anchorage attorney Howard Lazar. Mr.
Jordan related that Mr. Lazar indicated that this type of
potential liability could stop physicians from taking calls from
patients and simply rely on the standing instruction to proceed
to the emergency room. However, from a patient care standpoint
he didn't believe that was a good idea. Therefore, the language
in HB 472 that relates to calls in the middle of the night
[attempts] to respond to the issues raised in the Marsingill
case.
Number 1239
CHAIR McGUIRE explained that [in response to the Marsingill
case] at the legislative level, there have been attempts to
implement telemedicine across Alaska. Therefore, she inquired
as to the impact the Marsingill case will have on telemedicine.
MR. JORDAN answered that he believes that it will help
telemedicine. The specific language in HB 472 deals with the
means, as in "electronically provided," and deals with the
circumstance in which a patient doesn't avail himself or herself
of a message provided electronically from [a health care
provider].
REPRESENTATIVE ANDERSON, in response to Representative Gara,
clarified that his earlier statistic regarding the percentage of
million dollar cases was a national statistic.
Number 1321
REPRESENTATIVE GARA stated that he didn't have a problem with
the informed consent amendment, which seems reasonable.
However, he noted that he bristled a bit with the notion that an
informed consent amendment is necessary because the current
statute doesn't have any standards. Representative Gara pointed
out that the standard is clearly expressed. In the jury
instructions, it states "A doctor shall give a patient
information that a reasonable patient would need to make an
informed decision, and that information would include
information about risks and information about alternatives."
Furthermore, Representative Gara was concerned with Mr. Lazar's
letter because it did seem to suggest that doctors shouldn't
take calls anymore.
REPRESENTATIVE GARA commented that historically Alaska has had a
problem with doctor shortages. However, he related his
understanding that the growth rate of doctors in Alaska is
higher than the national average.
MR. JORDAN said that he didn't have any information with regard
to how Alaska compares with the rest of the nation. However,
Alaska has the lowest number of physicians per capita in the
nation.
Number 1414
REPRESENTATIVE GARA turned to malpractice rates, which have
always been high in Alaska. He inquired as to how much doctors
are paid in comparison to those in other states.
MR. JORDAN said that such data isn't collected. In regard to
the decision-making process of the physician, Mr. Jordan said he
would provide the committee with the American Medical
Association's (AMA) study regarding the considerations medical
students take when deciding where to do their residency. The
aforementioned study has shown that the legal environment, and
the availability and affordability of medical liability
insurance is very important in the recruitment of physicians in
Alaska. Mr. Jordan informed the committee that Alaska has one
residency program, family practice residency, that produces
eight [physicians], which is nominal. Furthermore, an AMA study
relates that 70 percent of residents practice in the location
where they performed their residency.
REPRESENTATIVE GARA asked if any of the insurance companies have
said that they would lower their insurance rates if this
legislation was passed.
MR. JORDAN replied no.
Number 1527
REPRESENTATIVE GARA informed the committee that in 1997 the
state's second round of major tort reform was suggested by
NORCAL Mutual Insurance Company (NORCAL). He explained that
NORCAL said that the 1997 tort reform was necessary because when
there was tort reform in the medical arena in California, the
malpractice rates decreased significantly. Therefore, NORCAL
wrote [to the Alaska State Legislature] saying, "Over the long
term Alaska physicians and hospitals should see similar
reductions in the cost of malpractice insurance if HB 58 is
enacted and upheld by the courts." Representative Gara said
that he has always been bothered by the aforementioned promise.
Furthermore, he said he was skeptical that promise would "hold
any water today."
MR. JORDAN referred to a 1996 study done by the American Academy
of Actuaries entitled, "Medical Malpractice Tort Reform:
Lessons from the States". Essentially, this study indicates
that effective medical liability reform is a matter of a package
of reforms. Therefore, what occurred in 1997 was part of the
package. He explained that the "gold standard" is California's
Medical Injury Compensation Reform Act (MICRA) that was enacted
in 1976. [Alaska's tort reform] in 1997 doesn't include all of
the key elements of MICRA. The American Academy of Actuaries'
study indicates that one of the key elements [for medical
malpractice tort reform] is a cap on noneconomic damages that is
low enough to make a difference. The cap in California is
$250,000. Furthermore, the requirement that judgments be
"annuitized" in California is a requirement so long as the
judgment is in excess of $50,000. However, in Alaska it's
discretionary.
REPRESENTATIVE GARA expressed concern with referring to the
California standard as the "gold standard." He explained that
noneconomic damages covers the compensation one receives for
pain, suffering, the inability to perform various tasks, and
other damages that are difficult to measure in dollar terms.
Under a $250,000 cap, a badly paralyzed individual with a 40-
year projected lifespan would receive about $22 per day. He
asked if it's fair for someone with a valid claim to receive $22
per day for the loss of the ability to walk, fish, carry his or
her child, et cetera.
MR. JORDAN pointed out that [the noneconomic damages] are only
one element, noting that there is recompense for the economic
damages. In further response to Representative Gara, Mr. Jordan
said that this is a policy decision with regard to whether the
desire is to create an environment that would allow recruitment
of physicians in the numbers necessary to treat patients. Mr.
Jordan acknowledged that the circumstances that Representative
Gara proposed are tragic, and reiterated that [noneconomic
damages] are only one element of the recompense. He pointed out
that there is no limit, nor has one been suggested, on the
economic damages. However, the recommendation is that there be
a cap on those damages that are most subjective. Mr. Jordan
indicated that the legislature, on a de facto basis, has
established caps on noneconomic and economic damages with the
Motor Vehicle Safety Responsibility Act.
CHAIR McGUIRE reminded the committee that although she allows
quite a bit of latitude in the committee, she didn't want the
witnesses to feel as if they are on trial.
REPRESENTATIVE GARA stated that a basic element of the members'
decision on this is with regard to whether this is fair.
Although Representative Gara recognized that Mr. Jordan doesn't
have to answer, he maintained his question regarding whether a
$250,000 cap in the situation he posed is fair. If it isn't
fair, the committee has to consider a lower noneconomic damage
limit for non-serious cases and have a higher limit for serious,
debilitating cases.
CHAIR McGUIRE pointed out that once the witnesses have
testified, it will be the committee's burden to weigh the policy
decisions of this.
Number 1902
REPRESENTATIVE OGG related his understanding that under the
current soft cap, with all the factors involved, the maximum is
$2 million.
MR. JORDAN said he has seen that estimate.
REPRESENTATIVE OGG turned to the area of intentional tort, which
is reckless disregard and gross negligence. He asked if HB 472
leaves an exception for those areas in which there are "bad
actors."
MR. JORDAN, noting that he isn't an attorney, answered that he
didn't believe HB 472 addresses that.
REPRESENTATIVE ANDERSON said he didn't recall [the legislation]
addressing that.
CHAIR McGUIRE recalled this discussion as it related to
homebuilders under HB 340 and surmised that issues of actual
misconduct, fraud, and other things that would be licensure
actions would be dealt with by [ASMA's] licensing board.
Furthermore, such issues would probably be dealt with in a
separate context. Chair McGuire said she didn't see anything in
HB 472 that would preclude a separate cause of action being
brought. However, she indicated the need to look into this
between now and the next hearing on HB 472.
REPRESENTATIVE OGG recalled that the language "except for" was
included in the homebuilders' legislation. He expressed the
need to be sure that the legislation isn't saying that it's
acceptable to be a bad doctor.
REPRESENTATIVE GRUENBERG asked if [ASMA] objected to including
the above-mentioned exception in HB 472.
MR. JORDAN replied that he didn't believe so, but noted that he
hadn't spoken with [ASMA's] board. However, this seems to enter
into the disciplinary area as well as the general civil statutes
that deal with punitive damages.
REPRESENTATIVE OGG agreed that punitive [damages] is a different
category than pain and suffering. He reiterated the need to be
sure that someone who is acting badly is liable for pain and
suffering.
CHAIR McGUIRE reminded Representative Ogg that HB 340 was
intended to be an exclusive limit on all causes of action based
on the actions that were derived and thus it would've
encompassed everything. Therefore, the committee decided to
include the language saying "except in those cases of gross
negligence, recklessness, and intentional disregard." Chair
McGuire said she believes what is being discussed with HB 472 is
a bit different in that it's noneconomic damages, which don't
include compensatory or punitive damages.
REPRESENTATIVE GARA pointed out that as written HB 472 would
impose a $250,000 cap on pain and suffering damages, even in
cases of reckless conduct. If it was intentional conduct and
amounted to something like fraud that wasn't a malpractice
claim, there would be an argument that this [proposed] cap
wouldn't apply.
Number 2152
ALEX MALTER, MD, MPH; President, Alaska State Medical
Association, informed the committee that he is an internist in
private practice in Juneau. In regard to Representative Gara's
comment that Mr. Lazar's letter was a bit inflammatory, Dr.
Malter said that his practice has changed since the Marsingill
decision. Based on Mr. Lazar's letter, correspondence from his
malpractice carrier, and what he has heard about the Marsingill
case, Dr. Malter said he has changed his practice. For example,
in the past he would've attempted to keep patients from going to
the emergency room when he thought it wasn't necessary.
However, he said that now he much more quickly recommends people
go the emergency room unless it's completely clear that a
patient doesn't need to go in. It's unfortunate that this is
the situation, he remarked.
DR. MALTER turned to the earlier question regarding whether
salaries are higher in Alaska commensurate with higher rates of
malpractice premiums. He related that a year ago he looked at
different practices in different states and all the offers he
received were higher salaries than he makes in Alaska.
Therefore, he felt it might be a bit simplistic to presume that
salaries in Alaska are much higher than elsewhere. With regard
to the question of a possible decrease in malpractice premiums,
Dr. Malter emphasized that this issue isn't simply about
malpractice premiums. The issue is the desire to develop a
healthy malpractice liability insurance market that doesn't
encourage insurers to leave Alaska and is attractive when
physicians consider working in Alaska.
Number 2324
DR. MALTER moved on to his prepared testimony and paraphrased
from the following written testimony [original punctuation
provided]:
ASMA represents physicians statewide and is primarily
interested in ensuring that Alaskans receive high
quality health care.
I am here today to express ASMA's support of HB 472,
and to urge you to support the bill as well. The
medical liability reforms it establishes are important
to Alaskans for a variety of reasons. I expect others
to testify, for example, how HB 472 will help
stabilize the professional liability market, and, by
so doing, effectively temper future increases in
federal and state expenditures on health care. I
would like to concentrate my remarks, however, on
explaining how strong medical liability reforms will
be critically helpful in recruiting and retaining
enough well-trained physicians to provide for the
future health care needs of Alaska's citizens.
TAPE 04-24, SIDE B
DR. MALTER continued:
Access to health care services is precariously limited
in the state. Alaska has one of the smallest-- if not
the smallest-- number of physicians per capita in the
country. A January 19, 2004 American Medical News
story pertaining to the special Medicare payment
reforms for Alaska noted the crisis in work force:
"Alaska has long ranked among the worst states in
terms of physician supply. In 2002, the state had
fewer than 1,350 doctors in private practice and
another few hundred in the military or other
government posts. The state has a population of
644,000.... Only six states had a lower doctor to
patient ration".
The article went on to identify Idaho as the state
with the worst physician shortage, estimating that
state had one non-government physician for every 544
patients. However numbers from ASMA's own 2002
database-- which we believe to be more accurate than
data used in the article-- showed only 1,115
physicians in active practice, or approximately one
physician per 578 patients. Thus, it is quite
probable that for 2002 Alaska actually had the lowest
physician to patient ratio in country. Updated
calculations based on our 2003 number indicate this is
almost certainly still true, with one physician per
553 patients. By comparison, the state would need
about 50% more actively practicing physicians to
approach the national average of one doctor per 360
patients.
Further exacerbating the problem, Alaska's physician
work force is relatively old compared to the rest of
the country. The ASMA database shows that over half
of the state's practicing physicians are older than
51, setting up a looming recruitment crisis. This
scenario was ... corroborated by the State Medical
Board in a September 2002 Anchorage Daily News article
title "Shingle Shortage?" Finally, a 2002 local study
of physicians by Providence Health System confirms the
work force is aging, and highlights immediate
shortages of certain specialists in Anchorage,
including general internal medicine, psychiatry, and
general surgery.
Number 2294
It is because of this imminent recruiting challenge
that medical liability reform is so critically
important in Alaska right now. This state does not
have the capacity to "grow" physicians on its own.
Alaska has no medical school, and of the small number
of students who graduate annually from the WWAMI
[Washington, Wyoming, Alaska, Montana, Idaho Medical
Education Program] program, some do not return to
practice here. Likewise, our lone family practice
residency-training program is relatively small.
Alaska is-- and will continue to be-- a net importer
of doctors. As such, we compete with other states
that have physician shortages, a competition that is
largely influenced by the state's medical practice
environment.
A recent American Medical Association study of medical
students found that the legal environment and the
availability of affordable medical liability insurance
plays a major part in a graduate's decision as to
where to consider setting up practice. Alaska needs
to optimize its medical-legal environment to help us
recruit the doctors we need. That is why the Alaska
State Medical Association supports HB 472. With its
$250,000 cap on non-economic damages, the bill
provides the "gold standard" liability reforms that
will help create the healthy practice environment so
important to physician recruitment.
ASMA understands that medical liability reform is only
one element in developing this healthy environment.
Still, because the State has already had the foresight
to enact other important medical practice reforms, we
believe liability reform is the most critical element
remaining. Indeed, we are pleased to have been able
to help [the] state reach this point through our
recent work on other important legislation, including
the Alaska Patient Bill of Rights, Prompt Pay
legislation, Physician Joint Negotiation legislation,
and federal Medicare payment reforms targeted to
Alaska. ASMA has even offered ideas to the current
Administration regarding strategies by which the state
could actively "market" Alaska to out-of-state
physicians. As a result of these previous and ongoing
efforts, ASMA believes that, except for strong medical
liability reform, Alaska's practice environment is
actually quite favorable.
Finally, I'd like to point out that in the gallery
today are Dr. Jeanne Bonar, ASMA's immediate Past
President, and Dr. Paul Worrel, the Association's
President Elect. Their attendance today, along with
mine, demonstrates that ASMA's past, present, and
future are all committed to work to help attract the
well-trained doctors the state needs. Thank you for
your attention, and I again urge you to support HB
472.
I'd be happy to answer any questions that you may have
at this time.
Number 2184
CHAIR McGUIRE recalled that in the late 1960s to early 1970s,
Alaska didn't have medical malpractice insurance, and therefore
the state formed a risk pool. Chair McGuire stressed the need
for everyone to realize the consequences whatever the policy
choice. She highlighted the need to understand that if the risk
isn't mitigated and the carriers leave, then the state should be
prepared to again form a risk pool.
DR. MALTER noted that his partner was around when the medical
malpractice crisis occurred some time ago, which did result in
the state forming a risk pool. He pointed out that it takes a
lot of money for the state to capitalize a pool. It has been
estimated that if the situation becomes worse - to the point of
not enough carriers or no carriers - it would cost scores of
millions of dollars to merely get started. Therefore, Dr.
Malter offered his opinion as a layperson that it would behoove
the state to have a strong medical malpractice market in place.
DR. MALTER explained that when two of the four medical
malpractice carriers left Alaska, one of the remaining two
carriers was limited in the number of new policies it could
write because of state requirements regarding secondary
insurance. Therefore, NORCAL was limited and only able to take
on a modest number of the physicians that were left without when
the first two carriers left. Because of the aforementioned, the
last remaining insurer was almost a monopoly for a month or two.
Thankfully, the physicians seeking coverage didn't feel that
they were taken advantage of in this nearly monopolistic
situation. Dr. Malter stressed that until recently the
situation was one in which there was close to one carrier being
left.
MR. JORDAN informed the committee that the capitalization for
the medical indemnity appropriation of Alaska was $9 million in
the mid 1970s. He explained that the amount of capitalization a
company has as well as its surplus determines how much it can
write. He agreed with Dr. Malter's characterization of [the
late 1960s to early 1970s] as a crisis situation. During that
time, a number of physician-owned insurance companies emerged,
including MIEC.
Number 1871
REPRESENTATIVE GARA related his understanding that there has
been an unintended suggestion that the two carriers that
recently left did so because of high malpractice liability
exposure. However, Representative Gara said the information he
has doesn't support that as the reason those carriers left. He
asked if Dr. Malter had any information with regard to why the
two carriers left.
DR. MALTER replied no.
REPRESENTATIVE GARA related his understanding that CNA, an
insurance company, basically stopped writing malpractice
insurance nationwide.
DR. MALTER reiterated that the concern is that this has been a
crisis nationwide, with certain states experiencing more of a
crisis than others. Dr. Malter reiterated that he didn't mean
to suggest that the goal is to reduce malpractice premiums. The
main notion is that by setting a cap, the insurance companies
have a better idea with regard to future risk, which creates a
market that is more attractive to enter. Furthermore, a
healthier environment for physicians to practice and recruit new
physicians is created.
REPRESENTATIVE GARA commented that he believes that makes sense
in that perhaps a hard cap is necessary rather than the current
soft cap. He surmised that the soft cap results in a situation
in which the [amount of the] soft cap could continue to increase
unless there was a firm guess on an individual's life
expectancy. Representative Gara inquired as to whether there is
any support for a two-tiered hard cap that would have a lower
damage cap, similar to what is suggested in HB 472, for pain and
suffering and loss of enjoyment of life and a higher damage cap
for a life-long debilitating injury, involving significant
disfigurement, paralysis, or something of that nature.
DR. MALTER said he would have to approach the board on the
matter. However, he expected that some on the board wouldn't be
comfortable with that. He pointed out that the medical
malpractice liability market is healthier in the states with a
single hard cap. Experiences from other states are being used
to develop statutes that will help create a healthy malpractice
market in Alaska.
MR. JORDAN turned to Representative Gara's understanding that
CNA stopped [writing malpractice insurance nationwide] and said
that isn't the case. He informed the committee that CNA is the
largest writer of medical liability insurance for physicians in
the State of Idaho.
Number 1812
REPRESENTATIVE OGG inquired as to the number of physicians, on
an annual basis, in Alaska from 1995 to the present. He also
asked if the earlier mention of Alaska [having fewer than] 1,350
physicians [in private practice] includes governmental and
quasi-governmental physicians such as Native [physicians].
DR. MALTER specified that the 1,350 number was an estimate from
the national association [AMA], but ASMA believes its numbers
are [more accurate]. Reiterating his earlier testimony, Dr.
Malter related that ASMA data shows that 1,115 physicians were
in private practice and thus there is one physician per [578]
patients. He noted that these are the same calculations that
are done when the [AMA] is comparing states. Although the
numbers may not seem parallel, the belief is that the
comparisons with other states are as accurate and valid as
possible. In further response to Representative Ogg, Dr. Malter
said he would provide information with regard to the number of
governmental and quasi-governmental physicians.
REPRESENTATIVE OGG turned to the issue of aging physicians in
Alaska and the lack of recruitment. Having served on various
boards and having held various jobs over the last few years,
Representative Ogg opined that the aging population isn't
strictly limited to the medical profession. For instance, he
predicted that the age of the average fishing permit holder is
probably around [51], and furthermore the recruitment into the
fishing industry is [lacking as well]. Representative Ogg
suggested that what is occurring in the medical profession is
probably reflective of the state as a whole. Furthermore, he
suggested that perhaps Alaska just isn't that attractive of an
environment, especially in the context of Alaska's fiscal
situation.
DR. MALTER said that the analogy of the fishermen is a bit
problematic. There are people who need medical care and thus he
contended that such a significant dearth of physicians is
potentially more problematic to the public health and safety of
the state than a dearth of fishermen.
REPRESENTATIVE OGG clarified that he was attempting to attain a
better global understanding of what is going on and thus he
surmised that physicians looking around would review the fiscal
situation of the state. He indicated that the state's current
fiscal state could be driving the situation being addressed
today.
CHAIR McGUIRE interjected her belief that it's probably a
combination of factors, including Alaska's remoteness and lack
of a medical school. Therefore, she believes that the focus
today should include the other factors. She offered to work on
other [factors] while noting that the aging of Alaskan
physicians is a large problem, especially in rural areas.
Furthermore, since there are no guarantees from the insurance
companies, the state can only try to reduce its exposure and
remain attractive enough to maintain the current carriers and
possibly attract more.
Number 1511
REPRESENTATIVE GRUENBERG asked if [ASMA] is an integrated
medical association in which everyone has to join. [The
response was inaudible.] Representative Gruenberg suggested
that perhaps there could be a survey either directly [to
physicians] or through the Division of Occupational Licensing in
order to determine the level of job satisfaction. He pondered
whether Alaska just doesn't offer enough money for physicians in
comparison to other areas of the country.
DR. MALTER recalled that Mr. Jordan pointed out that the largest
determinant for the location in which people practice is the
location of their residency. Alaska has one small residency
program. Therefore, the state needs to import physicians.
Having 50 percent fewer physicians per capita would seem to
indicate that Alaskans aren't receiving such high quality care.
Although [the state] is a bit constrained in what it can do,
[the state] can make the practice environment conducive [to
recruitment].
REPRESENTATIVE GRUENBERG highlighted that the student loan
program could be used [to address this problem]. He suggested
that perhaps nonresident medical students who enter into an
agreement to practice in the state could be eligible for an
Alaskan student loan. Representative Gruenberg mentioned that
the medical community is accustomed to thinking creatively to
address problems, and therefore he requested the medical
community's help with this. Representative Gruenberg noted that
his own physician was present today.
DR. MALTER noted that the administration has been approached
with regard to ideas of addressing the recruitment problem. In
further response to Representative Gruenberg, Dr. Malter agreed
to provide the committee with a list of the ideas.
Number 1205
GEORGE RHYNEER, MD, Alaska Heart Institute, informed the
committee that he is a cardiologist who has been practicing in
Alaska since 1971. He further informed the committee that he is
a founding member of the Alaska Heart Institute and a board
member of Alaska Physicians and Surgeons. Dr. Rhyneer
encouraged the committee to favor HB 472, which is about access
to medical care. Dr. Rhyneer recalled that when he started
practice in 1971 there was no heart program. He and his partner
started the heart program and the first cardiac catheterization
laboratory in Anchorage. Back in 1973, the heart surgery
program was organized.
DR. RHYNEER noted that other physicians were attracted to Alaska
because of the opportunities in this state. There was no
problem finding good employees, an office, a good hospital in
which to practice, and obtaining malpractice insurance. He
referred to malpractice insurance [at that time] as an
afterthought and noted that it was only $80 a year. Since
Alaska was attractive to physicians, Alaskans have enjoyed
remarkable improvement in access to medical care. In fact,
physicians have moved to smaller communities and the larger
cities have sophisticated services. However, conditions are
changing. As the technical ability to deal with serious illness
is improving, other circumstances are worsening. Many
physicians are nearing retirement age and too few physicians are
being trained nationally.
DR. RHYNEER echoed earlier statements with regard to the need to
import virtually all physicians in Alaska, but pointed out that
it's difficult to recruit physicians to Alaska for a number of
reasons. He informed the committee that the Alaska Heart
Institute spends $100,000 a year recruiting constantly and the
institute has always "been behind." Every advantage to attract
physicians is necessary and a good legal climate for the
practice of medicine is something the [legislature] can provide.
Without readily available malpractice insurance, recruiting will
be handicapped. Furthermore, without new physicians, Alaskans
will face reduced access to care. If Alaska's malpractice
insurance climate worsens, attracting young physicians to Alaska
will be nearly impossible, and thus, he opined, one can be sure
that some Alaskans will go without medical care.
DR. RHYNEER stated that although Alaska is up to date with
medical treatment and technology, Alaska has been behind in the
social and business upheavals that have been experienced in the
Lower 48. For instance, managed care is something that Alaska
has avoided by anticipating it. Dr. Rhyneer recommended that by
looking at the Lower 48 one could plainly see Alaska's future.
In the Lower 48 there is a lot of access to medical care by
patients. Furthermore, in the Lower 48 there are massive
physician migrations and early retirement and crisis
legislation. He suggested that the aforementioned events have
been created by legal climates that have made it difficult for
insurance companies to predict losses and so those insurance
companies haven't been able to continue in the medical
malpractice business.
DR. RHYNEER said that for that reason, many companies have left
the business both nationally and locally and some of those
remaining in business require premium payments that are so high
that it approaches the physician's annual take-home pay.
Alaska's [medical malpractice] insurance premiums are very high,
and more importantly, there are very few companies offering this
insurance. He informed the committee that the remaining two
companies are mutual companies owned by physician policyholders,
most of which live in California. Last year, Northwest
Physicians Mutual, the company who provided insurance for the
Alaska Heart Institute, canceled the institute's policy and left
the state due to high losses.
DR. RHYNEER related that Northwest Physicians Mutual had
requested a 100 percent increase in premium, which the Division
of Insurance denied. Another company did the same thing to the
large clinic in Fairbanks. The remaining companies face the
same legal climate that forced the others to leave. If the
remaining companies leave, "virtually all of us" will be without
insurance. Although some physicians will probably continue to
practice without coverage, many of the older physicians will be
forced to take involuntary early retirement. Dr. Rhyneer
characterized the aforementioned as a monumental catastrophe
that [the legislature] has the ability to prevent. With regard
to the notion that the state could form another insurance
company as it did in the 1970s, he pointed out that such a
company would face the same problems and it would be costly to
establish.
DR. RHYNEER said, "It's crystal clear we now need a legislative
solution." Although the state has changed tort law over the
years, these modifications haven't completely ameliorated the
problem, which he admitted is, in part, a societal problem. He
identified the $250,000 cap on noneconomic damages as the one
legal feature that discriminates between states with a stable
malpractice environment from those without it. Therefore, Dr.
Rhyneer said he supports [HB 472]. He acknowledged that his
increase [in malpractice insurance] from $80 to $20,000 per year
is due to many causes. However, it isn't due to an increase in
the rate of malpractice suits, he said. "You are faced, I
think, with a tradeoff: place a limit on the amount an
individual can get for pain and suffering and in return help
ensure that all Alaskans continue to have physicians available
to provide the medical care that they need and desire," Dr,
Rhyneer concluded.
Number 0773
DR. RHYNEER, in response to Representative Gara, explained that
Northwest Physicians Mutual would periodically publish data that
showed the amount of suits filed and settled or paid out, which
has remained about the same over the years. However, the actual
cost to settle or pay the claim was increasing exponentially.
In further response to Representative Gara, Dr. Rhyneer
explained that the data showed that the increase was partially
caused by defense costs, but a large portion was the claims paid
to the plaintiffs. He said he would try to obtain the above-
referenced information and provide it to the committee.
Number 0628
JOHN DUDDY, MD; President, Alaska Physicians and Surgeons,
informed the committee that he is an orthopedic surgeon who has
practiced in Anchorage since 1999. Dr. Duddy explained that he
came to Alaska after being recruited by his now-senior partner,
Dr. Mike Neuman (ph), who had spent two unsuccessful years
trying to recruit a physician. Dr. Duddy said he found the
practice environment in Alaska to be exceptional. He recalled
that while practicing physicians in the Midwest were complaining
about malpractice rates and availability of malpractice,
physicians in Alaska were upbeat and happy. The practice
environment in Alaska remained relatively stable until 2001 or
2002 when the AMA declared that Alaska was at-risk with regard
to a potential malpractice crisis.
DR. DUDDY said he didn't notice the gradual change until May of
2003, when Northwest Physicians Mutual notified its
policyholders that it would no longer issue policies in Alaska.
The aforementioned was a wakeup call for many Alaskan
physicians, although, fortunately, a relatively small amount of
physicians were covered by Northwest Physicians Mutual.
However, he suspected that those covered by Northwest Physicians
Mutual who had pending lawsuits or past suits may not have been
able to obtain malpractice insurance even with MIEC. Dr. Duddy
related that the loss of the two malpractice carriers has had a
direct negative effect on his ability to recruit new physicians.
In the Lower 48 Alaska is being characterized as an unfavorable
environment to practice. For example, the three neurosurgeons
in the state have been actively and aggressively recruiting for
five years, but have been unsuccessful in attracting any new
neurosurgeons.
DR. DUDDY echoed earlier testimony that not only is it becoming
difficult to attract new physicians or currently practicing
physicians to Alaska, but as the crisis develops many of the
practicing physicians will retire early. Therefore, the
combination of the aforementioned compounds the problem of the
physician shortage. He related that some AMA officials believe
that Alaska is one year away from such a crisis. He predicted
that a crisis would result in the remaining practicing
physicians limiting their practice. Therefore, certain high-
risk procedures and traumas would be sent to the Lower 48. Dr.
Duddy stated that there is the chance to avoid this crisis in
Alaska because it's only a matter of time before the crisis
impacting the states without medical liability reform in the
Lower 48 will effect Alaska. He related his belief that
physicians support this legislation.
Number 0230
RICHARD COBDEN, MD, Tanana Valley Clinic; Alaska Healthcare
Network; Alaska Orthopedic Association; informed the committee
that he is a practicing orthopedist in Fairbanks at the Tanana
Valley Clinic. This legislation is important because it will
help all three entities retain and recruit physicians. He also
informed the committee that the Tanana Valley Clinic and the
Alaska Healthcare Network were both covered by CNA until late
last year. The aforementioned left the two entities scrambling
and ultimately found NORCAL and MIEC to cover all the
physicians. However, 41 physicians were within three days of
having no coverage at all. Under the rules and regulations of
the hospital, those physicians wouldn't have been able to
practice in the hospital. The aforementioned would've been a
disaster because [those 41 physicians] represent approximately
half of the physicians practicing in Fairbanks.
DR. COBDEN related that he was told that CNA left Alaska because
of anticipated loss experience, which was a surprise because
[the Tanana Valley Clinic] had not experienced any lawsuits, and
furthermore of the 41 other physicians he knew of only one
lawsuit that was pending. Although there weren't a lot of
lawsuits occurring, he agreed with Dr. Duddy that it was related
to the amount of loss per claim. He further noted that CNA
cited an unfavorable atmosphere for insurance in Alaska. Dr.
Cobden mentioned that NORCAL has notified those it covers that
it will likely raise the rates in the near future.
TAPE 04-25, SIDE A
Number 0001
DR. COBDEN remarked, "We're all waiting for the other shoe to
drop." Dr. Cobden turned to the question regarding whether
insurance companies will lower rates if legislation such as HB
472 is passed, and related that they won't. However, the
insurance companies may not raise the rates or leave altogether.
With regard to why internists are leaving, Dr. Cobden said he
didn't believe that it directly has to do with medical liability
insurance. He related his understanding that internists are the
most highly trained, and yet the most underpaid of all
physicians. Furthermore, internists deal largely with Medicare
populations and Medicare has been notoriously poor in the realm
of reimbursement. As the cost of providing care increases,
including insurance, and reimbursement decreases, fewer and
fewer people are willing to enter this field. He mentioned that
Tanana Valley Clinic is currently in the midst of recruitment
for internists and it's very difficult to get individuals to
come to Alaska. However, keeping the insurance rates under
control would be helpful with recruitment.
DR. COBDEN turned to the earlier question regarding what a hard
cap does to the overall insurance rates. He recalled his
experience practicing in the Sacramento, California, area 10
years ago [after that passage of MICRA, with its $250,000 hard
cap on noneconomic damages]. He related that many of the
insurance companies cite [medical malpractice reform], including
MICRA, as one of the reasons the rates weren't raised
significantly over the next 20 years. The actual rate increases
over that 20 years in California was 26 percent. However, in
Nevada, a demographically and geographically situated state, the
rates increased by 2,700 percent and Nevada had no hard cap.
Therefore, Dr. Cobden said he believes there is an impact by
legislation such as HB 472.
Number 0314
REPRESENTATIVE GARA said that he is a bit uncomfortable with the
approach in HB 472 because it limits the rights of people with
valid claims who have severe injuries. These limits are based
upon the potential that insurance companies will begin behaving
in a reasonable manner. Representative Gara remarked that he is
looking at an insurance crisis that, in many cases, has nothing
to do with pain and suffering damages. He pointed out that
workers' compensation folks have informed the committee that
their rates have increased upwards of 50 percent in the last
[few years]. He noted that under workers' compensation, one
isn't even allowed pain and suffering damages. Therefore, he
surmised that there are other factors causing insurance
companies to lose money and cut coverage, especially since [the
terrorist attacks of September 11, 2001].
DR. COBDEN agreed that there are many factors [involved in the
insurance crisis] and most of those factors can't be controlled.
However, [the insurance industry has said that] this small
factor would make a difference. Dr. Cobden opined that the
insurance problems throughout the state and the country need
constant review.
Number 0486
RON NEUPAUER, President, Medical Underwriters of California;
Medical Insurance Exchange of California (MIEC), explained that
Medical Underwriters of California is a physician-owned
insurance company that provides coverage to physicians in Alaska
as well as three other states in the West. Medical Underwriters
of California, the attorney-in-fact for MIEC, began offering
coverage to Alaskan physicians in 1977 and began writing
policies the following year. Medical Underwriters of California
expanded to include Alaska because, at the time, ASMA faced
mandated [medical malpractice] coverage from Medical Indemnity
Corporation of Alaska (MICA).
MR. NEUPAUER reiterated that Medical Underwriters of California
is a physician-owned company that isn't in the business of
insurance for its own sake nor is it in the business of
insurance to make money. The promise has always been that
Medical Underwriters of California would have to charge rates
that its actuaries believe were necessary to pay the claims and
expenses. If money was left over, it would be used to
strengthen the company or be returned to the policyholders in
the form of dividends. Over the years, the company has a strong
record of returning dividends when claim trends are more
favorable than the actuaries predicted. However, when claim
costs increase, the rates have to be increased. Unfortunately,
that has been the case in every state over the last few years.
Mr. Neupauer informed the committee that Medical Underwriters of
California has a very strong capital base, and therefore the
company was able to step in [when Alaska lost two of its
carriers]. Mr. Neupauer recalled a few years ago when Alaska
had vigorous competition.
[The gavel was passed to Vice Chair Anderson.]
MR. NEUPAUER turned to California's passage of MICRA tort reform
in 1975, which has become the benchmark for proposals by state
legislatures across the nation. The centerpiece of that reform
package is the $250,000 cap on noneconomic damages. Mr.
Neupauer related his personal belief that it's not possible to
quantify pain and suffering. However, when [pain and suffering
awards] aren't limited, it creates huge uncertainty. In states
with no noneconomic cap there are occasionally emotion-laden
verdicts for large sums that can't be predicted. The
aforementioned drives up the cost of settlements in other cases.
He identified that as part of the problem, pointing out that in
a small population state such as Alaska a relatively small
number of very large cases has a huge impact on the overall
result for an insurance company or a risk-bearing pool of any
kind. Mr. Neupauer said he thought the aforementioned may have
been behind the decision to exit the state by some of these
other carriers. Mr. Neupauer announced that Medical
Underwriters of California has no plan to leave the state as
long as the company is able to obtain a rate that pays the
losses.
[The gavel was returned to Chair McGuire.]
Number 0877
REPRESENTATIVE SAMUELS inquired as to how Alaska ranks with
regard to average premiums paid and the rate increase since
[MICRA] in 1975.
MR. NEUPAUER said that although he didn't have the data at his
fingertips, historically the rates [Medical Underwriters of
California] has had to charge for Alaska physicians have been
considerably higher than those in California. He recalled that
in the early 1980s Alaska's rates had to be raised tremendously
due to a number of large cases and that happened again in the
late 1980s. In the 1990s the rates of [Medical Underwriters of
California] in Alaska began to decrease some while the rates in
California were stable. Over the long haul, he recalled that
Alaska's rates have been double to about 30 percent higher than
California's rates.
REPRESENTATIVE SAMUELS asked if Mr. Neupauer thought the earlier
example of Nevada's rate increase of [2,700] percent versus
California's 26 percent rate increase was typical.
MR. NEUPAUER characterized Nevada as an extreme example of a
tort system gone wrong. Nevada is the only state that MIEC
elected to depart after many years. At the end of MIEC's tenure
in Nevada last year, MIEC was charging 3.5 times more in Las
Vegas than what was charged in Northern California for the same
practice. "We didn't see any relief in sight," he mentioned.
REPRESENTATIVE SAMUELS inquired as to what an Alaskan physician
pays for liability as compared to another state with similar
laws and a hard cap.
MR. NEUPAUER answered that he believes Alaska pays more, on
average, than the states with hard caps. In some comparisons,
Alaska would pay a lot more. However, he noted that many
factors beyond the hard cap determine the [physician's premium].
The existence of the cap in California, he said, has kept the
rates lower than they otherwise would be. When one compares
what physician-owned companies charge throughout the nation,
last year the average of the five highest states was about 2.5
times the rates in California. He noted that Florida, New York,
Texas, Illinois, and Michigan are usually the five highest
states. "Alaska's not that high, but it's certainly well above
the average," he said. In further response to Representative
Samuels, Mr. Neupauer confirmed that he only knew of [MIEC] and
one other carrier in Alaska, although he noted that there may be
a few other carriers that insure a small number of physicians in
Alaska through specialty societies or on a nonlicensed basis.
Mr. Neupauer confirmed that currently [MIEC and the other
carrier] practically split the market in Alaska 50:50.
MR. NEUPAUER, in further response to Representative Samuels,
reiterated that [MIEC] maintains a fairly conservative capital
ratio that must be available for its commitments in all four of
the states in which it does business. He said he becomes a bit
nervous when contemplating being the only carrier in any state
because there should be choices.
Number 1112
REPRESENTATIVE GARA asked if the number of physicians, the size
of the insurance pool, in Alaska has anything to do with the
high insurance rates.
MR. NEUPAUER responded that when actuaries look at all the
factors, they review volatility. As the number [of physicians]
increases, the volatility decreases and thus there is more
assurance that the numbers are credible. Therefore, the smaller
the pool, the more variability there is from year to year. The
aforementioned would be a factor for Alaska as a smaller state.
In further response to Representative Gara, Mr. Neupauer
recalled that in comparison to Hawaii, Alaska's rates were
higher in the 1990s. However, currently the rates in Hawaii may
be slightly higher than in Alaska. Mr. Neupauer pointed out
that Idaho has the lowest rates of any of the states in which
[MIEC] does business. He noted that Idaho recently re-enacted a
hard cap of $250,000; the previous cap had an inflation
escalator.
REPRESENTATIVE GARA recalled that Mr. Neupauer said that without
a hard cap it's hard for a company to know what its liability
exposure might be at the end of the year. He asked if there
would still be an actuarial benefit if there were two caps, one
for non-serious injuries and a higher one for very serious
debilitating injuries, but a hard cap nonetheless.
MR. NEUPAUER said he believes that perhaps one or both of the
major actuarial firms that study this insurance have produced a
study that specifies that at levels above $250,000, the
actuaries can't measure the beneficial effects of a cap.
Number 1312
REPRESENTATIVE HOLM asked if having a hard cap would result in
the insurance company merely writing the check rather than fight
the case, which would essentially lower the amount of attorney's
fees. He pondered whether the unintended consequence of the
aforementioned would be settling a number of cases that wouldn't
normally be settled.
MR. NEUPAUER disagreed, pointing out that its policies include a
clause that a case won't be settled unless the physician agrees
to do so. Furthermore, the cases are peer-reviewed. The long-
standing history of [MIEC] is that if the physician didn't
depart from the standard of care, the company doesn't settle.
REPRESENTATIVE GARA noted that he has information specifying
that since 1990 the rise in malpractice insurance rates in
California is about twice as high as the rise in malpractice
insurance rates nationwide. He asked if that sounds correct.
MR. NEUPAUER said that doesn't sound correct. In further
response to Representative Gara, Mr. Neupauer recalled that from
1990 and the present California rates may have increased a bit
faster than Alaska's because California's rates came from a
lower base. However, when one reviews California's rates
against other states without a cap from 1985 to the present,
it's clear that California rates have increased a fraction,
perhaps 30 percent as much as other states without a cap.
Number 1481
LAURIE HERMAN, Director, Government Affairs, Providence Health
System in Alaska, announced Providence's wholehearted support of
HB 472. Ms. Herman provided the following testimony:
As you've heard today in a 2002 study commissioned by
Providence, we learned that Anchorage is facing a
physician shortage, one of the causes of the
healthcare access problem facing Alaska. While
limiting the amount of noneconomic damages in medical
malpractice cases will no doubt help in attracting
physicians to Alaska, it's not the end all, be all of
possible solutions to the physician shortage and
resulting access problem. I'm speaking with you today
in an effort to assure you that Providence is working
on those fronts where we can effect positive impacts
on these issues.
It is difficult to recruit physicians to our great
state. Research indicates that the majority of
physicians begin their practice not farther than
within a 50-mile radius of where they completed their
residency. Providence's Alaska family practice
residency program is designed to help in this area.
In conjunction with the WWAMI program, the family
practice residency is designed to grow our own
physicians and has proven to be very successful in
meeting that goal.
Of the 32 graduates who have completed our program, 75
percent of them are practicing in Alaska; half of them
are practicing in rural Alaska; and half are
practicing in urban Alaska, with many of them serving
the underserved or working with the Indian Health
Service. Of those graduates not practicing in Alaska,
all but one are enrolled to entities who are serving
the underserved. We need to grow and expand this
successful program and many of us at Providence are
working diligently to do just that. Unfortunately,
the program costs Providence some $2 million a year,
but we are working to find ways to curb those losses
and grow the program.
Alaska is facing an aging physician workforce, as you
heard today. The average age of our physicians is 51
and we simply are not recruiting at a rate that will
allow us to replace those physicians who decide to
leave their practices once retirement age is reached.
Providence has an aggressive physician recruitment
program, which we hope will bring more doctors to
Alaska. Continuing to run a successful family
practice residency program and to expand it are
certainly other ways to assist in this dilemma.
Providence stands ready to meet the challenge of the
physician shortage in our state, but we need your
help.
Alaska's one of the costliest states for physicians,
with medical liability insurance being a large
component of that cost. As you've heard, Alaska has
experienced some very dramatic increases in the cost
of medical liability insurance. As I've mentioned,
recruiting physicians to practice in Alaska is
difficult at best. We believe that putting a limit on
noneconomic damages in medical malpractice cases will
be a big help in our effort to bring more physicians
to Alaska. I ask for your support on House Bill 472.
Thank you very much.
REPRESENTATIVE GARA asked if Ms. Herman has any information
regarding how private practitioners' salaries in Alaska relate
to the nationwide average.
MS. HERMAN replied no, but offered to find out.
Number 1712
PAULA JACOBSON, Attorney and Nurse, informed the committee that
the majority of [legal] cases she handles involves medical
issues, including medical malpractice cases. Ms. Jacobson said
that she didn't know of any "excess verdicts" in medical
malpractice cases. In fact, she only knew of one verdict in
excess of $1 million in the last 10-15 years. She related that
the cases she handles that result in large awards aren't
[recompense] for pain and suffering but rather for medical
expenses and lost wages. Despite the fact that insurance
companies would like to have certainty with regard to future
exposure, there is no certainty in that.
MS. JACOBSON noted that she has witnessed all three rounds of
tort reform and each time the arguments driving the tort reform
have been the following: frivolous lawsuits, large jury
verdicts, the unavailability of insurance for doctors, and
access to medical care. In the last 20 years, there is no
evidence, to her knowledge, that capping noneconomic damages has
made insurance more available or attracted new physicians to the
state. In fact, she said, there is no evidence that Alaska has
a physician shortage because of the lack of a $250,000 hard cap.
Testimony today has reflected that Alaska's physician shortage
is caused by many factors, some of which have nothing to do with
the medical or legal system in Alaska.
Number 1823
MS. JACOBSON clarified that [the current cap] on noneconomic
damages is $1 million, not $2 million as was mentioned earlier.
Furthermore, Alaska has a two-tiered cap and the maximum amount
an individual can obtain under the current system is $1 million.
She emphasized that very few people receive [the $1 million
maximum]. The $1 million in noneconomic damages is reserved for
such severely injured people that it rarely happens, she said.
The simple fact is that awards haven't increased.
MS. JACOBSON then turned to Representative Gara's earlier
comment that there are two sides to every story. On the one
hand there is the story of the physician and the insurance
company and on the other hand there are the people most affected
by this. From the 300-400 people a year who want her to take
their case, she is hearing that Alaska's population is aging and
these are the people with no economic loss. Therefore, older
people as well as rural Alaskans and children will be severely
penalized by this $250,000 cap because they have no economic
loss. She suggested that there may be other ways to reach a
compromise such as Representative Gara's suggestion of a two-
tiered system. Ms. Jacobson said that based on her experience,
the $250,000 cap is unfair and won't make that much difference
in the legal situation of the state.
Number 1964
REPRESENTATIVE SAMUELS inquired as to the average earnings an
attorney would receive on [a medical malpractice] case.
MS. JACOBSON answered that an attorney's earnings depends on
various factors. She explained that she handles many federal
cases and under federal law an attorney's earnings [on a medical
malpractice] case is 25 percent. In some of these cases the
attorney would receive 30 percent and in rare instances 40
percent. Ms. Jacobson informed the committee that if she feels
that she has reached a fair settlement in a sufficient amount of
time, she is willing to reduce her fee. However, she emphasized
that these [medical malpractice] cases are incredibly difficult
to handle, noting that the only persons who can testify that a
professional has breached the standard of care are experts [in
that field]. In a complicated case, $100,000 can be spent
easily. Therefore, many people don't seek a remedy due to what
has to be spent to handle the case.
MS. JACOBSON, in response to Representative Samuels' earlier
question, clarified that under federal law attorneys are limited
to two-tier [fee] system. If a case is settled prior to filing
the lawsuit, the attorney would receive 20 percent. If a case
is filed and proceeds, the attorney would receive 25 percent.
The nonfederal cases fall under a graduated fee that is
dependent upon many factors. She estimated that in the last
nonfederal case that she settled she received a contingency fee
of 30 percent.
Number 2095
REPRESENTATIVE GARA highlighted that there are no regulations
with regard to state rates. He informed the committee that
[contingency fees] range from 25 percent to 35 percent, although
some do reach 40 percent and higher. He recalled that "we" tend
to reduce the rates if the case turns out not to be as difficult
as was thought. Representative Gara turned to the current cap
and asked if it's $1 million or greater if the individual has a
longer life expectancy.
MS. JACOBSON explained that there are two caps. For those
individuals who aren't severely and permanently disabled, the
cap is $400,000. For those who are permanently and severely
disabled, the cap is $1 million. Furthermore, the cap on death
claims is $400[,000] regardless of [the number of dependents
left]. She pointed out that HB 472 will cap medical malpractice
claims at $250[,000]. Ms. Jacobson confirmed that there is a
multiple that is multiplied by the age, but may not exceed $1
million.
Number 2207
DONNA McCRADY, Past President, Alaska Academy of Trial Lawyers,
said that she wanted to speak to the reality of practicing in
the medical malpractice area in Alaska. She informed the
committee that there are very few practitioners who are
plaintiff attorneys that actually bring medical malpractice
cases in the state because these are quite expensive cases. One
can spend well over $100,000 in these type cases. She recalled
earlier testimony that many medical malpractice cases don't
settle or do so late in litigation, and pointed out that's
because physicians have to agree to settle. Therefore, a lot of
money has been spent.
MS. McCRADY turned to the matter of expert [witnesses] and
highlighted that it's very rare to hire expert [witnesses] from
within the state and thus one must hire someone from out of
state, which is quite costly. Therefore, before she takes such
a risk, she carefully reviews the case. Furthermore, if she
takes a case and later learns information suggesting that she
may not prevail, she takes a look at dismissing the case and
eating the costs. The aforementioned is considered because of
the risk to the client who could go bankrupt if he or she
doesn't prevail. She pointed out that under Civil Rules 82 and
68 [of the Alaska Rules of Civil Procedure] if a plaintiff goes
to trial and doesn't prevail, the plaintiff could end up with a
judgment against him or her by the defendant for a portion of
the defendant's costs and fees. However, the plaintiff doesn't
have insurance to cover the aforementioned and could end up
bankrupt.
CHAIR McGUIRE inquired as to whether Ms. McCrady has ever had a
client face a Civil Rule 82 case or even heard of such.
MS. McCRADY replied no. She explained that she has experienced
one case in which the plaintiff prevailed. In other cases the
plaintiff, even with a strong case, was afraid to go forward
because of the significant risk. Therefore, those plaintiffs
were inclined to settle for much less than what she believes the
case was worth.
CHAIR McGUIRE surmised then that Ms. McCrady had never seen
Civil Rule 82 applied.
TAPE 04-25, SIDE B
CHAIR McGUIRE acknowledged that there are legitimate cases as
well as frivolous cases. Although Civil Rule 82 is a remedy,
it's never applied.
MS. McCRADY maintained that she does have clients who settle
cases which they ordinarily wouldn't because of the fear [of
Civil Rule 82]. Furthermore, she noted that she has read
supreme court cases that have discussed judgments against
plaintiffs when they haven't been the prevailing party.
Although Ms. McCrady didn't have the statistics with her, she
said she could inform the committee on this matter anecdotally
because it's a small bar of people who perform malpractice
cases. Therefore, she is very familiar with malpractice cases.
She noted that there are many defense verdicts. Ms. McCrady
offered to provide more information to the committee.
MS. McCRADY emphasized that Alaska has had caps since 1997. She
commented that she is a bit baffled by some of the [testimony]
that she has heard because she if familiar with the malpractice
cases in the state. There is such a small percentage of cases
that are actually brought forward, and furthermore there are
many verdicts that are for defendant physicians. Therefore, she
said she is struggling to understand why there is a
[malpractice] premium problem in Alaska. She pointed out that
all the data she has reviewed shows that payouts have remained
constant in Alaska while premiums have increased. She related
her understanding that the aforementioned is related to economic
forces and is absolutely unrelated to payouts. Furthermore,
there isn't an increase in the number of malpractice cases that
have been brought forward in Alaska. In fact, in the history of
Alaska there has only been one verdict that summed over $1
million. Therefore, Ms. McCrady viewed HB 472 as hurting those
with a valid claim.
Number 2254
MS. McCRADY recalled Representative Anderson's earlier statement
that when patients receive a bad result, they file a lawsuit.
However, she pointed out that in Alaska one can't file a lawsuit
merely because there is a bad result. In fact, the jury
instruction specifies that just because one has a bad result one
can't infer negligence against the health care provider.
Therefore, the plaintiff's attorney and the plaintiff bear the
burden of proving that a physician's care fell below the
standard of care and caused an injury. Furthermore, it has to
be a substantial injury for it to be economical to bring a claim
forward.
CHAIR McGUIRE inquired as to the average percentage of
contingency fees that Ms. McCrady charges.
MS. McCRADY answered that the average is 30 percent plus costs.
However, she noted that there are times when she will compromise
that fee. Ms. McCrady remarked that she believes her fee is
reasonable, especially when one considers that she spends a lot
of money on cases and may recover nothing. She emphasized that
she takes substantial risk in taking [medical malpractice]
cases. In further explanation, Ms. McCrady specified that in an
average medical malpractice case her costs may be $70,000, a
large portion of which is expert [witness] fees. She
acknowledged that defendants face the cost of expert [witnesses]
as well. If the case goes through discovery, travel is required
because most of the time the expert [witnesses] are in the Lower
48.
Number 2139
CHAIR McGUIRE asked if most malpractice insurance policies
include coverage pertaining to attorney fees.
MS. McCRADY replied yes and deferred to Mr. Brown [who testifies
later in the hearing]. Returning to the expert [witnesses], Ms.
McCrady clarified that these expert [witnesses] are other
physicians. She explained that these cases can't be brought
forward unless a physician practicing in the area says that the
care provided by the physician being charged fell below the
standard of care.
Number 2088
KATHY DALE informed the committee that she and her husband are
victims of malpractice. On May 18, 2000, her husband went to
have rotator cuff surgery, but came out of surgery with a
complex, severe brain injury due to the negligence of the
certified nurse anesthetist. If there had been a $250,000 cap,
she and her husband wouldn't have been able to bring a case.
The only way that she was able to uncover what had happened to
her husband and why was because of the ability to hire the
expert witnesses. She explained that rotator cuff surgery
entails lowering one's blood pressure. When her husband's blood
pressure was already low, he was administered two other drugs
that had the synergy of lowering the blood pressure [further].
Furthermore, the anesthetist stopped recording his blood
pressure or any of his vital signs for 45 minutes. Therefore,
Ms. Dale's husband wasn't receiving blood circulation to his
brain because of his imperceptible blood pressure and thus her
husband now has a complex brain injury that can be seen on an
MRI [magnetic resonance imaging]. To even discover that her
husband had a brain injury she and her husband had to go to the
Lower 48. Ms. Dale stressed that because of this [negligence]
she doesn't have the husband she had for over 42 years.
MS. DALE said that she didn't believe the proposed cap will
accomplish what is being said. Furthermore, those who have true
losses will certainly be robbed of the ability to obtain any
remedy. She related that in her case, she was told that she had
no economic damages because her husband had recently started a
new business and they couldn't prove any economic loss.
However, her husband's brain injury makes him unemployable. Ms.
Dale implored the committee not to pass the cap that would
prevent those in a situation similar to her from seeking
remedies under the legal system when there is negligence.
Number 1955
CHAIR McGUIRE remarked that as policymakers, legislators face
the challenge regarding whether there will be physicians
available to treat rotator cuffs in the future. [Alaska faces a
situation] that isn't just the cost of medical malpractice
insurance rather it's a case of whether it will even be
available. If medical malpractice insurance isn't available and
the state has to go to a pool similar to that used in the 1970s,
it will be done through a tax or the use of permanent fund
dividends, she predicted. Moreover, she questioned what
physicians would want to practice in a state that didn't have a
sufficient medical malpractice carrier. Chair McGuire assured
Ms. Dale that this isn't being done to rob anyone but rather
attempts to weigh a serious public policy matter. Chair McGuire
inquired as to the percent contingency fee Ms. Dale paid as well
as the additional costs.
MS. DALE answered that the contingency fee was 33 percent and
her out-of-pocket costs were in excess of $70,000. Ms. Dale
said that she understands that [the legislature] is attempting
to preserve the medical community in Alaska. However, she
suggested that if the physicians were more willing to police
their own, there wouldn't be the problem there is now.
CHAIR McGUIRE remarked that the medical licensing board is
working as hard as it can to [police it's own community] and
agreed that has to be part of the equation as well.
Number 1839
REPRESENTATIVE ANDERSON clarified that he didn't sponsor HB 472
to limit damages, especially with regard to economic damages.
Representative Anderson asked if Ms. Dale's case is over.
MS. DALE replied yes. In further response to Representative
Anderson, Ms. Dale explained that it was difficult to quantify
the economic loss given the current laws. She noted that she
and her husband are in the 60-year-old age group.
REPRESENTATIVE ANDERSON said he was shocked that Ms. Dale
couldn't obtain any economic damages. Representative Anderson,
drawing upon Representative Gara's earlier question regarding
whether $22 a day for 40 years is fair, asked Ms. Dale what she
believes would've been fair in her case.
MS. DALE clarified that her case didn't take into account pain
and suffering. She explained that she settled her case for the
cost of caring for her husband if she died first. In further
response to Representative Anderson, Ms. Dale confirmed that she
understood the difference between economic damages and pain and
suffering.
Number 1707
REPRESENTATIVE GARA announced that he disagreed with some of the
policies behind HB 472 and sympathized with Ms. Dale. He said
he has a problem with the policy that the legislation might slow
the increase of [malpractice] insurance rates because there is
no commitment from any insurance company that such will happen.
Furthermore, Representative Gara said he had a problem with
giving away the rights of those with valid claims of substantial
injuries in order to "perhaps punish those who file frivolous
lawsuits." Representative Gara said "The fit between the
proposal and the evil, we have ... to agree results in an impact
upon a completely innocent class of people who don't deserve to
have their rights taken away."
REPRESENTATIVE GARA said that he wanted Ms. Dale to know that
there are differing thoughts on this committee. He related his
frustration with regard to the myths surrounding these lawsuits.
Representative Gara explained that Ms. Dale and her husband
didn't have a decent economic damages claim because she and her
husband were close to 60 years of age. Any defense attorney
will claim that [people in the 60 year old bracket] were about
to retire anyway, and therefore the economic damages would be
limited. Furthermore, those in rural Alaska might live a
subsistence lifestyle and the law doesn't do well quantifying
the wage value of such a lifestyle. Therefore, Representative
Gara specified that for many people there are no economic
damages and thus the recovery is limited to pain and suffering
damages.
Number 1609
RAY BROWN, Attorney, Dillon & Findley, PC, began by informing
the committee that he learned of this hearing this morning.
Therefore, he requested an additional opportunity to present
some empirical evidence to the committee, including a survey of
medical malpractice rates and a history since the initial tort
reform of the mid 1980s, in order to determine whether there is
any empirical reality to the statements made today.
CHAIR McGUIRE noted that most people have been providing the
committee with written testimony and data. She highlighted the
latitude that has been afforded those testifying today.
Therefore, when the bill returns before the committee 20 trial
lawyers and 20 physicians won't be allowed to testify again, she
announced.
MR. BROWN noted his appreciation of any latitude that the
committee would provide. However, he emphasized that this
matter is so significant and the potential impact is so great
that he hopes the committee will allow both sides to be heard.
CHAIR McGUIRE said she would [allow both sides to be heard].
MR. BROWN returned to his testimony and said that he wasn't
aware of a medical malpractice crisis in Alaska. Mr. Brown
turned to Dr. Neupauer's testimony comparing [medical
malpractice] insurance rates between California and Alaska. He
said when one traces the history of [medical malpractice
insurance], it's easy to discern why [medical malpractice]
insurance rates have increased in California while Alaska's have
not since the 1990s. He related his recollection that the
original noneconomic damages [cap] in the 1986 tort reform was
$500,000 while noneconomic damages was unlimited for
catastrophic injuries. In 1997 the aforementioned was reduced
to what he considered hard caps in the amount of $400,000 or a
multiple up to $1 million for catastrophically injured people.
Catastrophically injured people would be those who were severely
disfigured, blinded, or had brain injuries. Additionally, the
medical malpractice carriers were given an additional tort
reform incentive in that they don't have to pay subrogation.
Therefore, unlike any other insurance carrier in the state,
medical malpractice carriers don't have to pay reimbursement to
any private health care insurer for medical expenses tendered by
those carriers, unless it's Medicare or Medicaid or some other
quasi-governmental health care provider. This is the case even
if it results in malpractice.
Number 1436
REPRESENTATIVE HOLM inquired as to what Mr. Brown means by
subrogation in this case.
MR. BROWN explained by posing an example in which he was injured
in an automobile accident and his insurance company paid $35,000
for his recuperation in the hospital. His insurance company
would have a right to recoup that $35,000 from the insurance
company of the driver who was at fault. However, if he was the
victim of medical malpractice, the medical malpractice carrier
wouldn't have to pay anything in subrogation because the medical
malpractice carriers are protected from that. Therefore, the
medical malpractice carriers have already received tremendous
economic benefits from prior tort reform. Mr. Brown reiterated
that he wasn't aware that the medical malpractice rates had been
increasing, and furthermore he said he would be very surprised
[to learn] that medical malpractice rates have increased
substantially or at an alarming rate.
MR. BROWN turned to the perceived public policy crisis. Mr.
Brown pointed out that NORCAL and MIEC have both written
coverage in Alaska since the mid 1970s, and both companies are
good companies that are very well capitalized. Of the two
companies that left the state, he understood that CNA left
Alaska for reasons unrelated to claims in Alaska while Northwest
Physicians Mutual was grossly undercapitalized. In fact, he
said he wasn't sure Northwest Physicians Mutual was still in
existence. Northwest Physicians Mutual leaving doesn't have
anything to do with paying out settlements in Alaska, rather it
has to do with the company's underwriting policy and perhaps
settlements paid in other states.
Number 1317
MR. BROWN remarked that there are exceptionally good physicians
in Alaska, many of which are his personal friends. Furthermore,
Alaska has a very good health care delivery system. However,
it's not without fault, he emphasized. When there are faults,
they can result in catastrophic consequences as Ms. Dale
testified. He explained that his firm screens over 140 cases
per year and only takes 5 cases, at the most. Mr. Brown said,
"We save 135 doctors a year from getting sued, some of those are
viable cases. Unfortunately, they are not economically viable."
Furthermore, no attorney on either side of these cases will
prosecute a claim or defend a claim that isn't meritorious.
MR. BROWN noted that in order to take these cases, the firm and
the attorneys have to be extremely competent and well funded.
Therefore, he said that he wasn't aware of any major law firms
or attorneys filing frivolous lawsuits against physicians. It's
not done for ethical reasons, and furthermore filing frivolous
lawsuits would be economic suicide. Mr. Brown related that he
charges 33.3 percent for a medical malpractice case as he does
for any contingency case he represents. The defense attorneys
charge $175 to $250 an hour. "In the end, I don't know who
profits more from medical malpractice, but I know who suffers
the most and it's the people like Ms. Dale and her husband," he
said.
MR. BROWN remarked that if one is 65 years old and retired, that
individual should be at the happiest point in his or her life, a
time in which to enjoy things and live off of retirement savings
or social security. Unfortunately, many of the victims of
malpractice are over age 65 and [in the above-described
position], and thus have no economic loss. Accordingly, any
claim that could be made would be for the pain and suffering.
If this proposed cap of $250,000 is [adopted], those cases
involving people who have been catastrophically injured wouldn't
be litigated because it would cost more to bring one of those
cases than could be recouped under a $250,000 cap. Therefore,
those individuals would be without any recourse. In closing,
Mr. Brown expressed hope that a compromise could be reached and
that there is the opportunity to discuss the matter with
empirical evidence.
Number 1004
MIKE HAUGEN, Executive Director, Alaska Physicians & Surgeons,
Inc., informed the committee that Alaska Physicians & Surgeons,
Inc., represents 170 physicians. With regard to the debate on
the caps on noneconomic damages and the formula, he recalled
that AS 09.17.010(c) states:
(c) In an action for personal injury, the damages
awarded by a court or jury that are described under
(b) of this section may not exceed $1,000,000 or the
person's life expectancy in years multiplied by
$25,000, whichever is greater, when the damages are
awarded for severe permanent physical impairment or
severe disfigurement.
MR. HAUGEN posed an example of a baby that was injured at birth.
The average age is just short of 80 years, and therefore 80
times $25,000 sums close to $2 million, which is the outside
limit. It's not the lessor of the $25,000 times the person's
life expectancy of $1 million; rather it's the greater of those
two. With regard to the solvency of MIEC and NORCAL, he agreed
that those two are more stable than the two carriers that left.
However, one must remember that the largest malpractice carrier
in the country, "St. Paul," left the market because its loss
ratio was unsustainable. He noted that St. Paul insured about
60,000 physicians. Therefore, even the best-capitalized
companies in the nation are at risk if this problem isn't
addressed.
Number 0900
MR. HAUGEN turned to where the money physicians pay in
[malpractice] premiums goes and what it pays for in the tort
system. He began by noting that about 60 percent of the
malpractice claims are actually dropped or dismissed and the
defense costs for those are about $16,000. Roughly 32 percent
of claims are settled and for those the average defense cost is
about $40,000. Only about 7 percent of the claims go to trial
and of that 6 percent the defendants win. However, the
defendants still pay about $85,000. Therefore, only in about 1
percent of these cases does the plaintiff actually win a jury
verdict. He noted that this information is in the [black three-
ring binder]. He further related that only about 20 percent of
the tort dollar actually goes to compensate the victims for
economic damages, while about 58 percent of every tort dollar
never reaches the victim because it pays for defense and
plaintiff attorney costs, expert witness costs, and
administrative costs.
MR. HAUGEN informed the committee that between 1995 and 1997, 36
percent of plaintiff verdicts were over $1 million. However,
that increased to 54 percent by 2001. Mr. Haugen pointed out
that the tort system in this country costs 2 percent of the
gross domestic product and it's expected to increase to 2.4
percent next year. One might think that with this increase in
expenses for the malpractice system, physicians would be
committing more malpractice. However, the frequency of
malpractice claims has been declining for the last 10 years.
Therefore, [the problem] is the severity of the claims.
Research has shown that the aforementioned has caused physicians
to practice defensive medicine, which the [U.S. Department of]
Health and Human Services (HHS) has estimated to add 5-9 percent
to the health care costs in this country. That estimate amounts
to $60-$108 billion a year in physicians ordering extra tests to
cover all the bases.
MR. HAUGEN turned to the question regarding whether economic and
noneconomic damage caps actually help with patient access in
Alaska. He related that HHS studies have also found that states
with noneconomic damage caps have, on average, 12 percent more
physicians per capita than the states without caps. Premiums in
states with caps are 17 percent lower than those without caps.
He highlighted that California's MICRA has dramatically
demonstrated how caps on noneconomic damages have kept premiums
lower. For example, between 1975 and 2001 California's
malpractice rates increased 182 percent while nationally the
rates increased 569 percent.
MR. HAUGEN provided a quote from the January 2004 Health
Tracking by Ken Thorpe who states: "It appears that a
substantial share of the multi-state physician-owned companies
have refocused their efforts on their state of domicile." Mr.
Haugen pointed out that there are no medical malpractice
insurance companies that are domiciled in Alaska. Therefore,
[Alaska Physicians & Surgeons, Inc.] fear that if this situation
isn't addressed, the state may return to the 1970s with a state-
funded plan. Mr. Haugen related a quote from Dr. Neupauer:
"With the supply of physicians in Alaska already at risk, any
tort lottery induced spiking claims and subsequent needed
premium hikes could be devastating to patient access."
Therefore, he surmised that MIEC, the stronger of the two
carriers left in Alaska, is concerned as well.
MR. HAUGEN said that one must remember that in Alaska the amount
of total premiums written in the state is a rounding error when
one considers how much premium is written in California and the
rest of the country. Mr. Haugen concluded by relating his
belief that Alaska should be in the forefront of medical
liability reform in order to keep the remaining medical
malpractice companies in the state and, almost more importantly,
to attract young, new physicians. The state desperately needs
to create a "gold standard."
Number 0539
REPRESENTATIVE GARA said that there is a response statistic to
most of those provided by Mr. Haugen. However, with regard to
the study reporting that states with caps do better with
[malpractice] premiums than states without caps, Representative
Gara pointed out that Alaska has a cap now.
MR. HAUGEN emphasized that there are various types of caps.
REPRESENTATIVE GARA surmised that the study addressed states
including Alaska because Alaska was a state with a cap.
MR. HAUGEN said he would have to check. He reiterated that the
states with the most significant increase are the states with
hard caps. More and more states are going toward hard caps, he
said.
REPRESENTATIVE GARA reiterated that he would be sympathetic to a
hard cap so long as it was flexible and fairer [than the one
proposed in HB 472]. Representative Gara recalled the statistic
that 60 percent of [medical malpractice] cases are dismissed,
and suggested that the aforementioned statistic isn't just
referring to cases that have been filed because it includes
prefiling.
MR. HAUGEN clarified that the study specified that 60 percent of
medical malpractice claims never reach trial.
REPRESENTATIVE GARA said that such studies often define when an
attorney or a client contacts a physician's office to alert the
physician of a malpractice issue as a claim even if the case
isn't pursued.
MR. HAUGEN interjected that such claims are still costing the
defense over $16,000.
REPRESENTATIVE GARA highlighted that there is a difference
between invalid cases that people pursue versus invalid cases
that people didn't pursue.
CHAIR McGUIRE announced that HB 472 would be held over.
HB 367-LICENSING SEX-ORIENTED BUSINESSES
CHAIR McGUIRE announced that the final order of business would
be HOUSE BILL NO. 367, "An Act relating to the licensing and
regulation of sex-oriented businesses and sex-oriented business
entertainers; relating to protection of the safety and health of
and to education of young persons who perform in adult
entertainment establishments; and providing for an effective
date." [Before the committee is CSHB 367(L&C).]
CHAIR McGUIRE explained that the committee has two proposed
committee substitutes (CS) in the committee packet: Version 23-
LS1394\V, Craver, 2/23/04; Version 23-LS1394\W, Craver, 2/25/04.
She also informed the committee that the committee packet should
contain written testimony from Carol and Kathy Hartman, the
police department, and other written testimony. Chair McGuire
noted that Colleen Duree (ph), clinical counselor, had
misunderstood that public testimony would be allowed today, and
therefore she suggested that Ms. Duree provide written testimony
or oral testimony during the House Finance Committee hearing on
this legislation.
The committee took an at-ease from 4:15 p.m. to 4:16 p.m.
Number 0290
CHAIR McGUIRE turned to her proposed CS, Version W. She pointed
out that the committee packet includes an amendment to page 10
of Version W. The language being inserted by the amendment to
page 10 would incorporate language that is in Version V by
Representative Gara. She pointed out that on page 11 of Version
V there are two paragraphs labeled (8) in Section 3, and
therefore on page 11, line 9, of Version V "(8)" should be
changed to "(9)".
CHAIR McGUIRE explained that both she and Representative Gara
agree that an individual must be 21 years of age to strip.
However, the disagreement comes into play with regard to the age
at which an individual can patronize adult-oriented businesses.
Version W specifies that one must be 21 years of age to strip or
patronize an adult-oriented businesses. The supreme court
opinions that she has read specify that there is no
constitutional right to entertainment. Therefore, she indicated
that [Version W] is constitutional.
CHAIR McGUIRE opined that she wanted a situation in which one
who enters or strips in an adult-oriented business would have to
be 21 years of age regardless of whether the business serves
alcohol. There has been compelling and overwhelming evidence
that drug solicitation, drug use, and a presence of alcohol are
prevalent at adult-oriented businesses.
TAPE 04-26, SIDE A
Number 0001
CHAIR McGUIRE related her opinion that the policy behind
changing the alcohol laws in Alaska, as well as in the Lower 48,
was the desire not to allow people under the age of 21 to drink.
The aforementioned was [decided] in light of the information
regarding the brain development [during the time prior to age
21], the fact that young people who are drinking are more likely
to be in automobile accidents and place themselves in a position
of danger, and young people are less experienced with regard to
handling alcohol. Because alcohol is present in these clubs,
she opined that this is an opportunity for entertainment at the
age of 21.
Number 0109
CHAIR McGUIRE acknowledged that there are some women that are
patrons and some men that strip, but generally speaking women
are stripping and men are patrons. She recalled the concern of
discrimination against certain genders if the age at which one
is allowed to strip is 21 and the age at which one is allowed to
patronize an adult-oriented establishment is 18. She said she
believes there is some practical merit to that, although it
doesn't seem to "fair out" constitutionally because of the need
to look at each class: stripper versus patron. Chair McGuire
related her belief that under Version W, strip clubs that serve
alcohol will become the predominant "fixture." Therefore, there
would be additional [oversight] from the Alcoholic Beverage
Control Board (ABC Board) due to the presence of alcohol in the
establishment. She noted that she had considered linking the
stripper license to an alcohol license, but ultimately decided
against it. She mentioned that at age 18 one can't smoke or
purchase cigarettes.
CHAIR McGUIRE, in response to Representative Anderson, clarified
that under Version W the dancer and patron of adult-oriented
businesses have to be 21 years of age. In Version V, the
[dancer] has be 21 years of age at an adult-oriented business
while a patron of such an establishment can be 18-21 years of
age.
REPRESENTATIVE GARA specified that [under Version V] an
individual under the age of 21 can patronize nonalcoholic adult-
oriented business.
REPRESENTATIVE ANDERSON pointed out that CSHB 367(L&C) specified
that both the patron and the dancer had to be 21 years of age,
which is the same as Version W.
Number 0366
CHAIR McGUIRE agreed that CSHB 367(L&C) is what is encompassed
in Version W while Version V embodies Representative Gara's
bifurcated age concept. Chair McGuire highlighted that [both
versions] changed the references to "sex-oriented businesses" to
"adult-oriented businesses" in response to those who were
offended by the reference to "sex-oriented businesses." [Both
versions] specify that regardless of whether the adult-oriented
business serves alcohol or not, the business will be regulated
under the state's laws. These businesses will have to obtain a
license. The only difference in the licensing requirements from
the original legislation is that [these two versions] no longer
license the stripper. Both versions added a proof of age
requirement, which specifies that if [a business] is criminally
negligent in failing to ascertain the person's age, then that
[business'] license may be pulled.
CHAIR McGUIRE highlighted that a new addition to this
legislation is the business hours requirement. On page 7 of
both versions it specifies that the business hours are set to
those of similarly situated businesses that serve alcohol.
Therefore, between the hours of 5:00 a.m. and 8:00 a.m., the
establishment has to be closed. She noted that most
municipalities have superseded the aforementioned law and
require closure at an earlier hour. Both versions specify that
the business hour requirement is either the state law or the
municipal ordinance that supersedes the state law. This
attempts to address testimony that related that these clubs have
began to serve as an "after-hours" club.
Number 0625
REPRESENTATIVE GARA agreed that there is only one major
difference between the versions, which he characterized as a
policy call. With regard to constitutional considerations,
Representative Gara suggested that those are probably a wash
between the versions. The belief, he said, is that with any
[constitutional] challenges either legislation would be upheld.
Returning to the policy decision, Representative Gara said that
both he and Chair McGuire believe that the harm to young people
who perform naked [in these adult-oriented] businesses is
phenomenal. Evidence shows that in some places drunken
customers verbally assault dancers, pimps and drug dealers
proposition dancers, and there are wage violations.
Furthermore, the no-touching rules at these [adult-oriented
businesses] are repeatedly violated.
REPRESENTATIVE GARA noted that one report specifies that 100
percent of all dancers report physical abuse at some point
during the dancers' career and 100 percent witness abuse of
other dancers. Furthermore, 77 percent of the dancers report
being stalked after leaving the club and 100 percent have been
propositioned for prostitution. These [adult-oriented
businesses] aren't a place at which 18-year-old girls should
work. At age 21, one can make a more mature decision, he
opined.
REPRESENTATIVE GARA explained that [both he and Chair McGuire]
want to regulate those dancers who are considered to be too
young to perform nude. However, he noted that [he and Chair
McGuire] differ with regard to whether the patron has to be 21
years of age. There is a valid argument that can be made
regarding not allowing 18-20 year olds to patronize these clubs.
However, Representative Gara said that [restricting the age of
the patron to 21 and older] goes too far for his comfort level.
He explained that he was convinced of the aforementioned by the
notion that if one is old enough to be in the military, one is
old enough to make the decision to patronize a strip club.
Therefore, he wanted to maintain a narrower focus and regulate
what he considered to be the greater problem with those working
[naked at these clubs].
REPRESENTATIVE GARA opined that there shouldn't be concern that
if you regulate the dancer's age one would necessarily have to
regulate the patron's age. Both of the versions require that
these [adult-oriented businesses] are going to be licensed.
Therefore, if these [adult-oriented businesses] allow someone
under the age of 18 to enter the business, it can be closed.
Furthermore, if people under the age of 18 are employed at these
[adult-oriented businesses], the business can be closed.
Moreover, persistent wage violations can result in the
establishment's closure.
REPRESENTATIVE GARA highlighted that [both versions] prohibit
private rooms because there is more touching. He recalled that
some of the former entertainers were concerned because [the
adult-oriented business] shared an entrance with apartment
buildings or other places where young children were in
attendance. Therefore, [adult-oriented businesses] have to have
a separate entrance and washroom. Representative Gara
reiterated that both versions are the same, save the age
difference discussed earlier, thus he left it to the committee
to decide which proposed CS is best.
The committee took an at-ease from 4:35 p.m. to 4:38 p.m.
Number 1020
[Not on tape, but reconstructed from the committee secretary's
log notes, was the following: CHAIR McGUIRE announced that HB
367 would be held over.]
ADJOURNMENT
Number 1021
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 4:40 p.m.
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