It's Never Over 'Til It's Over

In a speech late last year Governor Ed Rendell declared that the medical malpractice crisis in Pennsylvania was over. Putting aside whether there ever was a “crisis,” there is impressive evidence that the liability climate for medical providers and their insurance carriers is better now than it was four or five years ago. Consider the following:

• Malpractice claims are down 38% statewide since 2002.
• Total pay outs by the M-Care Fund have decreased for four consecutive years and are barely half of what they were in 2003.
• Two of the largest carriers in the state, PMSLIC and Med Pro, have filed for rate decreases in 2008.
• The number of physicians in the state has remained steady at 35,000 since 2002.

In addition to those statistics, perhaps the best indication that the medical community feels less burdened by the legal system is that the call for damage caps and other “reform” measures, while still present, lacks the urgency of years past. Likewise, the state legislature’s appetite for sweeping reform seems to have dulled.

But make no mistake, despite the favorable numbers and a more temperate climate in Harrisburg, the malpractice crisis, such as it is, will never truly be over because of these two words: cycle and abatement.

As lawyers and consumer groups have pointed out ad nauseum, we never really had a malpractice crisis. The spike in premiums for liability coverage was simply part of the natural ebb and flow in the insurance industry. In good economic times insurance carriers historically drop their premiums to attract new dollars so that they can take advantage of favorable investment returns in the market. Invariably, however, they either charge too little relative to the value of future claims or the investment returns eventually begin to decline. In either case, the only way for the carriers to recoup their losses is to disproportionately raise premiums. This “cycle” of lowering premiums to generate income and then increasing them to make up for losses is part and parcel of the insurance business. Just as surely as we went through such cycles in the 1970s and again in the late 1990s, we will go through another one at some point in the future, and when that happens, the legal system, rather than the economic realities of the insurance market, will once again be under attack.

The other circumstance which will eventually re-kindle claims of a “crisis” is the abatement fund, the Rendell administration’s program to pay some or all of the doctors’ M-Care premiums. Under the plan, high-risk specialists such as surgeons, OB-GYNs and others have 100% of that premium paid by the taxpayers, whereas others such as internists, dermatologists and the like have one-half of their premium being subsidized. The program is funded by a 25¢ per pack increase in the cigarette tax that went into effect in 2003. Since it’s inception, the state has paid a total of approximately $800 million in premiums on behalf of physicians. Presently, the Fund has a surplus of $400 million because M-Care premiums have dropped more than anticipated in recent years.

It does not take a genius to figure out that the legislature’s willingness to continue to pay part of the office overhead for upper-income professionals may not last forever. Indeed, the Governor himself is threatening to “pull the plug” on the abatement program if he is not permitted to use part of the surplus to provide health insurance for the underprivileged. It remains to be seen how that tug of war plays out, but the larger point is this. Whether it is the current battle about providing health coverage for the uninsured or some other issue, the state legislature will not have unlimited tolerance for the abatement program. At some point, the public’s indignation will become so overwhelming that the practice of giving those cigarette tax millions to doctors rather than spending them on schools, roads, and other local projects will end.

When that happens, one can state with absolute certainty that regardless of any trends in verdicts, settlements or lawsuits filed, there will be an immediate outcry from the medical community that we are once again in crisis. Think about it. If someone was paying your rent or picking up your bar bill for years on end and then that suddenly stopped, what would your reaction be? The doctors have become accustomed to the state subsidizing their insurance costs, and whenever that stops, the “sticker shock” they will experience from having to pay their own M-Care bill will make the premium increases of the late 1990s look like pocket change.

Thus, whether it is the economic realities of the insurance cycle or the political vulnerabilities of the abatement program, be assured that there are circumstances out there which, when they materialize, will immediately ramp-up the claims of a malpractice crisis, and undoubtedly we lawyers will once again be the villains. So, as we pause to enjoy this momentary respite from the tort reform wars, let’s be reminded that we cannot afford to let down our guard. The fight to preserve personal accountability, full and complete remedies for victims and other principles well rooted in our justice system must never end. The malpractice “crisis” is never over until it’s over.