Senate Health, Education, Labor and Pensions Committee and Senate Judiciary Committee Hold Joint Hearing on Role of Litigation in Patient Access to Care
GREGG:
If we could get everybody's attention.
There are a lot of things going on today in the Senate and a lot of members are moving back and forth to the floor with the debate involving Judge Estrada. I know Senator Kennedy will be arriving soon, as will Senator Hatch. They are both involved in that debateand Senator Leahy, who is also involved in that debate. And we've got a number of other members, including the majority leader, who is on the way. There are a number of members who expressed an interest in participating in this hearing who I am sure will be coming and going as we proceed forward.
Let me just outline a little bit of what is going to happen procedurally, since this is a joint hearing, which is unusual. We are excited about it. We appreciate the opportunity to be here with the Judiciary Committee.
We're going to have opening statements when these members arrive, from Senator Leahy, Senator Kennedy, Senator Hatch and myself and should the majority leader have time to come over, he'll do an opening statement. And then we'll go to the panel, which is very qualified and the panel which has a great deal of good opinions on this issue of how we deal with patients' access and lawsuits and the cost of lawsuits as they affect the medical industry, medical activities, and patients' abilities to see doctors. We will rotate in five minute questioning periods.
We all recognize, I think, just from watching the news that this issue of patient access to their physicians and the fact that many physicians are finding it difficult to practice because of the cost of their insurance premiums is a significant public policy concern. We've seen the situation in West Virginia.
There was a situation there where innumerable people were unable to see their doctor. In fact, one instance, I think, involved a janitor who was injured and went to the emergency room and could not get adequate attention and ended up having to go to Kentucky to be seen.
In New Hampshire, we have this issue as it involves especially OB-GYN practitioners. That's been a problem across the country. For example, in northern New Hampshire, where we do not have a lot of OB- GYN individuals, in fact, I think we have one in this region that I am talking about, the doctor in that area has found her premium going from $38,000 to $138,000 in one year, which makes it extremely difficult for her to practice and potentially forces her into retirement as a result of that cost.
Excessive litigation drives up the cost of the health care system. The health insurance premiums are increasing at their highest rate in over a decade. Small businesses are particularly hard hit. In New Hampshire, small businesses have seen a 34 percent jump in their premium cost, which means their ability to expand and create jobs is limited.
Congressional budget offices found that medical litigation reforms would save approximately $14 billion to the federal government. This savings would be even greater, of course, for the private health insurer. With health insurance being so close (ph), costly and out of reach for 41 million Americans, it simply makes no sense to allow excessive litigation to continue to eat up more resources in our health care system.
Today, at least a dozen states are facing urgent patient access crisis. Insurance carriers have exited these states at an alarming rate. Physicians, hospitals, nursing homes and other providers are also in trouble. All but seven of the remaining states have reached near crisis status. It is only a matter of time before the near crisis state reaches full crisis status. There is a chart up here of the states, which are in crisis in red.
The data is clear about what is driving this crisisdramatic increases in the size of jury awards, the cost of defending lawsuits and the frequency of large claims, mega jury awards are on the increase. In 1999, the most current year for which we have litigation data, the median award was $800,000, up 34 percent in three years. The number of million dollar plus jury awards is on the rise. Now, more than half of all awards are over $1 million.
GREGG:
Costs of defending lawsuits is extremely expensive and too many resources are devoted to defending frivolous lawsuits, as nearly 70 percent of all medical liability claims result in no payments to the plaintiff, at least. I guess the attorneys still get paid.
The trial lawyers are using the medical profession, unfortunately, almost as their ATM machine. Left unchecked, this pattern will continue to escalate and deplete the resources of our medical system.
Fear of excess litigation also results in substantial indirect costs when physicians practice defensive medicine by ordering additional and unnecessary tests and procedures. While difficult to measure, some experts believe that defensive medicine practices as a result of fear of lawsuits is somewhere between $60 billion and $180 billion.
Although billions of dollars are spent in our medical liability system in direct and indirect costs, far too few of those dollars actually flow to the patients. Almost 50 percent of the damages awarded in court go to attorneys' fees, not the injured patient. The current system leaves many injured patients with legitimate cases out in the cold.
The solution is to restore balance to the health care system, to ensure fair and timely compensation for patients who are injured by medical negligence. Unlimited compensation for current and future medical expenses and loss of wages should be awarded. Quantifiable economic expenses should be awarded and reasonable compensation for pain and suffering should be awarded.
However, the system must also ensure that patients are not denied access and this is the issueaccess on the front end. In order to do that, we must address the acute problem of the excessive litigation and we must address it now.
As the cry for help from patients and physicians grows louder, so too do the excuses for not acting. We have heard it all before. Liability rates aren't increasing significantly. There is no problem. Rates are increasing but it's somebody else's fault. Insurance companies are to blame. State regulators are to blame, or state regulators could do a better job if they would simply pass more regulations. It's bad stock market investment, the business cycle, anticompetitive behavior, so on and so on.
But the facts tell the truth. Insurance rates increases as insurers pay out more in losses and litigation expenses than they collect in premiums. According to A.M. Best study, the medical liability insurance industry paid out $1.54 in losses for every dollar they collected in premium. We have a recent study that has been submitted to us, which I will put in the record for the National Association of Insurance Commissioners, which has a similar type of finding as to the cause of the problem.
We must have the courage to just say no to the status quo and yes to the patients. We should act quickly to address the problem that we know are leaving patients without care. At a minimum, we should address the litigation lottery that has added to the unpredictability and liability insurance.
To ensure that there is no gaming of the system, we should ensure that reforms apply across the board to all entities involved in the delivery of patient care. I believe we should act. The model of success, such as the California Medical Injury Compensation Reform Act, upon which the House bill has been based. We should be open to any additional reforms to the underlying medical liability system, such as encouraging states to adopt patient safety best practices.
There is a lot that can be done to improve this system, to allow patients better access to their doctors and to allow doctors to actually practice medicine.
At this point, I will yield to the senator from Massachusetts for his opening statement, if he wishes to make one. Before the senator arrived, I stated that our procedure was going to be to have an opening statement by yourself, Senator Leahy, Senator Hatch and the majority leader, should he arrive and then go to questions.
GREGG:
Mr. Smarr, those statistics which you just presented were rather startling, I think, especially the California experience. But just to clarify, your organization which represents 60 percent of the doctors is a not for profit organization, is that correct?
SMARR:
Senator, they're not really not for profit because there is no such thing as a not for profit insurance company, but their companies are mostly mutual companies and reciprocals that are owned and/or operated by the doctors they insure.
They started over two decades ago with the philosophy of...
GREGG:
Well, there purpose isn't to gouge doctors.
SMARR:
Their purpose isn't to what, sir?
GREGG:
Is not to gouge doctors, correct?
SMARR:
Absolutely.
GREGG:
In fact, the doctors own them.
SMARR:
It is not to gouge doctors.
GREGG:
So, I am interested in thiscan you go back to your chart there, the MICRA chart.
Now, we heard testimony that said that the reason California's rates have dropped was because of Proposition 103. As I understand, 103 basically impacted property and casualty companies and automobile insurance and did not directly impact the malpractice insurance. Really, it is MICRA that has driven the drop in the cost of malpractice insurance and therefore the affordability of doctors to practice in California.
Is that your assessment also?
SMARR:
It is. Prop 103 was aimed primarily at the auto insurance industry. Malpractice carriers were required to roll back to provide premium refunds to their insurers and this is at a 20 percent level.
However, in the consent orders that were made with the department of insurance, these refunds of premium were considered as dividends, and at the time, the insurers were paying an excess of 20 percent dividends in any event and there was no roll back of insurance rates required in these consent agreements.
GREGG:
So, it is reasonable to presume that the real driver of the affordability of malpractice insurance and therefore the accessibility, for example, OB-GYNs in Los Angeles versus Los Vegas is the MICRA law.
SMARR:
That's my belief.
GREGG:
Commissioner, we received a letter from the National Association of Insurance Commissioners, which was cited as a source by Senator Kennedy in his opening statement and I believe it is the benchmark group for the purposes of insurance commissioners.
And it addresses the issue of price fixing. Now, I just wondered if you agreed with this from your experiences, Commissioner. The first question was whether or not legislationthis would be the legislation introduced by Senator Leahypresumes that medical malpractice insurance carriers are engaging in price fixing, bid rigging and market allocation.
In response to the insurance commissionthe Association of Insurance Commissioners was, quote, "No. To date, insurance regulators have not seen evidence that suggests medical malpractice insurers have engaged or are engaging price fixing, bid rigging or market allocation"and I emphasize the next sentence"The preliminary evidence points to the rising costs and defense costs associated with litigation as the principle drivers of medical malpractice prices". Then they go on in another answer to say, "Again, evidence points to high loss ratios, not price fixing as the primary drivers of escalating premium costs".
Do you agree with those conclusions?
MONTEMAYOR:
I do, Senator. The bulk of our research points to losses. The checks written toas a result of claims as well as defense costs is the primary driver of premiums universally across the country. I would agree with that assessment.
GREGG:
Now, to what extent doyou had some statistics which were fairly interesting that showed the number of lawsuits, but to what extent, what percentage of those -- 70 percent of the suits are won by the doctors, is that your experience in Texas?
MONTEMAYOR:
Our experience in Texas, is, in fact, even a little higher than that. It's in the mid eighties, the bulk of the time, most of lawsuits end up with zero payment to the plaintiff, but they do result in additional costs due to the defense costs.
GREGG:
That was going to be my question. You had a $91,000 -- the chart is not there. I think it was $91,000 if you went all the way through trial was the cost that was incurred. To what extentof that percentage, what extent would be deemed frivolous in the sense that they were brought simply to try to recover the fear of having to pay $91,000 in order to win the case?
MONTEMAYOR:
I will not be prepared to speak to which percentage of those were frivolous. I mean, I can tell you that those that did go to trial, the doctor won some 85 percent of the time. The plaintiffs won some 15 percent of the time.
GREGG:
Is it reasonable to presume that some percentage of those cases are brought because the plaintiff's attorney believes that even though they are not going to win the case, they are going to win the costs?
MONTEMAYOR:
That certainly is one of the conclusions that we have reached in looking into this issue.
GREGG:
And how do we address that, I mean, from a standpoint of legislation. Should we make it loser pay situation like the English have.
MONTEMAYOR:
That's a policy matter, Senator. I'm notI don't have a good answer for that.
GREGG:
To the extent that there has been gross negligence, again, Commissioner, should there be a cap on anything if there is gross negligence or willful negligence, willful misconduct.
MONTEMAYOR:
I would tell you that in speaking to all of our leaders at the state level and all of the other insurance commissioners, I don't think anybody is interested in denying those people who have been, in fact, the recipients of a medical error, access to have their grievance redressed.
I think the real issue is striking that right balance in terms of keeping insurance affordable and available to all physicians vis-a-vis the cost of the losses associated with it. One of the methods that was tried in the state of California was, in fact, through caps. Our research showed that they consistently, no matter what specialty we're talking about, they consistently get far better rates in that state than anywhere else.
But there or anywhere else, it's all driven by the cost actually of the claims themselves.
GREGG:
Isn't it sort ofI mean, I think it seems reasonable to me that if there has been action which goes outside the bounds of typical error that we should have some sort of different recovery system.
MONTEMAYOR:
It would seem reasonable, Senator.
GREGG:
But doesn't it also sort of intuitively obvious that if the number of claims that are over $1 million is increasing faster than any other percentage of the group, that it's really the claims that are driving this problem, not collusion of the insurance companies or loss of revenue from bad investments?
MONTEMAYOR:
Without doubt. All other costs are (inaudible) and the primary driver premium levels is, in fact, claims made in defense costs.
GREGG:
Thank you, Senator.
I'm going to have to depart. Before I do, I'd like to ask unanimous consent that the statements of the senators be inserted into the record and note that the record will be kept open for two weeks for submission.
I especially want to thank the panel. I'm going to turn it over to Dr. Ensign, because he had a couple of other questions. But I especially want to thank the panel. It's been an extraordinarily strong panel, in my opinion.
And I especially want to thank the folks who have had individual experiences which are extremely movingMs. Peel, Ms. McDougal, and Ms. Dyess, and Dr. Wilbourne, who chose Maine instead of New Hampshire, which I take as a
WILBOURNE:
You had no availability in New Hampshire. I checked there.
GREGG:
You know, as a number of senators have said, for you to come forward and share your stories with us is courageous and it's important, and we thank you for that. And we thank you for the expert testimony we've received from the other members of the panel.
Unfortunately, I have to move on, but I'm going to turn the hearing over to Senator Ensign.