Medical Care? What Medical Care?

Kenji Sugahara

Medical care has fast become one of the most important issues in this state and the nation. Issues include: HMO's, insurance rates, taxes, costs, OHP, quality of care, and medical malpractice. The biggest question for me is how do we provide quality medical care at a fair and reasonable cost? Costs have risen so dramatically that small businesses are having trouble providing medical coverage for their employees. The state will probably have trouble paying for medical coverage for state employees in the next biennium. OHP recipients are competing for a smaller pool of dollars, recipients have dropped off the rolls, service eligibility levels have been changing. Something needs to be done..


In my opinion, the optimum solution would be to move toward a single payer system. Yes, a nationalized healthcare system. However, I don't think the nation is quite ready for that solution. One area that I can see improvement is with medical malpractice. On one hand, I see how doctors are being burdened by increasing medical malpractice insurance rates. Some doctors are leaving practice areas or are refusing to do higher risk surgeries because of high insurance premiums. Ob/Gyn is a typical example- in Salem, there are very few Ob/Gyn doctors left. Even having a complaint filed against a doctor will increase insurance rates. In many practice groups, if one doctor is accused, the rates go up for the entire group. (Source: discussions with local doctors)

These higher costs have a disparate impact on rural areas. The Rural Physician Malpractice Insurance Subsidy Program (House Bill 3630) helps a little but it is only a small part of the equation. Declining Medicaid and Medicare reimbursement rates have also affected provision of care in rural areas. In 2003 in Prineville, between 50 and 60 percent of patients at Pioneer Memorial were on Medicare, and 12 to 15 percent were on Medicaid. Medicare and Medicaid compensate at around 60 percent of market rates. With low volume, low reimbursement, and high malpractice rates, new doctors are shying away from providing service in rural areas. Source. In this sense, I can see how caps on pain and suffering and punitive damages could help. (by helping keep premiums down).

On the other hand, I can see why there shouldn't be caps on pain and suffering and punitive damages. I understand the arguments that a judge and jury should decide the proper damages amounts, how we must provide doctors and hospitals with incentives to maintain strong safety procedures, and how insurance companies are simply overreacting to cycles in their industry. However, I do think the status quo is unacceptable yet I don't think caps are a great solution. As medical malpractice rates continue to contribute to higher healthcare costs, something needs to be done.

With so many interested parties, it will be tough to come up with a solution. However, I think we can look at a modified Workers' Compensation System Model integrated with SAIF. One of the things we need to do is remove the emotion from a lot of these cases. For example, there are probably less Ob/Gyn doctors because of the high settlement/verdict rates because of the subject matter of the litigation- there's nothing worse than a dead baby case for a doctor. The sad thing is, the settlement/verdicts for a dead baby will probably exceed those for an income generating male or female (with a family) in the prime of their life. Why? Because of the emotion involved.

Now for the potential solution.. hang with me... this may get complicated.

SAIF's role: SAIF would provide umbrella coverage for claims that exceed a certain threshold. For example, $1,000,000 (note that this number is pulled out of thin air and used only for illustrative purposes). Private insurers would be responsible for claims up to that threshold amount. This would serve to limit liability to private insurers thereby (hopefully) allowing them to reduce rates in Oregon.

A new division within the Department of Consumer and Business Services or a new independent agency would be formed- a Medical Compensation Division (or Agency) (MCD). A new Medical Compensation Board (MCB) would be formed (akin to the Workers' Compensation Board)- this board would be made up of an even number of representatives from various interested parties. An odd person (a tie-breaker of sorts) would be someone that is acceptable to all parties. The division or agency would not be funded out of general fund dollars but would be supported by a surcharge of $1 (again a number pulled out of the air) on every doctor visit by a patient. This agency would process medical malpractice claims. Based on certain criteria developed by a Medical Advisory Committee (MAC) (akin to the Workers' Compensation Medical Advisory Committee), medical malpractice claims would be either denied or accepted by the agency/division. The MAC would be made of lawyers, doctors, patients rights representatives, insurers, and other significant interested parties. If a claim is denied, a claimant could request reconsideration. If upon reconsideration the claim is denied, the claimant could then request a review by the Medical Compensation Board (MCB). If a claim is accepted, payment (payment schedule developed by MAC) to the claimant would be released. If payment is less than $1 million then the private insurer would be responsible. If the payment exceeded $1 million, then SAIF would pick up the excess. If the claimant still felt that they did not receive fair compensation or felt that the claim was unfairly denied or if the insurer(s) felt that the ordered payment was excessive or unwarranted then any of the parties could apply for reconsideration. If any party still felt aggrieved, the matter could be appealed to the Court of Appeals, and finally to the Supreme Court (discretionary review) for review for errors of law or of substantial evidence.

If conduct is especially egregious or negligent, the MCB would also have the authority to penalize (through enhanced fines) hospitals and doctors for misconduct. The enhanced fines would be split between the patient and SAIF Fund (attorneys fees would be based upon the agreement with the client or by statute). This is a similar setup to how punitive damages are disbursed. Currently, about 60% of punitives go to the Victim's Compensation Fund. One minor point: punitive damages are meant to punish the wrongdoer to hopefully prevent the same behavior in the future. Punitive damages are not meant to compensate the victim. These penalties could be appealed to the Court of Appeals then to the Supreme Court (discretionary review) to be reviewed for errors of law, substantial evidence, or penalty amount.

There would be a lot more issues to be resolved, but I think it's a great place to start a dialogue

Comments

  • Pat Ryan (unverified)
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    The elephants in the living room here are the insurance and pharmeceutical industries, but I guess we can't talk about that because they own both parties outright. (It doesn't really matter that the Dems can be bought for around 50 cents to the Republican dollar, when comparing various contributions.)

    When Hillary decided to put together a plan early in the Clinton administration, even she didn't propose getting rid of these guys. They still torpedoed her while most of the US Congress stood passively by and let her be crucified. Mojo did a great article on it at the time, but that's "so 12 years ago".

    The 1944 law (McCarran-Ferguson Act) which allows insurance companies to collude on fixing prices, is illegal in every other US industry (except baseball).

    Both of these industries are currently enjoying record profits.

    Jury awards are essetially flat over the last 10 years.

    In the 14 states where some form of Med/mal jury awards have been limited, the citizens are currently enjoying rates that are a whopping 3/10ths of 1% lower than states with no caps.

    It would be hilarious to watch physicians and attoneys go at it over completely peripheral issues if lives and careers were not at stake.

    There are a lot of solid references on this stuff including industry journals. Check this site out.

    http://www.centerjd.org/

    <hr/>

    Gotta go. The Oregon delegation to Boston will be having breakfast on Tuesday courtesy of an outfit called "Pharmaceutical Industry Labor-Management" according to my scedule of events even though I got zero hits when I googled 'em.

  • Chris Bouneff (unverified)
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    A worker's comp system would be an absolute disaster, especially for those injured by a preventable medical error. Hell, just ask injured workers how hard it is to get a payment out of SAIF. SAIF doesn't have mammoth reserves because of its generosity toward worker claims, even legitimate ones.

    In Oregon, there are so few jury awards that exceed $500,000 in noneconomic compensation, it's laughable. In all, the median payment to injured patients has hovered around $75,000, according to the National Practioners Data Bank. You're right -- OB cases generate the most in compensation. That's because the lifetime of care involved. That's expensive stuff. Last summer, in a Pendleton case, a jury awarded around $10.8 million. About $2 million was for noneconomic compensation. That is a sum, but more than $8 million was for economic compensation -- the direct care of the child through his entire life.

    From 1997 through 2002, there were only six jury verdicts in med mal cases in which noneconomic compensation exceeded $500,000, the cap that the Oregon Medical Association is seeking in its ballot initiative. Data come from the Oregon Board of Medical Examiners closed claims reports for commercial insurance carriers. There've been a few since that time, the Pendleton case included. In each case, the injuries are catastrophic.

    There is a problem. But it's a safety problem and an insurance regulation problem. The solutions aren't that complex in description, but are in practice but of all the political crap that comes with change.

    First, docs should move to a nonprofit insurance system, similar to the one that Oregon lawyers adopted in the 1970s. A Professional Liability Fund for docs makes sense, especially for the first $1 million in insurance coverage, a common level for most docs. Also, rather than experience rate for the first $1 million in coverage, the insurance pool should include all docs. Rates would drastically fall for high-end specialists such as neurosurgeons and OBs. General practitioners would pay a little higher in rates, but not much, especially in a monopolistic nonprofit system. Docs would then be free to buy excess coverage on the commercial market or through their PLF, much like attorneys do now.

    In 2001, the last year for which I have complete data, the loss per doctor in Oregon was about $8,500 per insured doctor. Yet, some docs were paying rates as high as $100,000 or more for insurance. That’s not risk spreading; that’s gouging.

    Second, the state needs stronger regulation mechanisms. For the entire property and casualty line, the state insurance division has only one actuary who reviews rate filings. And there’s little the division can do to regulate rates.

    In 1988, California voters approved a measure named Prop 103. This at the height of the last insurance crisis when docs and other property and casualty insurers were crying that juries were out of control.

    The measure rolled back rates and heavily regulated both rate increases and decreases. This ensured that premiums wouldn’t be subjected to the highs and lows of the business cycle -- low when profits could be made in the stock and bond markets; high when investments tanked. Not surprisingly, after California passed caps in the mid-1970s, rates continued to climb, sometimes astronomically.

    After rate reform, however, rates have remained stable. And one group, The Foundation for Taxpayer and Consumer Rights, has used a public challenge process to rate filings to fight back outrageous rate increases for docs there.

    Lastly, the entire medical profession needs to end its secrecy around medical errors. The VA system, much to its credit, began informing patients or their families almost immediately after an error occurred. They met with patients, advised them to come in with their lawyers, talked about how the injury occurred, and offered just compensation. They found that their litigation costs dropped and that they were able to compensate more patients. Hey, honesty works. Who knew?

    OK, I wrote a lot of words. But the concepts are simple. And it will never happen. Docs don’t want it. The OMA gets a six-figure kickback from the insurance company CNA to sell policies to members. And admit a mistake? Forget about it. As for lawyers, I doubt they’ll really press for such changes. Sure, money is a factor, or the loss of it. But in the end, they are advocates for a single patient. They aren’t the type of advocates to beat a constant drum for system change.

  • Anonymous Coward (unverified)
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    For more info online about the medical malpractice ballot measure, be sure to check out:

    http://www.TrustJuries.com http://www.EndFrivolousLawsuits.com

  • Marty Wilde (unverified)
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    Chris is absolutely correct. I've made an extensive study of malpractice insurance rates. The problem lies primarily with the mechanics of the insurance industry. While there has been a rise in the number of malpractice claims, there is probably a decline in the numbers of medical errors. People are simply more aware of their right to compensation.

    Medical error continues to be a large problem. Doctors have not embraced a culture of safety, with notable exceptions. Anesthesiologists embraced safety measures and significantly reduced the incidence of complications in general anesthesia. Their compatriots, surgeons, have not done so and thus continue to suffer from relatively high error rates. OBs have also been reluctant to make significant strides in safety, which is part of the reason their claim rates remain high.

    Doctors are also notoriously poor at policing their own. Lawyers, for all our faults, have much stronger protective mechanisms for the consumer. We disbar at a significantly higher rate than the medical boards revoke licenses. There is also a cultural resistance to reporting peer misconduct that doesn't help the medical profession maintain a trusting relationship with the public.

    Something like one in sixteen victims of medical error ever recover a dime from their medical providers. The problem is not a few vexatious litigants, but rather the failure of the medical profession to adopt reasonable safety standards.

    Marshall L. Wilde, JD, LLM

  • Michael Wilson (unverified)
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    Just a couple of quick comments if I may. The Institute of Medicine published a study a couple of years ago that suggested that 44,000 to 98,000 people die every year from medical errors in America's hospitals. With Oregon having slightly more than one percent of the national population that would suggest that Oregon has about 500 to 1000 deaths from medical errors annually. Whatever the number Oregon's Medical Examiner's Office needs to publish that number just as it publishes the number of deaths from drug overdoses annually.
    Secondly all though there are a lot of factors that have played a role in the increase of medical malpractice rates one that is little noticed is that insurance companies invest most of their funds in bonds and in the last few years as interest rates have declined so have the earnings from the bond market. As a result the insurance companies have seen their profits on bonds decline. Thank you, Michael Wilson

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    I like the idea of self insurance for doctors akin to the Oregon State Bar Professional Liability Fund. However, you have to have some sort of safety net. To give you an idea, one bad bankruptcy drained the reserves (kept by the State) of the self insured program (for Worker's Compensation). Similarly, one really bad claim or string of bad claims could theoretically drain the reserves of the "doctor self insurance fund". Thus, I think that SAIF should still provide excess insurance coverage.

    "Hell, just ask injured workers how hard it is to get a payment out of SAIF." Remember- I'm only saying that SAIF would be providing excess coverage- and the decision for payment would be made by the board.

    "In 2001, the last year for which I have complete data, the loss per doctor in Oregon was about $8,500" I'd love to look at the source data on this. Do you have a link per chance? I'm most interested in seeing the number of doctors who were sued. The other thing is that a lot of doctors will simply pay someone who complains about a "bad procedure" even though the patient gave informed consent and was informed of all the risks. A doctor I know paid someone $5000 because they threatened litigation. It's not because he did anything bad. If he fought it, he'd lose time in his practice, and his insurance rates would likely increase. It wouldn't make economic sense for him to fight it. This is one of the reasons we need a gatekeeper system along with controls on the insurance industry. Again, we need to remove the emotion from the equation.

    I also hear the argument that insurance companies are jacking rates to try to make up for losses in the stock market, and I agree 100%. I definitely like your idea of rate regulation. (Just like the PUC!)

    I don't think the pharmaceutical industry would have that much to gripe about in the medical malpractice field. There is the tangential issue that doctors could decrease practicing defensive medicine thereby reducing the need for costly drugs. However, I don't think that would be a significant issue. The pharmaceutical industry problems are another whole ball of wax. I mean look at the Medicare legislation- the prescription drug card- sure it gives a discount but then the pharmas jacked up the prices far beyond the rate of inflation before the cards went public. There's also issues about importing from Canada -" oh we can't guarantee the quality of meds from Canada." (do the pharmas mean to say that they're giving the Canadians crappier medicine?) Then there's the issue of advertising. How much are they spending on advertising? Sheesh. I'll can the rant about the pharmaceutical industry before I go too far.

    I'm interested to hear about what would be some of the suggestions on how to reduce error rates. I'd also love to hear some feedback from some docs.

  • Chris Bouneff (unverified)
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    Kenji:

    The source is the Oregon Division of Insurance.

    http://www.cbs.state.or.us/external/ins/index.html

    The numbers come from payouts in 2001 by CNA and Northwest Physician's Mutual. The per doctor costs comes from dividing the number of physicians that each company insures by the total payments. The number of insured docs comes from testimony before the House Judiciary Committee during the 2003 session when the OMA was pushing seven bills to curb consumer rights. The hearings were in March; you may still be able to hear the testimony via the Legislature Website, which I usually get to through http://www.oregon.gov. Try around March 10 to 13 or so. I seem to remember that’s when the hearings were.

    Your statement that "a lot of doctors will simply pay someone who complains about a 'bad procedure' even though the patient gave informed consent and was informed of all the risks" is a complete fallacy. It may happen, but it is very rare even in this imperfect system.

  • Shawn Dickey (unverified)
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    We really need to keep SAIF out of any solution to the medical malpractice problem. SAIF has given Oregonians reasons to be mistrustful of it, and it lacks the correct knowledge base to deal with medical malpractice. Don't use a hammer to install a screw, please!

    I too like the idea of a non-profit professional liability fund modeled after the Oregon PLF for lawyers. The commentary I see suggests that doctors should police their own, and develop safer methods. That sounds like a function that the PLF helps fill for lawyers. If an attorney thinks she has a potential malpractice problem, a call to the PLF can often result in a solution. I see no reason why doctors can't take a similar approach on the front end and be proactive, especially since some groups (anesthesiologists) apparently already do.

    And just to add my two cents to the idea of capping jury awards: I wholeheartedly oppose caps. I don't have any current statistics, but those I see quoted are on par with information I have seen before. People who have been hurt are not getting rich from doctors. The nuisance suits that are currently complained of could be handled readily by a professional liability fund - in fact, the fund could have some kind of mediation or arbitration system designed to be an alternative to court, which might discourage the questionable claims in the first place.

    Shawn Dickey UO Law Class of 2004

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    Thanks for the info Chris. I'll take a look see next week.

    Is taking the per doctor cost really accurate though? I mean if you do a straight division, would the figures accurately reflect whether there are a smaller number of doctors costing the system more? In terms of the $100,000 figure do you know whether that is a high limited to a few doctors (based on claim history or speciality) or whether that is a widespread figure? (Sorry to be such a pain... it's the lawyer in me I can't seem to get rid of.)

    I wouldn't call my statement that "a lot of doctors will simply pay someone who complains about a 'bad procedure' even though the patient gave informed consent and was informed of all the risks" a fallacy. It's supported by anecdotal evidence. I don't know what the rate would be in the wider population but I do think it is a factor that cannot be discounted. But... I think you can blame both patients and docs on this one. Doctors sometimes don't explain the risks in procedures well enough and patients sometimes only hear what they want to hear.

    Also, Shawn... congrats on finishing up at UO- (you're so lucky to have had all 3 years in the new law school.) As I said before, SAIF would only provide excess insurance above certain limits. The actual claim would be dealt by special panels (see original post for composition). Remember that SAIF is already involved with medical malpractice with the Rural Physician Malpractice Insurance Subsidy Program.

    The interesting thing about SAIF is that it is run like a business. It is a quasi independent state corporation. People may complain that they "wasted" money on consulting fees to Neil and lobbying... but again, it's what private corporations do. (Look at Liberty for example) Not that I condone the behavior, but the only folks who can complain about it are really the businesses who pay premiums. Remember, SAIF doesn't receive any general fund dollars.

    <h2>What I'm suggesting is an alternative process for medical malpractice claims- it would be akin to a mandatory arbitration (though there is always the ability for mediation)- with appeal rights to appellate courts- not limitations on awards.</h2>

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