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81–491CC 2002

HARMING PATIENT ACCESS TO CARE: THE

IMPACT OF EXCESSIVE LITIGATION

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

JULY 17, 2002

Serial No. 107–127

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE 

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman 

MICHAEL BILIRAKIS, Florida 

JOE BARTON, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

JAMES C. GREENWOOD, Pennsylvania 

CHRISTOPHER COX, California 

NATHAN DEAL, Georgia 

RICHARD BURR, North Carolina 

ED WHITFIELD, Kentucky 

GREG GANSKE, Iowa 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES ‘‘CHIP’’ PICKERING, Mississippi 

VITO FOSSELLA, New York 

ROY BLUNT, Missouri 

TOM DAVIS, Virginia 

ED BRYANT, Tennessee 

ROBERT L. EHRLICH, Jr., Maryland 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

ERNIE FLETCHER, Kentucky 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RALPH M. HALL, Texas 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

PETER DEUTSCH, Florida 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

TOM SAWYER, Ohio 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

KAREN MCCARTHY, Missouri 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

THOMAS M. BARRETT, Wisconsin 

BILL LUTHER, Minnesota 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

CHRISTOPHER JOHN, Louisiana 

JANE HARMAN, California 

DAVID V. MARVENTANO, Staff Director 

JAMES D. BARNETTE, General Counsel 

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON HEALTH

MICHAEL BILIRAKIS, Florida, Chairman 

JOE BARTON, Texas 

FRED UPTON, Michigan 

JAMES C. GREENWOOD, Pennsylvania 

NATHAN DEAL, Georgia 

RICHARD BURR, North Carolina 

ED WHITFIELD, Kentucky 

GREG GANSKE, Iowa 

CHARLIE NORWOOD, Georgia 

Vice Chairman 

BARBARA CUBIN, Wyoming 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES ‘‘CHIP’’ PICKERING, Mississippi 

ED BRYANT, Tennessee 

ROBERT L. EHRLICH, Jr., Maryland 

STEVE BUYER, Indiana 

JOSEPH R. PITTS, Pennsylvania 

W.J. ‘‘BILLY’’ TAUZIN, Louisiana 

(Ex Officio) 

SHERROD BROWN, Ohio 

HENRY A. WAXMAN, California 

TED STRICKLAND, Ohio 

THOMAS M. BARRETT, Wisconsin 

LOIS CAPPS, California 

RALPH M. HALL, Texas 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

PETER DEUTSCH, Florida 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

JOHN D. DINGELL, Michigan, 

(Ex Officio) 

(II) 

2

C O N T E N T S 

Page

Testimony of: 

Anderson, Richard, CEO, Doctor’s Company ................................................. 84

Court, Jamie, Foundation for Taxpayer and Consumer Rights .................... 92

Fine, Stuart H., CEO, Grand View Hospital .................................................. 50

Hollier, Lisa, LBJ General Hospital, Department of OB/GYN ..................... 26

Hurly, James, American Academy of Actuaries ............................................. 101

Plunkett, Travis, Consumer Federation of America ...................................... 108

Roberts Sam, on behalf of the American Academy of Family Physicians ... 40

Schwartz, Victor E., Shook, Hardy & Bacon .................................................. 117

Townsend, Lauren, Coalition for Consumer Justice ...................................... 43

Visco, Fran, National Breast Cancer Coalition .............................................. 34

Material submitted for the record by: 

American Academy of Dermatology Association, prepared statement of ..... 143

American Academy of Family Physicians, prepared statement of ............... 144

American Academy of Otolaryngology—Head and Neck Surgery, Inc., 

prepared statement of ................................................................................... 145

American Association of Orthopaedic Surgeons, prepared statement of ..... 147

American College of Physicians, prepared statement of ............................... 148

American Dental Association, prepared statement of ................................... 150

American Health Care Association and the National Center for Assisted 

Living, prepared statement of ...................................................................... 151

American Osteopathic Association, prepared statement of ........................... 153

American Society for Clinical Pathology, prepared statement of ................. 156

American Society of Anesthesiologists, prepared statement of .................... 157

Bleier, Robin A., letter dated July 19, 2002 ................................................... 158

National Medical Liability Reform Coalition, prepared statement of .......... 158

(III) 

(1)

HARMING PATIENT ACCESS TO CARE: THE 

IMPACT OF EXCESSIVE LITIGATION 

WEDNESDAY, JULY 17, 2002

HOUSE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, SUBCOMMITTEE ON HEALTH, Washington, DC. 

The subcommittee met, pursuant to notice, at 10 a.m., in room 

2123, Rayburn House Office Building, Hon. Michael Bilirakis 

(chairman) presiding. 

Members present: Representatives Bilirakis, Barton, Greenwood, 

Deal, Whitfield, Ganske, Norwood, Wilson, Pickering, Bryant, 

Buyer, Brown, Waxman, Strickland, Barrett, Capps, Pallone, 

Deutsch, Eshoo, Stupak, and Wynn. 

Also present: Representatives Cox and Fletcher. 

Staff present: Patrick Morrisey, deputy staff director; Steven 

Tilton, health policy coordinator; Cheryl Jaeger, majority professional staff; Eugenia Edwards, legislative clerk; Jonathan Cordone, 

minority counsel; and Bridgett Taylor, minority counsel. 

Mr. BILIRAKIS. Can we please take our seats? I call this hearing 

to order. I’m advised that there probably will be a vote at 10:30, 

so we’ll try to get in as many opening statements as we can. 

I’d like to thank our witnesses for appearing before the subcommittee today. This subcommittee certainly values your expertise and we’re grateful for your cooperation and attendance. 

Today, the Health Subcommittee is going to focus on how the 

current medical liability system is harming patient access to care. 

The United States is facing a crisis that in the end is going to 

harm patients. One has to look no farther than my home State of 

Florida where some obstetricians/gynecologists are paying in excess 

of $200,000 per year for their liability insurance. Or Mississippi, 

where neurosurgeons have been leaving the State to practice in 

Louisiana which has significantly lower insurance premiums. 

The most disturbing indication of the severity of this crisis, however, might in Las Vegas, where the county-operated trauma center 

was forced to close because the Center’s trauma surgeons could no 

longer afford to risk their livelihoods in this climate of runaway 

litigation. I’m advised that the trauma center recently reopened, 

which will spare the city from the dubious distinction of being the 

largest metropolitan area of the United States without a trauma 

center. 

Although it would be easy enough to gauge the severity of this 

crisis just by reading the newspapers, I decided to hold a field 

forum in my District to hear from providers about how this issue 

2

is affecting how they practice medicine. The event highlighted the 

scope of the problem and the urgent need for congressional action. 

As one solo practitioner remarked, ‘‘it is imperative that we act 

now to stem this crisis. If no action is taken soon, and if the 

present trends are allowed to continue, there will be no medical 

system left to save.’’ I’m sure that everyone here today believes that we’re facing a crisis and that patients are going to find it increasingly difficult to 

find an OB/GYN or a neurosurgeon or a trauma surgeon, unless 

the Federal Government intervenes. And I know that there are 

very different ideas about what format the solution should take 

and that’s what this is all about. 

While I have no doubt that many of my colleagues will use today’s hearing to advocate for increased Federal regulation of insurance companies, I would point out that this industry is already regulated at the State level. In fact, State insurance commissioners already approve each premium rate before it goes on the market. I 

will say, however, that that is a very legitimate and merited concern and topic and it’s something that we certainly should focus on. 

And this is the first of a series, certainly of two or three hearings, 

in any case, and we will be emphasizing that aspect of the situation more so in future hearings. 

Instead of talking about increased regulation of an already regulated industry, however, I would prefer that we look to models that 

we already know work. For example, in 1975, California enacted 

the Medical Injury Compensation Reform Act or MICRA. That’s in 

1975. The defining feature of MICRA is the limits it places on noneconomic damages. This reasonable law has done a commendable 

job of protecting patients’ rights, while also keeping insurance premiums at a relatively low level. 

The United States has seen steady increases over the past several years in both jury awards and malpractice suits and the average amount paid by insurance companies for claims merely alleging 

malpractice. However, California has remained relatively immune 

to the pressures brought about by these trends, largely thanks to 

MICRA. It is a time tested system that certainly seems to work 

and we should not be discarding any consideration of that type of 

a process. 

I’m a co-sponsor of legislation H.R. 4600 that closely mirrors this 

ground breaking law. Without delving into the specifics of this particular bill, I do believe that it represents a common sense solution 

to this problem that respects the States’ traditional role as regulators of the insurance industry. Although I’m aware that many 

members of this subcommittee have some strongly held views on 

this issue, I would hope to use this hearing to take advantage of 

our witnesses’ expertise and explore this issue in depth. Hopefully, 

we will leave with a better understanding of why this problem exists and what our role is in identifying and implementing a solution. 

While I often say that not every problem requires action by the 

Federal Government, this one apparently does. And I believe we 

can stabilize our out of control medical liability system without 

harming the ability of patients to recover adequate compensation 

when they have been harmed. 

3

And I’ll now yield to the ranking member, Mr. Brown, for his 

opening statement. 

Mr. BROWN. I thank the chairman. I’d like to thank all of our 

witnesses for joining us this morning. 

I share your interest, Mr. Chairman, in this issue. A physician 

friend of mine in Ohio was recently informed that his medical malpractice carriers are leaving our State. He tells me many carriers 

have either limited their coverage or left the State. The least expensive premium he has been quoted represents a 300 percent increase over his current year premium. There’s something wrong 

with this picture and I’m pleased the subcommittee is looking into 

it. 

I assume, Mr. Chairman, that the purpose of this hearing is to 

take an objective look at the diversity of factors that could be contributing to the spike in medical malpractice insurance premiums 

and the gaps and access to this type of coverage. I’m assuming the 

underlying goal is to make informed decisions about how best to 

remedy these problems and to do that, we must take into account 

the full range of factors contributing to the current situation. Not 

only do we have a responsibility to the doctors who are reeling at 

the size of medical malpractice premiums and in some cases trying 

to react to an unavailability of coverage, we also have a responsibility to patients who expect and deserve access to high quality 

health care. 

Malpractice insurance shouldn’t hinder access to high quality 

care. It should help ensure access to high quality care. 

Harming patient access to care, the impact of excessive litigation, 

the title of this hearing, implies that this hearing is perfunctory, 

that we’ve already drawn a conclusion about what is causing the 

spike in medical malpractice insurance premiums. Doctors in my 

District, who justifiably wonder whether the recent premium increases are actually the insurance industry’s attempt to recoup 

stock market losses or perhaps bad management decisions by the 

insurance company. Perhaps, instead of calling this hearing ‘‘harming patient access to care, the impact of excess of litigation’’, we 

should title the hearing, ‘‘harming patient access to care, the impact of corporate abuse on stock market volatility and insurance 

profit objectives’’ or maybe we should call the hearing, ‘‘harming 

patient access to care, the impact of huge insurance companies’

CEO salaries’’ or perhaps we should call the hearing ‘‘harming patient access to care, the impact of the insurance underwriting 

cycle.’’

The point of this, Mr. Chairman, is that doctors have raised valid 

concerns about medical malpractice insurance premiums, about access to medical malpractice coverage, about the nature of medical 

malpractice litigation itself. But the current medical malpractice 

crisis and it is undoubtedly a crisis because of its effect on patients, 

first and foremost, and on physicians, importantly, the current crisis should not be used as an excuse to decimate a system that protects patients and doctors. We shouldn’t use this hearing as an excuse to beat up on the insurance industry or to demonize lawyers 

or to trivialize the concerns of providers or dismiss the legitimate 

rights of patients. The doctors in my District and others around the 

4

country whom I know and whom I respect, have no problem with 

being held accountable as long as the system is fair. 

That brings me back to my doctor friend in Northeast Ohio. I 

wouldn’t call a 300 percent premium increase fair. I would call it 

an outrage. I hope and expect that today’s witnesses can help us 

build a factual basis for doing something about it, not simply to exploit preconceived notions. 

Thank you, Mr. Chairman. 

Mr. BILIRAKIS. And I thank the gentleman. I would say to the 

gentleman that there is merit in everything that he has said and 

as I’ve indicated, this is a first of a series of hearings. I can’t tell 

you how many we will have, but certainly we will look into some 

of the areas we are not looking into today. 

Mr. Greenwood. 

Mr. GREENWOOD. Thank you, Mr. Chairman. I thank you for 

holding the hearing on access to care for patients and the need for 

medical liability reform. 

As you know, I’m deeply committed to solving this problem which 

is affecting both of our States and impacting health care across the 

Nation. A few weeks ago at the committee field event in your District, we heard about the dire circumstances that your constituents 

find themselves in throughout Florida. 

And let me tell you about how this is impacting care in Bucks 

County in Southeastern Pennsylvania. Philadelphia, and the surrounding five county area with its world-class hospitals, medical 

schools, doctors and other institutions is one of the Nation’s and I 

dare say the world’s crown jewels in health care. However, the fabric that holds together these doctors, patients and institutions has 

become more than frayed. It has begun to tear and disintegrate before our eyes. 

The long term damage caused by the exorbitant cost and concomitant lack of medical liability insurance in Pennsylvania has become incalculable. Let me give you an example. Recently, Methodist Hospital in South Philadelphia, was forced to close down its 

obstetrics practice which has been in the present in the hospital 

since 1892. 

Mr. Chairman, let me read for you from several letters I received 

from constituents who describe this crisis most poignantly. This 

came from a woman in the Philadelphia area, my District. ‘‘I was 

born and raised in the Philadelphia area, an area that used to be 

known for excellent medical care. Eight months ago I again found 

a wonderful OB/GYN office. The doctors are wonderful, respectful, 

well educated and overall just great. They delivered my beautiful 

baby girl for me and I could not have been happier with their care. 

I referred my sister who is currently pregnant and due in a few 

short weeks to them. She too, is satisfied with them. But 2 weeks 

ago we were outraged to discover that they were closing their doors 

at the end of May 2002. My sister who has been going to their office for all of her prenatal care visits, cannot even have her after 

delivery exam by the doctor who delivers her first child. I will not 

be able to return to them for subsequent prenatal care or even normal GYN care. This is an outrage. It is also the second physician’s 

office I’ve been to in the last couple of years that has been forced 

to close due to medical liability costs. Another office that I was 

5

aware of closed as well for the same reason. I can’t even switch to 

see them because they no longer exist within our State. I don’t 

know who I can even go to now. No other OB/GYN physicians practice in my area any more. I plan to be in Doylestown area for quite 

a while and it would be a disaster to have families leaving the 

State so that they know they will be cared for properly in the event 

of an emergency medical situation.’’ Here’s another letter. This is from the husband of a physician. ‘‘My family has a 200-year history in lower Bucks County and my 

wife and I decided to stay local. After my wife’s residency at Penn 

and after four grueling years there and another at the MCP 

Honnoman Department of Neurology, she entered a group practice 

of neurology in the area. Her time there finished, she is trying to 

start her own practice, focusing on the underserved members of the 

lower Bucks senior population, those in nursing homes, long-term 

care facilities and home bound. Her desire to serve these patients 

was inspired not by a business decision, but for a true concern for 

those who find it difficult to get the quality of neurological care she 

has been trained to provide. Five months ago after sending her 

first application for insurance she is still not insured. The State administered JUA, Joint Underwriting Association, is not an option 

for a new physician starting out and the cost is prohibitive.’’ Mr. Chairman, this crisis affects more than just patients and 

doctors. Recently, the orthopedics practice that was to cover the 

Doylestown Hospital emergency room on a weekend found that its 

insurance coverage would lapse. After months of searching, the 

hospital then had to find other practices to cover the ER. Other orthopedics practices are also having trouble finding insurance in the 

area. 

What happens when we can’t find orthopedists to treat the broken bones and dislocated joints in the ER on weekends? Worse, St. 

Mary’s Medical Center, the only trauma center in Bucks County, 

faced closing its doors last fall since it could not find insurance. 

Luckily, the State came through with emergency coverage. However, this is not sustainable in the long run. Las Vegas, for the past 

few weeks, as we’ve seen in the news has not been so lucky. 

This is about patients, doctors and health care institutions where 

care is delivered. This is not merely a crisis. It is more than that. 

It is beyond a meltdown. It is a full-blown catastrophe that is having a damaging and detrimental impact on the health care of Pennsylvania and millions of Americans. 

Worse, this catastrophe will result in people dying because trauma centers will continue to close their doors or emergency rooms 

will be unable to provide care since doctors won’t be available. I am 

saddened and angered that this catastrophe is having permanent 

and long term effects, weakening hospitals, debilitating medical 

schools, reducing the number of doctors who practice and destabilizing health care institutions. 

The cause, Mr. Chairman, is clear, unfettered litigation. The median malpractice by jury awards rose from $500,000 in 1995 to 

$800,000 in 1999. We need reforms now. 

Mr. Chairman, the reforms that I have proposed, along with you, 

Chris Cox, John Murtha and a number of other bipartisan co-sponsors are common sense, time tested reforms. They follow the model 

6

used in California and a number of other States. This bill is fair 

and straight forward. The bill, H.R. 4600, the bipartisan Health 

Care Act includes reforms to make medical malpractice insurance 

affordable again and encourage health care practitioners to maintain their practices and to continue to serve patients. 

Thank you, Mr. Chairman. 

Mr. BILIRAKIS. I thank the gentleman. Mr. Pallone, for an opening statement. 

Mr. PALLONE. Thank you, Mr. Chairman. We can tell from the 

title of this hearing that the supporters of H.R. 4600 believe that 

excessive litigation is the precise direct reason for the current malpractice crisis and that by passing legislation that limits non-economic damages to $250,000, the problem will be easily solved. 

Mr. Chairman, I think this is far too simplistic. For example, you 

have the chart up there, but in 1975, California enacted the Medical Injury Compensation Reform Act into law that has severely 

limited the rights of patients injured by medical malpractice. From 

what I understand, California’s medical malpractice liability premiums actually increased by 190 percent in the 12 years following 

enactment of that law. 

I’d also like to add that medical malpractice insurance profits 

have been 10 times greater than the profits of other lines of insurance in California. Skyrocketing malpractice insurance premiums 

have been particularly acute in high risk specialties. This is clearly 

because inherent in high risk practices are bad outcomes that are 

beyond the control of providers. Further, this is compounded by the 

fact that medicine is changing in the direction of becoming more 

and more complex. For example, if a 50-year-old woman goes to her 

OB/GYN and wants to have a baby, it makes a high risk specialist 

liable for an even higher risk pregnancy where the chances of a bad 

outcome are dramatically increased. The OB/GYN is not going to 

turn the patient away or tell her that it’s not possible to have the 

baby, but my point is that although the face of medicine is changing, we have yet to examine how insurance needs to be changed in 

order to reflect the rapid advancements taking place in various 

fields of medicine. 

Aside from this example, if we take a surface level look into 

other changes in health care we see that HMOs for the last 15 to 

20 years have entered the market. Doctors have been subject to 

certain limitations under HMOs that may prevent patients from receiving the best care possible from their doctors. Is there a direct 

correlation between care under HMOs and bad patient outcomes? 

Well, it’s something we have to look at. 

I’m also curious, given the atmosphere of corporate malfeasance 

which we’ve seen so often in the last few weeks whether bad accounting or bad business judgment on the part of insurance companies has anything to do with dramatic rises in medical malpractice 

premiums. 

Mr. Chairman, I propose legislation the Federal Medical Malpractice Insurance Stabilization Act of 2002 that would create a national reinsurance fund. This proposal mandates the Secretary of 

Health and Human Services to establish a program where insurance companies pay into a Federal fund and in times of crisis these 

funds would be made available to those companies in an effort to 

7

provide stability in the market for medical malpractice insurance 

coverage. 

Some other ideas that my own State of New Jersey are exam- ining are deductible option of about $10,000 that would lower premiums, a risk management program for doctors that would correspond with the decrease in premiums and allowing doctors to 

make installment payments for high premiums over time without 

a penalty. 

I’m not suggesting that these are answers, but I think the title 

of this hearing, once again, shows that some on the committee just 

the cap, if you will, on damages as something that’s going to solve 

all the problems and I don’t think that’s the case. There’s no question that we have a crisis here. Certainly in my home State of New 

Jersey it is acute. We’ve had forums at my local hospitals with physicians to talk about this. We’ve had the State Insurance Commissioner in. We had a rally on the steps of the State House by physicians and other health care providers, basically begging that something be done. 

So I appreciate the fact, Mr. Chairman, that we’re having the 

hearing and that we will have others. I don’t think there’s any 

question that we need to address this. But I just hope that we can 

work together in this subcommittee and come up with sensible legislation that will effectively address the current problems with 

medical malpractice insurance and not just assume that certain aspects of tort reform are going to solve all the problems. 

Thank you. 

Mr. BILIRAKIS. I thank the gentleman. Mr. Cox? 

Mr. COX. Thank you, Mr. Chairman. The purpose of today’s hearing is to learn how to put patients first. Our health care lawsuit 

system today is destroying hospitals. It’s eliminating patient choice. 

It’s driving specialists out of entire States and out of their practices. And it’s enriching a handful of amoral trial lawyers beyond 

any level previously imagined. 

In days gone by, medicine and law were the professions. Both 

were respected. Both were considered upstanding members of the 

community. Members of both professions earn handsome compensation for their valued services. But neither doctors nor lawyers 

were paid extravagantly compared to say investment bankers. 

Today, in the early 21st century, that has changed. Doctors’ compensation by any standard is being squeezed. Hospitals are having 

trouble staying in business. OB/GYNs face such financial risks that 

many now refuse to deliver babies. Meanwhile, America is home to 

the world’s only billionaire lawyers. Many of those billions have 

been taken from the health care system and directly from patient 

settlements. 

In a national poll taken this week, lawyers rank at the bottom 

of the list, below politicians, below accountants, below CEOs, on a 

list of whom Americans can trust. 

In California, during the malpractice crisis of a generation ago, 

a Democratic legislature and a Democratic Governor, Jerry Brown, 

signed into law MICRA which regulates health care lawsuits for 

the benefit of all patients, not the lawyers. 

In California, specialists are not leaving our State. The malpractice insurance crisis so acute in other States, has not struck 

8

California. There’s a simple way to test this fact. Ask the doctors. 

In America, it’s high time we trusted our physicians, not our lawyers, with our Nation’s health care. 

Thank you, Mr. Chairman. 

Mr. BILIRAKIS. Ms. Eshoo for an opening statement. 

Ms. ESHOO. Thank you, Mr. Chairman. And good morning to all 

my colleagues and to our distinguished witnesses. Thank you for 

holding this hearing. I think it’s important to hear from a variety 

of witnesses, people that are steeped in the background that certainly Members of Congress need to hear and be made aware of. 

I agree with many of my colleagues that we have a problem and 

that it needs to be addressed. Physicians across the country are 

having trouble meeting the skyrocketing cost of malpractice insurance. We know that and that is cause for alarm. To have a stable 

health care system, we have to have a stable malpractice system. 

My father used to say at the end of the day you want the best doctors standing on one side of you and a great lawyer on the other 

side. So I don’t think that we should fall into the trap of either defending one side and damning the other or vice versa. We have to 

have strength on both sides and we have to have really a balance 

between the two. 

Just as patients need to have access to medical care and that we 

need top physicians that are going to provide the care that only 

they can, as well as their corollaries in the system, when something goes wrong, that has to be spoken to in our system as well. 

It hurts the medical practitioner in the country if there is a bad 

apple in the barrel, just as it hurts Members of Congress when we 

have bad apples in the political process as well. 

So where I disagree with some of my colleagues is in the total 

presumption, in the total presumption that the rising cost of malpractice premiums are solely due to patient litigation. We have to 

restrain ourselves a little here and we need to get more information. Is there something wrong? Yes. But I don’t think we can afford to just leap frog today. That’s why the hearing and hearings, 

subsequent hearings are very important. 

In reality, there are a whole host of factors in my view that have 

led to the increases and that the Congress has the duty to examine 

each and every one of the factors before we act. As a Californian, 

my State created MICRA and it’s been referenced in 1975. I’m 

pleased with how that law has helped to moderate malpractice premiums in our State and I know that Representative Greenwood has 

introduced legislation that’s based on the MICRA law. I’m concerned that there’s an urgency to act before understanding. We 

have to understand things before we can accept or reject, so developing, Mr. Chairman, and you’re doing that by having the hearing, 

is really important and I can’t state that enough. 

I also understand that there’s a GAO report that’s been requested on the role of market conditions and insurance company 

practices and I look forward to the results of that report and I 

think we all should. That needs to be taken into consideration as 

well. 

So the testimony of today’s excellent witnesses, amongst them, I 

think one of the real greats on behalf of women and the issues of 

breast cancer in our country, Fran Visco; with the GAO report and 

9

the data we already have on the effect of litigation on the malpractice system should really allow us to more ably and responsibly 

address this serious problem. So thanks again, Mr. Chairman and 

certainly to Mr. Greenwood whom I admire as a legislator. He’s serious. He always works to be fair and as a complete disclosure he’s 

been—I’m about to have been and still am, a partner with him on 

many pieces of legislation. 

If I have any time left, I yield back. Thank you. 

Mr. BILIRAKIS. Thank you. We have 3 minutes to make this vote, 

so we’re going to run over and make this vote. In 15 minutes to 

20 minutes at the latest we should get started again. When I get 

back into this chair, we’re going to get started. 

[Brief recess.] 

Mr. BILIRAKIS. Please take your seats. The gentleman from Kentucky, Mr. Whitfield, to give his opening statement. 

Mr. WHITFIELD. Thank you very much, Mr. Chairman, and of 

course, I’m also delighted that we’re having these hearings on this 

particularly important subject. There’s been a lot of comments 

made about the possibility that insurance companies are doing 

some gouging and so forth, but I find it interesting that last year 

the Nation’s second largest malpractice insurer had underwriting losses of $940 million, the St. Paul Companies and they announced 

that they were getting out of the insurance business, the malpractice insurance business. So if they’re making so much money, 

then why are they getting out of the business? 

An article in the Wall Street Journal indicated that the consequences of actions like that, because other malpractice carriers 

were getting out of the business, and the consequences are being 

felt by patients all around the U.S. Last year, Bolivar County in 

western Mississippi had six doctors providing obstetrical care. 

Today it has three. Obstetrics insurance for a doctor in Bolivar 

County jumped from $28,000 to $105,000 with a $25,000 deductible. In neighboring Sunflower County, all four doctors who delivered babies have quit private practice. In the northern half of the 

State last year, there were nine practicing neurosurgeons. Today, 

there are three on emergency call. 

And I could go on and on. There’s an article just a few days ago 

in my home State of Kentucky, ‘‘State losing doctors to insurance 

hikes.’’ Coverage for malpractice jumps as much as 204 percent. 

And the doctors are blaming jury verdicts for this increase. And another part of this article indicates that, for example, in Corbin, 

Kentucky, the Corbin Family Health Center lost malpractice coverage and closed down. We have doctors leaving Kentucky, going 

to Indiana because the Indiana insurance rates are much lower for 

malpractice insurance than in Kentucky and one reason that 

they’re lower is that Indiana adopted a meaningful tort reform legislation some time ago. And so there is a real difference in insurance rates between those areas where tort reform has been adopted 

and where it has not been adopted. 

So I’m delighted with this hearing. I look forward to the testimony and I yield back the balance of my time. 

Mr. BILIRAKIS. I thank the gentleman. Mr. Waxman. 

Mr. WAXMAN. Thank you very much, Mr. Chairman. I welcome 

this hearing today on the crisis of high medical liability insurance 

10

and its impact on doctors and patients around the country. The 

title of the hearing which focuses on the impact of litigation is unfortunate. It’s unfortunate because it assumes that increases in 

malpractice premiums are simply the result of the legal system out 

of control. With that conclusion which we heard during the insurance crisis of the mid-1980’s and many times since, it’s far from 

clear. We don’t know, for instance, to what extent the business 

cycle and the business practices of insurance companies have contributed to these increases. There is substantial evidence to suggest 

that rates are more closely related to these factors than to lawsuits 

and large jury verdicts. These are fundamental questions that need 

to be answered before we attempt any legislative fix for the problem and before we enact what is essentially a bill that may be considered a bailout for the insurance industry. 

In 1975, California adopted MICRA which stands for the Medical 

Injury Compensation Act. It imposed significant limitations on the 

rights of injured patients to sue and recover for malpractice-related 

injuries. For example, MICRA imposed a $250,000 cap on non-economic damages and eliminated joint liability. Some of the witnesses appearing before us today are going to tell us that MICRA 

has worked well in California and that because of that we should 

adopt legislation even more restrictive on the national level. 

H.R. 4600, for example, adopts many of MICRA’s major provisions and goes further. It extends limitations to product liability 

cases for defective drugs and medical devices and it imposes caps 

and other significant limitations on punitive damages. 

I have serious reservations about moving quickly to adopt limitations along these lines. Insurance regulations is an area that Congress has traditionally left to the States and for good reason. It’s 

a complex business. It varies market by market and community by 

community. We do not license medical doctors and other health 

professions. That’s done at the State level. One size does not fit all. 

We will hear testimony that raises serious questions about the 

California experience from Jamie Court, the Executive Director of 

the Foundation for Taxpayer and Consumer Rights who will testify 

that MICRA has prevented the courts from awarding adequate 

compensation to many deserving victims. He’s also expected to testify that MICRA has given a windfall to insurance companies in 

California and it has not delivered the reductions it promised for 

medical malpractice insurance. He will contend that the malpractice premiums in California have stayed close to premium 

trends around the country, and in fact, between 1991 and 2000, 

premiums grew at a rate of 3.5 percent which is higher than the 

national average of 1.9 percent. 

According to Robert Hunter, who is an actuary from the State of 

Texas and a former Texas Insurance Commissioner, in the years 

since MICRA was enacted, medical malpractice insurers have profited more from their business in California than in any other State. 

Since 1989, California medical malpractice insurers paid out less 

than 50 cents in claims to every premium dollar they took in. In 

other parts of the country, he contends that malpractice insurers 

typically paid out more than two-thirds of every dollar taken in 

through premiums. In addition, California medical malpractice insurers earn higher operating profits, that is profits earned as a perVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 W:\DISC\81491 81491
11

centage of premiums than to medical malpractice insurers outside 

the State. 

In short, there are a number of serious questions to sort through. 

We should be careful before we rush to use any one model for the 

entire country. 

I look forward to the testimony that we’re going to receive from 

witnesses today and to work with my colleagues on this very difficult issue. 

Mr. BILIRAKIS. I thank the gentleman. Dr. Ganske. 

Mr. GANSKE. Thank you, Mr. Chairman, for holding this hearing. 

I think this is a very important issue. In my home State of Iowa, 

we are not in a crisis yet. We are probably about 12 to 18 months 

from that. 

Let me give you a real life example. A woman, family practitioner in Iowa, gets called to the emergency room because a Hispanic woman who has received no prenatal care has shown up in 

labor. Out of the goodness of her heart and her professional ethics, 

this woman physician goes to the hospital, delivers a baby, no problems during the delivery. Baby is handed over to the neonatal unit. 

Subsequently becomes septic and dies. Needless to say, very shortly 

afterwards, this woman family physician is named in the lawsuit, 

for basically her pro bono work. 

Mr. Chairman, I will tell you we have worked on this issue. How 

many times have we voted on this now in the House in the last 

8 years? I think we’ve passed this at least twice, medical mal. tort 

reform, if not three times. And we’ll do that again. 

The real problem has been the hold up in the U.S. Senate in 

terms of getting something done on this. Now I don’t know whether 

insurance companies, investments in the tech bubble have had 

some effect on their ability to cap their reserves. That’s something 

we can find out easily, but I do know this, I know that the incidence of the types of lawsuits that this woman physician experienced recently in Iowa are driving insurance rates. And it is something we need to do something about or I’ll tell you, if you’re looking at going to Las Vegas, you may be gambling a little bit more 

than your money, if you have an accident. And this is happening 

all over the country. 

So thank you, Mr. Chairman, for holding this hearing. I look forward to learning from it. 

Mr. BILIRAKIS. Thank you, Dr. Ganske. Mr. Stupak. 

Mr. STUPAK. Thank you, Mr. Chairman, and thank you for holding this hearing today on the impact of litigation on medical malpractice insurance premiums. No doubt about it, this is an issue 

that merits our attention. We need today to sort out fact from fiction and to help us understand the real underlying reasons for 

those steep premium hikes. 

I’m concerned, however, that some of us here have already made 

up our minds as the reason for these hikes. Has blame already 

been placed? Let’s look no further than the topic and title of today’s 

hearing, ‘‘Harming Patient Access, the Impact of Excessive Litigation.’’ In this area, as in so many other areas, the right to sue is being 

attacked as the root of all evils and stopping Americans from suing 

is being proposed as the magic cure all. In fact, when you take 

12

away the incentive to behave or to be sued, you eliminate deterrence. This is a proven fact. I recommend to this committee in light 

of what the last couple of speakers on the other side of aisle have 

said, look at two Wall Street Journal articles written less than a 

month ago. First one on June 24, it says Wall Street Journal, June 

24, insurers’ price wars contributed to doctors facing soaring costs. 

Lawsuits alone didn’t inflate malpractice premiums. Reserves at 

St. Paul distorted pricing picture in the 1990’s. 

I also recommend another article, again on June 24. Wall Street 

examines medical malpractice liability crisis. Finds it is insurance 

industry generated. Insurance company executive admits the crisis 

is self-inflicted. It goes on to say the insurance industry’s questionable accounting exposed. Sounds like Enron and WorldCom to me 

all over again, so we’re going to blame the victims of malpractice. 

We’ve seen this happen with disastrous results with securities 

litigation that we passed, the Private Securities Litigation Reform 

Act of 1995. Accountants and executives had no incentive to be 

good corporate citizens and look what’s happened since then. The 

largest corporate bankruptcies in American history. And it’s not the 

fat cats that are paying, Mr. Chairman. The people who are paying 

are our constituents and now we have a proposal to do the same 

for those harmed by medical mistakes. 

H.R. 4600 introduced by the distinguished gentleman from Pennsylvania, Mr. Greenwood, I believe would do a similar injustice to 

medical consumers as the Private Securities Litigation Reform Act 

did to shareholders and investors. As we’ve done for shareholders, 

we’re now proposing to do for patients. I commend Mr. Greenwood 

for attempting to find a solution, but this bill is not the answer. 

This bill is a one size fits all approach to a complex issue. Experts 

on this issue in front of us today will testify that stopping lawsuits 

and capping damages is not the magic bullet. In fact, the insurance 

companies themselves have stated unequivocally that tort reform 

will not reduce premiums and will not fix the medical malpractice 

liability system. 

In my home State of Michigan, many of these reforms that have 

been listed in this bill before, have been done in Michigan, and yet 

Michigan is listed as one of these critical crisis States for malpractice reform. 

I understand and I sympathize with the doctors facing huge premiums, but this bill is not the answer they’re seeking. Careful, 

thoughtful consideration of all factors contributing to this dilemma 

is what we’re here to do today. I’m particularly bothered by section 

7(c) in this bill found on page 10 and it states on line 17, subsection (c) ‘‘no civil monetary penalties for products that comply 

with FDA standards.’’

We’ve seen this over and over again, much like the PLSRA. 

Again, go back to Los Angeles Times, December 20, 2000, headline, 

‘‘How a New Policy Led to Seven Deadly Drugs.’’ Medicine. Once 

a Wary Watchdog, the USFDA Administration set out to become a 

partner of the pharmaceutical industries.’’ Since 1997, these drugs 

have been approved with expedited process, only to find they have 

to be certainly withdrawn. According to the adverse events reports 

filed with the FDA, the seven drugs were cited as suspects in 1002 

deaths. It goes on to say that a total of 10 drugs have been pulled 

13

from the market in just the past 3 years for safety reasons, including three pills that were approved before the shift that took hold 

in 1993. That was PADUFA. Never before has the FDA overseen 

the withdrawals of so many drugs in such a short period of time. 

More than 22 million Americans, about 10 percent of the Nation’s 

population took these drugs and the drug company himself benefited to the tune of over $5 billion before they were withdrawn. So 

the answer is is not to restrict to FDA or say because the FDA approved a drug it is suddenly immune from any kind of tort liability 

or certainly restrict the rights of patients to bring lawsuits. 

Look, we need to look at our past mistakes on tort reform, 

PLSRA and some of these other bills that have passed through this 

committee and learn from them. 

So Mr. Chairman, I look forward to hearing from our witnesses 

today, looking forward to working with you and the gentleman 

from Pennsylvania, Mr. Greenwood, and let’s really look at the real 

cause of the problem and not just artificially go after medical malpractice as the answer. 

Mr. BILIRAKIS. The gentleman’s time has expired. Dr. Norwood. 

Mr. NORWOOD. Thank you very, Mr. Chairman. As we all know, 

all of us, both sides, that we are in the midst of a full-blown health 

care crisis. I like to liken it to a perfect storm where many storms 

are coming together. One of those storms could very well be the insurance industry and I want to know more about that and this 

committee is going to find out. But one of the storms we do know 

a lot about and are for certain of is the liability crisis and it would 

be of help if everybody on this committee would recognize that that 

is part of the problem. It may not be the entire part of the problem, 

but it is one that we do have a lot of information on. 

I don’t know any physician or health care provider who has not 

witnessed drastic increases in their insurance premiums over the 

past year. Whether these rate increases are 30 percent or 300 percent, the bottom line is that these premium increases threaten the 

physicians’ ability to continue to practice, especially specialty physicians such as OB/GYN. But while the financial burden forced on 

to physicians is the most obvious symptom of this crisis, the greatest harm that is occurring is patient access and patient care. On 

July 3, the trauma center of the University Medical Center in Las 

Vegas closed its doors as Dr. Ganske alluded to. Facing a 93 percent premium hike, what are the surgeons going to do? They had 

to walk out, obviously. Casino floor defibrulators has become the 

closest thing to emergency care as a 10,000 square mile was left 

without a trauma center. 

We have an opportunity here before us to defend patients’ access 

to health care and shore up the solvency of the health care industry. I realize the complexity and the multitude of issues impacting 

this medical liability crisis, regardless of what anybody on this 

committee says and the surplus of editorial page banner that’s 

going on, but the issue of tort reform is front and center. We know 

a lot about that, to have unlimited liability is part of the problem 

and it deserves all of our attention. 

We have clear and convincing evidence of the overwhelmingly 

positive results of medical liability reform for 25 years’ worth of 

data under California’s MICRA. This reform measure is centered 

14

on limiting non-economic damages and restricting abusive lawyer 

contingency fees. Let’s be clear, non-economic damages are rewarded to compensate for pain and suffering or other nontangible, 

unquantifiable, nonmonetary losses. And punitive damages are left 

to a sliding scale. 

I strongly believe in fair compensation to patients injured by 

health care provider negligence, but not in excess of these great 

jury verdicts. But of course, when we talk about limiting run away 

jury awards, we’re also talking about limiting runaway fees for 

lawyers which form the only true opposition to this legislation. The 

only opposition to this legislation. The medical liability industry is 

caught in a vicious cycle that hurts patients any way you cut it. 

Let’s fight for patients’ access to care and patient care. 

Mr. Chairman, I look forward to the testimony of our witnesses 

today. I look forward to our other hearings as we look at different 

parts of this storm and hopefully we can come together to improve 

the health care in this country. 

Thank you, Mr. Chairman. 

Mr. BILIRAKIS. I thank you, Doctor. Mr. Strickland. 

Mr. STRICKLAND. Thank you, Mr. Chairman. There is trouble in 

the medical malpractice insurance industry. That much is clear. I 

have heard from doctors in my District since early this year about 

spikes in costs and fears that more serious problems in the neighboring States of Pennsylvania and West Virginia will be replicated 

in Ohio. 

As a Representative of a rural area, I am particularly concerned 

about this issue. My District already suffers from chronic access 

problems and I am very worried that a malpractice crisis in which 

doctors simply cannot buy insurance would exacerbate this problem 

to the point of emergency. I received a letter last week from a physician in my District who told me that his malpractice insurance 

has gone from $12,000 last year to over $45,000 this year. That obviously is not sustainable. But the question we must ask and answer is why? 

As many of the witnesses before us today will confirm and discuss, a variety of factors have contributed to the current crisis. Certainly, we should consider what tort reforms may be needed, but 

as has been mentioned, the recent Wall Street Journal article illustrates other problems that may be serious factors in this escalating 

problem. 

Many of my colleagues are championing this H.R. 4600 bill, a bill 

that seeks to address the problem in medical malpractice using just 

one approach, tort reform. A look at research from across the country though finds that the States have dramatically different situations with respect to medical malpractice systems demonstrating 

how complicated this industry is. It is wrong to think that we can 

assign only one size fits all solution. That will adequately address 

this crisis. In fact, I fear that H.R. 4600 will not fix the problems. 

I worry that the bill may though hurt patients. Specifically, I fear 

that this bill could (1) violate States’ rights by stripping away State 

law and Federalizing a new body of law and procedure; (2) set a 

very short and unfair statute of limitations that could actually increase the number of lawsuits that are filed because people may 

rush to file before their window of opportunity expires; and (3) I 

15

fear that H.R. 4600 would create laws that have already been 

found unconstitutional such as the limit on non-economic damages. 

Even more importantly though, H.R. 4600 does absolutely nothing, 

nothing to address the reforms that are needed in the insurance industry to repair the current crisis and ensure that it doesn’t happen again. 

I am particularly concerned about the cap on uneconomic damages. I find this cap egregious because it limits access to our legal 

system. It disproportionately caps damage awards for women and 

others who earn low incomes. 

In addition, there is no evidence that these caps will actually reduce malpractice rates. The California situation has been alluded 

to, a $250,000 cap on economic damages has been in place since 

1975 and still the State of California has premiums that are 56 

percent higher than in my State of Ohio which doesn’t currently 

have caps. Limiting access to our legal system and place the burden of this limited access disproportionately on the most vulnerable 

in our society won’t ensure that malpractice rates stop rising. All 

of these reasons are why I am working with some of my colleagues, 

including Representative Sandlin to craft a thoughtful legislative 

response to malpractice crisis that takes all dimensions of the crisis 

into account including tort reform and insurance industry reforms. 

We must look critically at all of these systems and the problems 

that are plaguing them instead of believing that a single issue as 

addressed in H.R. 4600 will do the job. The problem is far too serious for us to do that and the health of all Americans depends upon 

the actions that we are likely to take in this committee. 

Thank you, Mr. Chairman, with this hearing and I yield back 

whatever time I—— Mr. GREENWOOD. Mr. Chairman, will the gentleman yield the 

balance of his time just for one quick correction? 

Mr. STRICKLAND. Yes, I would. 

Mr. GREENWOOD. The gentleman from Ohio I think misspoke 

when he said that California caps economic damages. 

Mr. STRICKLAND. Non-economic damages. If I misspoke, thank 

you for correcting that. 

Mr. BILIRAKIS. Dr. Fletcher for an opening statement. 

Mr. FLETCHER. Thank you, Mr. Chairman, and I appreciate your 

allowing me to sit in on this hearing and I want to thank Mr. 

Greenwood for his work on H.R. 4600. 

I don’t think there’s any question that runaway lawsuits have 

contributed to the increased cost of health care. There may be other 

problems that have additionally increased the cost of health care, 

but I don’t think there’s any question it’s had an impact on both 

increased cost of health care as well as access to health care. 

Let me say that I don’t believe any of us want to take away the 

appropriate redress that patients who have been injured by negligence have in this Nation. I don’t think there’s any question that 

we all believe that we need to certainly rid our communities of 

those who would practice negligently and that if physicians or 

other health care providers do such, that they need to be held accountable and that patients need to be compensated for that injury. 

But let me say what the runaway lawsuits have done. They have 

increased the cost of health care. They’ve ciphoned money from 

16

health care and from patient care and they’ve gone into the pockets 

to make personal injury lawyers very, very wealthy. Now I don’t 

have any problem with people being successful in life, but we’ve got 

to realize that the money comes out of health care and a large portion of it goes into personal injury lawyers’ pockets. 

Second, if you look at the IOM report, and you look at other studies, there’s a physician-attorney at Harvard named Troy Brennan 

who’s done studies to show that the runaway liability we have does 

not improve the quality of health care. And in fact, in promoting 

defensive medicine may actually have a deleterious effect on the 

quality of health care. It may worsen the quality of health care. 

Third, California rates and people have talked about California, 

actually, there’s been 125 percent increase in malpractice costs in 

California versus 425 percent across the United States in the same 

time period. There may be aberrations of that within certain 

States, as the gentleman mentioned, Ohio, but in fact, the procedures or the policies that have been in place in California have reduced the increase in escalation costs of premiums. 

I don’t question that there’s probably not some concerns with insurance companies. The gentleman mentioned the New England 

Journal of Medicine article. I read that article and from my recollection of that article, when you look at St. Paul, the problem with 

health insurance rates—correction, malpractice premium insurance 

rates are much higher now because they were under charging in 

the 1990’s. They were charging less than actuarially the responsibilities were laid upon them which meant the increased cost of 

the liability and all the lawsuits exceeded the premiums in the 

1990’s. So because of that they have to compensate, make up for 

that with increased cost. 

It is about patient access and I reference an article out of our 

local newspaper, ‘‘doctors seek cure from skyrocketing insurance, 

malpractice rates take toll on medical care.’’ Here’s an OB/GYN 

that’s leaving rural Kentucky where he delivers a large portion of 

Medicaid patients, delivers babies there. His insurance rates went 

from $65,000 to $185,000 a year. Now he’s leaving Kentucky because he can’t make a living there. We have a crisis, a malpractice 

crisis in this country. It affects some States more than others and 

I want to commend Mr. Greenwood for his effort on this bill. I 

think you put together, contrary to what’s been said, a very 

thoughtful piece of legislation. It is not the full answer of rising 

health care costs, but it’s a very thoughtful piece of legislation to 

address this problem. And, thank you, Mr. Chairman. I yield back 

the remainder of my time. 

Mr. BILIRAKIS. Ms. Capps. 

Ms. CAPPS. Mr. Chairman, I am pleased we are considering recent increases in professional liability insurance premiums. These 

increases may, in fact, be barriers to access for our constituents, 

but I have to say that I think we’re putting the cart before the 

horse with this hearing. Even its title is prejudicial. It assumes 

that so-called excessive litigation is the cause of premium increases 

and that it does reduce access to care. But I’m not sure this has 

been established yet. There is serious debate about why premiums 

are rising and what should be done to stem that growth, but until 

we resolve that debate, it seems unwise to determine solutions. The 

17

wrong solution could be harmful to many people and not prevent 

an increase in premiums. 

Some have suggested that the malpractice insurance companies 

are trying to make up for money they have lost playing the stock 

market. If that is true, we need to look at regulating the insurance 

industry. Others thing that frivolous lawsuits and exorbitant 

awards for damages are driving them up. These people argue we 

need legislation to cap non-economic damages to patients who have 

been harmed by doctors, mistake or negligence. The problem with 

this argument is that these lawsuits are not by definition frivolous. 

In cases where large damages are awarded, a jury has found that 

the patient has been severely harmed. And I have to say that I’m 

very skeptical of putting caps on the damage awards that a severely injured patient receives. This puts the burden on to someone 

who is rightfully seeking redress and it will unfairly penalize people who do not work or who are paid little such as senior citizens, 

stay at home moms, people with disabilities. They would have their 

damage payments limited while corporate CEOs will see massive 

payments. It is non-economic damages that make sure everyone 

gets the redress they deserve. I cannot support measures to cap 

damages in a way that will harm the neediest in society, particularly not when it has not been demonstrated that capping them 

will have a positive result on premiums. California has caps, as has 

been pointed out. And we in my area of California are still suffering great shortages of doctors. With our caps in place and even 

though they are in place, doctors are still leaving their practices in 

droves. So I hope that as this committee moves forward on this 

issue, Mr. Chairman, that we will carefully consider all the factors 

and not jump to conclusions about the remedies. And I yield back 

the balance of my time. 

Mr. BILIRAKIS. California does have caps in more ways than one. 

Ms. CAPPS. More than one kind, yes, thank you. 

Mr. BILIRAKIS. More than one kind. Mr. Buyer? 

Mr. BUYER. Thank you. I’ve sat on quality assurance risk management meetings at hospitals. I’ve litigated medical malpractice. 

I’ve done personal injury and I’m going to tell you, I’m stunned 

when I hear individuals willing to defend the lawyers here and 

blame insurance companies, blame hospitals, blame medical providers. I look at my own bar. My own bar has lawyers in there, 

some of whom are very responsible and have an individual who has 

been harmed by someone’s negligence. And we also have individuals in that bar who will take any case imaginable and really disgust me in what they do to my profession. And we have become too 

litigious of a society and I’m not surprised at all that you can even 

break this down. 

We went through this whole Medicare thing and others had a lot 

of fun saying Republicans are in the pockets of so and so. It’s not 

even debated in this country that the Democrats are in the pockets 

of the trial lawyers. That’s not even debated. So we’re not even surprised at all that we would hear that today——

Ms. ESHOO. Would the gentleman yield? Would the gentleman 

yield? 

Mr. BUYER. No, I’m having fun. And so I’m not surprised at all 

that we would hear that. 

18

But let me share something. It’s not—Ms. Capps is correct when 

she says it’s not just the lawyers. You see, the fear of lawsuits, not 

medical necessity, drives the ordering of many tests even. Doctors 

go to extensive lengths and expensive lengths to protect themselves 

from lawsuits and that ends up becoming a driver of medical costs. 

There is a better way. Now I have something that’s really interesting here. You want to say well, in California we have caps, but 

we have all these expenses. Let me share a perspective with my 

colleagues. Indiana, 20 years ago, Dr. Otis Bowen, who was the 

former, not only Governor of Indiana, but he also went on to serve 

as the Secretary of Health and Human Services under President 

Reagan, the State of Indiana took steps to protect its citizens by 

balancing the ability of patients harmed by the health care system 

to seek redress and the need to ensure continued access to health 

care by all Hoosiers. Indiana was one of the first States to pass a 

comprehensive medical malpractice reform and the Indiana model 

has now been used by other States in reforming medical tort law. 

So it’s workable for both injured patients and health care providers. 

Briefly, Indiana law places limits on the liability of health care 

providers. Any recovery over this limit is provided by a patient 

compensation fund. It’s managed by the State of Indiana and is 

funded through insurance surcharges. The total recovery is capped. 

Attorney fees are capped. And importantly, a medical review panel 

is convened for each case to review the validity of medical claims 

and must make its findings before a party can go to court. The 

findings of the medical review panel are admissible in court and 

there are time constraints on convening the panel and the panel 

making its findings so the case is not drawn out indefinitely. Injured patients receive compensation in a timely fashion. 

As I listen to some of my colleagues, let me do a little quick comparison. I have a medical liability rate survey here and in Indiana, 

people mentioned OB/GYN. In Indiana, the insurance average for 

the State of Indiana is $13,800. I heard testimony from my colleagues in Kentucky. In Kentucky, the average is $57,000. Let ms 

go to Ohio, since I heard some of my colleagues talk about Ohio’s 

problems and flight of doctors to Indiana. Ohio, for OB/GYN, the 

average is around $57,000 to $58,000. New Jersey. New Jersey is 

around $72,000. So you can defend the lawyers all you like. You 

can do rallies on whatever steps you choose, but don’t stick your 

head in the sand here and defend the lawyers and ignore the problems. It’s happening throughout the country and it’s a driver of 

costs and if you want to say we’re not too litigious a society, you’re 

having a huge impact on individuals’ responsibility and as a member of the bar, I just am disgusted by the conduct of some of my 

colleagues. I yield back. 

Mr. BILIRAKIS. The gentleman’s time has expired. Mr. Wynn. 

Mr. WYNN. Thank you, Mr. Chairman. Thank you for calling this 

hearing. I just wanted to make a couple of observations that kind 

of struck me in the course of this discussion. First of all, we’ve 

heard about California and now we’ve heard about Indiana and I 

can reflect on the experience from my own State of Maryland which 

also has caps. And it says one thing. States are competent to make 

this decision and the Federal role or Federal intrusion in this area 

19

is not necessary. There’s no real pressing issue here. If he cites a 

good example in Indiana, perhaps other States will follow as they 

see fit. 

The second observation that I want to make is this notion of socalled runaway lawsuits. Lawsuits in medical malpractice cases reflect the decisions of a jury of ones peers. They reflect what the citizens of that community believe is fair in light of the injuries that 

an individual has suffered, so the suggestion that somehow it’s the 

malpractice lawyers that are the villains in this scenario is just not 

accurate. You would think hearing the rhetoric that the other side 

doesn’t have lawyers, that there’s no standard of medical care to 

which practitioners can be held or critiqued on. That’s the reality 

of malpractice law, that there’s two sides in the courtroom, very 

competent lawyers representing doctors and most lawsuits are not 

runaway lawsuits. Most awards are not astronomical and that 

most of the people who receive these awards are average citizens, 

most of them women, in fact, who get awards that their community 

feels are fair. So I think that has to be taken into consideration. 

Third, you hear about runaway lawsuits driving health care 

costs, but I hope that this panel would share with us some concrete 

data and the analysis supporting it to show that that is, in fact, 

the case. 

Finally, I think we have to look at the business practices of the 

insurance companies. They made decisions during the 1990’s regarding setting premiums. In many cases they made some bad decisions, underpriced their premiums in relation to their true cost, 

used profits in the booming 1990’s to patch over these bad decisions 

and now are reaping the consequences of those business decisions. 

So I don’t see that we can portray them as the poor victims of the 

malpractice system because they made bad decisions. 

I think this is a good hearing to have. I’m looking forward to 

hearing the witnesses, but I hope it will be a balanced hearing and 

not one that just attempts to characterize the malpractice attorneys as villains in a very balanced judicial system which the forefathers conceptualized as a means to which citizens could have 

their grievances addressed. 

I hope we’ll have good testimony on all these issues and I look 

forward to hearing the witnesses. I would like to yield the balance 

of my time to my colleague, Ms. Eshoo. 

Ms. ESHOO. I thank the gentleman. I’d like to jump in and say 

something here and that is that if any of us went to a doctor and 

said we weren’t feeling well and the doctor said I’m only going to 

examine one part of your body, you’d move on to someone else. I 

think that this committee with all due respect to my colleague from 

Indiana who said I’m just having fun, this is not meant for fun. 

There are problems each person here, whether I agree 100 percent 

with them or not has pointed out something that we need to pursue. To come here and to pretend that we have the entire answer 

simply because we showed up this morning and think we’re having 

fun, I think, does a disservice to the people that we represent. So 

let’s listen to our witnesses and let’s see what we can devein out 

of this. I think that we should stay away from the bluster. It 

doesn’t do anything for me and most frankly for anyone that’s listening because this is being carried. I think it’s going to turn them 

20

off instead of being instructive and sensitive and see what we can 

come up with to resolve the problems that are being pointed out. 

I thank the gentleman for yielding. 

Mr. NORWOOD. Mr. Wynn, would you yield for just a second? 

Mr. WYNN. If I have any time left. 

Mr. BILIRAKIS. Yes, he has time. 

Mr. NORWOOD. I don’t think anybody here has said in any way 

that this is the only part of the problem. Nobody is saying that. 

Mr. WYNN. If I could just reclaim my time. 

Mr. BILIRAKIS. Mr. Wynn, we’re not going to get into a debate 

here. These are opening statements only. 

Mr. WYNN. Mr. Chairman, I yielded to my colleague. I just wanted to respond to his statement merely to say that I would like to 

know the facts on that question because it’s being characterized 

that this is the driving force behind the increase in health insurance rates and access to care and if there are facts to support that, 

I think we’d certainly like to hear them. But just to keep saying 

this and making this allegation without evidence, I don’t think is 

very helpful. 

I yield back the balance of my time. 

Mr. BILIRAKIS. The intent of the Chair is that we will get into 

those facts regarding the impact of litigation regarding what might 

be the impact of insurance regulation or lack of it or whatever the 

case may me. 

Mr. BROWN. Mr. Chairman, Mr. Chairman, our side is not real 

happy with the title of the hearing, just that it appears that all of 

the problem from the title of the hearing, all of the problem is one 

thing and I think all of us when we’re more introspective of it understand the problem is much more complicated than that, whether 

it’s physicians I know in Ohio or Mr. Wynn knows in Maryland or 

whether it’s our own judgment. We all know that it’s more complicated and we just wanted to express some unhappiness with the 

title and the direction. 

Mr. BILIRAKIS. If the gentleman will yield, the title ‘‘Harming Patient Access to Care, the Impact of Excessive Litigation’’ whatever 

that impact might be. And it’s only one of the impacts. There are 

other impacts, all right? So there’s nothing wrong with the title. 

It’s the way I think that you interpret it. 

Mr. WYNN. Mr. Chairman, Mr. Chairman, if the chairman will 

yield for just—— Mr. BILIRAKIS. I’ll be glad to yield. You have the time. 

Mr. WYNN. I wanted to say that perhaps it’s the use of the term 

‘‘excessive’’ that creates this impression that there may be somewhat of a predetermined—I yield back. 

Mr. BILIRAKIS. Let’s get to the problem here for crying out loud 

and quit quibbling about the title of the hearing. That’s why we 

quite often don’t get things done the way we should around here. 

Let’s see, Mr. Deal for an opening statement. 

Mr. DEAL. I thank the chairman. Mr. Chairman, quite frankly, 

I’ve enjoyed these opening statements better than any series of 

opening statements I’ve heard in a long time. I do think that this 

hearing is appropriate and I think the comments of all of our colleagues have likewise been appropriate. I think the reason this 

issue has been surrounded with so much intensity is that it litVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 W:\DISC\81491 81491
21

erally involves life and death issues. It likewise involves two of the 

great professions that are the hallmark of our Nation, the medical 

profession and the legal profession. 

It is not a solution that is easy to come by as we have seen from 

experiments in our various States. Now I know that we’re going to 

hear from various points of view, but I’m here to say there’s plenty 

of blame to go around in every way and direction you wish to point 

your finger. Let me give you just a few examples. 

With regard to the insurance industry. For years, as a member 

of the State Legislature in Georgia, I continually asked the question why are you charging the same premiums for the same specialties in the metropolitan city of Atlanta as you are charging in 

rural North Georgia? I never got a satisfactory answer. The reason 

was simply they’re in the same specialty. When you compare that 

to what most insurance premiums are dictated upon and that is a 

loss ratio. There was no correlation in most instances to loss ratios, 

nor any adjustment for geographical areas in which the practice is 

being maintained. I think they have done better in recent years to 

make those adjustments, but still I think they have a long way to 

go in that direction. 

With regard to my own profession and I was, as Mr. Buyer previously a trial lawyer, I am totally disgusted by the fact of the advertisements on television by members of our profession who say 

come down to see me, I can get you thousands or millions of dollars 

for your claim with no understanding of whether there was a meritorious claim or not. That to me is taking and I regret that the Supreme Court had gone so far as to the extend the first amendment 

to that kind of advertising, but unfortunately, we live in that era. 

With regard to the medical profession, certainly there are innocent medical providers who have been harmed and who are fearful 

of the effects of potential malpractice judgments where they think 

they may be blameless, but I know that there are some things in 

the medical community that need to be looked at. For example, 

they have constantly shielded their own members from their own 

malpractice as far as the public is concerned. It is a known fact 

that it is almost impossible in many instances to find out where 

the bad doctors are and many times the way to discipline a bad 

doctor is simply to ship him to another community where they’re 

unsuspecting and have no knowledge of his negligence and his 

background. That is something the medical community in my opinion has not come face to face with and until they do, they’re going 

to continue to have, as Mr. Wynn says, the peers in their own community who are suspect of what they’re doing and they are the 

ones delivering the verdicts. So maybe the bedside manner does 

translate into jury verdicts or perhaps in some cases the lack thereof. 

My point is this, there’s a lot of blame to go around. I think the 

purpose of this hearing is to look at all of the facets that surround 

this very emotionally charged issue, but the fact and reality is it 

is having an effect on the availability of health care in many parts 

of the country. My District, like many of your Districts, are seeing 

premium increases of 1000 percent or more in a 1-year period of 

premium jumps and that cannot be justified in most instances 

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22

ship in most instances. So I think the question is why are these 

premiums so high, what are the justifications for them and what 

can we do in a reasonable considered fashion not to do unjust damage to our judicial system which is the foundation for resolving all 

civil disputes in our country. 

I yield back, Mr. Chairman. 

Mr. BILIRAKIS. The voice of reason yields back. Mr. Pickering. 

Mr. PICKERING. Mr. Chairman, I would yield to my senior member. 

Mr. BILIRAKIS. He was hiding back here behind Mr. Cox and I 

didn’t see he was there. All right, he will not accept the yield. Mr. 

Pickering. 

Mr. PICKERING. I always try to follow my good Subcommittee on 

Energy Chairman, Mr. Barton. But Mr. Chairman, I want to thank 

you for having this hearing. I want to thank Mr. Deal for his comments, his attitude and I wanted to talk about the issues before us 

today. 

You know I come from a family, my father was a trial lawyer. 

Today, he is a Judge. I can remember going to the courtroom as 

a boy, as he tried his cases and I was always proud that I thought 

that he was trying to bring justice to somebody who may have been 

harmed or injured, but I looked today at my home State and the 

situation that we face and I try to make decisions, how do we 

maintain the principles, making sure that we have a jury system? 

How do we deter when there are wrongful acts or negligence, but 

how do we also protect health care in my home State where we’re 

seeing some terrible losses. We’re seeing 400 doctors leave our 

State. For the first time in the history of the University of Mississippi Medical Center, and the OB/GYN specialties, not one, not 

one OB/GYN medical student is staying in the State of Mississippi. 

We’re seeing clinics close. We’re seeing hospitals talk about moving 

away from Mississippi, across the river into Louisiana. We are seeing from Jackson, Mississippi to Memphis, Tennessee, which if you 

know anything about geography, is a lot of territory, a lot of communities, a lot of folks, that we will only have about two neurosurgeons. 

We’re seeing in OB/GYN an acute crisis and shortage. We’re seeing in rural hospitals that cannot afford health medical malpractice 

insurance premiums, whether they’re hospitals, for example, in 

Franklin County, Mississippi, a community or county of about 

8,000 people, their insurance premium has increased over the past 

year from $54,000 to $265,000. Now that health care clinic or hospital if you went to it, you would see that it is in terrible need of 

capital investment to improve their facilities. And they’re struggling to pay that bill so that they can give quality health care and 

then having a five fold increase in insurance premiums. 

There has to be a balance here that I hope that we can strike. 

I do believe that some cap, some limit, so that we do not have the 

excessive, so that we do not drive hospitals, we do not drive doctors, we do not drive specialties, we do not close clinics as a result 

of excessive verdicts. 

In my home State of Mississippi, the average malpractice case 

across the Nation is $3.5 million, but in Mississippi it’s $8.2 million. The rate, the number of claims for medical negligence, those 

23

cases brought is 55 percent greater than the combined averages of 

all States. So you see a terrible crisis in a State that is rural, that 

is low income. Many of the citizens on fixed income and you’re creating a crisis because of the excessive. 

We’ve got to maintain the principles of our judicial system. But 

we have to find a way to have a balance that we do not harm 

health care. I believe in the right to a jury, but I also believe in 

the right to good health care, that our mothers have a right to see 

an OB/GYN when they need to deliver a child, that if we have a 

tragedy, a trauma, a car wreck, and you have minutes that window 

of opportunity, that window of life to get care, that we’ll have a 

neurosurgeon that will treat our sons and daughters, our husbands 

and wives if that tragedy occurs. 

And so we’ve got to find a way, as Mr. Deal was talking about, 

to find a way to address all the issues and find a way to bring justice, but also protect affordable, accessible health care. 

Mr. WYNN. Would the gentleman yield? 

Mr. PICKERING. Yes. 

Mr. WYNN. I really appreciate the statement you made. I know 

it’s made out of a great deal of sincerity, but I have to ask the 

question, why can’t the State of Mississippi address this problem 

in a way that it sees fit just as other States have done including 

my own and others that have been referred to here? 

I feel kind of awkward on the Democratic side arguing States’ rights, but—— Mr. BILIRAKIS. These are opening statements for crying out loud. 

Now, let’s not get into debating. If you choose to respond to that, 

Chip, please do so very briefly. 

Mr. PICKERING. Like I was saying, I do believe in States’ rights, 

but we have a situation in my home State, the States that are 

around us that have implemented reforms have seen 30 percent reductions in medical malpractice insurance premiums and the question is what we’re saying is any State that adopts reform, this legislation will not apply. So we are giving incentives for the States 

to take care of this problem themselves, but if they don’t, my fundamental responsibility and I think fundamental responsibility of 

all members is to make sure that our mothers have health care, 

our families have health care, our families have health care and 

we’ve got to protect that right. Thank you. 

Mr. BILIRAKIS. The gentleman’s time has expired. Mr. Barton. 

Mr. BARTON. Thank you, Mr. Chairman, and the public, happy 

birthday, plus one. Yesterday was Chairman Bilirakis’ birthday. 

He’s now old enough to buy alcohol legally in his State. And I want 

to compliment you and Chairman Greenwood for—there you go, 

see—holding this hearing. I wish that my subcommittee members 

paid as much attention to the titles of the hearings that I do as 

they do to yours. 

I have waited to give my opening statement, Mr. Chairman, because my staff put together a really good statement. In fact, it’s so 

good that Congressman Norwood told me that his staff helped my 

staff put it together, so I felt like I needed to be here to do it. This 

is a good bill that we’re going to hold a hearing on, H.R. 4600 that 

you and Chairman Greenwood have introduced. We do have a crisis, in my opinion, in our medical liability system. I’ve heard from 

24

many of the doctors in my District down in Texas. They’re facing 

astronomical increases in their medical malpractice premiums. 

They’ve had their premiums doubled and in some cases tripled. Because of that, they’ve stopped performing certain procedures. Some 

have even retired from medicine all together. 

I believe that it is a crisis in medical liability and that this crisis 

is creating a barrier to obtaining quality health care. For example, 

women in South Texas are now finding it difficult to find an OB/

GYN to help deliver their expectant child. I’m told that out in Nevada, in Clark County, one of their emergency rooms, trauma centers just shut down, just closed the doors because of the rise in 

medical liability premiums, so I think the crisis is real. 

We all agree that if a patient is injured through malpractice or 

negligence that patient should be compensated for their injuries 

and that compensation should not be abridged. The Health Act contains no cap on economic and medical damages. If a patient is injured, he or she will rightly have the ability to be made whole 

through the judicial system. 

The Health Act allows unlimited recovery of economic damages. 

That person will be able to recover all past, present and future economic losses. There is a cap on non-economic damages of $250,000. 

Punitive damages are still allowed and can be levied against those 

who demonstrate malice or gross negligence. 

Our courts have become a system or a form of legal lotto. The 

purpose of lawsuits is not to compensate injured victims so much 

as it is to enrich the plaintiff lawyers that bring the lawsuits. They 

work on contingency fees and they’re looking and hoping that their 

winning ticket will turn them into instant millionaires. This system has clogged up the courts with frivolous lawsuits and has delayed the judiciary from processing more meritorious claims. 

One of the most important reforms in the Act before us is the 

elimination of joint and several liability. Joint and several liability 

encourages trial lawyers to search for deep pockets regardless of 

the culpability. This country was founded on the ideal of personal 

responsibility, the idea that a person should be responsible for his 

or her actions. Joint and several liability is the antithesis of this 

idea. 

Mr. Chairman, I want to thank Mr. Cox for helping me to pronounce antithesis and for my staff for putting in a big word so that 

I can learn a new word today. 

Mr. NORWOOD. That was my staff. 

Mr. BARTON. That was your staff that did that? Under the concept of joint and several liability, a party could be found to be 1 

percent at fault for a particular injury, yet could be responsible for 

paying 100 percent of the damage award. This encourages trial 

lawyers to file a claim, throw everything up against the wall and 

hope that something sticks. 

Our current medical liability system, in my opinion, creates one 

group of winners and that’s the plaintiff lawyers. However, there 

are numerous losers, the injured patients whose lawsuits linger in 

the judicial system because they’re overwhelmed by other frivolous 

lawsuits; the patients who can’t get care period because their providers no longer provide that care. 

25

I come to this hearing with an open mind. I want to thank you 

and Chairman Greenwood for putting in the bill and I hope that 

after the hearing we can work in a bipartisan basis to move the 

bill. 

Mr. BILIRAKIS. All right, I thank the gentleman. I believe that finally completes the opening statements to the relief of all of us. 

The first panel, oh yes, by all means. Unanimous consent request. 

Mr. BROWN. Mr. Chairman, I ask that all members have the opportunity to submit testimony in writing. 

Mr. BILIRAKIS. Without objection. That will be the case. I thank 

the gentleman. 

[Additional statement submitted for the record follows:]

PREPARED STATEMENT OF HON. W.J. ‘‘BILLY’’ TAUZIN, CHAIRMAN, COMMITTEE ON

ENERGY AND COMMERCE

Thank you, Mr. Chairman, for holding this hearing today, and thank you for the 

leadership that you have demonstrated in advancing this important issue. 

For over eight years, Members of this Committee have taken the lead in drafting 

legislation to help restore some degree of common sense to our tort system. They 

have realized that our current system is too slow, too expensive, too inefficient and 

most importantly, fails to improve the health of patients. 

Today, this Committee will hear from several witnesses about the current medical 

liability crisis, which is indeed a grave problem in need of serious attention. Health 

care providers in eleven states are in dire straits, having to make quick decisions 

about whether or not to move out of specialty practices, move to another state to 

practice, or retire early. Patients are the hidden victims here: when there is no doctor, there is no health care. It makes no difference that your HMO or Medicare covers a particular procedure. When there is an inadequate number of physicians available to perform procedures, there is limited health care access for patients. It’s that 

simple. 

This hearing is not about potential consequences. We are talking about real 

events, real trauma that is hurting patients before they even get in the door to see 

a doctor. Approximately two weeks ago, the University Medical Center in Las Vegas 

closed. The UMC trauma center serves a 10,000-square-mile area; when the center 

closed, Las Vegas became the largest metropolitan area in the nation without a 

trauma center. It is truly a miracle that no major catastrophes occurred during the 

ten-day period that the facility was closed. What can we do to prevent an occurrence 

like this from becoming a trend? What has happened to the business climate in Nevada that health care professionals who have dedicated their lives to saving patients 

are no longer willing to serve? 

The problem is not an isolated one. As policymakers, we need to find a solution 

fast, before more patients are harmed. Why are doctors fleeing the state of Nevada 

for the California coast? Why did a hospital that has operated for over a hundred 

years in Philadelphia, PA board its windows and lock the doors? Why have one-third 

of neurosurgeons left the state of Mississippi? While I am sure, no doubt, that my 

colleagues from Louisiana welcome the influx of doctors from the state of Mississippi, this is not how Louisiana wants to attract new residents to the State. 

What my home state has in place and what California have benefited from for 

over 27 years are common sense guidelines for health care lawsuits. These guidelines ensure that injured patients receive greater compensation while at the same 

time deterring frivolous lawsuits that extort health care professionals and drive doctors from the practice of medicine. 

It is difficult for me to believe that the reason so many of our health care providers are being sued is that they are bad doctors. The Texas Medical Examiner 

Board reported that half of the doctors in the state had lawsuits filed against them. 

Are half of the doctors in the state of Texas bad doctors? Members on both sides 

of the aisle know this is absurd. Just as there are good doctors, and bad doctors, 

there are good lawyers, and bad lawyers. Our judicial system must protect the good 

doctors, and provide speedy recourse for patients when they are harmed. Our judicial system should not be manipulated to benefit special interests at the expense 

of patients. 

Our task today is clear. Members on this Committee must evaluate if our current 

judicial system is serving patients well. When injured patients have to wait years 

26

before a medical injury case is complete, our judicial system has failed. When injured patients lose 58 percent of their compensation to attorneys and the courts, our 

judicial system has failed. When 60 percent of malpractice claims against doctors 

are dropped or dismissed, but the fear of litigation still forces doctors with twentyfive years of experience to retire early, our judicial system has failed. 

It’s time for this Congress to enact common-sense reforms that protect injured patients while restoring sanity in our judicial process. Patient care should not be 

harmed by special interest politics. This is an issue that deserves action this year. 

I look forward to the witness testimony.

Mr. BILIRAKIS. Dr. Lisa Hollier is with the LBJ General Hospital, 

Department of OB/GYN in Houston and she is here on behalf of the 

American College of Obstetricians and Gynecologists; Ms. Fran 

Visco, National Breast Cancer Coalition. Ms. Visco’s been with us 

before. Sam Roberts is from Elkins, West Virginia. Ms. Lauren 

Townsend, Coalition for Consumer Justice, from Philadelphia; and 

Mr. Stuart Fine, Chief Executive Officer of Grand View Hospital in 

Sellersville, Pennsylvania, here on behalf of the American Hospital 

Association. 

I don’t know whether Mr. Greenwood wanted to introduce Mr. 

Fine and supplement my introduction without Mr. Fine. 

Mr. GREENWOOD. I’d be delighted to, Mr. Chairman. Stuart Fine 

is the Director of Grand View Hospital, one of the finer hospitals 

in our region. He’s a good long time friend and really has been a 

leader in trying to change the medical system, the health care system and a fighter against abuses in a variety of ways. We’re just 

delighted to have him here. And now I understand why we call this 

a hearing because you come and hear us for 2 hours. 

Mr. BILIRAKIS. True. Anyhow, your written statements, those 

would be matter of the record. I would hope that what you would 

do is complement if you will, or supplement your statements. I will 

set the clock at 5 minutes. Hopefully you will try to abide that as 

well as you can. 

Dr. Hollier, please proceed. 

STATEMENTS OF LISA M. HOLLIER, LBJ GENERAL HOSPITAL, 

DEPARTMENT OF OB/GYN; FRAN VISCO, NATIONAL BREAST 

CANCER COALITION; SAM ROBERTS ON BEHALF OF THE 

AMERICAN ACADEMY OF FAMILY PHYSICIANS; LAUREN 

TOWNSEND, COALITION FOR CONSUMER JUSTICE; AND STUART H. FINE, CEO, GRAND VIEW HOSPITAL 

Ms. HOLLIER. Thank you, Mr. Chairman. As an obstetrician/gynecologist, I welcome the opportunity to speak with you this morning on behalf of the American College of Obstetricians and Gynecologists, 44,000 partners in women’s health care. 

I am here today because excess litigation has left American 

women asking who will deliver my baby. An ailing civil justice system in severely jeopardizing patient care for women and their 

newborns, forcing one out of ten obstetricians to stop delivering babies and countless more physicians to contemplate the same. 

After a brief overview, today I will delineate the inevitable health 

consequences for women if we allow excessive litigation to persist. 

In my home State of Texas and across the country, liability insurance for obstetrician/ gynecologists has become prohibitively expensive. Premiums have tripled and quadrupled practically overnight. 

In some areas, OB/GYNS can no longer obtain liability insurance 

27

at all as insurance companies fold or abruptly stop insuring doctors. When OB/GYNS cannot find or afford liability insurance, they 

are forced to stop delivering babies, curtail surgical services, or 

close their doors. 

This shortage of care affects hospitals, public health clinics, and 

medical facilities in rural areas and inner cities. Now women’s 

health care is in jeopardy and this crisis will only end soon with 

legislative intervention. This crisis involves more than just the decisions of individual insurance companies. The manner in which 

our antiquated tort system resolves medical liability claims is at 

the root of the problem. A liability system should equitably spread 

the insurance risk of providing affordable health care for our society. It should fairly compensate patients harmed by negligent medical care. It should provide compensation to patients with devastating outcomes, unrelated to negligence, like newborns born 

with cerebral palsy. Our current system fails on all counts. It’s punitive, expensive, and inequitable for all, jeopardizing the availability of care. 

Although the number claims filed against all physicians climbed 

in recent decades, the phenomenon does not reflect an increase rate 

of medical negligence. In fact, OB/GYNs win the vast majority of 

the claims filed against them. One half of claims against OB/GYNs 

are simply dropped by plaintiffs’ attorneys, dismissed or settled 

without a payment. Of cases that did precede to court, OB/GYNs 

won seven out of ten cases closed by a jury or court verdict. What 

should not be overlooked here are the ripple effects that excessive 

litigation is directly having on the delivery of women’s health care. 

Today, the liability crisis is causing women and their newborns 

to suffer in the following six ways. No. 1, less prenatal care. With 

fewer obstetricians, it’s harder for women to get prenatal care, a 

significant factor in the delivery of a healthy baby. The greater 

availability of this care over the last several decades has resulted 

in the country’s lowest infant mortality rate. Now, our ability to 

maintain that standard is threatened. 

No. 2, shorter visits and longer waits. Doctor shortages mean 

women have to travel longer distances for prenatal appointments 

and to deliver their babies, especially in rural areas. Wait times for 

appointments increased while quality time with doctors inevitably 

decreases. 

No. 3, losing gynecologic surgery. As doctors stop preforming 

gynecologic surgery, women can lose access to care that helps protect fertility and pelvic pain, or treat precancerous conditions early. 

No. 4, less preventative health care. Fewer doctors offering fewer 

services means less regular screenings for reproductive cancers, infections, and other health risks for women. 

No. 5, less for the underserved. Clinics that provide prenatal and 

delivery care to underserved and high risk populations included 

rural, inner city, and teaching hospitals, will have trouble recruiting and affording positions. 

And finally, No. 6, less training in women’s health. Hospitals 

may drop their residency training programs in obstetrics and gynecology when they can no longer afford to insure OB/GYNs residents 

and teachers. The result? Fewer new doctors trained to treat 

women, particularly pregnant women. 

28

As a physician, I strive to provide every woman in my practice 

with affordable health care of the highest quality. And without 

question, I believe that patients who have been harmed by professional negligence should have the opportunity to be adequately 

compensated for their injuries. But today the scales of justice are 

out of balance, and until this Nation enacts common sense medical 

liability reforms, America’s women and mothers will continue to 

suffer. 

Thank you, Mr. Chairman, for your leadership on this important 

issue and for the subcommittee’s attention to this crisis. I appreciate the opportunity to present our concerns for the panel’s consideration and look forward to working with you to protect women’s 

access to health care. 

[The prepared statement of Lisa M. Hollier follows:]

PREPARED STATEMENT OF LISA M. HOLLIER, ON BEHALF OF THE AMERICAN COLLEGE

OF OBSTETRICIANS AND GYNECOLOGISTS

On behalf of the American College of Obstetricians and Gynecologists (ACOG), an 

organization representing more than 44,000 physicians dedicated to improving the 

health care of women, we urge you to bring an end to the excessive litigation restricting women’s access to health care. 

In addition to providing an overview of the issue, this statement will explain how 

the medical liability crisis compromises obstetric care for women and detail the consequences for women’s health care if excessive litigation persists. This statement 

will also highlight how the medical liability crisis is acutely affecting nine states, 

including Florida, explaining how access to basic and important women’s health care 

in those states is severely jeopardized because of a liability system gone awry. 

I. EFFECTS OF EXCESSIVE LITIGATION ON WOMEN’S HEALTH CARE: AN OVERVIEW

The number of lawsuits against all physicians has been rising over the past 30 

years in an increasingly litigious climate, and obstetrics-gynecology—considered a 

‘‘high risk’’ specialty by insurers—remains at the top of the list of specialties affected by this trend. 

An ailing civil justice system is severely jeopardizing patient care for women and 

their newborns. Across the country, liability insurance for obstetrician-gynecologists 

has become prohibitively expensive. Premiums have tripled and quadrupled practically overnight. In some areas, ob-gyns can no longer obtain liability insurance at 

all, as insurance companies fold or abruptly stop insuring doctors. 

When ob-gyns cannot find or afford liability insurance, they are forced to stop delivering babies, curtail surgical services, or close their doors. The shortage of care 

soon affects hospitals, public health clinics, and medical facilities in rural areas and 

inner cities. 

Now, women’s health care is in jeopardy for the third time in three decades. This 

crisis will only end soon with legislative intervention. The recurring liability crisis 

involves more than the decisions of individual insurance companies. The manner in 

which our antiquated tort system resolves medical liability claims is at the root of 

the problem. 

A liability system—encompassing both the insurance industry and our courts—

should equitably spread the insurance risk of providing affordable health care for 

our society. It should fairly compensate patients harmed by negligent medical care. 

It should provide humane, no-fault compensation to patients with devastating medical outcomes unrelated to negligence—as in the case of newborns born with conditions such as cerebral palsy. Our current system fails on all counts. It’s punitive, 

expensive, and inequitable for all, jeopardizing the availability of care. 

Jury awards, which now soar to astronomical levels, are at the heart of the problem. The average liability award increased 97% between 1996 and 2000, fueled by 

states with no upper limits on jury awards. This ‘‘liability lottery’’ is enormously expensive, and patients who need, but can’t get, health care, pay the price. 

The current liability system encourages attorneys to focus on relatively few claims 

with exorbitant award potential, ignoring other claims with merit. Even then, much 

of a jury award goes straight into the lawyers’ pockets; often, less than half of every 

medical liability dollar ever reaches the patient. 

29

Patients and physicians need a real solution to this crisis. In the 1980s, the Institute of Medicine warned that the liability crisis compromised the delivery of obstetric care for women across the nation. It urged Congress to provide both immediate 

relief and long-term solutions. ACOG has asked the Institute to reexamine this 

issue and update its report. 

The liability crisis continues to compromise the delivery of health care today. A 

recent Harris survey showed that three-fourths of physicians feel their ability to 

provide quality care has been hurt by concerns over liability cases. And, patients 

understand the problem, too. An April 2002, survey by the Health Care Liability 

Alliance found that 78% of Americans are concerned about the impact of rising liability costs on access to care. 

II. HOW EXCESSIVE LITIGATION COMPROMISES THE DELIVERY OF OBSTETRIC CARE

Obstetrics-gynecology is frequently among the top three specialties in the cost of 

professional liability insurance premiums. Nationally, insurance premiums for obgyns increased over time: the median premium increased 167% between 1982 and 

1998. The median rate rose 7% in 2000, and 12.5% in 2001, with increases ranging 

from 0.3% to 69%, according to a survey by Medical Liability Monitor, a newsletter 

covering the liability insurance industry. 

A number of insurers are abandoning coverage of doctors altogether. The St. Paul 

Companies, Inc., which handled 10% of the physician liability market, announced 

in recent months that it was withdrawing from that market. One insurance ratings 

firm reported that five medical liability insurers failed in 2001. One-fourth of the 

remaining insurers were rated D+ or lower, an indicator of serious financial problems. 

According to Physicians Insurance Association of America, ob-gyns were first 

among 28 specialty groups in the number of claims reported against them in 2000. 

Ob-gyns were the highest of all specialty groups in the average cost of defending 

against a claim in 2000, at a cost of $34,308. In the 1990s, they were first—along 

with family physicians-general practitioners—in the percentage of claims against 

them closed with a payout (36%). They were second, after neurologists, in the average claim payment made during that period ($235,059). 

Although the number of claims filed against all physicians climbed in recent decades, the phenomenon does not reflect an increased rate of medical negligence. In 

fact, ob-gyns win most of the claims filed against them. A 1999 ACOG survey of our 

membership found that over one-half (53.9%) of claims against ob-gyns were 

dropped by plaintiff’s attorneys, dismissed or settled without a payment. Of cases 

that did proceed to court, ob-gyns won 7 out of 10 cases closed by a jury or court 

verdict. 

When a jury does grant an award, it can be exorbitant, particularly in states with 

no upper limit on awards. Jury awards in all civil cases averaged $3.49 million in 

1999, up 79% from 1993 awards, according to the latest reports from Jury Verdict 

Research of Horsham, Pennsylvania. The median medical liability award jumped 

43% in one year, from $700,000 in 1999, to $1 million in 2000: it has doubled since 

1995. 

Ob-gyns are particularly vulnerable to this trend, because of jury awards in birthrelated cases involving poor medical outcomes. The average jury award in cases of 

neurologically impaired infants, which account for 30% of the claims against obstetricians, is nearly $1 million, but can soar much higher. One recent award in a 

Philadelphia case reached $100 million. 

We survey our members regularly on the issue of medical professional liability. 

According to our most recent survey, the typical ob-gyn is 47 years old, has been 

in practice for over 15 years—and can expect to be sued 2.53 times over his or her 

career. Over one-fourth (27.8%) of ACOG Fellows have even been sued for care provided during their residency. In 1999, 76.5% of ACOG Fellows reported they had 

been sued at least once so far in their career. The average claim takes over four 

years to resolve. 

III. WOMEN’S HEALTH CONSEQUENCES OF EXCESSIVE LITIGATION

The medical liability crisis is complex, affecting every aspect of our nation’s ability 

to deliver health care services. As partners in women’s health care, we urge Congress to end the medical liability insurance crisis. Without legislative intervention, 

women’s access to health care will continue to suffer. We urge you to bring an end 

to the meteoric rise in liability premiums that is already impeding women’s access 

to health care. 

This crisis is obstructing mothers’ access to obstetric care. When confronted with 

substantially higher costs for liability coverage, ob-gyns and other women’s health 

30

care professionals stop delivering babies, reduce the number they do deliver, and 

further cut back—or eliminate—care for high-risk mothers. With fewer women’s health care professionals, access to early prenatal care will also be reduced, depriving them of the proven benefits of early intervention. 

Excessive litigation also threatens women’s access to gynecologic care. Ob-gyns 

have, until recently, routinely met women’s general health care needs—including 

regular screenings for gynecologic cancers, hypertension, high cholesterol, diabetes, 

osteoporosis, sexually transmitted diseases, and other serious health problems. Staggering premiums continue to burden women’s health care professionals and will further diminish the availability of women’s care. Legislative intervention is needed to avert another rural health crisis. Women in 

underserved rural areas have historically been particularly hard hit by the loss of 

physicians and other women’s health care professionals. With the economic viability 

of delivering babies already marginal due to sparse population and low insurance 

reimbursement for pregnancy services, increases in liability insurance costs are forcing rural providers to stop delivering babies. Help sustain those providers dedicated 

to caring for America’s rural women and mothers. 

Allowing the crisis to continue will mean community clinic cutbacks. Also hurt by 

the medical liability crisis are the nation’s 39 million uninsured patients—the majority of them women and children—who rely on community clinics for health care. 

Unable to shift higher insurance costs to their patients, these clinics have no alternative but to care for fewer people. 

Acting now can save more women from the ranks of the uninsured. Health care 

costs continue to increase overall, including the cost of private health care coverage. 

As costs continue to escalate, employers will be discouraged from offering benefits. 

Many women who would lose their coverage, including a large number of single 

working mothers, would not be eligible for Medicaid or SCHIP because their incomes are above the eligibility levels. Last year, 11.7 million women of childbearing 

age were uninsured. Without reform, even more women ages 19 to 44 will move into 

the ranks of the uninsured. 

As partners in women’s health care, ACOG urges Congress to act swiftly to avert 

further access issues for women. 

IV. WOMEN’S HEALTH SUFFERS NATIONWIDE

As ob-gyns, our primary concern is access to affordable, quality health care. Help 

us maintain the highest standard of care for American’s women and mothers by 

ending the crisis in the following nine ‘‘Hot States’’: Florida, Mississippi, Nevada, 

New Jersey, New York, Pennsylvania, Texas, Washington, and West Virginia. In 

three other states—Ohio, Oregon, and Virginia—a crisis is brewing, while four other 

states—Connecticut, Illinois, Kentucky and Missouri—should be watched for mounting problems. 

In identifying these states, the College considered a number of factors in the escalating medical liability insurance crisis for ob-gyns. The relative weight of each factor could vary by state. Factors included: the lack of available professional liability 

coverage for ob-gyns in the state; the number of carriers currently writing policies 

in the state, as well as the number leaving the medical liability insurance market; 

the cost, and rate of increase, of annual premiums based on reports from industry 

monitors; a combination of geographical, economic, and other conditions exacerbating an already existing shortage of ob-gyns and other physicians; the state’s tort 

reform history, and whether tort reforms have been passed by the state legislature—or are likely to be in the future—and subsequently upheld by the state high 

court. 

A. Florida 

• With the highest average premium for ob-gyns in the nation in 2000, at $158,000 

per year, Florida has a high number of medical liability lawsuits and a history 

of large jury awards. According to First Professionals Insurance Company, Inc., 

Florida’s largest medical liability insurer, one out of every six doctors is sued 

in the state as compared to one out of every 12 doctors nationwide. 

• In South Florida, where insurers say litigation is the heaviest, annual premiums 

for ob-gyns went as high as $208,949 in 2001—the highest rates in the country, 

according to Medical Liability Monitor. 

• The liability situation has been so chronic in Florida that during the crisis of the 

1980s, the state began to allow doctors to ‘‘go bare’’ (not have liability coverage), 

as long as they could post bond or prove ability to pay a judgment of up to 

$250,000. 

• Double- and triple-digit premium increases have forced some doctors to cut back 

on staff, while others have left the state or have stopped performing high-risk 

31

procedures to avoid the lofty rates. Ob-gyns in this state are more likely than 

their colleagues in other states to no longer practice obstetrics. 

• Florida already has some tort-reform laws aimed at protecting doctors. But more 

recent Florida Supreme Court rulings have weakened such laws, causing the 

number of lawsuits to climb again. Now Florida is one of at least a dozen states 

contemplating another round of legislation. 

B. Mississippi 

• According to the Mississippi State Medical Association, medical liability insurance 

rates for doctors who deliver babies have risen 20% to 400% in the past year, 

depending on the carrier. Annual premiums range from $40,000 to $110,000. 

• The Delta Democrat Times reported that from 1999 to 2000, the number of liability lawsuits faced by Mississippi physicians increased 24%, with an additional 

23% increase in the first five months of 2001. 

• According to the DELTA DEMOCRAT TIMES, 324 Mississippi physicians have 

stopped delivering babies in the last decade. Only 10% of family physicians deliver babies. 

• In Cleveland, Mississippi, three of the six doctors who deliver babies dropped that 

part of their practice in October 2001 because of the increase in premiums. 

• In Greenwood, Mississippi, where approximately 1,000 babies are born every year, 

the number of obstetricians has dropped from four to two. The two remaining 

obstetricians are each limited to delivering 250 babies per year, leaving approximately 500 pregnant women searching for maternity care, reports the Mississippi Business Journal. 

• In Yazoo City, Mississippi, which has 14,550 residents, there is no one practicing 

obstetrics. 

• Natchez, Mississippi, which serves a 6-county population of over 100,000, has only 

three physicians practicing obstetrics. 

• The State Legislature defeated 12 tort and insurance reform bills this year. No 

reforms were approved during the 2002 session, which adjourned in mid-April. 

• The St. Paul Companies, Inc., was the 14th insurer to leave Mississippi in five 

years, according to the Mississippi State Medical Association. 

• State Insurance Commissioner George Dale has stated that unless tort reform is 

passed, it is unlikely that insurance companies will be interested in doing business in Mississippi. 

C. Nevada 

• In December 2001, The St. Paul Companies, Inc., the nation’s second largest medical liability insurer, announced it would no longer renew policies for 42,000 

doctors nationwide—including the 60% of Las Vegas doctors who were insured 

by St. Paul. Replacement policies are costing some Nevada doctors four or five 

times as much as before: $200,000 or higher annually, more than most doctors’

take-home pay, the Los Angeles Times reports. Prior to the St. Paul announcement, insurance premiums for Las Vegas ob-gyns had been in the $40,000 

range. 

• A February 2002 survey of Clark County ob-gyns, commissioned by their ob-gyn 

society, revealed: 

• 60% indicated that they are going to drop obstetric care from their practices 

because they cannot afford the increases in their professional liability insurance. 

• 50% reported they have been quoted premium increases ranging from 50% to 

200%. 

• 42.3% are making plans right now to leave the state if there is no resolution 

in the medical liability situation in the next couple of months. 

• 78% percent indicated that they ultimately will have to leave the state if 

there is no long-term solution. 

• According to a March article in the Las Vegas Review-Journal, many Las Vegas 

Valley doctors say they will be forced to quit their practices, relocate, retire 

early or limit their services if they cannot find more affordable rates of professional liability insurance by early summer. 

• According to the Nevada State Medical Association, it is estimated that between 

200 and 250 physicians will be facing bankruptcy, closing their offices, or leaving Nevada this year. 

• In February 2002, the Las Vegas Sun reported that medical liability cases in 

Clark County had more than doubled in the past six years. In that period, 

plaintiffs’ awards in the county totaled more than $21 million. 

• USA Today reports that in the past two years, Nevada juries have awarded more 

than $1.5 million each in six different medical liability trials. 

32

• Recruiting doctors to Las Vegas is extremely difficult because of the escalating 

medical liability premiums and the perception that it is highly litigious. Nevada 

currently ranks 47th in the nation for its ratio of 196 doctors per 100,000 population. The state’s medical school produces just 50 physicians a year. • Unlike neighboring California, which has a cap on noneconomic damages, there 

is no limit in Nevada as to what juries can award patients in medical liability 

cases. 

D. New Jersey 

• In February 2002, the NEWARK STAR-LEDGER reported that three medical liability 

insurance companies went bankrupt or announced they would stop insuring 

New Jersey physicians in 2002 for financial reasons. The state’s two largest 

medical liability insurers have stated that they cannot pick up all the extra 

business and are rejecting doctors they deem high risk. • MBS Insurance Services of Denville, one of New Jersey’s largest medical liability 

insurance brokers, estimates that approximately 300 to 400 of the state’s doctors cannot get insurance at any price. • According to the Medical Society of New Jersey, premiums have risen 50% to 

200% over last year. • According to the Star-Ledger, ‘‘An obstetrician with a good history—maybe just 

one dismissed lawsuit—can expect to pay about $45,000 for $1 million in coverage. Rates rise if the physician faces several lawsuits, regardless of whether 

the physician has been found liable in those cases.’’ • The president of the New Jersey Hospital Association says that rising medical liability premiums are a ‘‘wake-up call’’ that the state may lose doctors. Hospital 

premiums have risen 250% over the last three years, and 65% of facilities report 

that they are losing physicians due to liability insurance costs. 

E. New York 

• New York State currently faces a shortage of obstetric care in certain rural regions. Increasing liability insurance costs will only exacerbate these access problems. • In 2000, New York was second only to Florida in the average cost of annual liability insurance premiums for ob-gyns ($144,973 per year). • Also in 2000, there was a total of $633 million in medical liability payouts in New 

York State, far and away the highest total in the country. According to the insurance consumer web site www.insure.com, this is 80% more than the state 

with the second highest total. • Increased insurance rates have forced some physicians in New York to ‘‘quit practicing or to practice medicine defensively, by ordering extra tests or procedures 

that limit their risk,’’ according to a recent New York Times report. • Physician medical liability insurance costs have historically been a problem in 

New York State. The legislature and governor had to take significant action in 

the mid-1970s and again in the mid-1980s to avert a liability insurance crisis 

that would have jeopardized access to care for patients. 

F. Pennsylvania 

• Pennsylvania is the second-highest state in the country for total payouts for medical liability. During the fiscal year 2000, combined judgments and settlements 

in Pennsylvania amounted to $352 million—or nearly 10% of the national total. • From the beginning of 1997 through September 2001, major liability insurance 

carriers writing in Pennsylvania increased their overall rates 80.7% to 147.8%, 

according to a January 2002 York Daily Record article. • Philadelphia and the counties surrounding it are hardest hit by the liability crisis. 

From January 1994 through August 2001, the median jury award in Philadelphia for a medical liability case was $972,900. For the rest of the state, including Pittsburgh, the median was $410,000. • One-quarter of respondents to an informal ACOG poll of Pennsylvania ob-gyns say 

they have stopped or are planning to stop the practice of obstetrics. 80% of medical students who come to the state for a world-class education ultimately 

choose to practice elsewhere, according to the Pennsylvania State Medical Society. • On April 24, 2002, Methodist Hospital in South Philadelphia announced that it 

will stop delivering babies due to the rising costs of medical liability insurance. 

The labor and delivery ward closed on June 30, leaving that area of the city 

without a maternity ward. Methodist Hospital has been delivering babies since 

its founding in 1892. 

• Despite some tort reform measures passed by the state legislature (House Bill 

1802) this past winter, ob-gyns were disappointed the measures did not provide 

33

more relief. The law did not include: caps on jury awards; sanctions on frivolous 

suits; changes in joint and several liability; limits on lawyers’ fees; or, a guarantee that a larger share of jury awards will go to injured plaintiffs. 

• The rules for venue of court cases in Pennsylvania are very liberal. Recently approved measures only appoint a committee to study venue shopping, but do not 

limit the practice. 

• Since HB 1802 passed, experts predict a 15% to 20% overall reduction in doctors’

liability premiums. But with the 50% to 100% premium increases of the last two 

years, medical officials believe the bill is not enough to stop physicians from 

leaving practice or to attract new physicians. Nor do they believe new insurers 

will begin writing policies in Pennsylvania. 

G. Texas 

• Preliminary results of a recent Texas Medical Association physician survey indicate that: 

• More than half of all Texas physicians responding, including those in the 

prime of their careers, are considering early retirement because of the state’s 

medical liability insurance crisis. 

• Nearly a third of the responding physicians said they are considering reducing the types of services they provide because of recent premium increases for 

medical liability. The percentage of physicians answering ‘‘yes’’ to that question was higher in Fort Worth, Houston, San Antonio, and Dallas than in 

Brownsville or El Paso. 

• Medical liability insurance premiums for 2002 are expected to increase from 30% 

to 200%, according to the Texas Medical Association. In 2001, ob-gyns in Dallas, 

Houston, and Galveston paid medical liability insurance premiums in the range 

of $70,00 to $160,000. 

• According to Governor Rick Perry’s office, between 1996 and 2000 an average of 

one in four Texas physicians had a medical liability claim filed against them. 

In the Lower Rio Grande Valley, the situation is even worse. 

• According to a February 2001 Texas Medical Association survey, one in three Valley doctors say their insurance providers have stopped writing liability insurance. 

• In 2000, 51.7% of all Texas physicians had claims filed against them, according 

to the Texas Medical Examiners Board. Patients filed 4,501 claims, up 51% 

from 1990. 

• By some estimates, as many as 86% of medical liability claims filed in Texas are 

dismissed or simply dropped without payment to the patient. Yet providers and 

insurance companies must still spend millions of dollars in defense, even 

against baseless claims. 

• According to a Texas Medical Association study, the amount paid per claim in 

2000 was $189,849 (average for all physicians), a 6% increase in one year. 

• Texas has no limits on noneconomic damages in medical liability cases, although 

the legislature enacted such limits in the 1970s as part of a comprehensive set 

of reforms. The Texas Supreme Court later rejected them in the 1980s. 

• Texas has procedures in place to screen lawsuits for merit and to sanction lawyers 

who file frivolous suits, but these are not enforced uniformly across the state, 

according to an April 2002 news release issued by Governor Rick Perry. 

• Only about 30% of the medical liability insurance market is served by insurance 

companies that are regulated by the Texas State Department of Insurance and 

subject to rate review laws, according to Governor Perry’s office. 

H. Washington 

• According to Medical Liability Monitor, in late 2001 the second largest carrier in 

Washington State announced that it was withdrawing from providing medical 

liability insurance for Washington physicians. This decision by Washington Casualty Company impacted approximately 1,500 physicians. 

• In 2001, state ob-gyns paid medical liability insurance premiums in the range of 

$34,000 to $59,000. For many physicians, this meant an increase of 55% or 

higher from the year 2000. 

• According to the Pierce County Medical Society, some Tacoma specialists reported 

300% increases. 

• Unlike California, Washington has no cap on noneconomic damages in medical liability cases. The State Supreme Court found a previous cap unconstitutional 

in 1989. 

• In April, The Olympian reported that Washington State Insurance Commissioner 

Mike Kreidler’s office has heard repeatedly from physicians throughout the 

34

state that they may be forced out of Washington because of high medical liability rates or the lack of available insurance. 

I. West Virginia 

• There are only three carriers in the state—including the state-run West Virginia 

Board of Risk and Insurance Management—currently writing medical liability policies for doctors. Annual premiums range from $90,700 to $99,800. • In 2000, many physicians had problems affording or finding insurance. This urgency prompted Governor Bob Wise to issue a request for proposals to commercial insurance carriers asking them to provide terms under which they would 

be willing to come to the state. The governor’s office received no response at all. 

To date, some carriers previously active in West Virginia are under an indefinite, self-imposed moratorium for new business in the state, according to the 

West Virginia State Medical Society. • Legislation eked out during a grueling special session in the fall of 2001 reestablished a state-run insurer of last resort. However, with rates 10% higher than 

the highest commercial rate, and an additional 50% higher for those physicians 

who are considered high risk, the state-run insurer does not solve the affordability problem, according to ob-gyns in the state. • According to an informal survey of ACOG’s West Virginia section, more than half 

of all ob-gyn residents plan to leave the state once they have completed training 

because of the state’s medical liability insurance climate. A majority of private 

practitioners who provide obstetric care plan to leave the state if there is not 

improvement in the insurance crisis. • West Virginia cannot afford to lose more doctors. The West Virginia State Medical 

Society reports that a majority of the state is officially designated by the federal 

government as a health professional shortage area and medically underserved. 

V. Conclusion 

Thank you, Mr. Chairman, for your leadership on this important issue and for the 

Subcommittee’s attention to this crisis. ACOG appreciates the opportunity to 

present our concerns for the panel’s consideration. The College looks forward to 

working with you as we push for a solution.

Mr. BILIRAKIS. Thank you very much, Doctor. 

Ms. Visco. 

STATEMENT OF FRAN VISCO 

Ms. VISCO. Thank you very much, Mr. Chairman. As you know, 

I’m the president of the National Breast Cancer Coalition and a 15-

year breast cancer survivor. The National Breast Cancer Coalition 

is a group of more than 600 organizations from across the country. 

We are dedicated to eradicating breast cancer through action and 

advocacy and we focus on increasing Federal funding for breast 

cancer research and collaborating with the scientific community to 

make certain that research is well done, to increasing access to 

health care for all women and certainly to quality clinical trials 

and to increasing the influence of women with breast cancer and 

other breast cancer advocates and all decisionmaking around 

breast cancer. 

We’ve been fighting as an organization for access to high quality 

health care since our inception in 1991. And much of the debate 

over the past decade has focused on how to finance and deliver 

health care. But we believe, and equally, if not a more important 

question is, how do we define quality care? What is it? How does 

it compare to the kind of care the patients usually and currently 

receive? 

You know, we’re talking today about whether excessive litigation 

is harming patient’s access to care, and I have to say in listening 

to a number of the opening statements, I was questioning whether 

I’m in the right room. Because really what I’m focusing on is and 

what the National Breast Cancer Coalition is focused on, what our 

35

goals are, to make certain that patients have access to quality 

health care. 

And there are many barriers standing in the way of access to 

quality health care. You’re dealing today with whether excessive 

litigation is one of those barriers. There’s an assumption that excessive litigation is increasing medical malpractice rates and increasing medical malpractice rates have resulted in a barrier to access to health care. Those are all assumptions that you’re going to 

have to test and put into the context of all the other barriers and 

prioritize what is the most important and how can we achieve as 

quickly as possible access to quality care for all Americans. 

The National Breast Cancer Coalition is one of a number of organizations that have supported very strong enforcement mechanisms 

in all litigation. We have opposed caps and liability damages. We 

are one of a number of organizations that take and continue to 

take that position. 

You’re asking today, again, whether the prevalence and amount 

of jury awards has been the cause of sky rocketing insurance premiums. And if that is the case, we’re asking well, would limiting 

lawsuits be the solution? Perhaps a better solution, one of a number of better solutions would be to limit the need for lawsuits. 

You know, there’s an atmosphere in this country now among the 

public and the patient community of distrust, distrust certainly for 

corporations, for institutions, and the medical community. We’re 

looking at what are the barriers in the way. What is it that we 

need to work on and focus on. 

The Institute of Medicine has issued a number of reports that 

have identified so many problems in the health care system in this 

country, the Quality Chasm Report, Medical Errors Report, the 

Data Report. There is much dialog and much research going in to 

looking at the barriers to health care. There are the issues of corporate individual and institutional actions. You’re looking at issues 

like Imclone. It’s not just the insider trading issues, but the issue 

of conflict of interest of institutions and clinicians who are involved 

in research. How does that impact access to quality care? What effect does that have on individuals? Those conflicts are serious and 

they’re real and they’re undermining the trust in the country for 

the medical community. 

We’re looking at recent, there are a number of examples given 

but there was also a recent article in the paper about a large pharmaceutical company hiding toxicity data when it presented data to 

the FDA for drug approval. That drug was then approved out in 

the public and a number of deaths occurred. We’re looking at a lack 

of evidence base medicine in this country. You’ve seen the recent 

report on arthoscopic surgery. You’re looking at the hormone replacement clinical trial recently. Breast self exam. Mammography 

screening. You’re looking at a system that needs serious attention 

and fixing in order to get access to quality care. You’re looking at 

tens of millions of Americans who lack health insurance. You’re 

looking at millions and millions of Americans whose health insurance premiums are increasing. 

There are barriers to doctors and institutions to providing care. 

There may be an overuse of technology. They’re saturated markets 

in competition. There’s lack of a focus on evidence based medicine, 

36

and we’re dealing with a necessary shift to evidence based medicine from a fee for service system. 

Now practice premiums are too high, but what caused that? Was 

it corporate mismanagement? Was it excessive litigation? The resources of the grass roots and the patients across this country that 

are part of the National Breast Cancer Coalition are precious. And 

we’re very careful how we utilize them. We’re very careful when we 

ask them to get behind a particular issue. And the resources of the 

U.S. Congress are equally precious. We look to you for leadership. 

We look to you for focusing on the right priorities on what we really need to accomplish to get all Americans access to quality health 

care. 

If excessive litigation turns out to be the case, then that is something I hope you will look at extremely carefully and we can work 

on together. But we need to work together to fixing the health care 

system. And as an organization, along with a number of other organizations to date, we do not believe that putting caps on what a 

patient is going to receive as a result of malpractice is the answer 

to this problem. Thank you very much. 

[The prepared statement of Fran Visco follows:]

PREPARED STATEMENT OF FRAN VISCO, PRESIDENT, NATIONAL BREAST CANCER

COALITION

INTRODUCTION

Thank you Mr. Chairman, and Members of the Committee, for inviting me to testify today. I am Fran Visco, President of the National Breast Cancer Coalition 

(NBCC), and a breast cancer survivor. I am one of the 3 million women living with 

breast cancer in the United States today. 

The National Breast Cancer Coalition is a grassroots advocacy organization dedicated to ending breast cancer through the power of action and advocacy. The Coalition’s main goals are to increase federal funding for breast cancer research and collaborate with the scientific community to implement new models of research; improve access to high quality health care and breast cancer clinical trials for all 

women; and expand the influence of breast cancer advocates in the decision-making 

process. 

NBCC has been fighting for access to high quality breast cancer care since its inception in 1991. While much of the debate over the past decade has focused on how 

to deliver and finance health care, we believe that these are secondary issues. Before we can determine what system best delivers quality breast cancer care, we first 

have to answer a more basic question: what is quality care? How does it compare 

to the kind of care that patients currently receive? 

The issue before the Committee today deals with whether excessive litigation is 

harming patient access to care. However, rather than focusing on whether litigation 

has increased, and whether jury awards are too high, we think the more important 

questions are: What type of care do patients deserve? Why are they turning to the 

court system to get it? Will limited accountability and capping damages solve the 

problem? 

The Institute of Medicine has published a number of reports—Crossing the Quality Chasm, To Err is Human, and Enhancing Data Systems to Improve the Quality 

of Care, which address important concerns about the quality of the health care that 

patients currently receive. These reports revealed that in many ways the healthcare 

system is broken, and that patients do not have access to the care they deserve. The 

focus must be on improving the system—and ensuring a patient-centered, accountable system of care. 

The National Breast Cancer Coalition is focused through its Quality Care Initiative to accomplish this goal. In fact, NBCC believes that the most effective way to 

reduce lawsuits is to create a fair and transparent system of accountability for 

health care. Once defined, a high quality health care system would be one where 

everyone knows the rules. Doctors would follow it. Insurance companies would embrace it. And patients would benefit from it. 

37

Moreover, in a quality health care system, no one would assume that the doctor 

is always right, that the health plan is always wrong. Rather, we would have guidance from a comprehensive set of high quality health care standards. Patients would 

have access to evidence-based medicine. Health plans would deny certain procedures 

only if they were ineffective, not because of the bottom line. Patients would not assume that more care is better care, because with a more transparent system, they 

would be better educated and more empowered. In NBCC’s vision of a quality care 

system, providers would be trained in a patient-centered perspective—from the beginning. 

I would like to focus my testimony on two main points: 

First, the reason that the National Breast Cancer Coalition cares about 

this issue is that we are committed to quality cancer care, and we believe 

that accountability is a key component to getting this care. 

NBCC is working with its 600 member organizations, and tens and thousands of 

breast cancer advocates across the country in a partnership with committed health 

insurers, providers and public policy officials to define a quality health care system, 

to put it in place, and to ensure that all breast cancer patients have access to it. 

Ultimately, we know that without accountability in the system, we will never have 

quality care. 

In the Coalition’s vision of quality, patients would get access to high quality evidence-based medicine. Patients would be ensured access to approved clinical trials, 

which provide the best evidence about what works, and what does not. Patients 

would have a seat at the tables where decisions about breast cancer are made, and 

the system would be more transparent. Transparency would lead to trust. Transparency would also result in a built-in infrastructure of accountability—one that 

would limit the number of patients harmed in the system, and compensate those 

who were injured. Providers and institutions would place the highest premium on 

delivering high quality care to their patients, and health plans would support providers in this endeavor. 

NBCC appreciates the difficult challenge in working to fix a system that may be 

broken as opposed to just saying what is wrong with it. It is for that reason that 

we hope you will embrace the opportunity to work to improve the quality of our 

healthcare system, and to reduce patients’ need to turn to the courts to get the care 

they deserve. 

When patients are diagnosed with breast cancer, the last thing they want while 

they fight for their lives is to have to go to court and fight for their care. If lawsuits 

are increasing, it is fair to assume that patients may not be getting access to the 

type of care they need, when they need it. We have a responsibility to work together 

to improve patients’ outcomes in the healthcare system. 

Recently, we have seen first hand the harm that results when there is a lack of 

accountability for corporate and individuals’ actions. We can pull relevant examples 

from the accounting world where corporate executives acted in bad faith, at the expense of their employees and the public, without concern that they’d be held liable 

for their actions. It is only now that the bad actors are splashed across the front 

pages of newspapers, and forced to testify before Congress to explain their actions, 

that the corporate culture is seeking to improve the system. And it is only because 

the corporate world is being held accountable for its illegal activity that it is committed to change. There is no doubt that accountability can be a powerful deterrent, 

and that it is an essential component of change. 

Why, then, would Congress seek to limit accountability in the health care system 

rather than improve the quality of care that patients receive? The way to improve 

quality care, minimize medical errors, reduce medical costs, and deter bad actors 

cannot be achieved by simply reducing damage awards or limiting enforcement. 

While the solution may be complex, the National Breast Cancer Coalition is committed to working with Members to ensure that all individuals have access to a 

quality healthcare system where they receive their care without having to go to 

court. 

NBCC believes that the right to sue also serves as an assurance that patients who 

have been injured have access to redress for injuries caused by medical errors and 

malpractice. 

Congress has made it clear that employees of Enron and WorldCom should have 

recourse for life savings they have lost due to actions of others. Likewise, shouldn’t 

a patient, who after being denied access to high quality care, or being the victim 

of medical malpractice, have the chance to be compensated for her loss? 

We have all heard the horror stories about patients who are denied access to quality care, and suffer tragic consequences as a result. While these individual stories 

are compelling and important to address, we believe that the focus of today’s hearing should be on what we can do to move forward toward a more patient-centered, 

38

1The National Cancer Policy Board, in its report Ensuring Quality Cancer Care (NIM/NRC, 

1999), found that we do not have good evidence about what constitutes good quality care. But 

it concludes that our current cancer care ‘‘system’’ leaves a substantial number of patients with 

far less than ideal care. The RAND Corporation, in How Good is the Quality of Health Care 

in the United States (RAND/RP-751, 1999), also notes the surprisingly small amount of systematic knowledge available on the quality of health delivered in the United States. But based on 

existing data, it also concludes that there are large gaps between the care people should receive 

and the care they do receive. In Crossing the Quality Chasm: A New Health System for the 21st 

Century (IOM/NAP 2001), the Committee on the Quality of Health Care in America concludes 

that quality problems are everywhere and that the U.S. health care delivery system is in need 

of fundamental change. 

evidence-based system of quality health care within which patients are survivors 

rather than victims. 

Second, the ultimate goal is to make certain that patients have access to 

quality healthcare. Extensive litigation may not be standing in the way. 

While medical malpractice insurance rates are increasing, there is no conclusive 

evidence as to why. There also seems to be a lack of clarity about what this really 

means for patients. NBCC feels strongly that medical decisions must be evidencebased; likewise, we believe that legislation must stem from an evidence-based analysis. We must ensure that we are addressing the real issue, the right way, rather 

than rushing to enact a solution before we truly understand the problem. 

According to a recent ‘‘Wall Street Journal’’ article, business decisions made by 

the insurance industry may also have contributed to the current crisis in affordable 

coverage. During the last decade, malpractice insurers competed for a national market share, keeping prices artificially low and inadequate to cover claims. Losses 

from inadequate pricing and poor investment decisions have forced many insurers 

either to withdraw from the malpractice market or restrict their coverage. 

It may be that too little oversight and regulation of the insurance industry has 

led to dramatic price increases and fluctuations in the availability of coverage, leaving many providers without access to affordable coverage. 

Of course at issue today is also whether the prevalence and amount of jury 

awards has been the cause of skyrocketing insurance premiums, and if that is the 

case, one must ask: would limiting lawsuits be the solution? NBCC believes that the 

better solution would be to limit the need for lawsuits. 

It is also important not to become alarmist about reports that patients are having 

difficulty in accessing healthcare due to medical malpractice rates. While there may 

be incidents in some states where patients had difficulty in accessing a provider, 

we have a responsibility not to suggest that the problem is widespread relative to 

all patients in all states, until we have conclusive information. 

The National Breast Cancer Coalition looks forward to working with Members of 

Congress to address the issue of access to high quality health care for all Americans. 

Attached for the record is NBCC’s position paper on our vision for quality health 

care, and a copy of our recently published ‘‘Guide To Quality Breast Cancer Care’’. 

Thank you for the opportunity to testify, and I’d be happy to answer any questions. 

POSITION STATEMENT

POSITION

NBCC has been fighting for access to quality breast cancer care since its inception 

in 1991. Much of the debate over the past decade has focused on how to deliver and 

finance health care, but we believe this is a secondary question. Before we can determine what system best delivers quality breast cancer care, we have to first answer a more basic question: what is quality care? NBCC believes that quality breast 

cancer care is a patient-centered, evidence-based system of care that fulfills the following overlapping core values: Access, Information, Choice, Respect, Accountability, 

and Improvement. 

THE PROBLEM

The term ‘‘quality health care’’ is often used but rarely defined. There is no national consensus on what makes breast cancer care ‘‘quality’’ care. But even without 

a precise definition, we know that breast cancer care in this country is inconsistent 

and sometimes dangerously inadequate. Recent studies are revealing the depth and 

breadth of the problem.1

As breast cancer activists, we know too well that the present health care system—

or rather, lack of a system—does not work for everyone. We believe everyone affected by breast cancer should have full access to the best care available, care that 

39

is based on sound scientific evidence and delivered in a respectful and timely manner. This is a far cry from reality. 

We also strongly support evidence-based medicine and know that more care is not 

always better care. We do not want to waste our limited resources—or risk our 

health or lives—on treatments that are based on little more than a hope. We deserve health care that works, and access to a wide range of well-designed and efficiently run clinical trials that help us find better treatments for breast cancer. 

But evidence-based care is just one part of quality breast cancer care. Because we 

do not have a sure cure, breast cancer patients and clinicians are often forced to 

make crucial choices with inadequate information. Sometimes there are no best answers. In such an uncertain and frightening environment, psycho-social concerns become paramount. 

For these reasons, NBCC does not view quality care as simply a checklist of procedures or a measurement of over-treatment and under-treatment. Instead, our vision 

is of overlapping core values. We believe the following six core values are the essential components of quality breast cancer care: Access, Information, Choice, Respect, 

Accountability, and Improvement. 

ACCESS

Comprehensive affordable health care must be available to everyone. All patients 

must have access to coordinated care that is user-friendly, culturally respectful, 

timely, and integrated both among and within provider offices and systems. 

INFORMATION

All information must be accurate, timely, readily available, and disseminated in 

an appropriate format. Health care providers must offer clear information on the 

risks and benefits of all treatment options, and the evidence and lack of evidence 

relating to each option. They must encourage multiple opinions to assure the patient 

that the provider’s recommendation is appropriate. 

There must be transparent standards of evidence that explain what level of evidence is acceptable and what happens in the absence of sufficient evidence. 

Providers and patients must be given time and resources to review evidence, and 

efforts to review and synthesize evidence must be expanded so the system reflects 

current scientific/medical knowledge. 

A national advocacy advisory panel should be established to work with advocates, 

health literacy specialists, economists, and the public health community to review 

evidence and help design effective methods for communicating health care information to consumers, providers, and insurers. 

CHOICE

Recommended treatments must offer the best possible outcome consistent with 

patients’ personal preferences. Patient preferences for information and involvement 

in determining the course of treatment must be respected. 

Patients must have choices among a reasonable range of providers and treatment 

options, including specialists and complimentary care with proven efficacy. 

RESPECT

Care must be patient-responsive and culturally respectful. Patients should feel 

comfortable asking questions, voicing opinions, and being participants (at whatever 

level is appropriate for them) in all health care decisions. They must have justified 

confidence in the experience and training of health care providers and know that 

providers listen to them and advocate on their behalf. 

Patient confidentiality is paramount, and patients must have assurances that it 

is respected. 

There must be a system-wide emphasis on comprehensive care that respects patients’ fears, beliefs, culture, time, bodies, pain, decisions, and family members. The 

system must enable patients for whom breast cancer is a chronic illness to take care 

of themselves, avoid complications, and maintain their quality of life. The system 

must provide a wide range of services related to end of life issues for those dying 

of breast cancer. 

ACCOUNTABILITY

There must be national standards of quality care that are continually updated; 

every aspect of care must meet these standards at all sites of care. Services provided 

should be ‘‘needed and effective’’ as determined by a decision-making body that inVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 W:\DISC\81491 81491
40

cludes consumers; the end result should be based on democratically developed unambiguous criteria. 

There must be a well-designed and trusted grievance procedure that is clearly articulated to patients and includes meaningful consequences for both system and 

health care/insurer provider errors. 

Patients must bring health issues forward to their providers and accept the 

choices they make for themselves. All providers and patients must be accountable 

to our society for the responsible use of health care dollars. 

IMPROVEMENT

There must be an ongoing commitment to increasing the quality and quantity of 

available evidence, especially regarding the causes and prevention of breast cancer, 

and with an emphasis on learning from mistakes. All patients must be fully informed of clinical trials for which they are eligible, and there must be no financial 

barriers to participation in these trials. 

There needs to be more creative and meaningful measures of quality, and more 

effective ways of collecting and disseminating this information. Designing scientific 

tools for measuring health care quality has, until recently, been the domain of 

health services researchers. Breast cancer survivors and activists bring a unique 

and crucial perspective to this issue, and must be involved at every level of the quality breast cancer care research process. 

A patient-centered evidence-based vision of quality must deeply permeate our 

medical educational system, including continuing medical education, so both current 

and future providers understand and appreciate their role in creating quality breast 

cancer care. 

CONCLUSION: A GUIDE TO QUALITY

The specific methods and strategies for fulfilling these core values will vary, but 

the core values themselves will not. Together, they serve as a guide to design and 

evaluate quality health care public policy. We believe that successfully incorporating 

all of these core values into our health care system is the key to achieving quality 

breast cancer care. 

ABOUT NBCCF

The National Breast Cancer Coalition Fund is a grassroots organization dedicated 

to ending breast cancer through the power of action and advocacy. The Coalition’s 

main goals are to increase federal funding for breast cancer research and collaborate 

with the scientific community to implement new models of research; improve access 

to high quality health care and breast cancer clinical trials for all women; and expand the influence of breast cancer advocates in all aspects of the breast cancer decision making process.

Mr. BILIRAKIS. Thank you, Ms. Visco. Before I introduce Dr. Roberts, I would like to announce that Ms. Capito, Congresswoman 

from West Virginia, who is not a member of the committee that of 

course greatly interested in this issue because of the problems in 

West Virginia, particularly, has joined us to listen in. Thank you 

for being here. 

Dr. Roberts. 

STATEMENT OF SAM ROBERTS 

Mr. ROBERTS. I’m Dr. Samuel Roberts from Elkins, West Virginia. I live in a town of about 10,000 people. The county is approximately 30,000 people. We take care of seven counties, approximately a 100,000 patient population. We have one hospital there. 

When I first went into practice in Elkins, 1978, there were six hospitals, providing full service, obstetrics, surgery, and emergency 

room intensive care work. There’s now one hospital in that area. 

We serve 100,000 people. We are losing physicians by the day. We 

have four OB/GYNs and myself delivering babies in that community. One of our OB/GYNs went to Canada last week to interview 

41

for a job because he could not find malpractice insurance in West 

Virginia. 

The three other OB/GYNs went to work for the hospital. I’m 

presently in private practice. My partner, who is also a family physician, stopped doing obstetrics 2 years ago because he could not 

afford the malpractice costs. I’m a second generation family physician. My father and I have delivered over 9,000 babies in Elkins, 

the town of 10,000. In the last 63 years, there’s been a Dr. Roberts 

practicing medicine, other than the 5 years that my father was 

gone during World War II as a medical officer in the European theater. Four years, excuse me. And I’m very proud of that. 

But he and I practiced together for approximately 6 years. And 

I have tried to continue that heritage. I have a daughter named 

Leah Roberts, who is a second year medical student at West Virginia University. Leah had hoped to come back to practice with me 

as I did with my father carrying on the tradition of caring for people in our community. Leah and many of her classmates do not feel 

that they can come back to West Virginia because they cannot afford to pay the malpractice premiums. I have four children in college and graduate school. I’m having difficulty paying their tuitions 

and continuing to keep my practice open. My practice is approximately 90 percent welfare, Medicaid and Medicare. And my obstetrical is 90 percent Medicaid. 

We provide services. I have two physician’s assistants, and a 

nurse practitioner. I have ten employees total that try to take care 

of as many people as we can. We’re not in it for the money. We’re 

there to try to help people. And honestly, it’s not an issue of money. 

It’s an issue of access to care. And the people really have a chance 

to see their family doctor, have a chance to do something to help 

themselves provide their family with the best care possible. 

The number of OB providers in West Virginia in 1978 was approximately 200 and included 140 family physicians and approximately 60 OB/GYNs. Now there are approximately 100 providers. 

In the last 24 years, the number of providers has dropped, from approximately 200 to less than a 100. So access to prenatal care and 

delivery services has diminished. For every dollar spent on prenatal care you save $4 on the care of pre-term infant. As the gentleman mentioned earlier, a woman comes into the emergency department at 26 or 28 weeks. If that woman had had good care, anticipatory prenatal care, she could have been prevented possibly 

from being brought in an emergency situation to deliver in an 

emergency department. 

That child, that family, and the society will pay the bill the rest 

of their life. When that child is born at 26 weeks, it’s going to have 

respiratory problems, many times cerebral problems, blindness, 

many complications that can occur from excessive prematurity. We 

need to be aware that this has long term impact on the people of 

America. The access to care is not there. 

In West Virginia it is critical. We are losing people by the day. 

We have four surgeons in Elkins. Two of them are going to retire 

this year because they had to change companies and they cannot 

afford to pay their tail. If they switch to a new company, they have 

to buy tail at that company. 

42

I had to switch BRIM, which is the Bureau Risk and Insurance 

Management, which is run by the State of West Virginia. It was 

initially brought about in order to provide services for professors at 

the universities, such as Marshall University and West Virginia 

University. And what’s happened is that BRIM has, in this emergency situation, taken up the individual physician, such as myself, 

that could not find other malpractice insurance. 

I have never had a malpractice claim in 24 years. My rates doubled last year from $17,000 to $35,800. I can’t afford that next 

year, because they tell me it’s going to double again. I can not afford to continue to provide obstetrical services in Elkins, West Virginia. I have families I have delivered eight, nine children for. It 

makes me very sad to know that I’m not going to be able to be 

there for those families. I am delivering babies of women that I delivered. And that’s a very wonderful feeling. To live in a small community in West Virginia and realize we’re going to lose that special 

touch. It makes me very sad that my daughter doesn’t feel that she 

can come back and practice with me. 

I think it’s a loss to West Virginia, it’s a loss to the United 

States. We don’t have a sense of what’s right here. The lawyers are 

pointing at the insurance companies. The insurance companies are 

pointing at the lawyers. The doctors are pointing at the insurance 

companies and the lawyers. We need to sit down and work out 

something we can all live with that allows our people to have the 

right to health care. We need to use common sense. We need not 

to make this a political issue. I’m a Democrat. My grandfather was 

Governor of West Virginia in the 1930’s. He brought West Virginia 

through some hard times. And I hope that we can come through 

this hard time. I hope that medically we can make a difference. We 

can stabilize the situation. But it takes people sitting down and 

working together and that’s the reason I’m here today. I appreciate 

you listening. Thank you. 

[The prepared statement of Sam Roberts follows:]

PREPARED STATEMENT OF SAM ROBERTS, ON BEHALF OF THE AMERICAN ACADEMY OF

FAMILY PHYSICIANS

Thank you, Mr. Chairman, Ranking Member Brown and members of the Health 

Subcommittee. My name is Dr. Sam Roberts. I am a family physician from Elkins, 

WV, here today on behalf of the American Academy of Family Physicians and the 

National Medical Liability Reform Coalition. 

I am here because I am concerned that the medical liability crisis threatens my 

patients’ ability to get the health care they need. I am the second generation to 

serve as the local physician in Elkins. My father was the local physician in Elkins 

before me. Between the two of us, we have delivered 9,000 babies in a town of 

10,000. I have never been sued in twenty-five years of practice, but I cannot afford 

the insurance to continue delivering babies. This year I will have to stop, leaving 

the seven counties around me with no family physician delivering prenatal or maternity care. This will mean my pregnant patients will have to drive four to six 

hours for their prenatal care and delivery. This is a hard decision both for both my 

patients and me. But the litigation environment in West Virginia has driven up premiums so that I cannot afford the insurance. 

I am also concerned that West Virginia is facing a larger health care crisis. My 

daughter, Leah Roberts, is sitting behind me today. She is in her first year of medical school at West Virginia University Medical School. Her incoming class was surveyed at the beginning of the year and over ninety percent expected to stay in West 

Virginia to practice medicine. At the end of this year, they were surveyed again. 

Over two thirds of the class now expects to leave the state for states that are not 

experiencing a litigation crisis. 

43

We need passage of liability reforms on the national level. The AAFP and the National Medical Liability Reform Coalition support H.R. 4600, the Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 2002.

Mr. BILIRAKIS. Thank you very much, Dr. Roberts, for your excellent testimony. 

Ms. Townsend. 

STATEMENT OF LAUREN TOWNSEND 

Mr. TOWNSEND. Thank you very much, chairman, members of 

the committee and for the civics lesson for my son who has been 

listening to all the back and forth throughout the day. 

I’m the Director of Citizens for Consumer Justice. We’re Pennsylvania’s largest consumer coalition and organization. I’m also 

representing U.S. Action. I’m on the board of U.S. Action nationally. We applaud you for addressing this very, very important 

issue. However, with all due respect to our own Representative 

Greenwood, we vehemently oppose the contents of H.R. 4600, because we know that it will hurt victims of medical malpractice. It 

will immunize wrongdoers and be a boon for the insurance industry. 

We, as patients, I know you’ve heard this over and over again, 

are regularly subjected to the hassle factor when we seek health 

care. Because of HMOs, because of these corner the market hospital system giants, our relationship with many doctors, unlike Dr. 

Roberts, is tenuous at best. Our hands, patients and doctors, are 

tied because of bureaucrats calling the shots and deciding how 

health care should be delivered. And the result is health care cost 

containment, and that means frequently blowing through patients, 

avoiding costly referrals to specialists, making nurses work overtime, and not modernizing or streamlining systems and processes 

and procedures to avoid mistakes. 

Doctors are finding themselves in a terrible, terrible predicament. They’re told how to practice medicine by administrators all 

the while finding the environment for practicing more difficult because of the sky rocketing insurance rates we’ve been talking about 

all day. 

Another issue that’s really important, the AMA itself has said 

that medical errors, medical mistakes account for the fifth leading 

cause of death in this country. At a rally last fall, Pennsylvania victims spoke of malpractice and their own personal horror stories. 

Donald Davis used to work at a Home Depot. In September of 

2000, he went to a doctor to have a bone spur removed from his 

right baby toe. Shouldn’t have been a big surgery and he was expected back to work within a few weeks. 

Because of a mistake on the part of the doctor, the surgery incision didn’t heal properly and become gangrenous. Ultimately, the 

infection ensued and he had to have the toe amputated and needed 

bi-pass surgery in his leg. By January of that year, he developed 

a massive blood infection and in his own words, he said, ‘‘if I hadn’t 

ended up finding a new doctor, I would have died because of the 

blood infection. But unfortunately, the only way to save my life was 

to have both legs amputated. What happened to me was the result 

two doctors’ errors and it was preventable. Because of my amputation I had to leave my job and my life will never be the same. I 

44

came in with a problem with one toe and came out without my 

legs.’’

H.R. 4600 is not the answer. It will only further hurt injured victims and do nothing to foster patient safety or lower insurance premiums. It tells a women whose doctor’s negligence costs the life of 

her child that the child’s life is only worth $250,000. And it tells 

Donald Davis that having no legs for the rest of his life because 

of malpractice is worth the same. 

Through caps on non-economic damages, we place an arbitrary 

price tag on the most horrendous of injuries. Should legislation decide the value of your baby’s life or your eyesight when taken from 

you by a negligent doctor? Wouldn’t we prefer to have that decision 

in the hands of your constituents on a jury that has heard all the 

facts? 

Last summer, at Philadelphia’s St. Agnes Hospital, a number of 

people died because of mistaken lab tests that went on for weeks 

without detection and affected hundreds of patients. This bill does 

nothing to upgrade technology and processes and procedures at our 

Nations’ hospitals. Instead it eliminates joint and several liability 

which just further immunizes hospitals and HMOs. It also does 

nothing to deal with the issue of fatigue on the job. Health care 

workers have to work brutal schedules without adequate rest. The 

government doesn’t allow truck drivers or airline pilots to work for 

such long hours. Why should we let our health care providers? 

Throughout our Nation, most doctors do wonderful things for 

people and it’s just a small percentage that repeatedly make errors. 

This bill does nothing to weed out the regular offenders, the ones 

that regularly malpractice. In fact, it’s a double whammy for victims because it caps damages against the repeat offenders and then 

compensates victims through periodic payments that many victims, 

particularly women and the disabled, need sooner rather than 

later. 

Americans need insurance reform. We need it desperately. In 

Pennsylvania, we’ve gone from eight malpractice insurance providers, the big ones, to four in a very short period of time. Industry 

experts, like Charles Kolodkin of Gallagher Health Care Insurance 

Services, tell us that a quick examination of the medical malpractice insurance market place might lead a dispassionate observer to conclude that that segment of the insurance industry is 

confused, in disarray, and generally in a state of disorder. Premiums are doubling. Hospital deductibles are tripling. Claims for 

the physicians are being nonrenewed and insurers are leaving territory en masse. 

We’ve seen St. Paul drop its malpractice branch. We’ve seen two 

notorious medical malpractice insurers, PIE & PIC that are no 

longer in business. In fact, the president of PIE Insurance company 

admitted that he stole $6.8 million from the company to buy a pig 

farm in Tennessee to pay off gambling debts. He pleaded guilty in 

Federal Court to charges of conspiracy, insurance fraud, and tax 

evasion. 

Mr. BILIRAKIS. Please summarize, Ms. Townsend. 

Mr. TOWNSEND. The bottom line is we should not allow the insurance and health industries to play divide and conquer politics. 

45

We applaud members of this committee for calling on the GAO 

to investigate the insurance industry’s role in creating this havoc. 

And we need to be asking questions and demanding answers. 

Aren’t the regulators of the insurance industry supposed to head 

off problems before they become disasters? Whose rates are too 

high? Whose rates are too low? What is responsible pricing. 

When we’re confronted with a PIC or a PHICO or a St. Paul, how 

do we get to the root cause of why the insurer got itself into trouble? And then why aren’t reviewing other insurance providers to 

find out whether they’re engaged in the same bad practices? 

The culprit is the insurance industry for this insurance crisis. 

And the system is rigged. This kind of legislation just further sabotages an already damaged system. And we know that passage of 

tort reforms do nothing to really eliminate the mistakes from happening. 

Mr. BILIRAKIS. You’re testimony is very excellent, but your time 

is long expired. You’re 2 minutes over. 

Mr. TOWNSEND. Forgive me. 

Mr. BILIRAKIS. I will forgive you. But we do have to move on. 

Mr. TOWNSEND. I will just say one final thing. Study after study 

has shown that tort reform measures across the country have not 

lowered insurance rates. There’s no evidence to prove that and 

members of the American Insurance Association have said so as 

well. Thank you. 

[The prepared statement of Lauren Townsend follows:]

PREPARED STATEMENT OF LAUREN TOWNSEND, EXECUTIVE DIRECTOR, CITIZENS FOR

CONSUMER JUSTICE

Hello. My name is Lauren Townsend. I am a Pennsylvania Board Member of 

USAction and Executive Director of Citizens for Consumer Justice, Pennsylvania’s 

largest consumer organization. Both organizations are dedicated to an agenda of 

economic, racial, social, and environmental justice. 

I’d like to thank the members of the Health Subcommittee of the House Energy 

and Commerce Committee for inviting me to speak today about HR 4600, the 

HEALTH Act of 2002. 

Citizens for Consumer Justice has become the state’s leading organization working on quality, affordable, safe health care for all, strengthening Social Security and 

Medicare, lowering prescription drug prices for consumers, and passing a strong Patients’ Bill of Rights with a right to sue HMOs. 

As you are no doubt aware, we in Pennsylvania have been mired for the last few 

years in a medical malpractice insurance crisis that has been spreading across our 

country and is the impetus for the introduction of HR 4600. While we applaud members of Congress like our own Pennsylvania Representative Jim Greenwood for 

wanting to solve the problem through legislative means, we vehemently oppose HR 

4600 which we know will hurt victims of medical malpractice, immunize wrongdoers 

and be a boon for the monolithic giant that should be the target of everyone’s ire: 

the insurance industry. 

OUR HEALTH CARE SYSTEM IS RIGGED FOR FAILURE

We patients are regularly subjected to the ‘‘hassle-factor’’ when we seek health 

care. We are either uninsured and find ourselves using trauma centers as primary 

care facilities OR we have insurance and are put through the wringer to get the 

care we need. Because of the advent and dominance of HMOs, and the merger of 

hospitals that have become corner-the-market-giants, our relationship with doctors 

is tenuous at best. Our hands—patients’ and doctors’—are tied because of administrative bureaucrats who are calling the shots and making health decisions. The result: ‘‘health care cost containment,’’ a fancy way of saying cut corners wherever and 

whenever possible. And that means: blow through patients; avoid costly referrals to 

specialists; make nurses work overtime; and don’t modernize and streamline systems and procedures to avoid mistakes. 

46

Doctors find themselves in an awful predicament. They are told how to practice 

medicine by administrators—a veritable petri dish for increasing the number of 

medical mistakes—all the while finding the environment for practicing medicine 

more difficult because of skyrocketing malpractice insurance rates. 

MALPRACTICE IS REAL AND IT DEVASTATES LIVES

According to the AMA, medical errors are the 5th leading cause of death in this 

country. It is the potential for (and reality of) these errors that compels doctors and 

hospitals to have malpractice insurance in order to practice medicine. 

At a rally last fall, Pennsylvania victims of medical malpractice told their horror 

stories and spoke out about the need for patient safety legislation and continued access to the courts. The individual stories that were told by the rally participants 

were sobering and dramatized how far behind Pennsylvania and our nation are in 

taking steps to reduce the medical errors that result in so much unnecessary suffering: 

Jenny Stephens is a victim of serious dental malpractice. Prior to May 19, 2000, 

she was a vibrant 40 year old woman, fully articulate and pursuing a career as a 

speaker within her industry. Today she suffers from facial paralysis, a large hole 

in her mouth that continues to baffle specialists with regard to restoration and 

chronic pain for which she must take very expensive medication on a daily basis. 

‘‘Would it surprise you to know,’’ she told CCJ and members of Pennsylvania’s state 

legislature, ‘‘that the dentist who inflicted this life long impairment upon me had 

been under state investigation for years prior to my seeing him? Or that I was unable 

to reach this dentist during the emergency he created because he was incarcerated 

and on a work release program for multiple DUI arrests and convictions? Worse yet, 

the insurance company who referred me to him had supposedly investigated his credentials, education, practice and ability prior to accepting him into their plan.’’

After talking about the need for real patient safety legislation, Stephens said, ‘‘Although my personal experience was a nightmare, I have learned one very important 

thing: you never know. On May 19, 2000, my life changed forever and now encompasses challenges I never dreamt possible. It could happen to you or one of your loved 

ones. It shouldn’t happen to anyone.’’

Donald Davis, a medical malpractice victim, used to work as the manager at a 

local Home Depot. In September of 2000, Davis went to a doctor to have a bone spur 

removed from his right baby toe—it should not have been a big surgery and he was 

expected back to work within a few weeks. Because of a mistake on the part of the 

doctor, the surgery incision did not heal properly, and became gangrenous. Because 

of the infection he had to have the toe amputated and needed bypass surgery in 

his right leg. By January of that year he had developed a massive blood infection 

from the bypass surgery. The blood infection prevented him from standing or walking and was making him increasingly ill. So not only had his doctor failed to treat 

a minor infection that caused him to lose his toe, he failed to take care of the blood 

infection which almost cost Davis his life. Davis said ‘‘If I had not ended up finding 

a new doctor, I would have died because of the blood infection. But, unfortunately, 

the only way to save my life was to have both my legs amputated... What happened 

to me was the result of two doctors’ errors, and it was preventable. Because of my 

amputation, I’ve had to leave my job and my life will never be the same . . . I went 

in for a problem with one toe and came out without my legs.’’

Bernadette Hudack is the mother of a three-year-old boy who suffers from cerebral palsy and mental retardation. In May of 1998, she came down with asthmatic 

bronchitis. She had a terrible cough, congestion and shortness of breath. She was 

also 32 weeks pregnant. On her first full day in the hospital her obstetrician ordered 

a test to evaluate the well-being of her baby and the test indicated that the baby 

was fine. During her stay in the County hospital (four full days), doctors continued 

to treat her bronchitis. Unfortunately, they neglected to monitor her oxygen saturation levels and neglected to monitor the baby, until it was too late. 

Hudack explained, ‘‘As my own oxygen saturation level dropped, so did my baby’s. 

Finally, on my fourth day in the hospital, a nurse repeated the test to evaluate the 

well-being of my baby and realized that he was in distress and needed to be delivered 

immediately. But the damage had already been done. 

Hudack hopes that after hearing stories like hers, that patient safety legislation 

will be passed. When she spoke of the mandatory overtime issue, she said ‘‘I know 

first hand what it means for patients to be with tired nurses who’ve worked more 

than the shift they originally came to work. Because I AM a nurse.’’

47

HR 4600 IS NOT THE ANSWER

On the contrary, HR 4600 will further hurt already injured victims and will do 

nothing to foster patient safety or lower insurance premiums for doctors:

• Insurers have convinced too many doctors that the answer to higher medical malpractice premiums is to limit the liability of insurance companies for malpractice. H.R. 4600 tells a woman whose doctor’s negligence cost the life of her 

child, that that child’s life was worth only $250,000. It tells Donald Davis that 

having no legs for the rest of his life, because of malpractice, is worth only 

$250,000. Through caps on non-economic damages, H.R. 4600 places an 

arbitrary price tag on the most horrendous of injuries. Should legislation decide the value of your baby’s life, or your legs, or your eyesight, 

when taken from you by a negligent doctor? Wouldn’t you prefer to 

leave that decision in the hands of 12 of your constituents on a jury 

that has heard all the facts? • Hospitals have resisted technology used in other states to guard against errors 

in medications and lab tests. Last summer patients at Philadelphia’s St. Agnes 

Hospital died because of mistaken lab tests that went for weeks without detection and affected hundreds of patients. One in every 250 prescriptions is wrong. 

Prescription errors are the worst offenders in the world of medical mistakes. 

HR 4600 does nothing to upgrade technology and processes and procedures in our nation’s hospitals. Instead, it eliminates joint and several 

liability, which will further immunize hospitals and HMOs from their 

responsibility to make victims and/or their families whole again. • Interns, residents and nurses still have to work brutal schedules without adequate rest. The government won’t allow truck drivers or airline pilots to work 

after so many hours. Why then do we routinely schedule our health care providers on double shifts when they, too, hold our lives in their hands? We don’t 

need studies to know that careless human errors increase when people are tired 

or sleep deprived. HR 4600 does nothing to prevent health care worker 

fatigue. On the contrary, without a Patients’ Bill of Rights that would 

enable us to hold HMOs and these huge hospital systems accountable 

for bottom-line motivated cost containment that limits the number of 

staff needed to deliver high quality health care, preventable medical errors will continue to be rampant. • It’s ironic that hospital systems like those in Pennsylvania have vied for tobacco 

settlement money that was secured through the doctrine of joint and several liability when these very entities want to use HR 4600 to destroy this doctrine of fairness for consumers who are victims of medical malpractice. 

Hospitals regularly tout their renowned doctors and the good things that happen in their facilities to attract patients. BUT, when medical malpractice occurs, 

suddenly they want to distance themselves from the mistake and shirk their responsibility. • In Pennsylvania and many other states throughout our nation most doctors do 

wonderful things for people and it’s just a small percentage that repeatedly 

make errors. HR 4600 does nothing to weed out those who regularly malpractice. In fact, it’s a double whammy for victims because it caps noneconomic damages against these repeat offenders and then compensates victims through periodic payments that many victims—particularly women and the disabled—need sooner rather than later. • What’s more, while doctors and hospitals are crying out for an expedited reimbursement policy from insurers and Medicare, they want those to penalize 

victims of malpractice who are smart enough or lucky enough to have 

health insurance by imposing a one-sided collateral source rule. 

AMERICANS NEED INSURANCE REFORM. 

In Pennsylvania, we’ve gone from eight principle malpractice insurance providers 

to four in a very short time. Industry experts, like Charles Kolodkin of Gallagher 

Healthcare Insurance Services, tell us that ‘‘a quick examination of the medical malpractice insurance marketplace might lead a dispassionate observer to conclude this 

segment of the insurance industry is confused, in disarray, and generally in a state 

of disorder. Premiums are doubling, hospital deductibles are tripling, claims-free 

physicians are being non-renewed, and insurers are leaving territories en masse. 

Simply put, the market is in chaos.’’

Kolodner tells us that throughout the 1990s insurers were charging premiums at 

such low rates that when the time came to pay losses (losses are when mistakes 

are made, doctors are held accountable and patients are compensated for their loss 

and injury by the responsible party’sinsurance company), the money wasn’t there. 

48

In large part this emphasis on increasing market share was driven by a desire to 

accumulate large amounts of capital that the insurers could place in higher risk, 

but potentially more lucrative, investments. 

Here are some good examples. St. Paul, one of the nation’s largest malpractice 

carriers, will no longer write malpractice policies because of more than $1 billion 

in losses nationwide. St. Paul also lost $108 million with the collapse of Enron. 

Two notorious medical malpractice insurers, PIE and PIC, are no longer in business. Larry E. Rogers, according to the Cleveland Plain Dealer, former President of 

the failed PIE Insurance Company, admitted that he stole more than $6.8 million 

from the company to buy a pig farm in Tennessee and to pay off gambling debts. 

He pleaded guilty in federal court to charges of conspiracy, insurance fraud and tax 

evasion. Charges filed by the prosecutor claim that the theft and Rogers’ corporate 

spending helped sink the insurer in 1998, leaving many doctors without insurance 

or with higher rates when other companies had to rush in to fill the void. The collapse left doctors in nine states without insurance. According to the Plain Dealer, 

‘‘patients who might have collected millions of dollars have been forced to settle for 

far less.’’

In the last year, the list of ‘‘impaired’’ medical malpractice insurers got longer as 

the Pennsylvania Department of Insurance placed PHICO under official state scrutiny. PHICO—run by the Hospital Association of Pennsylvania and one of the largest writers of medical malpractice insurance—aggressively sold insurance during 

the late 1990s. ‘‘Rehabilitation’’ was necessary as it became obvious PHICO’s premiums had been inadequate to cover losses. 

Citizens and Members of Congress should not allow the insurance and 

health industries to play divide-and-conquer politics by putting the blame 

of this crisis onto the backs of patients through legislation like HR 4600 by limiting our access to the courts for malpractice that devastates, shatters lives and all 

too often kills. Patients harmed by medical malpractice should not be further penalized when they seek justice. Instead, we should be asking questions. If we’re 

attempting to get to the bottom of Enron and Global Crossing, why aren’t we getting 

to the bottom of the gross negligence and improprieties—and, yes, accounting shenanigans—that exist in the insurance industry? 

Citizens for Consumer Justice applauds members of the U.S. House of 

Representatives and its Energy and Commerce Committee for calling for a 

General Accounting Office (GAO) investigation of the insurance industry’s 

role in creating such havoc for doctors and ultimately patients. That’s what 

we should be doing: asking questions and demanding answers. 

Aren’t the regulators of the insurance industry supposed to head off problems before they become disasters? Whose rates are too low? Whose rates are too high? 

What is responsible pricing? And how will our nation’s and individual state insurance departments ensure that responsible pricing is enforced? 

In Pennsylvania, PHICO, run by the Hospital Association of Pennsylvania, was 

put into rehabilitation after its surplus dropped to dangerously low levels. Our Insurance Commissioner was virtually absent while that was happening. This was 

right on the heels of Reliance going under, a demise that will likely cost Pennsylvania consumers billions of dollars. 

Insurance Departments throughout our nation are supposed to regulate the insurance industry and protect the insurance consumer. In addition, they are supposed 

to monitor financial solvency, license agents/brokers, and review and approve rates 

and forms, and coordinate the takeover and liquidation of insolvent companies and 

rehabilitate financially troubled insurers. 

When they are confronted with a PIC or a PHICO, do they investigate and get 

to the root cause of why the insurer was in trouble? And, if so, do they then review 

the other insurance providers to find out whether they are engaged in the same bad 

practices? How often are independent actuarial reviews conducted? Why aren’t medical malpractice insurance rates, like auto and other lines, experience-based? These 

are just some of the questions that need to be asked and, more importantly, answered. 

Also, the Joint Underwriting Associations (JUAs) across the country and in some 

states, Catastrophic Loss Funds or CAT Funds, are state run malpractice insurers. 

The JUAs around the country have historically been seen as the insurers of last resort because of high rates. However, the JUAs don’t have to charge such high rates. 

If we were to have a single-payer malpractice insurance system state by state or 

nationwide (in the case of Pennsylvania, a JUA with the CAT fund to handle the 

catastrophic cases) that is regulated by the state and the federal government, the 

administrative cost of underwriting would go down. With one payer, doctors’ premiums would go down, and having a centralized system would allow for comprehenVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00052 Fmt 6633 Sfmt 6621 W:\DISC\81491 81491
49

sive monitoring of medical mistakes so that we can learn why and where they happen and how we can eliminate them. 

WHAT CONGRESS CAN AND SHOULD DO TO PROMOTE PATIENT SAFETY

Real Peer Review—Malpractice that injures patients cries out for strong sanctions 

from medical review boards. Patients deserve to be protected from chronic offenders who continue to make avoidable, costly mistakes. 

Safe Rx—New technology and procedures need to be adopted, particularly in hospitals, that automatically check prescriptions against patients’ records. 

Doctor/Nurse Fatigue—Reasonable schedules and staffing level ratios for doctors 

and nurses will cut medical errors. Nurses, for example, should not be forced 

to work overtime. 

Access to the Courts—For those unfortunate victims of continuing medical errors, 

access to the courts for redress must continue. Without a legal system to hold 

those who harm innocent patients accountable, the heavy financial costs of their 

care will be imposed on taxpayers. And that is all of us. 

CONCLUSION—LOWER INSURANCE RATES BY REGULATING THE INSURANCE INDUSTRY

The culprit of the malpractice insurance crisis is the insurance industry and our 

health care delivery system. The system is rigged. Legislation like H.R. 4600 further 

sabotages an already damaged system. We know that passage of the so-called tortreforms like caps and the elimination of joint and several liability in this bill wuld 

do nothing to eliminate preventable medical errors from happening. Nor, as even 

the American Insurance Association and the American Tort Reform Association 

have admitted, would they reduce medical malpractice premiums. 

Instead, H.R. 4600 would further hurt individual victims whose lives are already 

shattered from lost babies, wives, husbands, eyesight, the amputation of limbs, the 

wrong medication...the list goes on. What we do know about limiting the non-economic compensation to $250,000 to a victim who has lost a baby, had the wrong 

breast amputated, or had a pap smear misdiagnosed, is that it is an arbitrary and 

paternalistic price tag hung on another person’s life. And this is wrong. 

It doesn’t make sense that this legislation is being contemplated as a solution to 

skyrocketing insurance rates when the Congress has not yet investigated the industry’s justifications or its accounting practices... and when the insurance industry 

itself has admitted that we shouldn’t expect ‘‘tort reform’’ to reduce insurance rates. 

The American Insurance Association (AIA), a major insurance industry trade 

group, said in a March 13, 2002 press release that lawmakers who enact ‘‘tort reform’’ should not expect insurance rates to drop. Evidently issued to critique the 

Center for Justice & Democracy’s 1999 study, ‘‘Premium Deceit—the Failure of 

‘‘Tort Reform’’ to Cut Insurance Prices,’’ the AIA release leads with an astounding 

face-saving pronouncement: ‘‘[T]he insurance industry never promised that tort reform would achieve specific premium savings.’’

What’s more, in 1999, ATRA President Sherman Joyce told Liability Week (July 

19, 1999), ‘‘We wouldn’t tell you or anyone that the reason to pass tort reform would 

be to reduce insurance rates.’’ Victor Schwartz, ATRA’s General Counsel, told Business Insurance (July 19, 1999) that ‘‘[M] any tort reform advocates do not contend 

that restricting litigation will lower insurance rates, and ‘I’ve never said that in 30 

years.’ ’’

‘‘Premium Deceit’’ is an exhaustive look at the impact of tort reform on nationwide 

insurance costs between 1985 and 1999. It finds that tort law limits enacted since 

the mid-1980s have not lowered insurance rates in the ensuing years. States with 

little or no tort law restrictions have experienced approximately the same changes 

in insurance rates as those states that have enacted severe restrictions on victims’

rights. The losers are those patients—like Donald Davis who sought medical care 

for a problem with one toe and came out without his legs—injured through no fault 

of their own. 

Citizens for Consumer Justice applauds Representative Greenwood and the Committee for delving into a grim problem facing our health care delivery system. However, we urge you to hold the real culprit accountable, and not punish innocent victims of medical malpractice by advancing H.R. 4600. 

Thank you.

Mr. BILIRAKIS. Thank you. 

Mr. Fine? Please use the mike. 

50

STATEMENT OF STUART H. FINE 

Mr. FINE. Thank you very much. Hi, I’m Stuart Fine, Chief Executive Officer of Grand View Hospital in Bucks County, Pennsylvania. I also chair the Cassatt Insurance group of 12 health care 

organizations from southeastern Pennsylvania that work together 

to improve patient safety and patient care quality and to share and 

ensure risk on a group basis. 

I’m here today on behalf of the American Hospital Association. 

We’re pleased to testify before you about the harmful effects that 

excessive litigation is having on patient access to care. From my 

testimony this morning I hope to make three points. First, the cost 

of medical liability insurance is spiraling out of control. Next, the 

lack of affordable medical liability insurance is having a severe impact on patients’ access to care. And finally, there’s an expanding 

national problem that requires a timely Federal solution. 

Grand View is our region’s largest employer. We provide jobs to 

more than 1,500 people and have an annual payroll that exceeds 

$55 million. These figures do not include the more than 250 physicians who comprise our medical staff, or the hundreds of employees 

who are employed by those physicians. It’s often been said that as 

goes our hospital, so does the economy of our community. It’s important to note that in Grand View’s 89 years of operation, our hospital has never had a court judgment against it for a professional 

liability claim. I’ll repeat that. We’ve never had a court judgment 

against us for a professional liability claim. 

The experience of Grand View Hospital on our Cassatt group, 

however, is quite telling. We’ve self-insured certain professional 

and general liability exposures for more than 10 years. Until 2 

years ago, we could secure reinsurance for our group at affordable 

rates due to competition among commercial carriers. However, because of the frequency of lawsuits and the size of jury awards that 

have recently resulted in our region, Grand View’s cost for insurance increased last year by about one third, and we were forced as 

a group to accept the $5 million deductible on each and every reinsured claim basis. 

This year, our cost increased by almost 50 percent more. And the deductible both increased to $7.5 million and involves a 50 percent 

per claim co-payment. This year, Grand View will allot an excess 

of $750,000 every day, 365 days a year, for professional liability insurance coverage. That’s nearly as much as we’ll spend on medications for our patients. The Cassatt Group as a whole will spend an 

excess of $60 million to insure itself in fiscal year 2003. 

Securing this reduced level of coverage, even at its increase cost, 

was not easily accomplished. Earlier this year, I traveled with colleagues to London for 2 days of meetings with seven different reinsurers from Switzerland, Germany, and Lloyd’s of London. We were 

told on three different occasions that along with Australia and 

Czechoslovakia, our region is viewed as being among the least attractive in the world within which to write insurance business. 

Because reasonably priced insurance coverage is not available for 

practitioners in many specialties, many of our region’s physicians 

have retired or are relocating. It’s become much more difficult to 

recruit new doctors and to secure insurance for practicing physician. If this situation continues, we’ll be forced to reduce important 

51

patient services, leaving our community with little or no access to 

needed health care. 

For example, if Grand View hadn’t been able to secure insurance 

coverage for our largest OB/GYN group at a cost of approximately 

$1,000 per delivery, Grand View would have lost five of our nine 

practicing obstetricians from practice 3 months ago. This would 

probably have resulted in the closure of our OB service, something 

that’s already occurred at three other Philadelphia area hospitals. 

That’s why Congress must help hospitals and physicians to find a 

solution to sky rocketing medical liability premiums, so we can continue to provide the right care at the right time and the right place 

24 hours a day, 7 days a week. We must reform this system at the 

Federal level. 

It’s well documented that the United States has the world’s most 

expensive tort system. Tort costs over the past 50 years have outpaced growth in the United States economy by a factor of four. According to the GAO, 43 percent of insurance defense costs are spent 

on claims that have no merit while other studies show that many 

claims with merit are never even filed. A Federal solution is warranted here. That’s why AHA strongly supports H.R. 4600, Health 

Act of 2002 sponsored by my Congressman, Jim Greenwood. The 

AHA believes that the California style reforms reflected in H.R. 

4600 should be adopted at the Federal level. 

For more than 25 years, the reforms known as MICRA have 

demonstrated that patients’ rights can be protected by reducing 

medical liability costs. The MICRA law has proven to be equitable, 

while the number of health care liability claims in California has 

remained steady on a per capita basis. The compensation actually 

paid to those medically injured in California has been higher after 

MICRA than before. This is not an issue of importance to just 

Pennsylvania and California. The medical liability insurance crisis 

affects hospitals and physicians nationally. Mr. Chairman, you already mentioned the reprieve recently realized by the University 

Medical Center trauma center in Los Vegas. Other members of the 

committee have discussed the situations that exist within their 

home States. 

In conclusion, hospitals and physicians need Congress to enact 

H.R. 4600 to prevent even more hospitals from shutting down 

needed services or closing their doors. We have a mission of providing health care services that save lives and improve the quality 

of lives our patients. But hospitals can’t fulfill that mission without 

your timely help. We look forward to working with you to enact 

H.R. 4600 and I’ll be pleased to respond to your questions. 

[The prepared statement of Stuart H. Fine follows:]

PREPARED STATEMENT OF STUART H. FINE, CHIEF EXECUTIVE OFFICER, GRAND VIEW

HOSPITAL ON BEHALF OF THE AMERICAN HOSPITAL ASSOCIATION

Mr. Chairman, I am Stuart H. Fine, Chief Executive Officer (CEO) of Grand View 

Hospital in Sellersville, Pennsylvania. I am here today on behalf of the American 

Hospital Association’s (AHA) nearly 5,000 hospital, health system, network, and 

other health care provider members. We are pleased to have this opportunity to testify before you concerning the harmful impact that excessive litigation is having on 

patient access to care. This issue is of critical importance for hospitals, physicians, 

and the patients and communities they serve across our nation. 

Formed in 1913 as Bucks County’s first hospital, Grand View Hospital is in most 

ways a typical community, not-for-profit hospital. Grand View provides a broad 

52

array of patient services, from obstetrics to orthopedics, and from hospice/home care 

to oncology. Our mission, in brief, calls for us to ‘‘provide and coordinate the appropriate utilization of quality, cost-effective health care and related services’’ for the 

people of our community. We are our region’s largest employer, providing jobs to more than 1,550 people and having an annual payroll in excess of $55 million. And 

these figures do not include the more than 250 physicians who comprise our medical 

staff, or the hundreds of individuals who are employed by those private practitioners. Solucient recently designated Grand View as operating one of the nation’s ‘‘Top 100’’ Intensive Care Units as measured by patient care outcomes and cost-effectiveness. Also of note is that Grand View has never had a court judgment against 

it for a professional liability claim in our 89 years of operation. 

On a related note, I also serve as the chairman of Cassatt Insurance Co., Ltd., 

a Bermuda-based ‘‘captive,’’ through which 12 suburban Philadelphia hospitals and 

health care organizations endeavor to improve patient safety and the quality of patient care services being provided; manage and share risk; and insure, on a group 

basis, their professional and general liability exposures. It is with this combination 

of experience and perspectives that I come before you today to discuss the problems 

associated with medical liability insurance, its impact on hospital and physician 

services, and, ultimately, how these factors affect access to important health care 

services. 

A recent AHA TrendWatch report, researched by the Lewin Group on behalf of 

the AHA, documented that health care providers across the nation are becoming increasingly concerned about their ability to find affordable medical liability insurance 

and how patients’ access to care has been undermined. The report confirmed that 

since 2001, many physicians have, and are continuing to experience, premium increases in the high double digits. Premiums for hospitals have more than doubled! 

The report suggests that the current crisis is likely to be more complicated than 

medical liability insurance problems that occurred in the 1970s and 1980s. It stated 

that the factors influencing the wide geographic differences in premiums include the 

following:

• State regulations, • Characteristics of physician organizations, • Local culture and legal practices, • Differences in the costs of defending claims, and • Population size and degree of competition among insurers in the market. 

The TrendWatch report also stated, ‘‘The exit of a large insurer, like St. Paul [one 

of the nation’s largest insurers that covered an estimated 750 hospitals and 42,000 

physicians throughout the United States], from a market can push premium rates 

up and make coverage harder to find. In response, physicians may leave for another 

market and hospitals may need to alter the services they provide.’’ The experience of Grand View Hospital and the Cassatt group of insured health 

care organizations is telling. As a group, we’ve self-insured certain professional liability exposures for more than 10 years. Until two years ago, however, we were 

readily able to group-purchase insurance at affordable rates for ‘‘excess’’ or ‘‘catastrophic’’ layers of coverage above our primary limits, and do so on a ‘‘first dollar’’ basis above the primary layer of coverage. We were able to obtain this coverage due 

to competition among a large number of commercial carriers who were very interested in securing our business. 

Last year, Grand View’s cost for insurance coverage increased by approximately 

one-third. But that doesn’t tell the whole story. In addition to experiencing that huge increase in cost, we were forced to accept, on a group basis, a $5 million dollar 

deductible or retention on an ‘‘each and every’’ claim basis. 

This year, our insurance cost increased yet again—this time by almost 50 percent. Our deductible level is going from $5 million to $7.5 million. On top of that, we are 

being forced to accept a 50 percent ‘‘co-pay’’ for each $5 million above the $7.5 million for which we secured coverage. Consequently, Grand View Hospital will spend 

in excess of $7,500 each and every day for our insurance coverage in the current 

fiscal year—about the same amount that we spend for medications/pharmaceuticals. Accordingly, the Cassatt group of hospitals will spend in excess of $60 million to 

insure itself in fiscal year 2003! 

Securing the coverage that I’ve described was not easily accomplished. In January, I joined four colleagues from other Cassatt hospitals and traveled to London 

for two days of meetings with seven different carriers and re-insurers from Switzerland, Germany, and the Lloyd’s of London insurance syndicates. While essentially 

marketing our group to these carriers and re-insurers, we were surprised to be told 

on three different occasions during our visit that, along with Australia and Czechoslovakia, the Philadelphia region is viewed by the international insurance markets 

as being among the least attractive within which to do insurance business. The raVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00056 Fmt 6633 Sfmt 6621 W:\DISC\81491 81491
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tionale supporting that view was that, up until that time, there had been a lack 

of meaningful tort reform activity on the part of our state legislators. 

THE EFFECT ON CARE

In addition to experiencing serious increases in the cost of health care liability insurance, hospitals are facing a growing workforce shortage; reductions in private, 

Medicare, and Medicaid payments; and redoubled disaster preparedness efforts. 

These additional burdens are threatening hospitals’ ability to appropriately staff 

emergency departments, recruit new physicians to high-risk specialties, and deliver 

babies in the manner that most Americans have become accustomed. 

While I am pleased to report that Grand View Hospital continues to deliver babies, three other hospitals in our immediate area have discontinued OB services. 

Warminster Hospital in Bucks County has discontinued the service altogether, as 

have both Methodist and Misericordia Hospitals in Philadelphia. More recently, 

Methodist and Doylestown Hospitals announced that they would no longer be providing prenatal care for low-income women. The primary reason given for these unfortunate reductions in service was the rising cost of medical liability insurance. 

Our county has seen numerous OB/GYN physicians either retire from practice or 

eliminate the OB component of their practices. This has occurred at Doylestown 

Hospital, St. Mary Medical Center, and Lower Bucks Hospital. Already mentioned 

was Warminster Hospital’s closure of its OB service. In the community of 

Quakertown, two of the three existing OB/GYN offices were closed as the physicians 

in those practices withdrew from our region based on the high cost of professional 

liability insurance. One of Doylestown Hospital’s two orthopedic surgery groups has 

been unable to secure malpractice coverage and has discontinued its surgical practice and Emergency Room back-up coverage. At Grand View Hospital, we’ve lost 

physicians specializing in family practice, general surgery, plastic surgery, and 

interventional radiology. And, we have no neurosurgery coverage. Our efforts at recruiting replacement/successor physicians to those who have left our area, or are 

planning to retire, have proved fruitless. We currently need physicians in the areas 

of cardiology, family medicine, diagnostic and interventional radiology, neurosurgery, plastic surgery, and obstetrics. If our hospital had not been able to secure 

insurance coverage for our largest OB group at a cost of approximately $1,000 per 

delivery, an increase of approximately 50 percent over the prior year, Grand View 

would have lost five of our nine practicing obstetricians from practice. That would 

probably have resulted in the closure of our OB service. 

In the book ‘‘Ghost Soldiers,’’ by Hampton Sides, a veteran of the Battle of Bataan 

describes how ‘‘the defense of Bataan devolved into a brutal war of attrition—a 

war . . . of consumption without replenishment.’’ It is just such a circumstance that 

confronts our nation’s hospitals and physicians. Without intervention by Congress, 

we will soon be unable to address the basic health care needs of our communities. 

Congress must help hospitals and physicians find a solution to skyrocketing medical 

liability premiums so that we can continue to provide the right care, at the right 

time, in the right place; 24 hours a day, seven days a week. 

THE CURRENT SYSTEM NEEDS REPAIR

The current medical liability system is a costly and ineffective way of resolving 

health care liability claims and compensating injured patients. This has led to the 

growing crisis I’ve described. In many states, especially Delaware, Florida, Mississippi, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, South Carolina, Texas, Washington, West Virginia, and my own, inherent problems in the 

health care liability system are causing skyrocketing premiums. 

For example, there are many reasons why Pennsylvania is currently struggling 

with medical liability problems. Insurers faced heavy losses when declining returns 

on investment exposed insurers to expenses that were significantly above premiums 

collected. In addition, large jury awards, which often set the standard for settlement 

awards, began to put upward pressure on premiums. Finally, the three largest insurers, PHICO, PIC, and PIE became insolvent and no longer offered medical liability insurance. In short, insurance capacity evaporated. 

In an effort to address these issues, the Governor of Pennsylvania signed into law 

a medical liability reform bill in March of 2002. Pennsylvania’s effort represents the 

latest in a series of legislative actions taken by the state to alleviate pressure on 

health care providers. While the law signed in March does not include a cap on 

damages, it does allow hospitals and physicians to appeal if paying those damages 

would force a doctor out of business or force a hospital to cut services, thereby affecting access to care in the community. In addition, it allows judgments for future 

medical costs to be spread out over time. More recently, a law reforming the rules 

54

regarding ‘‘joint and several’’ liability was passed in June. This is especially important to hospitals because we are often singled out as the ‘‘deep pockets’’ in many 

litigation situations. 

Because the effects of tort reform take time to be fully realized, in part due to 

the long trail of claims, the effects of the Pennsylvania legislation remain to be seen. 

At our hospital, due to our inability to obtain adequate medical liability coverage 

at a reasonable rate, many physicians have retired or relocated to areas with lower 

premiums. And it has become increasingly difficult to recruit new doctors and secure physician coverage. If this continues, we will be forced to reduce important patient services, leaving our community with little or no access to appropriate health 

care. Further, it is well documented that the United States has the world’s most 

expensive tort system, with tort costs over the past 50 years outpacing growth in 

the United States’ economy by a factor of four. Such growth has not translated into 

efficiency. According to the General Accounting Office (GAO), 43 percent of insurance defense costs are spent on claims that have no merit. Other studies show that 

many claims with merit are never filed. 

LEGISLATIVE SOLUTION NEEDED

The AHA believes that a federal legislative solution to America’s medical liability 

crisis is warranted under the current circumstances. That is why the AHA strongly 

supports H.R. 4600, the bipartisan Help Efficient, Accessible, Low Cost, Timely 

Health Care (HEALTH) Act of 2002, sponsored by my congressman, Representative 

Jim Greenwood (R-PA). 

The AHA believes that the California-style reforms enacted under the Medical Injury Compensation Reform Act (MICRA) of 1975 and reflected in H.R. 4600 should 

be adopted at the federal level. For more than 25 years, MICRA has demonstrated 

that patients’ rights can be protected at the same time that medical liability costs 

are reduced. H.R. 4600 includes the following MICRA-type reforms: 

A limit on non-economic damages—By placing a ceiling of $250,000 on non-economic damages (pain and suffering), stability is restored to the insurance market. 

All economic losses and/or costs are paid in full. Such a cap provides affordable coverage, and ensures that health care providers can buy coverage. It does not affect 

a plaintiff’s ability to be fully compensated for economic damages such as medical 

expenses or lost wages. 

Establish a fair share rule—The ‘‘joint and several’’ rule allows any defendant to 

be liable for the entire amount of an award, regardless of how small that defendant’s share of the fault may be. As a result, the rule generally punishes a co-defendant (or a sole defendant) who is fully insured or has substantial assets—the socalled ‘‘deep pocket’’ defendant. For some providers, this removes any incentive to 

carry full liability insurance coverage. By establishing a fair share rule in health 

care lawsuits, each party is liable solely for its share of damages and not for the 

share of any others. 

Periodic payments—Periodic payments would allow compensation to be made in 

intervals rather than a lump sum, permitting settlements to be geared to a plaintiff’s needs over the course of his or her life. In addition, because periodic payments 

can be funded through an annuity, future needs can be fully met at a considerably 

lower cost to the health care system. 

Regulation of attorneys’ fees—Under the current health care liability system, patients awarded compensation are often shortchanged. Money that should go toward 

their long-term care goes instead to their attorneys. This is because, traditionally, 

attorneys in liability cases are paid through contingency fees, which provide the attorney a percentage of the plaintiff’s award. Percentage limitations should be applied to attorneys’ fees. 

The California experience under the MICRA law has proven to be more equitable 

to the medically injured. While the number of health care liability claims brought 

by medically injured plaintiffs in California, on a per capita basis, is the same as 

before MICRA, the compensation actually paid to those medically injured in California was higher after MICRA than before. 

The AHA also supports a uniform statute of limitations in health care liability 

cases and the continued development of successful conflict resolution programs. 

Bringing liability claims to court is often inefficient and costly and renders unpredictable results. Nontraditional approaches such as alternative dispute resolution 

systems can play an important role in reforming the health care liability system. 

55

A NATIONAL PROBLEM REQUIRES A FEDERAL SOLUTION

While I appreciate the opportunity to discuss some of the challenges we face in 

Pennsylvania due to the medical liability crisis, this issue affects hospitals and physicians throughout the United States. 

I’ve already mentioned that Methodist Hospital in Philadelphia announced that 

it would no longer be able to provide prenatal care for low-income women, and just 

two weeks ago, the University Medical Center’s (UMC) Level-I Trauma Center in 

Las Vegas, Nevada closed its doors due to the liability risk at the facility. As a result of the increased insurance premiums, 11 of UMC’s 13 general trauma surgeons 

and 57 or 58 orthopedic surgeons resigned from trauma-care responsibilities. Within 

the past few days, the UMC Trauma Center has retained the temporary services 

of trauma and orthopedic surgeons who have agreed to be covered by the county’s liability insurance for 45 days. This temporary reprieve allows the governor to call 

a special legislative session to address this issue. While the trauma center has been 

able to keep its doors open for a few more days, a large question mark remains regarding access to care in the community. Without the UMC Trauma Center, patients will instead be routed to the closest emergency room, where most doctors 

aren’t trained to do surgeries and where specialists might not be readily available. 

The UMC Trauma Center serves a 10,000-square mile area in four states—Nevada, 

California, Arizona, and Utah. 

Hospitals and physicians need Congress to enact H.R. 4600 to prevent even more 

hospitals from being forced to close their doors. We want to provide the type of 

health care that saves patients’ lives and improves their quality of life, but we can’t 

continue to do that without your help. 

I appreciate the opportunity to testify before your committee today. The hospital 

and physician communities look forward to working with members of this committee, as well as the entire Congress, to ensure that this critical legislation is enacted into law.

Mr. BILIRAKIS. Thank you very much, Mr. Fine. 

Dr. Roberts, you’ve testified that just a few years ago you had 

six hospitals in your immediate area—number of counties? 

Mr. ROBERTS. Yes, there are seven counties. 

Mr. BILIRAKIS. Seven counties. And now it’s down to one. 

Mr. ROBERTS. There’s one. The other hospitals have either completely closed or they became emergency rooms or they have a 2-

day holding bed possibility, but they don’t do obstetrical care, surgery, or intensive care work. 

Mr. BILIRAKIS. And what do you attribute these other five hospitals not being available? 

Mr. ROBERTS. Largely it was by Federal mandate that they wanted to regionalize health care. And that has happened for question 

cost efficiency. The problem is that bad things happen to good people. Sometimes, malpractice situations occur because people are 

blaming someone, they’re upset, they have to understand what 

happened. So the most proximate person is the health care provider. So many times we get caught in that phase of resolution that 

people are going through. 

In our community, we have a very good feeling between our patients, I believe. But what is happening is that physicians are becoming afraid of their patients. Who’s going to turn around and sue 

me next? So it creates a barrier as was mentioned earlier. There’s 

a barrier between the physician and the patient. And I think it’s 

critical that we address this and we look at access and the ability 

of people to find their health care provider and chose the person 

that will provide their family with family oriented care. 

Mr. BILIRAKIS. Doctor, you indicated that your rates already have 

doubled. You received word that they plan to double next year? 

Mr. ROBERTS. They have not given me a firm quote. My insurance is up in November, and they told it will probably double next 

56

year. I was with PHICO, and PHICO went under, and then I 

picked up by BRIM and they doubled the rate. 

Mr. BILIRAKIS. Have you inquired as to why this is taking place 

to the insurance commissioner of your State? 

Mr. ROBERTS. Yes, I have. 

Mr. BILIRAKIS. What is his or her response? 

Mr. ROBERTS. Because BRIM is the insurance of last resort, they 

created premium on all BRIM rates to make us try to find other 

insurance companies. The problem is the insurance companies are 

leaving the State. We just had physicians last week be notified that 

they would not be renewed by medical insurance. St. Paul has already pulled out. So we are in a critical situation. We have positions on our staff that will not have insurance as of October 1 or 

November 1 at the end of this year. And they’re going to have to 

leave the area. We’re losing people to early retirement. We’re losing 

people because we can’t recruit new physicians into the community. 

Private practice physicians such as myself will have to, I may have 

to go back to West Virginia University. I’m a professor there, but 

I may have to go there and teach, and stop my private practice. 

Mr. BILIRAKIS. You’ve already told us that you haven’t had any 

claims against you. You’ve never had any claims against you? 

Mr. ROBERTS. No, sir. 

Mr. BILIRAKIS. How does the claims filed against the members of 

medical profession in West Virginia compare to other States? 

Mr. ROBERTS. West Virginia has a very active litigation system, 

and we have a lot of claims. There were a lot filed last fall. The 

State legislator spent 60 days in session at $35,000 a day trying 

to deal with this problem. And there were some cursory changes 

that were made, but I don’t feel that they really made any significant change in the threat of major lawsuits. 

Mr. BILIRAKIS. So you attribute then the doubling of the rates to 

the total number of claims that are taking place in the State of 

West Virginia? 

Mr. ROBERTS. Absolutely. And then with my colleagues their 

rates have tripled. It really was quite fortunate that it wasn’t higher. But next year, it will be and I’m going to have to stop delivering 

babies. 

Mr. BILIRAKIS. All right. I have 1 minute left. I’m going to yield 

to Ms. Capito, if she would like to inquire to either Dr. Roberts or 

anybody else. 

Ms. CAPITO. Welcome, Dr. Roberts from West Virginia in my District. I’m pleased to be here. I know that what you’re saying is absolutely true and one of the hospitals in where I live in Charleston 

is actually paying the neurosurgeons to cover them a $1,000 a day 

for each of the two neurosurgeons in the Charleston area medical 

center to cover their insurance. Doctors are leaving West Virginia 

early retirement, but you know they’re going to other States. They 

go to Ohio. I hear stories of them going to Ohio, Virginia. What do 

you attribute that to? Is it the number of lawsuits filed in West 

Virginia? 

Mr. ROBERTS. The rates presently in those States are approximately half or less than what they are in West Virginia. So positions in Bluefield, West Virginia move across the street to Bluefield, Virginia and their rates drop. I understand though that some 

57

of the insurance companies have gotten wise to that and are now 

looking for the zip codes of the patients on the other side of the 

border. People from Wheeling move over into Ohio. I can’t do that. 

I’m in the center of the State. I either stay there or I leave. 

Ms. CAPITO. Well, I want to thank you for your years of service 

and your generational years of service. This is a crisis in West Virginia. No question about it. Not only does it affect our health care 

but it goes into affecting the economic fabric of our State because 

whose going to bring a company in if you can’t get good health 

care? So I applaud your efforts in this and look forward to working 

for you——

Mr. BILIRAKIS. The Chair——

Mr. ROBERTS. I’m a physician that feels fortunate to have a 

chance to help people make a living doing that. 

Mr. BILIRAKIS. It sounds that that’s an appropriate time——

Mr. ROBERTS. I really feel we need to look at that aspect of this 

and how we serve our patients. 

Mr. BILIRAKIS. If there’s less rhetoric and our real interest on the 

part of all of us is to solve this problem in an objective, open minded manner and we’re going to get it done. And hopefully we will. 

The Chair recognizes Mr. Brown to inquire. 

Mr. BROWN. I thank the chairman. 

Dr. Roberts, my father practiced medicine as his father did in a 

town a little bit bigger than Elkins but in Mansfield, Ohio. He 

practiced some 50 years general practice, never had a claim against 

him. And he unfortunately was not able to practice with his father, 

but he had his father’s practice after World War II. And I emphasize with you and thank you for doing the same kind of work I believe my father did. I’m not a lawyer, so I don’t have a dog in this 

hunt, but I hear my friend, Mr. Norwood say it’s only the lawyers 

who have concerns or are opposed to whatever exact term he used 

about the Greenwood Bill. 

And I just want to enter into the record and ask consent request 

to enter into the record the National Partnership for Women and 

Families letter expressing their concern. And if I understand this 

as a nonlawyer, I’m a little confused about the non-economic caps. 

I understand that the Norwood Bill does not limit punitive damages, does not limit economic damages. But what that tells me, if 

you limit non-economic caps it’s a little bit like the Republican tax 

cut. It helps those people that are already wealthiest and penalizes 

those that aren’t. 

[The prepared statement of the National Partnership for Women 

and Families follows:]

NATIONAL PARTNERSHIP FOR WOMEN & FAMILIES

July 17, 2002

The Honorable W.J. TAUZIN

Chairman, Energy and Commerce Committee 

U.S. House of Representatives 

Washington, DC 20515

The Honorable JOHN D. DINGELL

Ranking Member, Energy and Commerce Committee 

U.S. House of Representatives 

Washington, DC 20515

DEAR CHAIRMAN TAUZIN AND RANKING MEMBER DINGELL: We write on behalf of 

the National Partnership for Women & Families to submit comments for the Energy 

58

1See, e.g., Zimmerman, Rachel & Christopher Oster, ‘‘Assigning Liability: Insurers’ Missteps 

Helped Provoke Malpractice ‘Crisis’ ’’ Wall Street Journal, Monday, June 24, 2002; Hunter, J. 

Robert & Joanne Doroshow, ‘‘Premium Deceit: The Failure of ‘‘Tort Reform’’ to Cut Insurance 

Prices,’’ Center for Justice & Democracy, 1999. 2 Id., Zimmerman & Oster. 3 Hunter & Doroshow, 2. 

and Commerce hearing being held today, ‘‘Harming Patient Access to Care: The Impact of Excessive Litigation.’’ Although the Partnership shares the Committee’s con- cerns about the harmful impact that the lack of affordable medical malpractice insurance is having on patients’ access to needed care, we urge you and other Committee members to fully investigate the multiple factors causing this crisis before 

taking any action that could further curtail patients’ access to quality health care. 

As a nonprofit, nonpartisan advocacy organization dedicated to improving the 

lives of women and families, the Partnership advocates policies that ensure greater 

access to affordable, high quality health coverage. The Partnership is concerned 

about the barriers that patients are facing in accessing care as a result of doctors’ inability to afford medical malpractice coverage. Women may be disproportionately 

,hurt as a result because Ob-Gyn doctors are more likely to have higher premiums 

and experience difficulty finding coverage than doctors in any other specialty. Some 

have suggested that the root cause of the current crisis is ‘‘excessive litigation’’ and 

are proposing federal litigation reforms to limit patients’ ability to bring suits and 

seek appropriate damage awards as the simple answer to this problem. Substantial 

evidence suggests that this problem is far more complex, having its roots in the insurance industry itself, and that federal tort limits are not the right approach to 

address this crisis.1

A key component in ensuring women and families’ access to quality medical care 

is providing meaningful accountability for harms resulting from poor or inadequate 

care. Without such accountability, patients and their families have no redress for 

serious, debilitating, and life-threatening injuries caused by medical errors and malpractice. Such accountability also provides an important deterrent against mistakes 

and malfeasance and ensures that providers and institutions make improved patient 

safety a top priority. And limits on non-economic damages of the kind often proposed in ‘‘tort reform’’ legislation disproportionately hurt women and children—because courts are less likely to value children’s lives or stay-at-home moms’ contribution to the family into economic terms, women and children are more likely to be 

seeking non-economic damages that exceed the damage limits imposed by so-called 

‘‘tort reforms.’’ Congress has recognized the importance of preserving accountability 

as a means of ensuring better quality care from managed care plans by including 

accountability provisions in both versions of the Patients’ Bill of Rights legislation 

that passed last year. We strongly believe that curtailing accountability for medical 

wrongs will have the perverse effect of diminishing quality health care for women 

and families, not improving it. 

Providers’ difficulty in finding affordable medical malpractice coverage may have 

little to do with litigation. According to a recent Wall Street Journal article, business decisions made by the insurance industry have contributed greatly to the current crisis in affordable coverage.2 In the 1990s, malpractice insurers competed for 

national market share, keeping prices artificially low and inadequate to cover 

claims. Insurers’ recent losses from inadequate pricing and poor investment decisions in the stock market caused many to either withdraw from the malpractice 

market or restrict their coverage. Minimal regulation and oversight has led to dramatic price increases and fluctuations in the availability of coverage, leaving many 

providers without access to affordable coverage. More information is needed to clearly determine the factors that are driving this crisis before any action should be 

taken to redress it. In this regard, we applaud the recent request made by Representatives Conyers, Dingell and other members of Congress to have GAO study 

the role the insurance industry may be playing in this crisis. 

It is also unclear whether limiting accountability would have any impact on the 

affordability of malpractice coverage. According to a recent study by the Center for 

Justice and Democracy, actual experience with insurance rates and tort reforms 

suggests that there is no correlation between strong restrictions on accountability 

and lower premium rates.3 In fact, after looking at insurance rates and tort law limitations across the country from 1985 through 1998, the study found that states 

with little or no tort law restrictions experienced the same insurance rates as states 

that enacted very strong tort restrictions. These findings suggest that limiting accountability might have very little, if any, impact on the current crisis. 

An alternative approach that could both address malpractice insurers’ concerns 

about rising claims and respond to consumers’ interest in improved quality would 

59

be to encourage malpractice insurers to partner with practitioners in promoting best 

practices and patient safety measures. For example, insurers could offer discounts 

in insurance rates not just based on actual claims experiences, but also based on 

a practitioners’ implementation of proven safety measures that will improve health 

outcomes and reduce errors that could result in malpractice. This approach would 

have multiple benefits, including lowering premium rates, making insurance more 

affordable, and improving health care quality. As the Committee moves forward in 

this area, we encourage you to consider these types of alternatives. 

For these reasons, we encourage the Committee to study this issue carefully before moving forward with any legislative proposals, especially those that might restrict access to meaningful accountability. We also encourage the Committee to further study the extent to which the insurers themselves may be playing an important 

role in creating this crisis and to determine whether further regulation of this industry is needed, at the state or federal level. Thank you for your concern and attention to this issue of tremendous importance to women and families. 

Sincerely, 

JUDITH L. LICHTMAN, President 

DEBORAH L. NESS, Executive Vice-President 

ALICE M. WEISS, Director of Health Policy

Mr. BROWN. I wish that Ms. Visco were still here because she 

talks very passionately and convincingly about how this hurts 

women, especially a 58-year-old woman who is working as a hotel 

maid or as a clerk at Walmart and has very little earning power 

in her future and so the non-economic damages are, the economic 

damages are pretty minimal to her compared to a 32-year-old investment banker who has got millions of dollars potential earnings 

while the 58-year-old woman who works as a clerk is close to retirement, if she could ever retire on the little bit of money she 

would make there, and has very little potential economic potential 

earning potential. To sort of limit the economic, the non-economic 

damages, again I’m not a lawyer and I don’t totally get this, but 

to limit the non-economic damages is sort of like tax cuts for rich 

people. And we give tax breaks, you know, we’re cutting taxes for 

everybody. Yeah, well if you’re making a million dollars a year you 

get tens of thousands. 

If you’re making $30,000 you get $12. And there’s a little bit of 

that in and this and it just sort of continued class warfare that my 

friends on that side of the aisle commit against working people in 

this country and poor people. And I’m frankly sick of it and I’m 

sorry that this hearing was used to continue that sort of assault. 

I would like to move on and ask Ms. Townsend a couple of questions and I appreciate the testimony of all four of you. I think it 

was helpful and enlightening and Ms. Visco’s was too. 

I agree with, first of all Ms. Townsend, I agree with Mr. Fine’s 

assessment that Congress must help hospitals and physicians find 

a solution to this very real crisis. And I hear Dr. Roberts. I remember my dad talking about it in a lesser way because the problems 

weren’t perhaps as great 20 years ago when we retired 15 years 

ago. 

But Mr. Fine mentioned three factors that contributed to increases in Pennsylvania. One, declining returns on investment for 

insurance companies. Second, that the three largest insurers were 

vacating the market. Third, large jury awards. 

Based on your experiences in eastern Pennsylvania, what contributed most to these increases in premiums? Can you help us understand that better? 

60

Ms. TOWNSEND. I think that the biggest culprit was the insurance industries’ boon during the 1990’s and the way it was investing and then spending the money that it brought in and not having 

enough money in reserves. And there were a lot of improprieties 

that are now coming out in the newspapers because there’s litigation going on. The insurance commissioner is actually looking into 

PHICO and there’s litigation going on about PIC and PIE right 

now too. I would say that that is the biggest culprit and I think 

it’s critical. 

It’s been mentioned a number of times the comment from an insurance industry executive in the Wall Street Journal saying we 

have to look inwards. We made the mess and I think we really 

need to investigate the insurance industry as we are in Enron, 

Global Crossing and look for ways of making the system work better. 

Mr. BROWN. You call it PIE. We in Ohio who are not as literate 

call it PIE, which I believe it’s headquartered in Cleveland. What 

caused PIE to leave the Pennsylvania medical malpractice insurance market? Maybe you can talk more informationally about PIC 

or PHICO if that’s how you say those, PHICO and PIC and PIE. 

What can you tell us about that? 

Ms. TOWNSEND. To the best of my knowledge, I think it was because they ran out of money and they just could not continue the 

business. 

Mr. BROWN. They ran out of money because? 

Ms. TOWNSEND. Because they spent it all on poor investments 

and they invested unwisely and didn’t have enough in reserves to 

be able to pay out when loses happened. 

Mr. BROWN. And with PIE it was also obviously, you cited the 

case——

Ms. TOWNSEND. There was impropriety on the part of the president there. 

Mr. BROWN. In these cases, is it mostly mismanagement, or is it 

fraud, or is it some sort—you know, one of the interesting things, 

and I’ll wrap up, Mr. Chairman, the interesting thing about all this 

corporate abuse that president points out it’s just not the illegal 

abuses that we should be concerned about. It’s also the corporate 

CEOs sitting on each other boards and paying huge amounts of 

money in salaries, not illegal in bonuses, but ultimately cause layoffs in the companies. Is it some of that too in your——

Ms. TOWNSEND. Something that remains a mystery to me, if I 

can answer you question in a different kind of way, is we’ve had 

a catastrophic loss fund in Pennsylvania, and over time it has now 

going to be phased out as a result of recent legislation. The CAT 

fund, as opposed to the private insurers about which we’re speaking with huge CEO salaries, runs in a very lean kind of way. The 

amount of money per claim, claims management they call it, per 

claim is about $500 per claim to manage it from start to finish as 

opposed to what they’re going to do. What they’re going to do now 

which is phase it out and then shop it out to the for profit entities 

that will cost between $4,000 and $5,000 per claim with less experienced people managing them. I guess that’s my way of saying because of the obscene amount of money that’s made by the insurance industry which is one of the richest industries in America 

61

today, consumers and patients are losing. And a suggestion that we 

had made that a number of people—— Mr. NORWOOD [presiding]. Please wrap it up, Ms. Townsend. 

Time has expired for Mr. Brown. 

Mr. BROWN. That’s fine, Mr. Chairman. I would like her to finish 

her thought. Yes, Mr. Chairman. 

Ms. TOWNSEND. We have been talking about making a single 

payor malpractice insurance system in Pennsylvania. JUAs don’t 

have to charge such excruciatingly high rates. If we had one payor 

per State or one payor nationwide, the administrative costs would 

go down and premiums would go down and we’d have a centralized 

place to monitor mistakes where and when they happen and why 

they happen and get to the root cause. 

Mr. NORWOOD. Thank you, Ms. Townsend. 

Mr. Brown, as the prerogative of the Chair, I wanted to point out 

that this is not the Norwood bill, but it is the Greenwood Bill for 

which I support the basic premise of which if you don’t have some 

limits on liability, we are never going to solve the problem of excess. But Mr. Greenwood is certainly on the right track. I recognize 

Mr. Cox now. 

Mr. COX. Thank you, Mr. Chairman. I think it’s important to 

point out because some of the dialog that’s taken place that the experience in California is that there are no real limits in MICRA, 

that is to say there is no limit on the amount that a party to a lawsuit can recover. It’s unlimited. There is no limit, for example, on 

punitive damages. And Ms. Townsend gave an example of someone 

cutting off the wrong foot or doing something wrong. Punitive damages are routinely awarded, and the amount is unlimited. Likewise, 

after all medical expenses are paid, not just to remedy whatever 

went wrong, but also to take into account all future medical expenses for one’s lifetime if that’s caused by the injury. That, of 

course, is unlimited. But also, all manner of conceivable second 

order effects from the injury such as I can’t work in exactly the 

same line of work I used to be in and so on. All that’s unlimited. 

There are no limits overall in California to what can be recovered. 

The limit is effectively infinitive. The only thing that MICRA limits 

in California is non-economic damages by which we mean so-called 

injured feeling damages. The inherently nonquantifiable damages 

that juries assess based on a gut feeling, as it were. That was 

thought a quarter century ago was the main contributor to the 

jackpot nature of some verdicts or more specifically the lack of horizontal equity and the lack of predictability and the subtraction of 

significant amounts of money from the health care system. 

We now have some experience with California versus the rest of 

the United States and because some people in their opening statements suggested that premiums might have gone up unduly in 

California notwithstanding MICRA, I think that it should be pointed out that since 1976 up until the turn of the 21st century, U.S. 

malpractice premiums over that period went up 420 percent. And 

in California the premiums went up 168 percent. That’s a rather 

significant difference for the biggest most populous State and the 

most diverse State in the Union. And yet, we hear that we have 

these horrible problems in West Virginia. We hear that we have 

these horrible problems in Nevada. Horrible problems in MisVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00065 Fmt 6633 Sfmt 6602 W:\DISC\81491 81491
62

sissippi. One can look around the country and sadly, tragically, 

some of it relates to OB/GYNs and I want to ask Dr. Hollier because you’re here in that capacity and you are an OB/GYN yourself. Is that right? 

Ms. HOLLIER. Yes, sir. 

Mr. COX. Why it is that doctors who deliver babies are specially 

the targets of these kinds of lawsuits? 

Ms. HOLLIER. Doctors who deliver babies are considered high risk 

practitioners because babies can be born with problems and very 

often babies who are born with problems are associated with lawsuits against physicians. And I think it’s important to remember 

that the claims that are brought against these physicians are not 

necessarily truly medical negligence. 

Mr. COX. Another specialty that is deemed high risk is neurosurgery. 

Ms. HOLLIER. Yes, sir. 

Mr. COX. On the one hand, I can understand the connection between delivering babies and the kinds of defects that might occur 

at birth and the insurance risk attended to neurosurgery because 

patients can become paralyzed or worse. But on the other hand, it 

strikes me, as a lawyer, not a doctor, that delivering babies in a 

certain sense is the most basic function of a health care system. It’s 

sort of work a day. And so when people are run out of town, when 

they can’t deliver babies anymore and Dr. Roberts has given us 

rather striking testimony in that regard, are we mischaracterizing 

that profession, that specialty, in calling it especially hazardous, 

especially high risk, because the human race is going to continue 

to propagate itself for a long time. We probably got by without neurosurgery, but I don’t think we ever got by without delivering babies. 

How does this characterization of your specialty, how is it justified? 

Ms. HOLLIER. I think that obstetrician/gynecologists clearly provide an incredibly important service for women and the 4 million 

women who are going to deliver their children this year are relying 

on us to provide them with the highest quality of medical care. Perhaps my colleagues in the insurance industry can better explain 

why obstetricians and gynecologists pay such dramatically higher 

premiums than other types of physicians. We certainly work very 

hard to provide the best quality care that we can everyday. 

Mr. COX. I’m wondering whether or not there might be more jury 

appeal when the injury occurs to an infant. Or whether it’s the fact 

that there’s a whole lifetime ahead for the infant that runs up the 

damages. But when I look at the Nevada situation and we have 

West Virginia on the panel here and Mr. Pickering spoke to Mississippi, but Nevada is also an extreme case. The University of Nevada Medical School tells us that this is as of last month 42 percent of obstetricians are making plans to move their practices out 

of southern Nevada. If that happens, only 78 obstetricians are 

going to be left in Las Vegas, which is a city of 1.5 million people 

and 23,000 births every year. 

Seventy-six percent of the obstetricians in Las Vegas have been 

sued. Now is it conceivable in America that there is a city of such 

63

substantial size where three quarters of the doctors are crooks or 

frauds or charlatans or quacks? 

Dr. Roberts, maybe you’d like to respond to that. 

Mr. ROBERTS. I think the problem is that everyone expects a perfect baby every time. When my father began practicing in the 

1930’s, they didn’t have the antibiotics that we have today. They 

didn’t have the procedures that we have today. So they expected 

to lose some children, to not always have a perfect outcome. Unfortunately today, people in America expect a perfect baby every time. 

It’s not always someone’s fault. Many times it’s an act of God. It’s 

something that was going to happen no matter what the individual 

physician did or the nurse or whoever is held accountable for the 

problem. So I think we need to have a more realistic expectation. 

We all pay for the lawsuit abuse. We pay the bill one way or another. It plays into the inflationary spiral that costs us all more 

money every day. You can’t put a price on non-economic damages. 

You can’t put a price on human life. You cannot give somebody a 

million dollars and tell them they feel better because they lost their 

loved one. 

Unfortunately, our society has gotten to that point. We believe 

money is more important than feelings. Many times physicians 

need to communicate better. And this is a problem I see with many 

physicians as I teach students. I tell them to talk to people. Treat 

people the way you would like to be treated if you were that person, or if that were your wife, your child, or your parents. If we 

all did that, we’d have a much better communication system. We 

wouldn’t be afraid of each other. We’d be treating each other with 

respect. 

Mr. NORWOOD. Thank you, Dr. Roberts, Mr. Cox. 

Ms. Eshoo, you’re no recognized for 5 minutes. 

Ms. ESHOO. I want to thank all of the witnesses that are part 

of this first panel. While you have some differing views, I think 

that you presented yours very, very well and with a great deal of 

sincerity and professionalism. 

Doctor, I think that you have with your testimony, with your 

words, really etched into every single member’s mind that we really do have a problem. I mean, here you are, someone that has continued a tradition in your community. You have never had a suit 

against you and yet, what is the cost of your premium this year? 

Mr. ROBERTS. $35,800. 

Ms. ESHOO. And who is the carrier that you pay your premiums 

to? 

Mr. ROBERTS. Bureau of Risk and Insurance Management in the 

State of West Virginia. 

Ms. ESHOO. And it was how much last year? 

Mr. ROBERTS. $17,000. That was with PICO. And then PICO 

went, of course, into receivership. So they did double the premium. 

They have said it may be as much as twice that next year. And 

I obviously will not be able to afford that. 

Ms. ESHOO. And approximately, what’s the gross of your practice? 

Mr. ROBERTS. I can’t tell you that. There are two physicians, two 

nurse practitioners and two—— Ms. ESHOO. What does this present in terms of overhead for you? 

64

Mr. ROBERTS. Excuse me. It represents, I’m going to say, 10 percent of my income. And there are expenses that come out of that. 

Ms. ESHOO. It’s a lot of money. I’m sure you’ve shopped for insurance. 

Mr. ROBERTS. I can’t get any other insurance in the State of 

West Virginia. All the other providers have pulled out. They will 

not ensure family physicians that do obstetrics. If I did not do obstetrics, my rate would be approximately half what it is. What happens is people drop procedures. They stop delivering babies. So 

women don’t get prenatal care. Babies end up being born at 28 or 

30 weeks in an emergency situation. They have to get in a helicopter and go to Morgantown. Those babies cost approximately 

$1,500 a day besides the human cost for that family and that child. 

The State pays the bill. Eventually, we all pay. Providing pre-natal 

care is one of the most important things we can do as a society. 

Ms. ESHOO. You’re a good man. You really have touched me with 

how you’ve conducted yourself. You’re a decent person, you’re doing 

something that, and I’ll tell you one thing, for a woman to, the relationship of women with their physicians, their OB/GYNs is something that no one can never drive a wedge through. We have very, 

very complicated bodies and we’re reliant upon you. 

I’d like to ask the person sitting next you. How do you respond 

to the doctor? I mean, here he is—just a little cross rough. I’m not 

looking to make mischief. Each one comes in with their 100 percent 

clear cut view. And yet this is a pretty, this is not, I don’t think, 

a stand alone case. It speaks to the problem that we have in our 

system. He has never been sued. What do you have to say about 

the problem? And also, I appreciate your testimony. You point out 

some very important things. But how would you respond to what 

he’s saying? 

Ms. TOWNSEND. I’ve been equally moved by Dr. Roberts. 

Ms. ESHOO. He’s not a single, he’s not just a single smokestack. 

Ms. TOWNSEND. Oh no, he’s not. 

Ms. ESHOO. He underscores the problem that we have. Now, I 

understand the room that there is in the system for medical malpractice, but if the insurance rates are what they are and he has 

never done anything that’s wrong, what does that say to you? 

Maybe that’s the fairest way to ask the question. 

Ms. TOWNSEND. That tells me that Dr. Roberts, I believe, is being 

price gouged by the insurance industry. And that tells me, and 

maybe this is a crazy idea, I don’t know whether this happens elsewhere, but is there such a thing as experience-based insurance for 

medical professionals? It makes me think about that. 

Ms. ESHOO. We have, I know, on our next panel, and I hope I’m 

going to be able to be here for it, because we’ve already been in for 

about 3 hours here. Well, there’s a lot of discussion and debate. As 

long as it takes, we should do it. 

Do the other two panelists, would you like to lean in on this and 

just say a few words? I give you the opportunity to. 

Mr. FINE. If I may add—— Ms. ESHOO. Not very long so everyone else has a chance, but go 

ahead. 

Mr. FINE. I understand. Physicians, and rightly so, take care of 

patients one at a time. Hospitals have to bridge taking care of paVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 W:\DISC\81491 81491
65

tients one at a time while at the same time trying to play a public 

health role in preparing and addressing the health care needs of 

their communities. So we’re caught in a ‘‘Catch-22;’’ we try to address the individual situations such as those that are discussed by 

Dr. Roberts and Ms. Townsend, and the need for us to be prepared 

to take care of the people in our community. Without resolving this 

problem, we will lose the capabilities in our community. 

Ms. ESHOO. It becomes gum stuck to your shoe as well. 

Mr. FINE. Exactly. 

Ms. ESHOO. Doctor, would you like to say something before my 

time expires? 

Ms. HOLLIER. Thank you very much for giving me the opportunity. We certainly appreciate your attention to this issue today 

and we appreciate the recognition of this committee that this truly 

is a crisis. The residents that I’ve trained who have debt from medical school, who have debt from brand new practices—— Ms. ESHOO. Another huge problem we should be addressing. 

Ms. HOLLIER. They are going to be unable to continue to practice 

obstetrics next year, if premiums increase again. We desperately 

need of a solution. 

Ms. ESHOO. Has the Academy looked at the whole issue of experience pricing? What is it? 

Mr. NORWOOD. Your time is up, Ms. Eshoo. 

Ms. ESHOO. If she could answer that, Mr. Chairman. 

Mr. NORWOOD. This will be the end of it. 

Ms. ESHOO. Has the Academy looked at that, Doctor? 

Ms. HOLLIER. I am not aware of that. 

Ms. ESHOO. Thank you. Thank you, Mr. Chairman. 

Mr. NORWOOD. Yes ma’am. I now recognize myself for a couple 

of brief questions. 

Dr. Roberts, your malpractice insurance company is whom? 

Mr. ROBERTS. BRIM. The Bureau of Risk and Insurance Management of the State of West Virginia. 

Mr. NORWOOD. So Ms. Townsend is applying that the State of 

West Virginia is gouging you with that high premium. 

Mr. ROBERTS. I’ll leave that question alone. 

Mr. NORWOOD. Is that what you were implying, Ms. Townsend? 

Ms. TOWNSEND. I think he’s being charged too much money. 

Mr. NORWOOD. So the State of West Virginia is charging you too 

much money, but nobody else will insure you. 

Mr. ROBERTS. That’s correct. 

Mr. NORWOOD. That sort of leads me to the question, Dr. Hollier, 

about what happens if we have choices here. Would pregnant patients around the Nation rather have access to windfall jury 

awards because we refuse to admit there needs to be some limit on 

liability? And I’m not wishing to debate what that limit is, the fact 

that there needs to be some number out there in malpractice lawsuits. Or would the women of the country rather be ensured that 

they will have access to health ensure a safe pregnancy and a 

healthy child by having people stay in business? What would be 

your feeling about that? 

Ms. HOLLIER. Thank you very much for asking that question. My 

feeling is that the women of this country, just as I did, would recognize that prenatal care is extremely important in a delivery of a 

66

health child and would advocate for access to care. I think this legislation is important because we need to balance a few women who 

recover unquantifiable damages against the ability of all women in 

this country to receive the preventative and the diagnostic care 

that they need. 

Mr. NORWOOD. So the American College supports H.R. 4600. 

Ms. HOLLIER. The American College of Obstetricians and Gynecologists strongly supports H.R. 4600. 

Mr. NORWOOD. Do you agree with what many members have 

said, and panelists, that actually physicians at a rapid rate for 

leaving medicine and in particular OB/GYN. 

Ms. HOLLIER. Yes, sir. I absolutely agree with that. One of my 

colleagues in Cady, Texas just recently found out that his liability 

insurance was going to cost him $70,000 for the practice of both obstetrics and gynecology. If he drops obstetrics it’s only $20,000. So 

he stopped obstetrics. 

Mr. NORWOOD. And Dr. Roberts, you agree that positions in the 

country, particularly those around mine and your age that may 

have had experience are rapidly getting out of the practice of medicine and particular OB/GYN. 

Mr. ROBERTS. Yes, sir. 

Mr. NORWOOD. Then it’s logical to conclude that women in this 

country do not have access. Now what we’re discussing today is 

why are those premiums as high as they are. 

Mr. ROBERTS. What is happening in the State of West Virginia, 

the Bureau of Risk and Insurance Management is dependent upon 

the State Treasury of West Virginia. They do not want physicians 

to be on BRIM program. BRIM program was initially begun so that 

the professors at West Virginia University and Marshall University 

would have coverage. What’s happened is by default, they had to 

provide the availability of insurance to us, the other insurance companies have left. BRIM does not want us to continue. They are trying to get the State Medical Society to create a Physicians Mutual, 

which has in the past not done well—look at PIE and PHICO, and 

there are other examples across the country. 

So the State Medical Society has been very reticent to produce 

an insurance alternative because it’s just a stop gap measure. Until 

we address the real issue, which is the excessive awards and the 

fact that people have developed this lottery system, then we are 

never going to have anything that’s going to have a significant 

meaning. The State Treasury does not want to be at risk. That’s 

why they have made BRIM the highest price. There’s a 10 percent 

premium. Whatever rate you can get in the State of West Virginia, 

they add 10 percent to it and that’s your BRIM rate. 

Mr. NORWOOD. So we can all then agree that part of the problem 

for the premium increase has got to be, part of it, the increased 

awards that are going on, and in many cases not even an award. 

Dr. Hollier, you said in your statement that out of 10 cases taken 

to court of OB/GYNs, 7 were found for the defendant, meaning 

three 3 found to have done something wrong and there was then 

an award. But the other seven, having spent time, dollars, etcetera, 

were found not guilty. 

Ms. HOLLIER. Yes, sir. That is absolutely correct. In addition, in 

Texas, in fact, one study has shown that 86 percent of claims 

67

against physicians are ultimately dropped by plaintiffs’ attorneys, 

thus these claims are nonmeritorious. 

Mr. NORWOOD. Then why would these attorneys spend so much 

money taking a claim like that to court and lose so many of them? 

Ms. HOLLIER. I think that’s a very difficult question. But that 

certainly brings us to address one of the important legislative components of H.R. 4600 which is a limit on the contingency fees lawyers can charge in litigation involving professional liability. 

Mr. NORWOOD. Well, does that mean that maybe 60 percent of 

an award that’s supposed to go to a patient actually goes to the 

plaintiff attorney in court costs, therefore, windfalls are potential 

here, therefore it’s okay to lose 7 out of 10, because all you have 

to do is win one and you don’t even have to be right? To win one 

in the system you just have to be able to hire the most expert witness. So surely we can come to some agreement in this committee 

that there is a problem with the system that is contributing to the 

fact that women in this country are losing access to care no matter 

what side of this you’re on, Mr. Brown. We ought to be able to sit 

down as grownups and discuss this and recognize. There’s got to 

be some limit somewhere. 

My time is up, I’m sorry to say. 

Mr. Stupak, you’re now recognized for 5 minutes. 

Mr. STUPAK. Thank you, Mr. Chairman. In your comments to Mr. 

Brown, I think we probably could sit down and talk about this if 

we were to separate fact from fiction. I don’t know of any State 

that allows a 60 percent recovery for attorney fees in malpractice 

cases as you claim for this big windfall for attorneys. 

Mr. NORWOOD. Would you yield just a second? 

Mr. STUPAK. Just as long as I get my time back, I will. 

Mr. NORWOOD. I included court costs in that, too. Attorney’s fees 

and court costs. 

Mr. STUPAK. All right. I’ll let it go. I don’t tell you how to practice 

dentistry. You shouldn’t tell us how to do malpractice. All right. 

Dr. Roberts, you said that the West Virginia legislature had tried 

to address this malpractice situation? 

Mr. ROBERTS. Yes, sir. 

Mr. STUPAK. What did they determine? 

Mr. ROBERTS. Well, they spent 60 days in session and I can give 

you this off the top of my head, but please don’t quote me exactly. But they raised the fee to file a malpractice claim from $85 to 

$250. They increased the jury from 6 people to 12 people. Nine out 

of the 12 have to agree that there is malpractice. They created a 

tax credit. We have a provider tax in West Virginia. We pay 2 percent of our gross. Before we pay any bills, we pay 2 percent of our 

gross for the right to practice medicine in West Virginia. They gave 

us a partial tax credit. You deduct $10,000 from your malpractice 

fee premium and you take 10 percent of that amount off of your 

provider tax. So those are the things that were primarily done in 

the State of West Virginia, which again I feel are relatively minimal in having an impact on the situation. 

Mr. STUPAK. Let’s back up here. You said your total income, your 

malpractice is about 10 percent of your total income and it’s probably going to be $35,800, so if that’s 10 percent your income is 

about $300,000. And if West Virginia taxes you, what, 2 percent? 

68

Mr. ROBERTS. Two percent. 

Mr. STUPAK. So how much is 2 percent of your gross income 

that’s paid to West Virginia? 

Mr. ROBERTS. $6,000. Something like that. 

Mr. STUPAK. So they gave you a rebate on that. 

Mr. ROBERTS. Ten percent credited toward that amount. 

Mr. STUPAK. They didn’t go into caps and all this other stuff, 

right? West Virginia? 

Mr. ROBERTS. No. There is a cap, a million dollars on non-economic damages now in West Virginia already in place. 

Mr. STUPAK. If your legislature, you say you’re State is in crisis. 

If your legislature won’t take the steps you want them to do, as 

found in this bill, why then should the Federal Congress pass a law 

that affects all of the States? 

Mr. ROBERTS. This is a very political issue. In the State of West 

Virginia, I don’t believe any tort reform will be passed unless the 

State Bureau of Risk and Insurance Management is the only provider in the State, and the State Treasury becomes that risk. Then 

the legislature will have to do something to limit the awards. 

The other thing that could happen is that a Federal bill, such as 

H.R. 4600, would come down to the State of West Virginia. They 

would have to comply with that. 

Mr. STUPAK. We always hear up here that State legislatures are 

so much more closer to the people and they know better than we 

do, so why would we be Federalizing the system that the State 

won’t do? 

Mr. ROBERTS. State legislatures are just as prone to politics as 

they are on a national level. 

Mr. STUPAK. Sure. Can you then tell me then, Dr. Roberts, you 

indicated you never had any claims or anything like that against 

you, right? You didn’t get any credit for that from the insurance 

carriers? 

Mr. ROBERTS. No. 

Mr. STUPAK. Never, right? No claims, your policies keep going 

up? The premium keeps going up. 

Mr. ROBERTS. Yes, sir. 

Mr. STUPAK. And your license has never been suspended for anything then? 

Mr. ROBERTS. I had a situation about 15 years ago, yes sir. It’s 

a personal matter that’s really not germane to this issue. And it 

did not affect my malpractice claims if that’s your question. 

Mr. STUPAK. No, no. I’m just trying to figure out why it always 

goes up, you never get a rebate if you never had a claim. But if 

your license is suspended, that’s by the State of West of Virginia 

then, right? 

Mr. ROBERTS. Yes, sir. 

Mr. STUPAK. So something else there other than a malpractice 

claim. 

Mr. ROBERTS. Yes, sir. It had nothing to do with malpractice, did 

not affect my rights in any way. 

Mr. STUPAK. Your carrier told you that? 

Mr. ROBERTS. Yes, sir. 

Mr. STUPAK. I would just think that if the State would take a 

drastic action like taking away a license of a physician, that’s a 

69

right that you have a property right and your income right, that 

there has to be—— Mr. ROBERTS. Sir, I addressed this with the Board of Medicine 

in West Virginia in 1987, 15 years ago. It was addressed correctly, 

it was resolved at full licensure with the Federal Government and 

with the State government of West Virginia. This is not an issue. 

Obviously, you’re trying to turn this into political process. I’m a 

Democrat, too. Why are you attacking me? 

Mr. STUPAK. Wait a minute. I asked an innocent question. You 

said that you had never had a license suspended or anything like 

that. No malpractice claims. So I asked a question. There’s a part 

of licensing, or malpractice, called licensing. Did you ever have 

your license suspended? Innocent question. I’m not trying to get 

into your personal life. What I’m trying to say does it have influence on these malpractice premiums. There’s a lot of factors that 

go into it. It’s not just lawsuits. 

So answer this if you can, Doctor. What is it that States with 

caps on damages, why those with damages, caps, why isn’t the premium higher than those without the caps? 

Mr. ROBERTS. I don’t know. 

Mr. STUPAK. Was West Virginia then voted caps? Was that an 

option they had in the legislature to go to caps? Was that an option 

that they presented at West Virginia to go to caps on malpractice 

award for non-economic losses, for punitive damages? Did they propose caps in West Virginia? 

Mr. ROBERTS. They proposed a cap of a million dollars on noneconomic damages, yes. And there is no price on human suffering. 

I don’t care if you call it a million dollars or $250,000. You cannot 

replace human suffering with money. 

Mr. STUPAK. Then why would we have put a cap on it then? 

Shouldn’t you let the jury determine then what that suffering was? 

Mr. ROBERTS. Because we all pay that price. Can you reward 

pain and suffering? Can you replace that individual? I don’t think 

so. 

Mr. STUPAK. But you said you can’t put a price on it, but yet you 

want to put a cap on it. Correct? 

Mr. ROBERTS. I think it’s a matter of economics. The United 

States cannot afford to continue to pay the prices that we’re paying. 

Mr. STUPAK. So life is just a matter of economics then? 

Mr. ROBERTS. It’s economics if people can’t find a doctor. It’s economics if a baby is born weighing 1.5 pounds at 26 weeks and has 

to go on a ventilator. That’s how it becomes blind because of oxygen 

toxicity, or has a ventricular leak because they could not find a doctor. They had no prenatal care. 

Mr. STUPAK. It’s also economics if you have to take care of that 

injured person for the rest of your life. That family then has some 

economic factors that have to be considered. 

Mr. ROBERTS. It wasn’t my fault if I wasn’t able to be there to 

take care of the mother and baby. 

Mr. STUPAK. It was your fault. 

Mr. ROBERTS. They couldn’t get care because there was no access. 

Mr. NORWOOD. Thank you, gentleman. 

70

Mr. STUPAK. If it was your fault. If you’re talking about economics, it applies both ways. It can’t just be one side. 

Mr. NORWOOD. Thank you very much, Mr. Stupak. 

Mr. STUPAK. Thank you, Mr. Chairman. 

Mr. NORWOOD. And I want to apologize to you. I misspoke and 

I want to correct that. It’s not 60 percent that goes into the administration and defense costs and attorney fees. It’s actually 58 percent, and I’d like to submit for the record the Report on the Council 

of Economic Advisors and put that in the record the imply the 

problem is the patient doesn’t receive as much as we think they do. 

And now I’d like to recognize Mr. Buyer for 5 minutes. 

Mr. BUYER. Thank you. I have some questions about this culture 

of fear. I sort of touched on it in my opening remarks about, I guess 

it can also be called practicing defensive medicine. 

And so I would like Dr. Roberts, actually I’m not picking on the 

two docs here. Help me out here. You’re practicing medicine. You’re 

doing the best that you can. But you also know that the lawyers 

are out there and if a lot of these claims are being filed also are 

being classified then as frivolous suits or nonactionable or however 

you want to title them. Tell me about the inside, the sit down with 

your colleagues? Tell us about the inside, the practice of defensive 

medicine. Is it happening, is it not? I’m just curious. 

Ms. HOLLIER. Thank you. It seems like my problems today are 

technical. We have quantifiable data that talks about the practice 

of defensive medicine, and it appears that more than three fourths 

of physicians feel concerned about malpractice litigation, in fact, 76 

percent. This concern hurts their ability to provide quality of care 

in recent years. 

Physicians also report that the fear of malpractice claims causes 

themselves and/or other physicians to order more tests than they 

would need based on professional judgment of what’s truly medically needed. Ninety-one percent have noticed other physicians do 

this, and 79 percent report that they do this themselves due to concerns about professional liability. 

Physicians may prescribe more medications such as antibiotics 

and only a scant 5 percent of physicians think that their colleagues 

are comfortable discussing medical errors with them. 

I think the medical community is working very hard to limit 

medical errors. We are actively involved in research to limit medical errors. Hospitals, as I believe you addressed earlier in your 

opening remarks, have quality assurance committees, risk assessment committees, and physicians are working very hard to improve 

patient safety. 

Mr. BUYER. Dr. Roberts? 

Mr. ROBERTS. I think one thing that’s happened in some States 

is that there are certain practice guidelines that have been established, and what they’ve done there is try to determine the standard of care in the community. And if you have met that standard 

of care, then you can be held nonresponsible. But sometimes this 

leads to unnecessary x-rays, scans, and lab procedures that are 

done purely because we are afraid. If you’re afraid that you’re 

going to be sued, you order the extra CAT scan whether you feel 

it’s really necessary. If a child falls and the child is fine, you’ve 

done a complete neurological exam. You’ve looked in their eyes. 

71

You’ve done all the screening tests. You go ahead and order the 

CAT scan in the emergency room because you’re afraid if it’s ever 

is that one in a million case that that is going to be the thing that’s 

brought into court. 

Mr. BUYER. Answer this as you like. You can even do it in the 

hypothetical. But if you have a doctor doing his diagnostic analysis 

and he thinks it’s a, could be b, but I really think it’s a. But you 

know what, I know that this individual’s insurance covers an MRI. 

I just want to be 100 percent. Is it happening that they go ahead 

and go yeah, let’s just go ahead and get that MRI done. Let’s go 

ahead and get that other procedure. Is that happening out there? 

Mr. ROBERTS. Absolutely. Every day. In every emergency room 

across the country and every doctor’s office. 

Mr. BUYER. So it wouldn’t be just for an MRI. It could be for laboratory tests from blood. Give us some examples. And then Mr. 

Fine I’d like for you to jump in. 

Mr. ROBERTS. What happens is the individual physician is put in 

the position of realizing that this case could be brought into court. 

They could be accountable whether it’s their fault or not. Did you 

do the proper procedure? Did you order the proper test? And subsequently, the individual physician orders the test just because they 

know that, not because they feel it’s necessary for the patient. And 

the problem is many of these people don’t have insurance. 

Mr. BUYER. So it exceeds the boundary of the community standard of quality of medicine and then it becomes defined as defensive 

medicine. 

Mr. ROBERTS. Absolutely. I agree. 

Mr. BUYER. Thank you. Mr. Fine? 

Mr. FINE. Yes. To piggy back on that, it certainly occurs in every 

emergency room across the Nation regardless of whether has insurance or not for their health coverage. If someone comes in as the 

doctor described who has fallen and struck their head, CAT scan 

or MRI becomes the standard of care whether or not it’s necessary 

in that incidence. And that occurs in the Philadelphia area whether 

or not the hospital paid for the case. Most of us are paid a flat rate 

for emergency room case, substantially less than a $100 per case. 

But that person that comes in who has lost consciousness or has 

had a minor head injury can end up with a $1,000 CAT scan or 

MRI because the emergency room can’t afford, or the emergency 

room physician can’t afford the exposure that’s associated with not 

doing that test. 

Mr. BUYER. Thank you, Mr. Chairman. I yield back. 

Mr. NORWOOD. Thank you. Mr. Strickland, you are now recognized for 5 minutes. 

Mr. STRICKLAND. Thank you, Mr. Chairman. And I’d like to say 

to my friend, Representative Deal, that I wish I had been wise 

enough to make your opening statement. I listened to all the opening statements, and I very much appreciated the balance and the 

passion with which you spoke. Thank you. 

Dr. Hollier, I’m not sure I’m pronouncing you correctly? 

Ms. HOLLIER. Hollier. 

Mr. STRICKLAND. Do you believe that caps, if they are or were in 

place, would reduce malpractice premiums? 

72

Ms. HOLLIER. Yes, sir. I believe that they would. I think that the 

MICRA reforms that we’ve been talking about today really have 

stood the test of time in California. We’ve talked a lot about how 

the absolute number of the premium paid by physicians in California is relatively similar to the number physicians pay in other 

States. And I think it’s important for us to remember that we very 

well may be comparing apples and oranges. 

Mr. STRICKLAND. Can I ask you to respond to this then? I have 

data here from Medical Liability Monitor. It presents the average 

liability premium for OB/GYN physicians for 2001. And then in 

States without caps, the average premium is $44,485. And in the 

States with caps, the average premium is $43,010. 

How do you explain that data from what I believe is a credible 

source because it seems as if there is very insignificant difference, 

if any at all. 

Ms. HOLLIER. Well, I have not had the opportunity to specifically 

review that data. I would like to say that it’s important to remember that we need to compare rates for the same amount of coverage. For example, my physicians in the State of Texas can’t obtain $1 million, $3 million coverage. In fact, what we’re obtaining 

for our $37,000 a year may in fact be $5,000, not $1 million. Or 

what is most common now in the State of Texas is actually 

$200,000, $600,000. 

Mr. STRICKLAND. But you see, the problem that we face up here 

is that we hear all of these claims and accusations. At some point, 

there needs to be some coming together, some reasoning together 

to find out that we’re looking at the same data, providing the same 

coverage. And I don’t think we’re there yet. I have a second question, if you’d be so kind. 

Many of us are interested in exploring not only the solutions that 

have been suggested by many of you, but also exploring reforms in 

the insurance industry as a part of the solution to the current problem. 

Now I have here information regarding several States that have 

already enacted caps. Florida caps both punitive and non-economic 

damages. Nevada caps punitive damages. New Jersey caps punitive 

damages and in wrongful death cases non-economic are not available. Michigan caps punitive damages and non-economic. Texas 

caps non-economic and punitive damages. Washington has abolished punitive damage. 

Why is it that States with caps on damages are still facing this 

same crisis that we are describing if caps are going to provide the 

kind of premium relief that many of you seem to believe they will 

provide? 

Ms. HOLLIER. I think that’s a very good question. Clearly the 

problem is multi-faceted and we are interested in investigating 

multiple measures to reduce those prices and ensure access of our 

patients to care. 

Mr. STRICKLAND. It seems to me that your answer, and I think 

it’s an accurate one, it’s a multi-faceted problem, calls for a multifaceted solution. And my problem with what we’re attempting to do 

here is that we seem to have a single shot solution to a problem 

that is multi-faceted in nature. 

73

I’m very close to the hospitals in my District, Mr. Fine. I value 

what you and your association does and I’m wondering if you would 

just speak to that same series or a couple of questions that I’ve addressed to the good doctor here in regard to why our States which 

have these caps in place are still experiencing the kind of crisis 

that we’re all recognizing as a reality? 

Mr. FINE. A few points there. First of all, within States there are 

significant differences by region. In Pennsylvania, the southeastern 

Pennsylvania region’s rates for professional liability coverage are 

substantially higher than the more rural central part of the State. 

So part of this has to do with the venuing of cases and the way 

in which cases are reviewed by local juries. 

The listing that you had offered relative to States in which limits 

have been already implemented, as I understood the list, most of 

those limitations applied not to non-economic damages, but mostly 

to punitive damages and in H.R. 4600 those two things are addressed very, very differently. 

Mr. STRICKLAND. If I could just make one concluding statement, 

Mr. Chairman. I’m conflicted because we trust the jury system to 

make life and death decisions regarding whether or not a person 

should be put to death, for example. It troubles me that we would 

trust the jury system to make decisions about life and not trust the 

jury system to make decisions about money. That is so fundamental to the conflict that I’m feeling, while recognizing that the 

problems that you’ve described here are very real ones and we need 

to address them. 

Mr. Chairman, I would yield—I think my time is up, as a matter 

of fact. Thank you. 

Mr. NORWOOD. Thank you very much, Mr. Strickland. 

Mr. Deal, you are recognized for 5 minutes. 

Mr. DEAL. Thank you, Mr. Chairman. As I observed in my opening statement, this is a multi-faceted issue that has, quite frankly, 

very few good and absolute solutions, but I am after being in Congress and State legislature and practicing law for over 20 years, 

I’ve concluded that the perfect is never really going to be achieved, 

but what we try to do is to come as close as we can to resolving 

these issues. 

And Dr. Roberts, I would say that your testimony certainly is a 

graphic demonstration of the very practical problems that we’re 

facing and I appreciate the fact that you would be willing to come 

and share your experiences with us because you come from an area 

that’s very similar to my District and I’m sure the District that 

many people represent here and that is smaller communities where 

there has always been and hopefully will always continue to be a 

personal relationship between the doctor and the patient. The reputation of the doctor in that community spreads itself to the point 

that jurors who are assembled are confronted with a protectionist 

attitude, because this is our doctor and we have a relationship with 

him. Unfortunately, I think as we get into larger communities, 

much of that is lost. 

One of the problems that I alluded to earlier is that even though 

in the breakdown I now see that Mr. Buyer has here about insurance malpractice rates, that in some companies they are beginning 

to make geographical distinctions between larger communities 

74

many times where many of the larger verdicts come from and 

smaller communities where if there is ever a verdict it is always 

of a smaller magnitude. 

One of the aspects of this whole issue, however, that concerns me 

and that I’m hearing from my medical community is a decline in 

the number of young people who are actually applying for medical 

schools. Is that a concern that you’ve heard expressed, and if so, 

would you comment on it, any of you? 

Mr. ROBERTS. It’s very much a concern. I teach at Western University. I’m a clinical professor and I also have worked on the medical school admissions board doing interviews with students. We 

have less applications every year. Students are discouraged from 

going into medicine because of fear. People actually in medical 

school such as my daughter are being questioned about where 

they’re going to go and they’re looking for States. She’s considering 

going to Colorado. She worked out there for a year with an OB/

GYN group and she found that their laws were much more stable 

than West Virginia. I’m not sure exactly the structure of that law, 

whether it’s similar to the MICRA law or not, but I’ve noticed that 

Colorado is one of those States that’s not as likely to get into a lawsuit. 

So yes, it is a concern. It’s a concern that it’s discouraging, some 

of our good students, not to go into medicine, and it concerns me. 

Mr. DEAL. Doctor? 

Ms. HOLLIER. Thank you very much. I’d like to echo those concerns. I’m a teacher at the University of Texas Medical School at 

Houston and we are definitely seeing a decrease in the number of 

students who are interested in obstetrics and gynecology. In fact, 

one of the most frequently asked questions for me is what is the 

liability situation going to be like for me, am I going to actually be 

able to practice obstetrics. If I go through a 4-year residency training, a 3-year fellowship, am I going to be able to practice what I 

have learned? Our students are clearly demonstrating their concern about the current crisis and I’m afraid if this crisis continues, 

the quality of physicians that choose obstetrics and gynecology may 

decline. 

Mr DEAL. So the effect is, first of all, there is a declining interest 

in medical school, in general, in the population, plus there is obviously a selection process of specialties going on and it is in some 

part dictated by liability concerns in the particular specialties and 

certainly the OB/GYN being one of those high risk specialties from 

a liability standpoint. Is that what I hear both of you saying? 

Mr. ROBERTS. Yes sir. Many family practice residents are electing not to obstetrics and not to do other high risk procedures because of that when they go into practice which again limits access 

to prenatal care and delivery care services. 

Mr. DEAL. Mr. Fine, as a hospital administrator and CEO of a 

large hospital, I presume that one of your requirements for granting hospital privileges for physicians is that they must have liability insurance in their own right. Is that correct? 

Mr. FINE. That’s not only a requirement of our hospital, in order 

to be licensed as a physician in the Commonwealth of Pennsylvania, you must have a minimum of $1.2 million of professional liability coverage. 

75

Mr. DEAL. So there’s no, in that case, there’s no option about 

having to have liability insurance. 

Mr. FINE. No option. 

Mr. DEAL. You can’t just elect to be self-insured, in other words? 

Mr. FINE. Correct. 

Mr. DEAL. And especially in situations where there is no separate liability allowed, but to joint and several liabilities in place, 

obviously the hospital is almost invariably a co-defendant in cases 

of alleged malpractice that occurred within the confines of the hospital. Is that correct? 

Mr. FINE. Yes sir, that’s absolutely correct. 

Mr. DEAL. All right. With regard to the insurance coverage of the 

hospital itself, would you repeat what your percentage of increases 

have been? 

Mr. FINE. Sure. Grand View Hospital specifically, 2 years ago was paying approximately $1.5 million for its professional liability 

coverage. That went up to approximately $2.3 million last year and 

will be over $3 million this year, in addition to the increases in coverage. We’ve been now forced to take $7.5 million deductible in the 

first layer of excess insurance, right above $1 million. And a 50 

percent co-payment for any claim that actually pierces into that 

layer. We have a tremendous exposure. 

Mr. DEAL. I understand that that’s a similar pattern that hospitals in my State and other States are experiencing is the larger 

up front deductibles and the larger percentage of co-pays. I don’t 

think your situation is unique in that regard. Is that your general 

understanding? 

Mr. FINE. That is my understanding. 

Mr. DEAL. I think all of us—is my time up, Mr. Chairman? I’m 

sorry. I would not dare infringe on that. Thank you. 

Mr. NORWOOD. Thank you, Mr. Deal. I sure didn’t want to call 

you down on it either. 

Mr. Deutsch, you’re now recognized for 5 minutes. 

Mr. DEUTSCH. Thank you, Mr. Chairman. I would throw this out. 

I know all of you in good faith answered my colleague from Georgia’s question, but I’d be curious to see any empirical data to support the contentions that were just made about less quality of students and people choosing not to go into medicine based on liability 

issues, people choosing not to go into specialties because of liability 

issues. I just—I have a medical school in my District where I have 

not heard of any of that. So if it exists, maybe it exists in other 

States besides Florida, but I’d be curious about it. 

Did you want to respond to that? 

Ms. TOWNSEND. I actually have examples in three States to answer that question. 

Mr. DEUTSCH. Okay. 

Ms. TOWNSEND. One is New York State. According to the New 

York Public Interest Research Group, New York State is ranked 

third in the Nation in its number of obstetricians and gynecologists 

per capita which is ahead of California which is ranked 27th. And 

when compared to the region, Connecticut ranked second as ahead 

of New York State in the number of OB/GYNs per capita. 

What’s more, the number of physicians practicing in New York 

has gone up significantly and is increasing at a rate faster than the 

76

national average. The Nation’s ratio of physicians per capita rose 

by 43.6 percent compared with the 47.9 percent increase in New 

York during the period of I guess between 1980 and 1998. I’m trying to speed this up. 

Mr. DEUTSCH. You know what, I’ll tell you. I got the gist of what 

you’re saying. 

Ms. TOWNSEND. And also, this is from the Center for Justice and 

Democracy. There was also a study done called the Price of Practice from the Charleston Gazette in West Virginia, done by two reporters that found that despite claims from the medical association 

there, that the lack of tort reform had caused a mass exodus, that 

in fact, they were seeing an increase in physicians and the same 

goes for Pennsylvania. John Reed of the CAT Fund has——

Mr. DEUTSCH. Mr. Chairman, Mr. Chairman, if you want to take 

my time, can you ask me to yield? 

Mr. NORWOOD. Would you yield to find out what study that was? 

Mr. DEUTSCH. I’d be happy to yield to the chairman. 

Ms. TOWNSEND. It’s called, it’s a series that appeared in the 

Charleston Gazette. It’s called the Price of Practice and the reporters in question where Lawrence Messina and Martha Leonard. 

Mr. NORWOOD. Thank you very much. 

Mr. DEUTSCH. Thank you. Recalling my time, we’ve had a lot of 

testimony this morning and I guess a question that I would raise 

and give you the opportunity because as far as I’m aware it really 

hasn’t been discussed, why are we here? Why are we talking about 

this as one of the unique things that the Federal Government 

needs to be involved in? Many of us on this panel have served as 

State legislators and actually dealt with malpractice issues in the 

legislature. This has traditionally been a legislative issue, a State 

legislative issue. Why all of a sudden is this an issue that has to 

be Federalized? 

I’d like to thank my colleagues on the other side of the aisle, continuously, always say local government does better, State does better. Why are we choosing to have this hearing? Why are we choosing to discuss Federalizing what has historically and traditionally 

been a State issue? 

Does anyone want to offer any reason for it? I mean sort of——

Mr. FINE. I’ll offer the comment that in some States the crisis 

has already developed and in most of our neighborhood States, we 

see that the crisis is rapidly developing to the point that it would 

appear that a common solution to the problem would make more 

sense. 

Mr. DEUTSCH. But again, I guess I would ask you, why can’t you 

go to your legislatures? I mean there’s a reason why we have not 

Federalized insurance. Again, my question would be if the crisis is 

so dramatic as you’re describing, the numbers you presented I 

think would absolutely point to that, why isn’t your legislator responding? And let me just follow up on that, that if they’re not responding and the crisis is as bad as you’re describing, you have the 

ability in a political process to elect new legislators. This is again 

historically not a Federal issue for some very good reasons. And it 

seems very selective that we’re even here today, all of a sudden 

Federalizing this particular issue. 

77

Mr. FINE. In Pennsylvania, I was asked to come here by members of the State legislature. In Pennsylvania, we have certain constitutional provisions that according to the Pennsylvania Supreme 

Court have precluded the establishment of such things as caps on 

non-economic damages. Members of the Pennsylvania House with 

whom we’ve worked closely on this, have worked to pass legislation 

that has then been overturned by the State Supreme Court. This 

occurred when—— Mr. DEUTSCH. Let me just—— Mr. FINE. Congressman Greenwood was sitting in the Pennsylvania Senate. 

Mr. DEUTSCH. Let me just mention because I see I’m wrapping 

up on time. I mean in Florida, again, I have a fair amount of experience in Florida. Both sides of this issue or three sides of this 

issue, four sides of this issue on more than one occasion, again, I 

don’t know, Pennsylvania, ability to do initiatives in terms of constitutional amendments, but in Florida, we’ve had some very aggressive constitutional amendments because of similar issues related to, as you said, in Pennsylvania. 

The last thing I would mention, and really give people an opportunity and maybe Mr. Fine, you in particular, which always sort 

of—I have questions of this in terms of the whole malpractice issue. 

You mentioned a specific thing in terms of someone coming into an 

emergency room setting and getting a CAT scan. And I guess the 

perspective I have is in terms of either practice parameters or in 

terms of what is appropriate medical care. If it’s not appropriate, 

even if it’s one in one thousand times that the case that looks like 

the concussion is not a severe concussion, that only a CAT scan 

could pick up, then in any type of factual setting, why would someone, what’s—it doesn’t make sense that they would not do a CAT 

scan. It might not be for the—in other words, what I’m saying is 

you have to evidence. It’s a factual issue. There has to be a factual 

basis at some point in a setting that that was an appropriate procedure to do, appropriate test to do. You’re not doing CAT scans on 

fingers or broken arms because you’re not and again, it might not 

be likely. It might not be that often. If you were paying out of pocket, maybe you wouldn’t want to do it or maybe the patient might 

not want to do it, but I guess what I’m saying is if the test is actually showing something, even if it’s unlikely, I mean in a sense it 

has to be showing something that very well might save the person’s 

life. So I guess my question——

Mr. NORWOOD. Mr. Deutsch, I know you’re a stickler for protocol 

and your time has expired. 

Mr. DEUTSCH. But Mr. Chairman, I would ask to give the gentleman an opportunity to follow up and see if he can answer. 

Mr. NORWOOD. Well, it wasn’t a question, was it? 

Mr. DEUTSCH. It really was. 

Mr. NORWOOD. You want to answer, Mr. Fine? 

Mr. FINE. If I understood the gist of the statement, the issue becomes that in retrospect any test that is found to be positive is determined to have been a necessary test and any test that was negative is generally viewed as having been unnecessary and that can 

only be determined after the fact, in retrospect. Until such time as 

we have, either reform such as those that are being discussed today 

78

or we have practice parameters that are established and protect 

practitioners so that they will not be found retrospectively responsible for having made what seemed to be a very well informed decision at the time. We will continue to have the problem that I believe I understood you to be outlining. 

Mr. NORWOOD. Thank you very much, Mr. Fine. Mr. Fletcher, Dr. 

Fletcher, you’re now recognized for 5. 

Mr. FLETCHER. Thank you, Mr. Chairman. Let me say I agree 

with some of the comments about Mr. Deal’s opening statement. I 

think it was very thoughtful and I concur with him that in the profession of medicine we need to do a lot more on policing our own 

members and I’ll ask a question about that just briefly regarding 

transparency which I think the runaway lawsuits decreases which 

makes it more difficult for peer review. 

Additionally, let me make a statement regarding also the chairman’s or Dr. Norwood’s questioning regarding lawsuits, only 70 

percent, of all liability claims result in no payment to plaintiffs. 

And this is one of the problems of having this possibility of getting 

this large settlement. It is this fact that attracts trial lawyers and 

we see a lot of their ads on television as I believe Mr. Deal had 

mentioned, to go after cases which don’t have the facts with them, 

simply because it’s kind of the roll of the dice. And not only that, 

but the median cost of defending such a case, one where the jury 

rules the defendant not guilty is $66,767 and that was in 2001. So 

you see, there’s a lot of money that changes hand, a lot of money 

to be made, even in these lawsuits that have no credibility and that 

are lost and that’s part of the problem. That’s what makes it broken. 

Let me make a comment additionally on the quote about the poor 

and I want to quote from Cruz Reynoso, a Democratic Vice Chairman of the U.S. Commission of Civil Rights, professor of law at 

UCLA and a former Justice to the California Supreme Court. He 

stated that publicly funded medical centers are supportive of 

MICRA because in their own insurance rates they found they 

would go up much more without MICRA which would decrease 

their ability to serve the poor. And I think that’s true for institutions all across this country. So I don’t think as some have tried 

to purport here, that having unlimited liability somehow protects 

the poor disproportionately. I think it’s just the opposite. We’ve 

heard where rural physicians have had to stop practicing and move 

to other States or out of the rural areas. 

Dr. Roberts, you’ve talked about that. You and your father, delivering 9,000 out of 10,000 people, I don’t know how that happened, 

but in your community, but obviously your departure of doing obstetrics there is going to have a tremendous impact on that community and young women are going to have travel. 

Let me ask you, what percentage of the two physicians here, Dr. 

Hollier and Dr. Roberts, do you all deal with Medicaid patients or 

patients that you don’t end up getting paid from? What do you all 

do with those patients? 

Ms. HOLLIER. I practice at LBJ General Hospital in Northeast 

Houston, and the vast, vast majority—more than 90 percent of my 

patients—are uninsured or Medicaid patients. 

79

Mr. FLETCHER. And so if you left practice because you can’t afford the escalating premium cost of malpractice insurance, you’d 

leave those people trying to find some place to go, is that right? 

Dr. Roberts? 

Mr. ROBERTS. That’s the same situation in West Virginia. We 

have a very high percentage of Medicaid and uninsured patients. 

They have expanded the Federal guidelines, so more people can be 

guaranteed by Medicaid, but the majority of my patients, probably 

90 percent of my obstetrical patients are Medicaid patients. 

Mr. FLETCHER. I think the point is well taken. Here’s an individual who took care of a number, a majority of poor individuals, 

women, particularly, and his service is no longer available because 

of this crisis, so this bill certainly is not a perfect solution, but it 

is part of the solution and I think a very important part of the solution. 

If I can ask the assistant to put up a chart here, there was a 

study done at Stanford on defensive medicine that shows a 5 to 9 

percent increase in medical costs due to the unlimited liability and 

effective tort reform would lower the cost 5 to 9 percent. Savings 

nationally would be $50 billion. Do you know how may prescription 

drugs we could provide for our seniors, low income seniors, if we 

could spend that $50 billion on prescription drugs? Or what about 

on caring for the poor, those that have no insurance, almost 40 million people in this country. 

I want to and the physicians, I think, spoke to this. Does defensive medicine affect your practice? Do you feel that sometimes 

there’s a sense of fear of liability in the practice, that sometimes 

affects your judgment? 

Dr. Hollier? It’s a difficult question, but I’ve been there and let 

me say I’ve felt it personally. 

Ms. HOLLIER. I think there’s definitely a climate of fear in which 

we practice. 

Mr. FLETCHER. Dr. Roberts? 

Mr. ROBERTS. I think it absolutely affects the decision that every 

physician makes every day. I don’t think you can decide if someone 

has insurance or doesn’t have insurance whether they need a test. 

You need to order the test anyway and I think we need to be very 

careful that we don’t become afraid to deal with people honestly 

and straightforwardly, that we continue to communicate with them 

in the way we would as if they were our own families. 

Mr. FLETCHER. Well, thank you. Let me ask you a question, Ms. 

Townsend and I certainly appreciate your testimony. I’m sorry——

Mr. NORWOOD. Your time is up, without objection, you can have 

an additional minute. 

Mr. FLETCHER. Thank you, Mr. Chairman. The IOM report, To 

Err is Human, notes over and over again that health care professionals are threatened from sharing information on medical errors 

because of fear of retaliation. The IOM report states ‘‘fears about 

the legal discoverability of information may undercut motivations 

to detect and analyze errors. Unless such data assures protection 

of information about errors will continue to be hidden and errors 

will be repeated. A more conducive environment is needed to encourage health care professionals and organizations to identify, 

80

analyze, and report errors without the threat of litigation, without 

compromising patients’ rights.’’ Let me ask you, does your organization support legislation to 

grant peer review protections for data related to patient safety and 

quality improvements? 

Ms. TOWNSEND. Would you define the peer review system about 

which you speak? 

Mr. FLETCHER. Does your organization support legislation to 

grant peer review protections or if you have a peer review program 

in a hospital that tries to identify any concerns or problems going 

on with a colleague/physician of protecting that peer review so that 

you can identify a problem and correct them to protect that data 

for patient safety and quality? Because the Institute of Medicine, 

I think they’re a pretty good organization, has stated that this impairs the ability to improve the quality of medicine and to do as 

Mr. Deal was talking about, to identify bad practitioners. 

Ms. TOWNSEND. That’s a very interesting idea. My organization 

has not looked at that particular recommendation. 

Mr. FLETCHER. So you have no stand on that? 

Ms. TOWNSEND. I think we need to do something about making 

it more common place for doctors and health care workers to come 

forward and talk about what goes wrong in the hospitals. 

It was interesting when I spoke with John Reed of the CAT Fund 

in Pennsylvania, he was a wealth of information. He could tell me 

which corner of the hospitals mistakes happen more often. He 

could tell me which day of the week was the least desirable date 

to go to a hospital, to get a procedure. 

Mr. BILIRAKIS. Will you share all that with us? 

Ms. TOWNSEND. Well, if we had a centralized location, if we had 

a single payer system, perhaps, we would have that information 

and you could fix the problems. 

Mr. BILIRAKIS. The gentleman’s time has expired. Mr. Greenwood 

to inquire. 

Mr. GREENWOOD. Thank you, Mr. Chairman, and I apologize that 

I had to leave for an hour or so. 

First off, if I could, Mr. Chairman, I’d like to enter into the 

record a series of letters that I’ve received from physicians and constituents in my District. 

Mr. BILIRAKIS. Without objection, that will be included. 

Mr. GREENWOOD. And let me turn my questions to you, Ms. 

Townsend. 

Ms. TOWNSEND. Certainly. 

Mr. GREENWOOD. And I apologize and I know I’m going to ask 

some questions that may have been asked already, but that’s the 

way it works. 

In your testimony, you say that H.R. 4600, that we vehemently 

oppose H.R. 4600 which we know will hurt victims of medical malpractice, immunize wrong doers and be a boon for the monolithic 

giant that should be the target of everyone’s ire, the insurance industry. 

Could you tell me how you know that victims of medical malpractice will be hurt by this legislation? 

Ms. TOWNSEND. Well, in the case of somebody who is a low income person, the case of a woman, women traditionally today make 

81

less money than men do. A senior citizen, a person with a disability—— Mr. GREENWOOD. Okay, let’s take a woman who is low income 

and she’s injured as a result of malpractice. How does this—— Ms. TOWNSEND. If she is injured as a result of malpractice and 

it’s a severe malpractice and the jury decides that in addition to 

economic damages, she should receive non-economic damages to 

cap non-economic damages at $250,000 is hurtful to that person 

who might need additional money—— Mr. GREENWOOD. For what? 

Ms. TOWNSEND. To take care of her life for the rest of her life 

because she wasn’t making a lot of money and economic damages 

are——

Mr. GREENWOOD. But she is entitled to say I lost my right arm 

as a result of an error by a physician and I’m not—this will be the 

limitations on my economic abilities. She will be able, you would 

agree that she can recover all of her medical costs, all of her medication costs, all of her therapy costs, all of her psychotherapy costs, 

whatever inability she has to achieve income, she’ll be able to recover that, right? 

Ms. TOWNSEND. My question to you would be, what would be the 

difference between that woman’s economic damages versus a CEO 

of a company who had the same thing happen to him? 

Mr. GREENWOOD. She would recover everything that she might 

have otherwise had and so would the CEO. 

Ms. TOWNSEND. But the CEO would receive a significant sum 

more. 

Mr. GREENWOOD. He was going to—he or she was going to get 

that anyway. In other words, she’s going to recover, she’s going to 

be—she’s not—she’s going to be held whole. 

Ms. TOWNSEND. So he’s going to be given money to give him the 

style to which he has grown accustomed and the woman who was 

struggling who perhaps will not be able to work for the rest of her 

life or has been severely altered what she can do, will never be able 

to factor in the fact that maybe that woman would be the American 

dream and was going to be a manager in a store 1 day and own 

the company the next day and ultimately be that CEO. 

Mr. GREENWOOD. Well, she’s, of course, able to get punitive damages as well. 

Correct? 

Ms. TOWNSEND. In this legislation is there not caps on punitive 

damages? 

Mr. GREENWOOD. No, there are no caps. 

Ms. TOWNSEND. There’s no—is there a formula? 

Mr. GREENWOOD. Excuse me, the cap is do you not know how we 

treat punitive damages in this legislation? 

Ms. TOWNSEND. If you could tell me again. I know that there’s 

a formula to it. And I don’t have it committed to memory. 

Mr. GREENWOOD. I don’t mean to be insulting, but when you 

come and testify about a bill, it helps if you’ve read it. 

Ms. TOWNSEND. And I’m honestly saying——

Mr. GREENWOOD. Mr. Chairman, now wait a second—— Mr. BROWN. Mr. Chairman, she’s not testifying on the bill. She’s 

testifying on the issue. 

82

Mr. BILIRAKIS. Did you yield? 

Mr. GREENWOOD. I did not yield the floor. 

Mr. BILIRAKIS. Let’s go on. Let’s go on. 

Mr. GREENWOOD. Ms. Townsend, the individual in this case can 

receive all of her economic damages. She can receive $250,000 in 

non-economic damages and she can receive punitive damages equal 

to twice her economic damages. 

Ms. TOWNSEND. I understand that now, thank you. What I do 

know about punitive damages, if this woman is—has had something so egregious happen to her that the jury decides that she 

should receive punitive damages, I believe (1) that it should be up 

to the jury to decide what that amount is, an amount that is oftentimes ratcheted down ultimately, because it’s aimed at sending a 

message to the wrongdoer that they should never do that ever 

again. 

Mr. GREENWOOD. That’s what punitive damages are for. 

Ms. TOWNSEND. They happen also very, very rarely. So we can’t, 

unless we know the circumstances of that woman, count on punitive damages because they happen seldom. 

Mr. GREENWOOD. Let me ask you this question, where does your 

organization receive its funding? From where does it receive its 

funding? 

Ms. TOWNSEND. We receive funding from a variety of individuals 

and organizations from around the country and the States. 

Mr. GREENWOOD. To what degree would you say that the trial 

bar constitutes your organization and funds your organization? 

Ms. TOWNSEND. I would say that attorneys and the association 

just a very little bit, probably contribute some 25 to 30 percent of 

the organization’s work. And like you, I’m sure you know that you 

need to raise money to run for office like we need to raise money 

in order to exist as an organization, and we work to bring in funding from individuals who agree with our organization on the issues, 

rather than adapting to the—— Mr. GREENWOOD. I just want the record that. Thank you, Mr. 

Chairman. 

Mr. BILIRAKIS. All right, I think that finally that completes the 

work of this panel. 

Mr. BROWN. Mr. Chairman, can I ask for a clarification? I was 

very confused by that, Ms. Townsend and Mr. Greenwood, back 

and forth discussion. Could I just ask a question to understand it 

better? 

Mr. BILIRAKIS. Would you like a minute, 2 minutes? 

Mr. BROWN. Two minutes would be fine. 

Mr. BILIRAKIS. Two minutes, without objection. 

Mr. BROWN. First, I heard Mr. Greenwood say that punitive damages aren’t limited and then I think you said, Mr. Greenwood, and 

I will yield to you that they are, in fact, limited? 

Mr. GREENWOOD. I said they’re not capped. They are permitted 

to—punitive damages are limited to the result, to twice the economic damages. 

Mr. BROWN. Okay, I reclaim my time. So the interesting thing 

here and I go back to this Congress, the majority in this Congress 

continuing to go after working families and rewarding the wealthy 

in society. Think about this. The cap on punitive damages is based, 

83

is two times the amount of economic damages. That means if a doctor injures a CEO, the CEO can get more punitive damages than 

if the doctor injures or the hospital or the nurse whatever, injures 

a woman who works in a hotel. So that’s just sort of inexplicable. 

I’ll just leave it at that. I don’t get that, why that should be the 

case. In addition to earning power in the future and all that we’re 

doing on economic damages, that sort of to me, makes me wonder 

about the whole intent of this legislation. 

Mr. NORWOOD. Mr. Chairman, could I have 2 minutes, too, 

please? 

Mr. BILIRAKIS. No objection, but I don’t want any more of that. 

This panel has been here for 4 hours. 

Mr. NORWOOD. Just a quick thought. 

Mr. BILIRAKIS. Without objection, go ahead. 

Mr. NORWOOD. The purpose of economic damages is if a person 

is harmed economically they are to be made whole. And the person 

who is harmed economically as a CEO is made whole—— Mr. BROWN. These are punitive damages. 

Mr. NORWOOD. Don’t interrupt now. You all are sticklers for that. 

The other thing I wanted to quickly ask Dr. Roberts is I heard you 

say that defensive medicine is practiced. Mr. Fine said it also in 

the emergency room—is practiced all the time because you are 

afraid. And what I think you are afraid of is that juries today, and 

with so many plaintiff lawyers trying to take you to court, that you 

can lose everything. All your life’s work. All at one lick. Because 

there is absolutely no limit as to what they can do and the trial 

attorney has great interest in driving that number up as high as 

possible. 

Would you be less afraid if there were some reasonable limitation 

so that you could then protect yourself through reinsurance and be 

able once again to practice medicine rather than having to practice 

law to defend yourself. 

Mr. ROBERTS. Absolutely. I think that would be an ideal solution. 

Mr. NORWOOD. Thank you, Mr. Chairman. 

Mr. BILIRAKIS. The Chair asks for unanimous consent that it document what appeared in the May 1996 issue of the Quarterly Journal of Economics entitled ‘‘Do Doctors Practice Defensive Medicine?’’ be made part of the record. That being the case without objection. Thanks so very much. I apologize for keeping you here this 

long. But I think you can see an awful lot was gained by all of us 

in terms of knowledge. We customarily have written questions 

which we send to witnesses, to panelists, if you will, and ask for 

responses in a timely fashion. You’re all willing to do that, aren’t 

you? I think Ms. Visco, she’s appeared before us, so I expect that 

she would be willing to submit also. That having been the case 

with our thanks you are discharged. Thank you very much. 

The next panel which has been so very, very patient consists of 

Dr. Richard Anderson, CEO of the Doctor’s Company on behalf of 

the Physician Insurers Association of America; Mr. Jamie Court of 

the Foundation for Taxpayer and Consumer Rights here from 

Santa Monica, California; Mr. Jim Hurly on behalf of the American 

Academy of Actuaries from Atlanta, Georgia; Mr. Travis Plunkett 

with the Consumer Federation of America; and Mr. Victor E. 

Schwartz with the firm of Shook, Hardy & Bacon here in WashVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00087 Fmt 6633 Sfmt 6602 W:\DISC\81491 81491
84

ington, DC. Welcome, gentlemen, and thank you for being here and 

again we appreciate your understanding and your patience. Your 

written statement is, of course, a part of the record and we would 

hope that you would complement it verbally. We’ll set the clock at 

5 minutes and hope that you can stay within that period of time 

or shortly thereafter, if you would. 

Dr. Anderson, if you would pull that mike closer so we can hear 

you. Please proceed, sir. The mike is not on. 

STATEMENTS OF RICHARD E. ANDERSON, CEO, DOCTOR’S 

COMPANY; JAMIE COURT, FOUNDATION FOR TAXPAYER AND 

CONSUMER RIGHTS; JAMES HURLY, AMERICAN ACADEMY 

OF ACTUARIES; TRAVIS PLUNKETT, CONSUMER FEDERATION OF AMERICA; AND VICTOR E. SCHWARTZ, SHOOK, 

HARDY & BACON 

Mr. ANDERSON. Chairman Bilirakis, Representative Brown, and 

members of the subcommittee, thank you for this opportunity to 

present our views on the implications of excessive malpractice litigation on our health care system and the need for Federal reform. 

I am Chairman of the Board of the Doctor’s Company, one of the 

45 doctor owned and/or operated medical liability insurers that 

comprise the Physicians Insurance Association of America, PIAA. 

PIAA members insure more than 277,000 physicians and 1,100 

hospitals against the accusations of malpractice. Personally, as an 

oncologist, I must bear the knowledge that each and every cancer 

patient whose life I tried to save can be turned into a potential adversary in our current medical legal system by the effects of the 

terrible disease and an exploitative plaintiff’s attorney. 

In my testimony, I would like to discuss with you proven solutions to some of the most serious problems affecting our health care 

system. Today’s crisis and medical care access is well known to 

you. What must be understood is that States like California have 

previously experienced very similar crises and have successfully 

adopted medical liability reform and have no such crises today. 

Despite stunning advances in scientific knowledge, medicine remains more art than science because human beings are not machines. Medicines’ achievements today and promise tomorrow, as 

remarkable as they are, cannot be guaranteed. It’s a sad commentary on our society that approximately one of every six practicing physicians faces a malpractice claim every year. 

In high risk specialties such as obstetrics, orthopedics, trauma 

surgery, and neural surgery, there is one claim for every doctor 

every 2.5 years. It is critical to understand that 7 or more out of 

10 of these claims are found to be without merit. Nonetheless, each 

of these meritless cases requires costly legal defense averaging approximately $23,000 per case. The Doctor’s Company alone has 

spent more than $400 million defending claims that were ultimately shown to be without merit. 

The insurance system was able to accommodate even this inexcusable volume of litigation as long as the size of the few valid 

claims was predictable. Unfortunately, in the past few years, there 

has been an explosion in the cost of individual claims. Texas has 

seen a $268 million verdict. A number of States have witnessed 

verdicts in excess of $100 million. The city of Philadelphia alone 

85

has recorded multiple verdicts in excess of $50 million in just the 

past 2 years. 

Mr. Chairman, insurance is not magic. If society expects insurers 

to pay unlimited awards, it should expect that those who are insured should pay corresponding premiums. As premiums rise, so 

must the cost of health care. Since health care today is a zero sum 

game, these cost increases mean corresponding decreases in access 

to necessary medical services. 

Those are the largest claims. What about the size of the average 

claim? PIAA data shows that the average indemnity claim payment 

in 2001 was more than $310,000, a 60 percent increase in just the 

past 5 years. The figure continues to be affected by the tens of 

thousands of malpractice claims closed every year. Whatever the 

number, beyond dispute, is that the cost of these claims is rising 

precipitously. The sum of the malpractice indemnities paid in New 

York and Pennsylvania alone was nearly $1 billion in year 2000. 

Those who would attempt to obfuscate the truth will argue that 

the numbers are much smaller. The Center for Justice and Democracy and J. Robert Hunter actually state the average claim payment in 2002 was $8,066. He got this number by adding all the 

claims that closed without any payment whatsoever. In other 

words, zero dollar claims to the number of paid claims. 

Put differently, Mr. Hunter would argue that the solution to today’s malpractice crisis is more frivolous litigation because that 

brings down the average cost per claim. Such arguments are as 

without merit as the frivolous claims themselves. 

Mr. Hunter also claimed that the cost of malpractice premiums 

had risen no more in California which has tort reforms than in the 

rest of the country. In fact, since the MICRA statutes of 1975 were 

enacted, rates in California have increased at a rate only one third 

that of the rest of the country. You don’t need to take my word for 

this. This is data affirmed by the National Association of Insurance 

Commissioners. 

Moreover, those who would obfuscate the truth would argue that 

stock market loses by insurance companies are the real driver of 

price increases. The truth is once again quite different. 

I know of no insurance companies that have experienced net 

losses greater than their investment income. Not only do State insurance commissioners who closely regulate such investments, but 

rating agencies also monitor them closely. What has happened is 

that less investment income is available to subsidize premium levels. Therefore, today premium levels must more closely approximate claims loses. 

California has 27 years’ experience with MICRA. This is not an 

experiment. We know, we do not speculate, that genuine liability 

reform works. Since 1975, Doctor’s Company Malpractice Premiums in California have decreased by 40 percent in constant dollars. This is true despite the fact that there has not been and is 

not today any limit whatsoever on actual damages awarded. 

We know, we do not speculate, that claims settle about 33 percent faster in California than the rest of the Nation because the 

lottery aspect of non-economic damages has been controlled. 

We know, we do not speculate, that even very large judgments 

can be accommodated by the insurance system because they can be 

86

1PIAA Data Sharing Project, May 2002.

paid on an annual basis over the intended period of compensation, 

not as a single jackpot. 

We know, we do not speculate, that injured patients take home 

a significantly higher percentage of awards in California because 

there is an upper limit on attorney contingency fees. 

Mr. BILIRAKIS. If you could summarize, Dr. Anderson, I would 

appreciate it. 

Mr. ANDERSON. Yes sir. We know, we do not speculate, the 

MICRA has not limited access to attorneys. California is a litigious 

State and the frequency of suits in California is 50 percent higher 

than the national average. But still 8 out of 10 claims in California 

are found to be without merit. 

Finally, we know that not only does MICRA not limit total 

awards, but also that malpractice awards still arise faster than inflation in California. These same reforms are found in H.R. 4600, 

the PIAA and the Doctor’s Company totally support the provisions 

of this Act, which when signed into law would provide the same 

protections to patients across the United States as found in California for over a quarter century. 

We thank the members of the committee and their staff for this 

important hearing and inviting us to testify. We look forward to 

working with you to make the health care liability system fairer for 

everyone. 

I’ll be happy to answer any questions. 

[The prepared statement of Richard E. Anderson follows:]

PREPARED STATEMENT OF RICHARD E. ANDERSON, CHAIRMAN, THE DOCTORS’

COMPANY ON BEHALF OF PHYSICIAN INSURERS ASSOCIATION OF AMERICA

Chairman Bilirakis, Representative Brown and members of the subcommittee, 

thank you for this opportunity to present to you today our views on the implications 

of excessive litigation and the need for Federal health care litigation reform. My 

name is Richard Anderson and I am an oncologist with more than 25 years experience practicing cancer medicine in California. I am also Chairman of The Doctors’

Company one of the 45 doctor-owned and/or operated medical liability insurers that 

comprise the Physician Insurers Association of America (PIAA). Collectively, the 

PIAA companies insure over 60% of the Nation’s practicing physicians. At last 

count, PIAA companies insured more than 277,000 doctors and 1,100 hospitals. On 

behalf of our member companies and their insureds, the PIAA has always supported 

health care liability reform that will more equitably and rapidly compensate patients who have received substandard care, but which at the same time will also 

limit frivolous lawsuits and increase access to health care. 

BACKGROUND

Despite stunning advances in scientific knowledge, medicine remains more of an 

art than science because human beings are not machines. Sadly, the tide of litigation against America’s doctors has risen even faster. Approximately one of every six 

practicing physicians faces a malpractice claim every year. In high-risk specialties 

such as obstetrics, orthopedics, trauma surgery and neurosurgery, there is one claim 

for each doctor every 21⁄2 years. However, fully 70% of these tens of thousands of 

cases are found to be without merit. Nonetheless, every single case requires a costly 

legal defense. Nationally, as the chart below shows, these loss adjustment expenses 

average $22,967 per defendant. Those cases that go all the way through trial before 

a vindicating defense verdict average $85,718 per defendant.1 [See chart below] The 

Doctors’ Company itself, for example, has spent more than $400 million defending 

claims that ultimately were shown to be without merit. 

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2Professional Liability in the ‘‘80s, Report 1, American Medical Association, 10, 84, p4. 3PIAA Data Sharing Project, December, 2001.

ROOTS OF THE CURRENT ENVIRONMENT

Medical liability claims were fairly uncommon until the 1970s. In the 40 year period between 1935 and 1975, 80% of all medical malpractice lawsuits were filed in 

the last five years of that period.2 Massive losses between 1970 and 1975 forced 

many commercial insurers to conclude that the practice of medicine was an uninsurable risk, and they simply refused to provide malpractice insurance at any price. 

This resulted in a ‘‘crisis of availability’’ to which providers responded emergently. 

Doctors contributed their own funds as capital to support the efforts of their state 

medical and hospital associations, among others, to start as many as 100 provider 

owned specialty carriers across the country. Dubbed ‘‘bed pan mutuals’’ by their 

commercial competitors (many of whom had fled the market), these upstarts were 

not expected to succeed where the giant commercials could not find success. Because 

their primary mission is to provide a service, and because they were entirely committed to remaining present even in the most difficult markets, these companies 

have succeeded and are the basis of the PIAA. As one example, The Doctors’ Company was formed by doctors, for doctors in 1976, and today insures more than 

25,000 doctors throughout the nation. 

A LITIGIOUS SOCIETY GROWS

A second crisis emerged in the early 1980’s, known as a ‘‘crisis of affordability.’’

Insurers faced ever-mounting losses, with rampant increases in paid claim frequency (number of paid claims) and severity (amount of indemnity payment). PIAA 

data shows that on average it takes 51⁄2 years for an insurer to close a malpractice 

claim after the date of the incident.3 There is often a long lag before the claim is 

reported. The majority of the delay, however, comes because of the inefficiencies of 

the tort system. California enacted the Medical Injury Compensation Reform Act of 

1975 (MICRA) which largely eliminates the lottery aspect of malpractice litigation 

in that state. The Doctors’ Company data reveals that claims are settled in onethird less time than the national average. [See chart below] This result not only decreases the cost of litigation, but it means injured patients are indemnified much 

faster in California. 


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88

During much of the 1990s, PIAA companies exercised their fiduciary responsibility to wisely invest the premium deposits of their policyholders, who benefited 

from the rising bond markets. These returns were used not to line the pockets of 

the companies, but to subsidize the premium rates being charged to policyholders 

so that they could remain affordable. It was the policy holders (health care providers) who reaped the financial benefits. 

It must be noted that insurance is a highly regulated industry. Every state department of insurance, as well as the national rating agencies, closely monitors both 

the kinds and qualities of investments. Virtually no medical liability insurance company has experienced net investment losses. In fact, 80% of investments by PIAA 

companies are in high-grade bonds. What has happened is that investment yields 

have declined due to falling interest rates and are no longer available to subsidize 

premium rates to the extent they once did. In other words, premium rates must now 

more closely match the actual cost of losses. The combination of these factors created ‘‘the perfect storm’’ for medical liability insurers. 

THE PERFECT STORM

During this same time period, claim frequency and severity continued to increase. 

In addition, reinsurance costs rose significantly in relation to the increase in loss 

costs. The insurance system was able to accommodate even this inexcusable volume 

of litigation as long as the size of the few valid claims was predictable. Unfortunately, in the past few years there has been an explosion in the cost of individual 

claims. Texas has seen a $268,000,000 verdict. A number of states have witnessed 

verdicts in excess of $100,000,000. The city of Philadelphia alone has recorded multiple verdicts in excess of $50,000,000 in just the past two years. Four claims in Arkansas totaled $98,000,000 in just the past year. According to PIAA data [shown 

on next chart], during the period 1991 to 2001, the percentage of claims costing in 

excess of $1 million dollars increased nearly four-fold. Insurance is not magic. If society expects insurers to pay unlimited awards, it should expect those who are insured to pay corresponding premiums. As premiums rise so must the cost of health 

care. Since health care today is a zero sum game, these costs increases mean corresponding decreases in access to health care.


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89

Those are the largest claims. What about the size of the average claim? PIAA data 

shows that the average indemnity payment in 2001 was more than $310,000, a 60% 

increase in the last five years. As the next chart shows, the average malpractice 

payment is rising precipitously. With it, the sum of the malpractice claims paid 

rises. In New York and Pennsylvania alone nearly $1 billion was paid in 2000.

THE CURRENT SITUATION

As the new millennium began, insurers who were not able to weather the storm 

began to experience poor financial results. Expressed differently, a number of companies that felt that they could provide insurance for less than its cost learned the 

inevitable lesson. Several, such as PHICO, PIE and Reliance, have ceased all underwriting operations. In December of last year, long-time industry leader St. Paul announced that due to unsustainable losses and the ‘‘unfavorable tort environment’’

the company would no longer write new medical liability coverage and it would not 

renew the policies of its 42,000 physicians, 750 hospitals and 73,000 other health


g:\graphics\81491.003 g:\graphics\81491.004
90

care providers. Though St. Paul is a commercial carrier and not a member of PIAA, 

it is telling that the largest company in the industry for the better part of two decades feels that it can no longer afford the risk of insuring the practice of medicine. 

Companies remaining in the market have had no choice but to take the rate increases necessary to insure survival. 

Conning & Co. estimates that malpractice insurers will pay out approximately 

$1.40 for every premium dollar collected in 2001 and 2002. Even with the projected 

rate increases, Conning & Co. still projects insurers will pay out $1.35 for each dollar collected in 2003 (Conning Report on Medical Malpractice Insurance, April 

2002). PIAA data reveals that since 1990, claims costs have risen annually by 6.9%, 

nearly three times the rate of inflation. 

IN CONCLUSION

The average claim payment has increased by 60% over the past five years. The 

cost of the most expensive claims has exploded in a manner that is absolutely unprecedented. If judgments are to be unlimited, than the premiums need to increase 

accordingly to pay for those judgments. With absolute certainty, this money will be 

taken out of our healthcare system and compound the severe access to care issues 

that we all face today. 

Several spurious arguments have been put forth by those with an interest in continuing the tsunami of medical malpractice litigation. First, it has been deceptively 

argued that stock market losses are the real driver of price increases. In fact, investments by insurance companies are highly regulated and controlled by each state department of insurance and closely monitored by the rating agencies. Insurance companies continue to gain funds from their investments and use those funds to offset 

even higher malpractice premium rates. As income from investments decreases, 

however, premiums must more closely match losses. 

Second, it is argued that insurance companies should have raised rates sooner. 

There may be some truth to this. However, it is difficult to understand how having 

today’s sky-high rates earlier would make them more palatable. 

Third, it is argued that insurance companies fail to settle claims when they 

should, and are therefore, exposed to astronomic jury verdicts. Again, reality is quite 

different. In most cases, it is the physician, not the company, who must make any 

settlement decision. Remember that doctors are found to be without fault in approximately 8 out of 10 malpractice trials. Should these cases have been settled? 

Finally, there are those who argue for a state run medical liability system. Allow 

me to point out that the majority of state run malpractice programs have gone 

bankrupt, or charge premiums that are much higher than those charged by PIAA 

companies. In New York, premiums are actually set by the Department of Insurance, not by individual companies, and New York rates are among the highest in 

the nation. 

THERE IS A ‘‘TRIED AND TRUE’’ SOLUTION

California has 27 years of experience with the MICRA statutes. We know, we do 

not have to speculate, that tort reform works. Since 1975, The Doctors Company 

malpractice premium rates in California have decreased by 40% in constant dollars. 

[See chart below] This is true despite the fact that there has not been and is not 

today any limit on actual damages awarded.

91

We know, we do not speculate, that claims settle about 33% faster in California 

than the rest of the nation because the lottery aspect of non-economic damages has 

been controlled. 

We know, we do not speculate, that even very large judgments can be accommodated by the insurance system because they can be paid on an annual basis over 

the intended period of compensation, not as a single jackpot. 

We know, we do not speculate, that injured patients actually take home a significantly higher percentage of awards in California because there is an upper limit on 

attorney contingency fees. In many areas, more than 40% of a malpractice award 

goes directly into the pocket of the plaintiff’s attorney. In California, MICRA contains a limitation on this fee. An attorney winning a $1 million claim must be satisfied with a legal fee of $221,000. 

We know, we do not speculate, that MICRA has not limited access to attorneys. 

California remains a litigious state and according to The Doctors Company data the 

frequency of malpractice cases in the state is 50% higher than the national average. 

California passed effective tort reforms and its providers have been able to weather this liability crisis well. These same reforms are found in H.R. 4600, the Help 

Efficient, Accessible, Low-cost, and Timely Healthcare Act of 2002 (the HEALTH 

Act). The PIAA and The Doctors Company fully support the provisions of this act, 

which when signed into law, will provide the same protections to patients across the 

United States as found in California for over a quarter century. The next chart, 

which was compiled from data reported to the National Association of Insurance 

Commissioners, speaks volumes about MICRA’s effectiveness:


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92

We thank members of the Committee and their staff for holding this important 

hearing and inviting us to testify. We look forward to working with you to make 

the health care liability system fairer for everyone. I will be happy to answer any 

questions you might have.

Mr. BILIRAKIS. Thank you, doctor. 

Mr. Court. 

STATEMENT OF JAMIE COURT 

Mr. COURT. I’m Jamie Court and I have a few slides. Hopefully, 

we can put the first one up. I’m Executive Director of the Foundation for Taxpayer Consumer Rights. I deal with patients. I’ve dealt 

with probably a couple hundred patients over the years who have 

been victims of MICRA, the medical malpractice restrictions you’re 

debating for the Nation. This is one of them, and he’s the reason 

I actually came 3,000 miles here today. His name is Steven Olsen. 

He’s 12 in this picture. It was taken last week. He’s blind, he’s 

brain damaged. When he was two, he fell on a stick in the woods. 

He tripped, the stick impaled him. He went to a hospital. They 

took the stick out. His parents felt he was acting a little weird, 

rubbing his head. Asked for a CAT scan because his mother had 

a tumor, she had had a brain tumor before. Thought something 

was up. They didn’t give him the CAT scan, sent him away. He 

came back, same situation. They wanted the CAT scan. Again, 

these are doctors driven in an HMO environment to do less for the 

patient, not exhibit enough caution. Sent him away, he came back. 

Finally, blind, comatose and as he is today. 

A jury awarded $7.1 million after hearing these facts in non-economic damages for his lifetime of pain and suffering, for his lifetime of darkness for not knowing as a child whether he would be 

become an executive or a millionaire for a doctor. He’ll never have 

that chance. That’s what that compensated him for. And today 

after that $7.1 million verdict, it was reduced by a Judge unbeknownst to the jury to $250,000 for pain and suffering. 

A jury foreman found out about it in the newspaper and wrote 

a letter that’s in my testimony that you can read, shocked that a 

jury in America could be overturned and not know about it. 

This child today has lots of problems. His mother had to quit her 

job. They had to take him over a hundred medical and therapy appointments last year. His life and his family’s life is forever altered 

and he’s a victim of MICRA. He is a kid who will never see. And 

because of a one size fits all cap on compensation, his pain and suffering is valued as the same as anyone else in California. And it 

was determined by an arbitrary limit set by the legislature. 

MICRA has denied victims, not just adequate compensation, but 

also legal representation. If you are a patient with only non-economic damages, you will not find a lawyer in California. And I urge 

you to read the patient stories I put together. There are a lot of 

patients that don’t find attorneys and what happens to them—they 

go on public assistance and the tax payer pays for them when they 

can’t get their injuries compensated. That’s what happened to patients. The other aspect of MICRA that I’d like you to consider 

today is that it does have an effect on HMOs. 

The Nation’s largest HMO which is Kaiser, and the state’s largest HMO, is protected in about 400 lawsuits every year by the 

93

MICRA cap. And in my testimony I’ve shown some evidence that’s 

come out in newspapers of systemic problems in Kaiser that were 

never fixed because of the price of those injuries to Kaiser was limited in non-economic damages of $250,000. There was no incentive 

for this system to change and Kaiser operates nationally. It covers 

6 million California patients. So for 6 million of our 24 million insured, those patients don’t have redress. 

The final question that I’d like to bring to your attention is for 

what. And if we can move to the next slide. 

What has been the impact overall on MICRA and what I put together here is the NAIC data showing medical loss, these are insurers loss ratios which go across all lines of insurance. And if you 

can see in California, ever since 1986, was when the Supreme 

Court said the MICRA cap was legal. You have seen that malpractice insurers consistently have paid out less than 50 cents of 

every dollar they have taken in in premiums and claims. So less 

than 50 cents of every premium dollar goes out in claims in California. Next slide, please. 

You can also see from this slide that insurers’ profits, and it’s all 

in the testimony as well, have been higher than the national average every year since 1986. 

Next slide, please. This is all attributable to the fact that was described in the Wall Street Journal Article—the insurance cycle. 

This is happening against all lines of insurance, not just medical 

malpractice insurance. I deal with HMOs. Premiums are going up 

in California by HMOs 30 percent for small businesses. It’s happening on home owners. It’s happening on other lines of malpractice, and it’s because when investments are good, when they’re 

rich, insurers cut their premiums to attract people so they have 

more capital to make money in the investment markets. And when 

Wall Street is bad, what happens? They raise their rates to make 

up for their losses. This is the problem that needs to be addressed—the passing through of investment losses. And that happens in all lines of insurance. If you go to the next slide and the 

last slide. 

This is an article dealing with the malpractice crisis. But it’s not 

for doctors. It’s the California Bar Journal in this issue of July 

2002. It’s for lawyers whose premiums are now going up literally 

200 and 300 percent. Why? Because investment losses are driving 

this crisis. And what I put to this panel is I suspect from the discussion today you would not limit the rights of people who are represented by lawyers to sue them for malpractice as a way of solving 

this crisis. So if you’re not going to do it for lawyers, I ask that you 

don’t do it for medical providers. There are some disputes in numbers. 

There’s one statistic I’d like to address before stopping. It is the 

statistic that’s been thrown out a few times here about malpractice 

premiums. 

Bob Hunter did do a study that showed, by looking at NAIC premium data, earned premiums, and dividing it by number of doctors 

in California and then similarly the number of doctors in the 

United States, and he found malpractice premiums pretty comparable. I mean, not enough to limit victims’ rights clearly, not 

enough of a difference. The data that I’ve heard today talking 

94

about a 400 percent increase in premiums nationally versus a 150 

percent premiums in California since 1976, that deals with a very 

interesting little quirk that I found out when I was talking to a 

friend about Hunter’s data. 

The friend is from the medical establishment and he tells me 

wait a second. California malpractice premiums you represent are 

way lower than we know them to be. And that’s because a third 

of the physicians in California, those who are a part of Kaiser 

Permanente, are self-insured and not counted in that premium 

data. And similarly, in this premium data from the NAIC that is 

being talked about today, a third of the premiums are not represented because a third of the doctors are self insured. So thank 

you for the time. 

[The prepared statement of Jamie Court follows:]

PREPARED STATEMENT OF JAMIE COURT, EXECUTIVE DIRECTOR, FOUNDATION FOR

TAXPAYER AND CONSUMER RIGHTS

‘In age where expanding patients’ rights has become a national demand, HR 4600 

would dramatically contract patients’ rights across the nation. This anti-consumer 

legislation will shield HMOs and providers they influence from legal accountability 

to the patient for harm they cause. 

HR 4600 will deny innocent victims of medical negligence both adequate compensation for their injuries and legal representation for legitimate claims. It will 

confer substantial financial benefits only on malpractice insurance companies, not 

the average physician. To the extent that staff model HMOs indemnify their staff 

and facilities, as the nation’s largest HMO does, HR 4600 will also protect HMOs 

from liability for the harm they cause to patients. The evidence comes from California, where the model for HR 4600 has had these consequences. 

Under California’s restrictions, malpractice insurers have consistently paid out in 

claims less than 50% of the premiums they have taken in and made excessive profits. Despite limitations on victims, California doctors’ malpractice premiums have 

been consistent with the national average. 

The failed model for this legislation was enacted in California in 1975 as the Medical Injury Compensation Reform Act, or MICRA. In recent years, Californians have 

been confronted with MICRA’s devastating human impact and its failure to achieve 

its financial goals. The California legislature has tried twice in the last four years 

to remove MICRA’s limits, but have been unsuccessful in the face of lobbying by the 

insurance industry. 

First my testimony will explain the impact of the MICRA provisions also contained in HR 4600 and their draconian consequences for innocent patients. Then, 

I will address MICRA’s impact on malpractice premiums and how insurers in California have seen the only substantial profits from MICRA. 

Like HR 4600, MICRA provisions: 

• Place a $250,000 cap on the amount of compensation paid to malpractice victims 

for their ‘‘non-economic’’ injuries. 

• Eliminate the ‘‘collateral source rule’’ that forces those found liable for malpractice 

to pay all the expenses incurred by the victim. 

• Permit those found liable for malpractice to pay the compensation they owe victims on an installment plan basis. 

• Impose a short ‘‘statute of limitations’’ on malpractice victims (generally three 

years). 

• Establish a sliding scale for attorneys fees which discourages lawyers from accepting serious or complicated malpractice cases. 

I have been contacted over the last ten years by hundreds of patients who are 

innocent victims of medical malpractice, then further victimized by these MICRA restrictions. The actual experiences of these patients shows the cruel consequences of 

each MICRA restriction also contained in HR 4600. 

CAPPING MEDICAL MALPRACTICE VICTIMS’ COMPENSATION CAUSES INNOCENT PATIENTS

MORE PAIN AND SUFFERING

Like HR 4600, MICRA places a cap of $250,000 on the amount of compensation 

paid to malpractice victims for their ‘‘non-economic’’ injuries, no matter how egregious the malpractice or serious the harm. 

95

The MICRA cap is not adjusted for inflation. In order to provide the same level 

of compensation in today’s dollars, the cap would have to be approximately $800,000. Put another way, the $250,000 MICRA cap has decreased in value since 

1975, when compared to the Consumer Price Index, to approximately $70,000. 

Though health care costs—hospital charges, medical fees, etc.—have risen dramatically since 1975, compensation for non-economic damages has been frozen by the 

statute. 

Non-economic injuries include pain, physical and emotional distress and other intangible ‘‘human damages.’’ Such damages compensate for severe pain; the loss of 

a loved one; loss of the enjoyment of life that an injury has caused, including sterility, loss of sexual organs, blindness or hearing loss, physical impairment, and disfigurement. 

Applying a one-size-fits-all limit to non-economic damages objectifies and erases 

the person, considering them as a fixed ‘‘thing’’ for the purposes of law, so that there 

is no recognition of the uniqueness of their suffering. There is no quicker way to 

strip an individual of their humanity than to fail to recognize their suffering. 

My personal bias on this point springs from the experiences of a friend who today 

is twelve years old. Steven Olsen is blind and brain damaged because, as a jury 

ruled, he was a victim of medical negligence when he was two years old. He fell 

on a stick in the woods while hiking. Under the family’s HMO plan, the hospital 

pumped Steven up with steroids and sent him away with a growing brain abscess, 

although his parents had asked for a CAT scan because they knew Steven was not 

well. The next day, Steven Olsen came back to the hospital comatose. At trial, medical experts testified that had he received the $800 CAT scan, which would have 

detected a growing brain mass, he would have his sight and be perfectly healthy 

today. The jury awarded $7.1 million in ‘‘non-economic’’ damages for Steven’s avoidable 

life of darkness and suffering. However, the jury was not told of a two decade old 

restriction on non-economic damages in the state. The judge was forced to reduce 

the amount to $250,000. The jurors only found out that their verdict had been reduced by reading about it in the newspaper. Jury foreman Thomas Kearns expressed his dismay in a letter published in the San Diego Union Tribune. 

We viewed video of Steven, age 2, shortly before the accident. This beautiful child 

talked and shrieked with laughter as any other child at play. Later, Steven was 

brought to the court and we watched as he groped, stumbled and felt his way long 

the front of the jury box. There was no chatter or happy laughter. Steven is doomed 

to a life of darkness, loneliness and pain. He is blind, brain damaged and physically 

retarded. He will never play sports, work, or enjoy normal relationships with his 

peers. His will be a lifetime of treatment, therapy, prosthesis fitting and supervision 

around the clock . . . 

Our medical-care system has failed Steven Olsen, through inattention or pressure 

to avoid costly but necessary tests. Our legislative system has failed Steven, bowing 

to lobbyists of the powerful American Medical Association (AMA) and the insurance 

industry, by the Legislature enacting an ill-conceived and wrongful law. Our judicial 

system has failed Steven, by acceding to this tilting of the scales of justice by the 

Legislature for the benefit of two special-interest groups . . . 

I think the people of California place a higher value on life than this. 

When in San Diego, I often visit Steven and his family. Their struggles are 

unfathomable to me. In 2001, Steven had 74 doctor visits, 164 physical and speech 

therapy appointments, and three trips to the emergency room. And his parents say 

that was a good year because Steven was not hospitalized. Steven’s mother Kathy 

had to leave her job because caring for Steven is a full time job. She has to struggle 

constantly with the school district for Steven to receive special education classes. 

One day, Steven ate part of a light bulb, not an uncommon problem for children 

with brain injuries. He has to be watched constantly. Insurance executives that seek 

to limit jury awards for the individual’s pain and suffering claim society must do 

so to save money. Yet these executives typically make millions every year without 

any of Steven Olsen’s pain and suffering. Limiting their responsibility for the pain 

of individuals reduces not only the corporation’s accountability, but the worth of the 

individual to that of a mere object. 

Last week, Kathy Olsen said this about Steven: It has been 10 years ago this 

month when Steven came home from a 5-month life changing stay at the hospital. 

He was only 2 years old. When he went into the hospital no one asked his party 

affiliation. He was a casualty of the system. The system that he had no say in. 

Which lawmakers were looking out for him? Now with all his disabilities he will 

never see, do things that the average person gets to do in their lifetime, or vote in 

an election. Please look out for all the Steven Olsen’s in this great country. Don’t 

let this happen over and over again. 

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Other California patient cases similar document how the $250,000 cap on compensation has further victimized innocent victims. 

Patients with permanent injuries are limited to $250,000, even when juries award significantly more compensation, tangible ‘‘economic’’ damages 

exist (but are unidentified by juries), and unforeseen ‘‘economic’’ costs 

arise later. 

Harry Jordan, a Long Beach man, was hospitalized to have a cancerous kidney 

removed but the surgeon took out his healthy kidney instead. A jury awarded Jordan more than $5 million dollars, but the judge was required to reduce the verdict 

to $250,000 due to California’s cap on ‘‘non-economic’’ damages—plus a mere $6,000 

in ‘‘economic costs’’. Jordan, who lived for years on 10% kidney function, could no 

longer work, though the jury (which lawfully can not be notified about the ‘‘non-economic’’ cap) did not take this into account. Jordan’s court costs—not including attorney fees—amounted to more than $400,000 and his medical bills, that arose after 

frequently being denied by insurers, totaled more than $500,000. He paid $1700 per 

month in health insurance. 

Arbitrary caps on ‘‘non-economic’’ compensation unfairly discriminate 

against the suffering of women—who typically sustain injuries due to medical 

negligence, such as laceration of the uterus or loss of a new born during child birth, 

that do not carry high ‘‘economic’’ price tags but involve significant loss. Injuries 

sustained by homemakers are also unvalued, because they have no ‘‘wage loss.’’

Caps not only deny women victimized by medical malpractice fair compensation and 

legal representation for their injuries, but subject women to repeat offenders and 

have been undeterred. 

San Andrean Terry McBride lost her unborn baby and her fertility at the hands 

of a negligent doctor who had injured at least 25 women before her, causing the unnecessary deaths of their babies and the affliction of Cerebral Palsy to 2 children. 

California’s ‘‘non-economic’’ compensation cap restricted McBride to less than 

$250,000 for the loss of her child’s life and her own sterilization (because she suffered no wage loss due to her injuries). The award was even insufficient to cover 

the cost of an expensive new procedure seeking to restore her fertility. 

Arbitrary caps on ‘‘non-economic’’ compensation unfairly discriminate 

against the littlest victims, children—who can not prove significant future wage 

loss and whose families cannot realistically estimate the expenses they are to incur 

over the course of a life time. 

A six year old Northern California girl paralyzed by negligent medicine was restricted to 250,000 in compensation for her lifetime due to California’s ‘‘non-economic’’ cap because she could not prove any future wage loss. 

Caps on ‘‘non-economic’’ compensation devalue the lives and health of 

low income patients. Caps on pain and suffering discriminate against the suffering of low income people whose ‘‘economic’’ basis—wages—are limited. A strictly 

‘‘economic’’ evaluation based on wages devalues what victims will create or produce 

in the future, their quality of life, as well as an injury’s impact on their ability to 

nurture others. For instance, a laborer may loose his arms due to the exact same 

act of medical negligence as a corporate CEO, but the CEO would be able to collect 

millions and the laborer would be closely limited to the $250,000 cap. A housewife 

similarly would be limited to the cap no matter the physical or emotional depths 

of her injury. Caps assign greater value to the limbs and lives of some people than 

the limbs and lives of others. 

The five children of a 32-year old mother, who was unemployed and untrained 

(therefore had no ‘‘economic’’ value), were left with merely $250,000 to compensate 

all of them for their life time after the errors caused their mother’s death during 

an emergency Caesarean section. 

Caps make taxpayers foot the bill for malpractice. Malpractice victims receive full compensation only for medical bills and lost wages. But those who are not 

wage earners—such as seniors, women, and the poor—have no other resource from 

which to pay for unforeseen medical expenses and basic needs. A cap forces malpractice victims to seek public assistance from state or federal programs funded by 

taxpayers. 

A Los Angeles woman, who sustained severe jaw damage and slight brain damage 

from an HMO’s misdiagnosis and refusal to treat her, was not represented by an 

attorney because she was limited in her recovery by California’s cap. As the HMO 

did not pay for the damage it caused, and would not treat her, the woman was 

forced to receive government funded Medicare and Supplemental Social Security Income payments for her disability. 

97

HMO PROTECTION: ENDING DETERRENCE TO HMO ABUSE

The nation’s largest HMO, which is also California’s largest HMO, is protected by 

MICRA’s cap in California and staff model HMOs like it would be similarly shielded 

across the nation under HR 4600. Kaiser Permanente has hundreds of cases in its 

system every year in California for which it is liable for no more than $250,000 in 

non-economic damages. In many cases, California’s cap system has limited the liability for egregious systemic error to an acceptable cost of doing business, permitting systemic medical negligence to continue undeterred. There is no incentive to 

systemic problems. 

For example, Colin McCaffery was born too large, in Kaiser’s Woodland Hills facility with only a nurse-midwife present—although his parents urged that a physician 

be there because their other children had been born large. As a cost cutting practice, 

the HMO did not routinely assign doctors to be present during child birth, except 

for ‘‘high risk’’ cases. Because the nurse-midwife lacked the skill to properly guide 

Colin out of the birth canal, he was crippled, losing movement in his arms and 

torso—a rare condition know as Erbs Palsy resulting only from botched deliveries. 

Due to California’s cap on recovery, Colin’s family settled for only $250,000—not 

enough to compensate Colin or make Kaiser change its practice. Colin’s father stated after the case the HMO ‘‘still does not provide the option for a doctor when delivering babies. At a clinic for Colin, I saw over 50 babies, all under the age of two, 

clinging to their parents. None of them were smiling. They all had Erbs Palsy. One 

little girl around one had such a sad look to her. Her arms, both of them, just dangled lifelessly by her side. ‘‘ Other similar cases of seriously injured or dead 

newborns due to the child birth system have emerged in California, but they typically cost Kaiser no more than $250,000, so there is little incentive for the HMO 

to change its system. 

A recent account from the Los Angeles Times of systemic problems with overcrowding in Kaiser’s emergency room show how un-addressed deficiencies have led 

to many patient deaths from similar circumstances (Charles Ornstein, ‘‘Cases Reveal Lapses in Kaiser Emergency Care,’’ Los Angeles January 2, 2002 p.A1) 

MICRA’s cap dramatically limited the HMO’s liability in these cases so there was 

no incentive to change its practices over a ten year period. As the article points out, 

recently the California Department of Managed Health Care fined Kaiser $1.1 million for these same systemic problems. ‘‘In justifying a $1.1-million fine against Kaiser, state regulators cited three patient deaths and said the cases demonstrated a 

pattern of problems in emergency care that has put the HMO’s 6 million California 

members at risk,’’ the Times reported. ‘‘Similar problems showed up in at least nine 

other cases since 1995 . . . in which arbitrators found Kaiser liable for patient injuries 

or deaths.’’ Had MICRA’s shield not protected the HMO, perhaps Kaiser would have 

had an incentive to change its practices. Under MICRA, deterrence to wrongdoing 

at Kaiser has been removed. 

For HMOs like Kaiser, the $250,000 cap in MICRA and in HR 4600 allows negligence without consequence. Deterrence to wrongdoing is especially important at 

HMOs. Arbitrarily applying one-size-fits-all caps to systemic wrongdoing lets HMOs 

know there is a financial limit to how much they will pay no matter how egregious 

and irresponsible their conduct. This is carte blanche in many cases to throw caution to the wind. 

Ironically, proponents of HR 4600 claim it will limit ‘‘defensive medicine’’ procedures. The Congressional Office of Technology Assessment reported in July 1994 

that ‘‘defensive medicine,’’ procedures purported to be driven by physicians’ fears of 

lawsuits, account for only 8% of medical procedures and may in fact constitute 

merely preventative, high quality health care. As the OTA stated, fear of lawsuits 

can often simply make those with the least incentive to be cautious exhibit more 

caution. This is precisely the incentive HMOs and their doctors and hospitals now 

need. 

PERIODIC PAYMENTS REWARD CONVICTED WRONG-DOERS AT THE EXPENSE OF

MALPRACTICE VICTIMS THEY INJURE

Like HR 4600, MICRA permits defendants found liable for malpractice to pay jury 

awards on a periodic, rather than a lump sum, basis, if the award equals or exceeds 

$50,000 and the defendant requests it. Jury-designated malpractice awards can be 

restricted by the judge as to the dollar amount paid each period and the schedule 

of payments. The periodic payment arrangement, once approved by a judge, cannot 

typically be modified—unless the victim dies earlier than expected, in which case 

the defendants, rather than the family of the deceased, retain the balance of what 

they owe. 

98

This provision of MICRA, like HR 4600’s provisions, allows the negligent provider 

or its insurance carrier to control, invest and earn interest upon the victim’s compensation year after year. No adjustment is made in the payments to reflect unexpected trends in the inflation rate or changes in the cost of medical care. 

If the defendant enters bankruptcy or simply ceases to pay, the victims are forced 

to return to court and engage in another lengthy legal proceeding. Another problem 

is that an inflexible payment schedule leaves the victim without sufficient resources 

in the event that unanticipated medical or other expenses arise. This is most likely 

to occur in the years immediately following the injury, when the periodic payments 

are unlikely to cover the aggregate costs. 

Periodic payments allow wrong-doers to invest and earn interest on the 

money owed injured victims. Periodic payment schedules permit convicted perpetrators to control the money owed victims and profit from its use year after year. 

If the physician happens to fall into bankruptcy due to bad investments, the victim 

is denied the agreed upon compensation. 

If a patient dies, all payments stop and the victim’s family receives nothing. Wrong-doers are rewarded for causing the most severe, life threatening injuries. If a patient dies, periodic payments cease and the guilty physician is allowed 

to keep the remainder of their money. Awards do not revert to the next of kin. 

Periodic payments reduce the already limited compensation received by 

victims, as the value of the verdict diminishes over time due to inflation. 

No adjustment is ever made in the payments to reflect the inflation rate or changes 

in the costs for medical care—which have risen sharply and well above the inflation 

rate for many years. 

Periodic payments put the burden on the victim to meet their basic 

needs. The periodic payment arrangement, once approved, is extraordinarily difficult to modify. If costs of the victim’s medical care increases beyond their means, 

or a special expensive medical technology is made available which the victims requires, the injured patient must retain a lawyer to have the schedule modified—and 

may very well not succeed. 

CAPPING PLAINTIFF ATTORNEY CONTINGENCY FEES, BUT NOT DEFENSE ATTORNEY FEES, 

DENIES VICTIMS REPRESENTATION

Like HR 4600, MICRA sets a sliding contingency fee schedule for plaintiffs’ attorneys representing victims of medical malpractice. The MICRA fees are limited to 

40% of the first $50,000 recovered; 331⁄3% of the next $50,000; 25% of the following 

$100,000, and 15% of any amount exceeding $200,000. MICRA does not limit the 

fees of the defendant’s lawyers. 

Only the most seriously injured victims with clear-cut cases to prove can 

ever find legal representation. In states with caps on attorney contingency fees 

for medical malpractice cases (and particularly in states such as California where 

a victim’s pain and suffering compensation is also capped), victims of medical malpractice simply can not find legal representation. It is not cost effective for attorneys 

to take the vast majority of cases. Says the President of Safe Medicine For Consumers, a California-based medical malpractice survivors group, ‘‘The vast majority 

of individuals who contact us are women, parents of children or senior citizens. 90% 

of these individuals are unable to pursue meritorious medical malpractice cases because they can not find legal representation on a contingency basis and their savings have been wiped out.’’

Limiting plaintiff attorney contingency fees, but not defense attorney 

fees creates an uneven playing field for victims. Defendants can typically afford very high priced attorneys who fly special expert witnesses in from out of state. 

A contingency fee practice demands that a plaintiff’s attorney must front the cost 

of expert witnesses to refute the testimony of experts flown in by the defendant. 

With caps on fees, such costs become prohibitive for the victim’s legal counsel. 

Undermining the contingency fee mechanism contributes to a deteriorating quality of health care and passes costs onto taxpayers. Left without 

legal representation in California, victims go uncompensated, and dangerous doctors 

go undeterred. Taxpayers pay the cost of low income victims’ medical care and basic 

needs through public assistance programs if the physicians responsible for the injuries are not held accountable. 

Undermining the viability of contingency fee mechanism discriminates 

against low income patients who are most at risk of medical malpractice. 

A contingency fee system is a poor patient’s only hope of affording an attorney to 

challenge a negligent physician. Undermining such a system through caps on fees, 

that reduce incentives for attorneys to take malpractice cases, fails to punish negligence in poor neighborhoods. 

99

IMPOSING A COLLATERAL SOURCE OFFSET FORCES TAXPAYERS AND POLICY HOLDERS TO

PAY FOR WRONGDOERS’ ERRORS

The collateral source rule prohibits defendants charged with negligence from informing the jury that the plaintiff has other sources of compensation, such as health 

insurance or government benefits, including social security and disability. The purpose of this long-established doctrine is to ensure that the jury holds the defendant 

responsible for the full cost of the harm the defendant caused by requiring the defendant to pay all the victim’s expenses—even if a collateral source has already paid 

them. 

Application of another legal doctrine, known as subrogation, ensures that the collateral source rule does not result in ‘‘double recoveries’’ for injured victims. Under 

subrogation rights—which are applicable to virtually all health insurance policies, 

government programs, and workers’ compensation systems—the third-party payor of 

a health or job loss benefit has the legal right to take funds from a malpractice 

award to reimburse itself for payments it has already made to the malpractice victim. The collateral source rule, in conjunction with subrogation rights, ensures that 

wrongdoers pay for the full amount of the harm they cause, and that victims do not 

receive double payments for their injuries. HR 4600’s provisions are not necessary 

because there are already controls on ‘‘double recoveries.’’ For example, an injured individual’s health care coverage usually pays the victim’s medical bills. Under the traditional collateral source rule, if the victim sues 

the wrongdoer for compensation, including payment of medical bills, the defendant 

cannot tell the jury that the bills have already been paid by another source. However, once the jury makes an award to the victim, including damages for medical 

care, the health insurer can exercise its subrogation rights, and recover from the 

defendant (or the victim, if the award has been paid) the amount of money already 

paid for the victim’s medical bills. 

As HR 4600 proposes for the nation, MICRA repealed these rules in California. 

Consequently, in a trial, defendants may introduce evidence of insurance or other 

compensation obtained by the plaintiff. The jury is further permitted to reduce its 

award against the defendant by the amount of alternative compensation the victim 

received or is entitled to. As with the cap on non-economic damages, abolition of the 

collateral source rule reduces the amount of money the wrongdoer must pay. In effect, responsibility for the harm is transferred to the victim, who purchased the insurance coverage, to the victim’s insurer, and/or to taxpayers. Moreover, once the 

defendant tells the jury about payments made by collateral sources, MICRA prohibits the collateral source from using the subrogation process to obtain reimbursement from the wrongdoer. 

Collateral source offsets will shift billions of dollars per year in malpractice injury costs caused by the negligent onto taxpayers and the health 

insurance system. The cost of injuries resulting from medical malpractice total 

$60 billion each year according to the Harvard School of Public Health. Instead of 

wrong-doers bearing the full cost of these injuries, tax-payer funded programs, such 

as social security, and policy-holder funded health plans, will be forced to pick up 

the tab. 

A collateral offset forces poor patients onto welfare, while wrong-doers’

fortunes will be protected. Low income victims ‘‘entitled’’ to public assistance 

payments from taxpayer-funded supplemental social security, social security disability and aid to families with dependent children become government assistance 

recipients while the wrong-doers earn interest on profits made at the victim’s expense. 

MICRA’S PROMISES HAVE NEVER MATERIALIZED, DATA SHOWS HR 4600 WILL ENRICH

ONLY INSURERS

Like HR 4600, MICRA promised drastic reductions in physician malpractice premiums. MICRA was enacted by the California legislature in 1975 in response to rapidly-increasing medical malpractice insurance premiums. The powerful insurance 

and physicians’ lobbies told state legislators that medical malpractice lawsuits and 

jury awards were responsible for the higher premiums. 

Insurance companies threatened that the costs associated with malpractice insurance were rising at such a rate that their only option was to raise health care professionals’ liability premiums or to withdraw from the market altogether. Physicians 

and hospitals emerged as high visibility advocates for the legislation: many opted 

to ‘‘go bare’’ (practice without malpractice insurance), some discontinued providing 

certain high-risk procedures, while others threatened to quit. 

The crisis, we now know, was created by the ‘‘insurance cycle.’’ This is a well-established phenomenon in which insurers, during bad economic times, raise preVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00103 Fmt 6633 Sfmt 6621 W:\DISC\81491 81491
100

miums to cover investment losses after years in which they have lowered premiums 

(the good economic times) to attract capital for investment. This cycle and its inherent periods of investment losses, then as now, increased malpractice premiums, not 

lawsuits and claims. Reform then should focus on preventing such insurer investment practices, not restricting victims’ rights. 

For this reason, data from the National Association of Insurance Commissioners 

(NAIC) shows MICRA has not significantly lowered physician malpractice premiums 

compared to the national average and has resulted instead in excessive overhead 

costs and profit margins for insurers. 

Nationally recognized actuary J. Robert Hunter, former Texas Insurance Commissioner and Federal Insurance Administrator under presidents Ford and Carter, compared national malpractice premium trends to those in California. Hunter found 

that from 1991 to 2000, malpractice premiums in California have stayed close to national premium trends. 

• The 2000 average premium per doctor in California was only 8.2 percent below 

that of the nation ($7,200.61 vs. $7,843.75). 

• The average malpractice premium in California between 1991 and 2000 actually 

grew more quickly (3.5 percent), than it did in the nation overall (1.9 percent.) According to Hunter, ‘‘there is not much difference in the rates or the rate of change 

between California and the nation based on the latest decade of experience.’’

If there are savings to limiting the rights and recovery of innocent victims of dangerous and culpable doctors, then insurers have not passed them onto physicians. 

The following table shows Mr. Hunter’s analysis.

Year 

California 

Number of 

Doctors 

U.S.A. Number of Doctors 

California 

Medical Malpractice 

Prem Earned 

(in thousands) 

U.S.A. Medical Malpractice 

Prem Earned 

(in thousands) 

Average Med 

Mal Premium 

Per Doctor 

California 

Average Med 

Mal Premium 

Per Doctor 

U.S.A. 

1991 ......................................................... 76043 631400 529056 4862170 6957.33 7700.62

1992 ......................................................... 76367 652100 526496 5138395 6894.29 7879.77

1993 ......................................................... 76411 670300 563004 5174055 7368.10 7719.01

1994 ......................................................... 77311 684400 576771 5931898 7460.40 8667.30

1995 ......................................................... 78169 720300 597660 6080639 7645.74 8441.81

1996 ......................................................... 79048 737800 610003 5992394 7716.87 8121.98

1997 ......................................................... 80341 756700 628858 5917038 7827.36 7819.53

1998 ......................................................... 81762 777900 652601 6195047 7981.72 7963.81

1999 ......................................................... 82872 797600 611785 6155241 7382.29 7717.20

2000 ......................................................... 84675 812800 609712 6375401 7200.61 7843.75

1991 to 1999 percent change ................. 3.5 1.9

1991 to 1999 % change (annualized) .... 0.4 0.2

Sources: 

Doctors USA: Statistical Abstract of the United States 

Doctors CA: California Department of Consumer Affairs 

Earned Premiums: NAIC Report On Profit By Line By State 

NAIC data also shows that California insurers have, in fact, profited greatly from 

California patients’ pain. 

• In most years since the courts ruled that MICRA’s cap was constitutional, 1986, 

California malpractice insurers have paid out in claims less than fifty cents of every 

dollar they have taken in through premiums (every year since 1989). By contrast, 

malpractice insurers nationally have typically paid out in claims more than twothirds of every premium dollar. 

• California malpractice insurers’ ‘‘operating profits’’ have been higher than the 

rest of nation since MICRA was implemented, even though many insurers claim to 

be ‘‘not for profit.’’ For non profits, the money taken in from doctors but not paid 

to victims can also be tied up in excessive overhead, assets and reserves that yield 

investment profits or in higher legal costs of defending against claims. 

The chart below shows this NAIC data taken from Report on ‘‘Profitability By 

Line By State, 1976-2001’’

101

Loss Ratios for Malpractice 

Year 

CA Loss ratio: 

Losses 

Incurred/

Premiums 

Earned 

CA Profit 

($000) 

CA Operating 

Profit: Profit 

As a % of 

Premiums 

Earned 

U.S. Loss 

Ratio: Losses 

Incurred/

Premiums 

Earned 

U.S. Profit 

($000) 

U.S. Operating 

Profit: As a % 

of Premiums 

Earned 

1976 ............................................. 61.9% 3,198 1.4% 47.0% 238,576 20.1%

1977 ............................................. 38.9% 50,638 22.3% 40.4% 315,608 24.1%

1978 ............................................. 41.3% 53,227 21.4% 59.7% 175,510 12.7%

1979 ............................................. 42.1% 59,494 24.9% 68.2% 119,064 8.6%

1980 ............................................. 44.3% 61,241 26.6% 77.8% 90,662 6.8%

1981 ............................................. 61.3% 49,733 24.4% 101.0% 36,959 2.8%

1982 ............................................. 81.8% 19,169 9.1% 113.0% -65,644 -4.3%

1983 ............................................. 70.5% 45,961 16.0% 104.4% 44,262 2.4%

1984 ............................................. 92.7% 18,358 4.9% 112.1% 187,029 8.8%

1985 ............................................. 80.8% 37,327 8.3% 121.6% -513,570 -19.3%

1986 ............................................. 68.2% 89,382 14.2% 98.5% -99,011 -2.6%

1987 ............................................. 63.0% 64,024 10.1% 85.8% 86,459 1.9%

1988 ............................................. 52.4% 137,936 20.8% 75.6% 426,683 8.4%

1989 ............................................. 39.4% 232,467 36.7% 52.6% 1,428,346 27.9%

1990 ............................................. 35.6% 241,699 39.9% 53.9% 1,449,651 29.4%

1991 ............................................. 9.0% 354,997 67.1% 55.7% 1,419,754 29.2%

1992 ............................................. 39.8% 148,998 28.3% 69.5% 1,495,273 29.1%

1993 ............................................. 38.1% 153,137 27.2% 64.6% 1,541,868 29.8%

1994 ............................................. 37.5% 148,807 25.8% 59.3% 1,506,702 25.4%

1995 ............................................. 41.5% 133,388 22.3% 59.3% 1,563,241 25.7%

1996 ............................................. 45.0% 132,262 21.7% 62.9% 1,696,723 28.3%

1997 ............................................. 44.3% 178,933 28.5% 57.8% 1,892,251 32.0%

1998 ............................................. 41.3% 197,932 30.3% 73.0% 1,258,887 20.3%

1999 ............................................. 42.0% 125,494 20.5% 73.9% 874,421 14.2%

2000 ............................................. 45.8% 171,520 28.1% 80.9% 869,373 13.6%

CONCLUSION

For what? That is the question asked by Californians who understand both the 

human devastation MICRA has wrought and its financial failures. Enacting similar 

draconian restrictions federally would fly in the face of the experience of too many 

California casualties who have suffered needlessly under MICRA for a result that 

has only benefited malpractice insurers. 

The real answer to skyrocketing insurance premiums, which are striking across 

all lines of insurance, is to regulate the insurers’ pricing and accounting practices 

so that investment losses cannot be passed onto policyholders. Congress should not 

blame the victim for a crisis created by insurance companies.

Mr. BILIRAKIS. Mr. Hurly. 

STATEMENT OF JAMES HURLY 

Mr. HURLY. Chairman Bilirakis, Ranking Member Brown, members of the subcommittee, thanks for inviting me to testify today 

on behalf of the American Academy of Actuaries. My name is Jim 

Hurly. I am chairperson of the Academy’s Medical Malpractice Subcommittee. The Academy is the public policy and professional organization for actuaries practicing in all specialties within the United 

States. The Academy is nonpartisan and assists the public policy 

process through the presentation of clear and objective actual analysis. The Academy also develops and upholds actuarial standards 

of conduct, qualification, and practice. And for those of you who 

don’t know who an actuary is, he’s the guy who evaluates loss data 

to advise about rates and reserves, those liabilities that companies 

carry. So what I do is evaluate those loss data and make determinations about what rates need to be charged and what loss reserves need to be held. 

102

I appreciate this opportunity to comment on issues related to the 

availability and pricing in medical malpractice insurance. In the 

time available, I would like to highlight a number of key points 

from my written statement. It may be helpful to start by discussing 

recent experiences in the medical malpractice line of business. During the 1990’s, the medical malpractice line experienced favorable 

operating results and insurers competed aggressively. Health care 

providers shared in the benefit of improved loss experience and 

higher levels of investment income through lower charged premiums. 

Recently, however, the cost of medical malpractice insurance has 

been rising. Rate increases have been precipitated in part by the 

growing size of claims, more frequent claims in some areas and 

higher defense costs. The relationship of increasing litigation and 

increased losses is clear. For example, the size of a medium jury 

award went to $1 million in 2000, a jump from roughly $475,000 

in 1996, according to July 2002 Insurance Information Institute Report. 

From a financial standpoint, medical malpractice results deteriorated in 1999 and 2000, and they’re expected to to continue to deteriorate in 2001. These results can be looked at in two component 

parts, underwriting and investments. The combined ratio is an indication of how the company is doing in its insurance underwriting. 

A.M. Best Company offers comprehensive data to insurance professionals and tracks these results. For all companies reported in A.M. 

Best, the combined ratio of 130 percent and 134 percent of the earlier 2 years, respectively, has deteriorated to 143 percent based on 

preliminary estimates for 2001. 

From underwriting, this represents a loss of 43 cents on each dollar of premium earned in 2001. The operating ratio factors in investment income and other costs to reflect the companies bottom 

line. An operating ratio of 106 percent for 2 earlier years, reflecting 

a loss of 6 cents on every dollar of premium earned, is expected to 

deteriorate when 2001 results of the entire industry become available. At these levels, 2001 results will be the worse they’ve been 

in 15 years or more, approximating levels on the mid 1980’s. 

Today the loss environment has deteriorated. Benefits of favorable reserve development appear to be gone and the available investment income offset has declined. In fact, reserve reliability may 

require increases to cover current ultimate lost obligations. 

All said, rates for both insurers and reinsurers need to increase 

to properly align with current loss and investment income levels. 

Companies failing to do this jeopardize their surplus base and financial health. 

My written statement summarizes the two key drivers of financial results and their effects on operating results and surplus. The 

chart on display, which appears as chart c in my testimony, demonstrates the fall in that operating income. And this is for a subset 

of those companies reporting to A.M. Best because all of that data 

is not summarized yet, so this is a summarization of a significant 

portion of the companies that are reporting to A.M. Best. 

The strong operating results of the earlier years as you can see 

by the chart in the neighborhood of 20, 25 percent, has declined to 

a slight profit in 2000 and to a 10-percent loss for 2001. 

103

The next chart which appears as chart d in my testimony demonstrates the decline in surplus for these same companies. Surplus 

increased through 1999 and it shows the rate of increase, so you’re 

looking at the percent of increase year over year. Surplus increase 

through 1999 decreased slightly in 2000 and decreased again more 

significantly in 2001. 

Surplus represents a capital base for these insurers. And it’s decline reduces the capacity to write new or renewing business and/

or absorb losses on business written in prior years. And this includes their opportunity to write business that will become available from companies withdrawing from the market. 

I noted earlier the underwriting investment components of financial results. Most malpractice insurers anticipate losing money in 

their underwriting operations and offsetting the loss with their investments. However, investment income is no longer sheltering the 

operating loss as reflected in the operating results or bottom line 

described earlier. 

Investment income plays an important role in overall financial 

results, particularly for insurers and medical professional liability 

because of the long delay between the payment of premium and 

payment of losses. Insurers, just for the record, have not suffered 

investment losses. They’ve experienced lower rates of returns on 

those investments. In establishing rates, insurers do not recoup investment losses. Rather, the general practice is to chose an expected prospective rate of return, for example five or 6 percent, calculate a discount factor, usually producing a credits of rates on the 

order of 10 to 15 percent. Since interest yields drive this process, 

when interest yields decrease, rates increase. 

In conclusion, I appreciate this opportunity to provide an actuarial prospective on these important issues. I would be glad to answer any questions you may have or provide any additional information that would to be helpful to the subcommittee in its deliberations. 

[The prepared statement of James Hurly follows:]

PREPARED STATEMENT OF JAMES HURLEY, CHAIRPERSON, MEDICAL MALPRACTICE

SUBCOMMITTEE, AMERICAN ACADEMY OF ACTUARIES

INTRODUCTION

The American Academy of Actuaries appreciates the opportunity to provide comments on issues related to insurance and the availability and pricing of medical 

malpractice insurance. The Academy hopes these comments will be helpful as the 

subcommittee considers related proposals. 

This testimony discusses some facts about medical malpractice financial results 

updated through 2001, contributing factors, and some common misconceptions about 

the results. 

Then and Now 

During the 1990s, the medical malpractice line of business experienced favorable 

operating results, and insurers competed aggressively. Healthcare providers shared 

in the benefit of improved loss experience and higher levels of investment income 

through lower charged premiums. 

Recently, however, the cost of medical malpractice insurance has been rising. Rate 

increases have been precipitated in part by the growing size of claims, more frequent claims in some areas, and higher defense costs. The relation of increasing litigation and increased loss costs is clear, and the size of a median jury award rose 

to $1 million in 2000, a jump from $474,536 in 1996, according to a July 2002 Insurance Information Institute report.

104

From a financial standpoint, insurance industry medical malpractice results deteriorated in 1999 and 2000, and are expected to have continued to deteriorate in 

2001. For all companies reporting to A.M. Best (an organization offering comprehensive data to insurance professionals), the combined ratio of 130 percent and 134 percent for the earlier two years, respectively, has deteriorated to 143 percent, per A.M. 

Best preliminary estimates. An operating ratio of 106 percent for the two earlier 

years, reflecting a loss of 6 cents on every dollar of premium written after considering underwriting and investment results, is expected to deteriorate when 2001 results become available. At these levels, 2001 results will be the worst they have been in 15 years or more, approximating levels 

of the mid-1980s. 

Today, the loss environment has deteriorated, benefits of favorable reserve development appear to be gone, and the available investment income offset has declined. 

In fact, reserve liabilities may require increases to cover current ultimate loss obligations. All said, rates for both insurers and reinsurers need to increase to properly 

align with current loss and investment income levels. Companies failing to do this 

jeopardize their surplus base and financial health. 

SOME FACTS

Because 2001 insurance industry A.M. Best data is not available, the following 

discussion is based on results of 30 companies (the 30-Group), primarily physicianowned and/or -operated medical liability insurers. These companies represent about 

one-third of the exposure reported to A.M. Best. Information is shown for the last 

seven years. 

Results for these companies reflect a slight operating profit (a 96 percent operating ratio, or 4 percent net income relative to premiums) in 2000. However, the 

results deteriorated to a 10 percent operating loss (a 110 percent operating ratio) 

for 2001. 

Following are discussion and charts summarizing the two key drivers of financial 

results and their effects on operating results and surplus. 

CHART A: COMBINED RATIO

Driver #1—Higher combined ratio (defined here as calendar year loss and all loss 

adjustment and underwriting expenses divided by premium earned). The combined 

ratio deteriorated by 10 points in 2000 and a further 14 points in 2001. The ratios 

were 124 percent and 138 percent in 2000 and 2001, respectively. The preceding five 

years reflect a rather stable 110-115 percent range. The driver in these results is 

the deterioration of the loss and loss adjustment expense ratio as the underwriting 

expense ratio remains relatively flat. The earlier years reflect the benefit of significant reserve reductions that have decreased and contributed to the deterioration observed. 

CHART B: INVESTMENT INCOME AS PERCENTAGE OF PREMIUM 

DECLINES


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Driver #2—Decreased investment income (shown here as pre-tax investment income divided by premium earned). As shown in Chart A, insurers generally spend 

more money on loss and expense than they collect in premium. This is possible because investment income offsets this underwriting loss. In Chart B, pre-tax investment income is divided by earned premium to estimate the protection provided to 

offset an underwriting combined ratio in excess of 100 percent. As can be seen from 

Chart B, this statistic has declined over the measurement period from the mid-40s 

to the mid-30s, and, in 2001, to 31 percent. This ‘‘offset’’ will continue to decline in 

the future for two reasons. First, most invested assets are bonds and are affected 

by recently lower yields, a change that has not been fully felt in current investment 

income. Second, the premium base is growing due to increased rates, growth in exposure, or both. Invested assets are not increasing as rapidly as premium and, 

therefore, investment income as a percentage of premium will decline. 

Effect #1—Net operating income falls (shown in Chart C as a percentage of premium). Net operating income represents the net impact of the combined ratio and 

investment income ratio, adjusted for other income statement items (primarily policyholder dividends, miscellaneous other income, and federal income tax). The 

strong operating returns of the early years have been followed by the slight 2000 

profit and 10 percent loss for 2001 described earlier. 

CHART C: CALENDAR YEAR OPERATING RESULTS TURN NEGATIVE

Effect #2—Surplus declines are shown in Chart D as a percentage change from 

one year to the next. Surplus increases through 1999, decreases slightly in 2000, 

and decreases more significantly in 2001. Surplus represents the capital base for 

these insurers, and its decline in 2000 and 2001 reduces the capacity to write new 

or renewing business prospectively, and/or absorb adverse loss developments on 

business written in prior years. 

CHART D: SURPLUS CHANGE TURNS NEGATIVE

CONTRIBUTING FACTORS

There are several factors contributing to the financial results described above. It 

is probably best to note the factors contributing to the favorable results of the early 

and mid-1990s and then discuss the changes in these factors today. 

Factor #1: Throughout the 1990s, premium rates for the insurance industry as a 

whole were relatively flat or down in several states. Rates decreased toward the 

middle and end of the period in comparison to rates at the beginning of the decade. 

In many cases, rate decreases were a consequence of more significant discounts 

rather than changes to filed rates. 

Factor #2: Loss-cost trends (the annual change in the frequency and severity of 

claims) during this time period were relatively low. Long-term indications suggest 

a low single-digit change, 3 percent to 5 percent, varying from state to state. This 


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reflects a lower general economic inflationary environment, and, perhaps more importantly, an equally low medical inflationary index. Rates established at the beginning of the period contemplated higher trends. Companies responded to this emerging data in different ways. Some held rates stable and paid policyholder dividends 

or gave premium discounts. Some reduced filed rates. Others found they needed to 

increase rates modestly and tried to refine pricing models to improve the equity of 

their program costs. Many insurers employed combinations of these, with resulting 

increases in some programs and decreases in others, depending on specific facts and 

circumstances. However, in general, there was a decline in the adequacy of premiums in this period. Collected rates came into line with insurers’ costs, but competitive actions pushed rates even lower in some jurisdictions. 

Factor #3: Lower than expected loss-cost trends allowed reductions in loss reserves established in anticipation of trends more in line with historically higher levels. As experience emerged, loss reserves for prior years were reduced, contributing 

to very profitable calendar year results. This evidence emerged gradually as claims 

settled. Thus, the reductions occurred over a period of years. Loss reserve reductions 

for prior years lowered current calendar year loss ratios (and thus the combined and 

operating ratios) during the mid-to-late 1990s, as shown in Chart E. As is clear from 

the graph, loss reserve development for the 30-Group was not a factor in 2001. From 

a broader perspective, it appears that the medical malpractice line for the insurance 

industry as a whole is currently in a deficit position. For example, the industry as 

a whole had to increase reserves in 2000, and indications are that this also will 

have occurred in 2001. (Insurance industry results for 2001 are not yet available.)

Factor #4: During the 1990s, investment income returns produced a real spread 

between fixed income rates of return and economic inflation. In addition, the modest 

equity position of invested assets for the 30-Group combined with fixed income 

yields to produce significant investment gains, improving overall financial results. 

These gains increased the investment income ratio (see earlier graph) and improved 

the operating ratio.

Factor #5: Given the financial results of the early-to-mid-1990s, some companies 

considered expansion into new markets (although they may have had limited information to develop rates), became more competitive in existing markets, and offered 

more aggressive premium discounts. In most jurisdictions, ‘‘discounts’’ against the 

manual premium became common, reducing the actual premiums paid by health 

care providers. Reinsurers likewise reduced rates, competed and covered more exposure but often at lower rates. As a consequence, rates on a coverage year basis became less adequate.

Factor #6: Loss-cost trends, particularly claim severity, began to pick up toward 

the latter part of the 1990s. The number of large claims (sometimes very large) increased, but even basic limits analyses (eliminating the distortions of very large 

claims) began to move upward. This, coupled with the cumulative effect of the low 

loss-cost trend and rate activity in the earlier part of the decade, produced rate indications that were moving up significantly in many states. Insurers are moving to 

eliminate competitive discounts.

Factor #7: Aggregate loss reserve levels were reconciled to the lower loss-cost 

trends, resulting in no further reductions in 2001 (and for the insurance industry, 

requiring an addition to prior reserve levels). In fact, the upward loss-cost pressure 

noted above calls into question whether current reserve levels will be adequate to 

meet ultimate loss costs. Results to date for the 30-Group reflect little or no 

strengthening in the aggregate, although results vary on a company-by-company 

basis.


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Factor #8: Rates of return on invested assets declined, and equity values fell. In 

addition to the fact that this affected interest earnings on existing assets, it also 

affected the expectation for investment earnings used to offset needed prospective 

premium levels. Rates established using an interest rate assumption of 6 percent 

rather than 7 percent were 3 to 4 percent higher (assuming no changes in other rate 

components) due to the multiplier effect of investment income. Moving to even lower 

yields compounds the impact. 

Factor #9: Reinsurers’ experience deteriorated as their results were affected by 

the increased claim severity and pricing changes in the early-to-mid-1990s. Since reinsurers generally cover the higher layers of exposure, their results were disproportionately impacted by claim severity increases. This, coupled with the broadly tightened reinsurance market after the events of September 11, 2001, caused reinsurers 

to substantially increase rates and tighten terms of reinsurance for medical malpractice. 

FREQUENT MISCONCEPTIONS

In closing, it would be helpful to address some frequent misconceptions about the 

insurance industry and medical malpractice insurance coverage. 

Misconception 1: ‘‘Insurers are increasing rates because of investment losses, particularly their losses in the stock market.’’

Investment income plays an important role in the overall financial results of insurers, particularly for insurers of medical professional liability, because of the long 

delay between payment of premium and payment of losses. Insurers have not suffered investment losses, but they have experienced a decline in their portfolio rates 

of return. The vast majority of invested assets are fixed-income instruments. Generally, these are purchased in maturities that are reasonably consistent with claim 

payments. Losses from this portion of the invested asset base have been minimal, 

although the rate of return available has declined. Equities are a much smaller portion of the portfolio (for this 30-Group, representing about 15 percent of invested 

assets). After favorable performance up through the latter 1990s, there has been a 

decline in the last few years, contributing to less favorable investment results and 

overall operating results. Thus, investment returns are still positive, but the rates 

of return have been adversely affected by equity declines and lower fixed income investment yields. 

In establishing rates, insurers do not recoup investment losses. Rather, the general practice is to choose an expected prospective rate of return (e.g., 5 percent or 

6 percent) and calculate a discount factor (usually producing a credit to rates on the 

order of 10 percent to 15 percent). This means the insurer is expecting to have an 

underwriting loss that will be offset by investment income. Since interest yields 

drive this process, when interest yields decrease, rates increase. 

Misconception 2: ‘‘Companies operated irresponsibly and caused the current problems.’’

Financial results for medical insurers have deteriorated. Further, some companies 

made underwriting and rate decisions that have resulted in adverse financial results, including insolvencies. A significant portion of this adverse experience is 

emerging on business written in newly entered markets by companies that attempted to expand in the mid-to-late 1990s. In addition, companies became too aggressive in discounting premiums for existing business. 

Additionally, while one can argue about whether companies were imprudent in 

past pricing behavior, today’s rate increases reflect a reconciliation of rates and current loss levels, given available interest yields. There is no added cost for past 

mispricing. Thus, although the competitive, soft market pricing delayed reconciliation of rates and loss levels, the ‘‘current problem’’ reflects current data. 

Misconception 3: ‘‘Companies are reporting losses to justify increasing rates.’’

This is a false observation. Companies are reporting losses primarily because 

claim experience is worse than anticipated when prices were set. It is clear that 

companies, having gone through the 1990s reporting very profitable results, would 

not suddenly have decided that, in order to get more profits, they would report 

losses to increase rates. Further, several companies have suffered serious adverse 

consequences given these financial results, including liquidation or near liquidation. 

For example, the St. Paul Cos., formerly the largest writer of medical malpractice 

insurance, is now in the process of withdrawing from this market. 

The Academy appreciates the opportunity to provide an actuarial perspective on 

these important issues and would be glad to provide the subcommittee with any additional information that might be helpful.

108

Mr. BILIRAKIS. Thank you very much, Mr. Hurly. 

Mr. Plunkett? Please proceed, sir. 

STATEMENT OF TRAVIS PLUNKETT 

Mr. PLUNKETT. Thank you, Mr. Chairman and thank you to the 

chairman and Mr. Brown and members of the subcommittee for the 

opportunity to offer our comments on this very important issue. I’m 

Travis Plunkett. I’m the Legislative Director with the Consumer 

Federation of America. 

For the third time in less than 30 years, Congress and State Legislators are grappling with the problem of fast rising medical malpractice rates. As we’ve just heard, insurers insist a sharp increase 

in large, unwarranted jury verdicts is to blame for the crisis. 

But research by our Director of Insurance, Robert Hunter, shows 

that insurers are pointing fingers when they should be looking in 

the mirror. It is the hard insurance market and the insurance industry’s own business practices that are largely to blame for the 

rate shock that physicians have experienced in recent months. 

Our research shows several trends that are relevant to the debate about malpractice rates. First is we’ve already heard, these 

rate hikes aren’t occurring in a vacuum. Commercial insurance 

rates are rising overall depending on the size of the account and 

type of insurance. The problem is caused by a classic turn in the 

economic cycle of the industry, and I’d ask that the insurance cycle 

slide be put up—sped up, but not caused by the terrorist attacks. 

There are been three malpractice crises since the early 1970’s, in 

the mid-1970’s, the mid-1980’s, and right now. As the graph shows, 

these crises have coincided precisely with the bottom of the insurance cycle each time this has occurred, with the one exception in 

1992, that would be payouts for Hurricane Andrew losses. This appears to be so far, this crisis, the mildest of the three events in 

terms of price increases and coverage unavailability. Even with the 

withdrawal of the largest malpractice insurer, Saint Paul, from the 

market. 

According to the National Association of Insurance Commissioners, there are three major causes of this kind of steep underwriting cycle. 

First, a large loss shock. Second, changes in interest rates. Third, 

underpricing in soft markets. Lower interest rates and underpricing have already been in place for quite some time. September 

11 provided the shock loss in an achingly painful way. But the 

cycle had turned before the 11th in late 2000. 

As I mentioned, a significant part of the problem is underpricing, 

and I’d like to turn now to exhibit a. 

This shows that the average malpractice premium per doctor 

barely climbed from 1991 to 2000—1.9 percent, which is really a 

32.5 percent drop if medical inflation is factored in. That means it 

would take a rate increase of 48 percent to bring premium rates 

in 2000 back to the 1991 level. 

Our research shows that medical malpractice as well as a percentage of national health care expenditures is quite low. It’s a 

fraction. It’s about 66 cents over the last decade for every $100 of 

national health care cost. Thus, the maximum potential savings if 

you eliminate all rights for injured patients to seek legal redress 

109

would be under 60 cents on a $100 medical bill. I say under 60 

cents because the year 2000 cost was about 56 cents. 

Regarding claims in the last decade, let us note that only one in 

four person, as you’ve heard, get any payment at all. I’d like to 

turn to exhibit c. Each closed claim in America which includes all 

million dollar verdicts averaged $27,824 for the decade ending December 31, 2000. Notice I’m talking about the decade, not the most 

recent year where data on claims is clearly insufficient. This includes costs for insured defense and claims adjustment. The figures 

over the decade showed virtually no growth in closed claims. 

Now why do we talk about closed claims? Because they include 

those costs you’ve heard so much about today. They include the 

cost for the zero claims. They include the cost for paying out those 

claims and defending against those claims. It’s important to note 

that. If you talk just about claims that are paid, and the number 

we have in our chart over a decade is average $112,000, this number doesn’t include costs for defensive claims settled, adjudicated or 

otherwise closed with no payment. So you have to look at both. You 

have to look at both the closed claims and those that are paid. 

The conclusion we’ve drawn from this data is that the insurance 

cycle and the practices of the insurance industry themselves are 

the key culprits in the rate shock that physicians, hospitals, and 

patients are grappling with. Unfortunately, each time the cycle 

turns from soft to a hard market, the response by insurers is extremely predictable. 

They shift from inadequate under pricing to unconscionable over 

pricing. They cut back on coverage and then they blame large jury 

verdicts for the problem. Insurers seem to expect Congress and the 

American public to swallow the dubious line, that trial lawyers 

have managed to time their million dollar jury verdicts to coincide 

precisely with the bottom of the insurance cycle three times in the 

last 30 years. That just doesn’t seem plausible. And as you’ve heard 

from others the insurance cycle is quite complicated and you can’t 

boil it down simply to a question of losses involving jury verdicts. 

A lot is at stake in this debate. As you’ve already heard, the IOM 

report demonstrates that far too many Americans face the serious 

possibility of an injury or even death due to medical mistakes in 

the hospital. Their range, on medical errors, was either the eighth 

leading cause of death in the country ahead, of AIDs and breast 

cancer, or the fourth leading cause of death in the country, depending on how you calculate the numbers and what study you look at. 

Mr. BILIRAKIS. Please summarize, Mr. Plunkett. 

Mr. PLUNKETT. Absolutely. Some medical errors are directly attributable to physician negligence and some aren’t. But the point 

is it that there are serious implications here if you roll back legal 

rights. And before you move tort reform legislation, I urge you to 

look at these insurance issues very closely, get the facts, and look 

at the role the insurance industry has played in the predicament 

that we all find ourselves in right now. Thank you. 

[The prepared statement of Travis Plunkett follows:]

PREPARED STATEMENT OF TRAVIS PLUNKETT, LEGISLATIVE DIRECTOR, CONSUMER

FEDERATION OF AMERICA

Good morning. I am Travis Plunkett, legislative director for the Consumer Federation of America. CFA is a non-profit association of more than 290 organizations 

110

1 4th Quarter 2001 Survey, released January 2002. 

founded in 1968 to advance the consumer interest through advocacy and education. 

Ensuring the provision of fairly priced and adequate insurance has been one of our 

core concerns since CFA’s inception. 

I would like to thank Chairman Bilirakus, Ranking Member Brown and the other 

members of the Subcommittee for the opportunity to offer our comments on this extremely important issue. For the third time in less than thirty years, Congress and 

State legislators across the country are grappling with the problem of fast-rising 

medical malpractice rates. Insurers insist that a sharp increase in large, unwarranted jury verdicts is to blame for the crisis. As a result, lawmakers on this Subcommittee and in a variety of states are considering legislation to place further limits on the legal rights of Americans who have been harmed or killed by medical malpractice. 

But research by actuary and CFA Director of Insurance J. Robert Hunter shows 

that insurers are pointing fingers when they should be looking in the mirror. It is 

the ‘‘hard’’ insurance market and the insurance industry’s own business practices 

that are largely to blame for the rate shock that physicians have experienced in recent months. CFA has found that:

• Medical malpractice rates are not rising in a vacuum. Commercial insurance rates 

are rising overall. 

• The rate problem is caused by the classic turn in the economic cycle of the industry, sped up—but not caused by—terrorist attacks. 

• Insurers have under-priced malpractice premiums over the last decade. It would 

take a 50 percent rate hike to increase inflation-adjusted rates to the same level 

as existed ten years ago. 

• Further limiting patients’ rights to sue for medical injuries would have virtually 

no impact on lowering overall health care costs. Medical malpractice insurance 

costs as a proportion of national health care spending are miniscule, amounting 

to less than 60 cents per $100 spent. 

• Insurer losses for medical malpractice have risen slowly in the last decade, by just 

over the rate of inflation. 

• Malpractice claims have not ‘‘exploded’’ in the last decade. Closed claims—which 

include claims where no payout was made—have remained constant, while paid 

claims have averaged just over $110,000. 

• Medical Malpractice profitability over the last decade has been excellent, at just 

over 12 percent, despite a decline in profits in the last two years. 

I. PUTTING MEDICAL MALPRACTICE INSURANCE RATES INTO CONTEXT: INSURER

PRACTICES AND THE INSURANCE CYCLE

A. Commercial Insurance Rates Overall Are Rising 

To put price increases in insurance anywhere in America today into context, you 

have to be aware of a general tendency toward higher rates nationally. According 

to data released by the Council of Insurance Agents (CCIA) and Brokers,1 commercial premiums are increasing quickly. According to estimates made by CFA based 

upon the CCIA data for the 12-month period ending December 31, 2001, average 

prices rose as follows: Small Commercial Accounts +21%; Mid-size Commercial Accounts +32%; and Large Commercial Accounts +36%. 

The worst hit are, not surprisingly, ‘‘terrorist target’’ risks, such as skyscrapers. 

According to the CCIA survey, CFA calculates the average increases over the last 

year by line of insurance as: Business Interruption +30%; Construction +46%; Commercial Cars +28%; Property +47%; General Liability +27%; Umbrella Liability 

+56%; and Workers’ Compensation +24%. 

Interestingly, the broad rate increases are occurring even when terrorism is excluded. The market shows all the earmarks of a classic cycle bottom, which is discussed in some detail below. 

B. There is a Classic ‘‘Hard’’ Cycle Nationally—with Prices Rising Accelerated by the 

Events of September 11th 

Insurance is a cyclical business. This is particularly true in the medical malpractice insurance business. In the mid-1970s, the country experienced the first liability insurance crisis. In this case, the crisis was particularly acute in product liability insurance and medical malpractice insurance. 

At the mid-70s cycle low, the industry’s rate of return was ‘‘2.6% in 1975,’’ rose 

‘‘to 19.7% in 1977, a gain of almost 17 points in the course of only two years. The 

industry’s rate of return then fell by more than 17 points over the next 7 years to 

111

2 Cycles and Crises in Property/Casualty Insurance: Causes and Implications, edited by 

Cummings, Harrington and Klein, NAIC, 1991. Page 11. 3 Both of these charts use data from A. M. Best and Co., Aggregates and Averages, 2001 edition for all years except 2001, where CFA made estimates of the results based on current information. 4 Cycles and Crises in Property/Casualty Insurance: Causes and Implications, edited by 

Cummings, Harrington and Klein, NAIC, 1991. Page 8. 5 ‘‘The Big Question For 2002: Will Hard Market Last Long?’’ By Sean F. Mooney, National 

Underwriter, January 7, 2002 edition. 6 ‘‘. . . there is clearly an opportunity now for companies to price gouge—and it’s happening... But I think companies are overreacting, because they see a window in which they can 

do it.’’ Jeanne Hollister, consulting actuary, Tillinghast-Towers Perrin, in, ‘‘Avoid Price Gouging, 

Consultant Warns,’’ National Underwriter, January 14, 2002. 7 ‘‘As Insurers Hike Prices, State Regulators Consider Reducing Regulatory Authority,’’ Consumer Federation of America, December 5, 2001. 8 ‘‘We’ve seen premiums go up as much as 40-70 percent,’’ says [Jenny] Jones [CEO of Elkins/

Jones insurance brokerage]. She points out that commercial buildings which now pay five or six 

cents per square foot for insurance need to budget for costs to go up to as much as seven or 

eight cents a foot. She says the increases could be across the board for all types of properties. 

Single family housing developers could be sharply affected, she notes, citing one homebuilder 

whose liability premium doubled at the November 11 renewal.’’ ‘‘Large Insurance Premium Increases in 2002 as September 11 Ricochets Through Industry, Expert Advises,’’ Business Wire, 

January 3, 2002. 9 ‘‘To be sure, the market began firming in 2000. But the Sept. 11 terrorist attacks sent insurance prices skyrocketing far beyond the estimates of increases that earlier were being attributed 

to a normal hard cycle.’’ ‘‘Year in Review,’’ Business Insurance, December 24, 2001. 

1.9% in 1984, the nadir of that soft market. During the subsequent hard market, 

profits once again shot up—to 15.4%’’ (by 1987).2

The mid-1980s crisis was in commercial liability generally, hitting municipalities, 

day care centers, environmental liability, medical malpractice and many other liability risks and lines. Time magazine had a cover story called ‘‘Sorry America, Your 

Coverage is Cancelled.’’

Two charts below show the cyclical nature of insurance.3 The first chart, ‘‘Insurance Cycle’’ shows the operating income as a percentage of premium from 1967 to 

2001. The operating income of the industry falls below zero four times on the 

chart—in 1975, in 1984 and 1985, in 1992, and in 2001 (the last number estimated 

by CFA). 

The 1992 data point was not a classic cycle bottom, but reflected the impact of 

Hurricane Andrew and other catastrophes in that year. 

The 1975 and mid-80s bottoms were both classic cycle bottoms with very sizeable 

price increases and coverage availability problems immediately following the bottom. Consider the mid-80s cycle turn: between 1977 and 1984, insurance premiums 

had ‘‘. . . actually declined (by) 4.4%...from 1984 to 1987, net premiums written increased 63.3%...’’ 4

The price increases in this cycle turn began in late 2000.5 The rate of change was 

accelerating upward before September 11th. The terrorist attacks sped up the price 

increases into what some seasoned industry analysts see as gouging.6 Many examples of unjustified price increases have surfaced in the last few months.7,8

Gouging usually does occur as the cycle turns.9 The evidence is very strong that 

what we are experiencing is a classic underwriting cycle turn into a ‘‘hard,’’ from 

a prolonged ‘‘soft,’’ market. 

According to the National Association of Insurance Commissioners, 

‘‘. . . underwriting cycles may be caused by some or all of the following factors:


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10 Cycles and Crises in Property/Casualty Insurance: Causes and Implications, edited by 

Cummings, Harrington and Klein, NAIC, 1991. Page 339. 11 ‘‘Risk Managers Blame Insurers for Renewal Woes,’’ National Underwriter, January 14, 

200212 Named after a famous insurance financial writer, Roger Kenny. 

1. Adverse loss shocks... unusually large loss shock... may lead to supra-competitive prices. 

2. Changes in interest rates . . . 3. Under pricing in soft markets...’’ 10

Prior to September 11th, the industry had been in a soft market since the late 

1980s. The usual six to ten year economic cycle had been expanded by the amazing 

stock market of the 1990s. No matter how much they cut their rates, the insurers 

wound up with a great year when investing the float on the premium in this amazing market (the ‘‘float’’ occurs during the time between when premiums are paid 

into the insurer and losses paid out by the insurer—e.g., there is about a 15 month 

lag in auto insurance). Further, interest rates were relatively high in recent years 

as the Fed focused on inflation. 

But, in the last two years, the market turned with a vengeance and the Federal 

Reserve cut interest rates again and again. Item 2 above had occurred well before 

September 11th. 

Item 3 above, the low rates, were also apparent. The chart, ‘‘Insurance Cycle,’’ shows the operating profit drop from about 13% of premium in 1997 to about 3.5% 

of premium in 2000. 

So, before September 11th, the cycle had turned, rates were rising and a hard 

market was developing. An anticipated price jump of 10% to 15% in 2001 was predicted by CFA and confirmed by the Insurance Information Institute. 

Item 1, the shock loss was all that was missing. September 11th provided that 

in an achingly painful way. 

However, the increases are mostly due to the cycle turn. The price increases were 

sped up by the terrorist attack, collapsing two years of anticipated increases into 

a few months, but the bulk of the increases are not related to pricing for terrorism, 

per se. This is a classic economic cycle. 

The question we hear a lot of debate about is how long the hard market can last. 

Given the amazing inflow of capital, can the prices hold for long? While the jury 

is still out on that question, there are some factors that make it seem likely that 

the hard market will be brief. They include:

• The capital inflow in excess of the after-tax terrorism loss, • The relatively overcapitalized position of the industry as shown in the chart, ‘‘Leverage Ratio,’’ below, • The availability of alternative risk mechanisms to the larger client risks, the insureds with the biggest price hikes, 

• The pattern of risk managers blaming insurers, not the terrorism event, for renewal problems, and shopping for better deals.11

A ‘‘leverage ratio’’ is the ratio of net premiums written (i.e., after reinsurance) to 

the surplus, the amount of money the insurer has to back up the business; assets 

less the liabilities. Surplus is not reserves, which are liabilities set up to cover 

claims. The leverage ratio has always been the key measure of insurer strength. 

The rule of thumb used for decades by insurance regulators and other experts in 

determining solidity is the so-called ‘‘Kenny 12 Rule’’ of $2 of premium for each $1 

of surplus as safe and efficient use of capital. Some now say that this rule is antiquated, given the new level of catastrophe possible, but new ways of spreading the


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risk, such as securitizing it, may offset this. CFA still believes a 2:1 ratio is safe. 

But even those proposing a lower ratio do not go below 1.5:1. The NAIC uses a 3:1 

ratio as the standard for determining if an individual insurer warrants solvency inspection. 

When the cycle turned in the mid-70s, the premium/surplus ratio was as high as 

2.8 to 1. This was a dangerously high average ratio since many insurers exceeded 

the 3:1 NAIC problem ratio. When the mid-80s cycle turned, the ratio was as high 

as 1.8 to 1—a relatively safe level. In today’s cycle turn, CFA projects the ratio for 

2001 year-end to be about 1.2 to 1, extremely safe and, indeed, overcapitalized. 

II. THE FACTS ABOUT MEDICAL MALPRACTICE CLAIMS AND LOSSES

As the lengthy explanation above demonstrates, the practices of the insurance industry itself are to largely to blame for the wildly gyrating business cycle of the last 

thirty years. Each time the cycle turns from a soft to a hard market the response 

by insurers is predictable: they shift from inadequate under-pricing to unconscionable over pricing, cut back on coverage and blame large jury verdicts for the problem. It is particularly appalling to see a crisis caused by insurer action being 

blamed, by the very insurers that caused the problem, on others. Insurers seem to 

expect legislators and the American public to swallow the dubious line that trial 

lawyers have managed to time their million-dollar jury verdicts to coincide precisely 

with the bottom of the insurance cycle three times in the last thirty years. Medical 

malpractice insurance rates are now rising fast. Insurers tell the doctors it is the 

fault of the legal system and urge them to go to state legislatures or to Congress 

and seek restrictions on the rights of their patients. Physician associations, unfortunately, are only too willing to accept this faulty logic. 

Although rates are obviously now increasing, medical malpractice insurance losses 

are not ‘‘exploding’’ and have actually declined by one significant measure. CFA’s 

Director of Insurance, J. Robert Hunter, conducted an actuarial analysis of medical 

malpractice insurance using the most recent insurance data available from the National Association of Insurance Commissioners and A.M. Best and Company. He 

found the following:

1.Inflation-adjusted medical malpractice premiums have declined by onethird in the last decade. Exhibit A shows that the average medical malpractice premium per doctor barely climbed from $7,701 in 1991 to $7,843 in 

2000, an increase of 1.9 percent. Rates in constant 2000 dollars have declined 

by 32.5 percent, when the medical care services Consumer Price Index is taken 

into consideration, It would take a rate increase of 48 percent to bring premium 

rates in 2000 back to the 1991 price level. This chart points to insurer pricing 

practices (e.g. under-pricing during a soft market followed by a sharp increase 

in premiums as the market has hardened) as a key culprit in the rate shock 

that many physicians are now experiencing. 

2. Medical malpractice as a percentage of national health care expenditures are a fraction of the cost of health care in this nation. Over the 

last decade, for every $100 of national health care costs in the United States, 

medical malpractice insurance cost 66 cents. In the latest year (2000) the cost 

is 56 cents, the second lowest rate of the decade. Exhibit B shows that malpractice premiums as a share of health costs have declined from .95 percent in 

1988 to .56 percent in 2000. Medical malpractice insurance is actually an amazing value as it covers all medical injuries for about one-half of one percent of 

all health costs. Moreover, this chart shows that proposals to further limit patients’ rights to sue for medical injuries have little, if any, value in terms of lowering overall health care costs. The maximum potential savings of eliminating 

all rights for injured patients to seek legal redress would be under 60 cents on 

a $100 medical bill. 

3. There is no ‘‘explosion’’ in the severity of medical malpractice claims. 

Only about one in four persons who bring a claim (24.6%) get any payment at 

all. Each closed claim in America—which includes all million-dollar verdicts—

averaged only $27,824 for the decade ending December 31, 2000. This includes 

costs for insurer defense and claims adjustment. The figures over the decade 

showed no growth in average paid claim. If one looks at average payout just 

for claims with payments (as opposed to all closed claims) the average loss was 

$112,987. This includes costs for defense of claims settled, adjudicated or otherwise closed with no payment, thereby overstating the cost per claim paid. (See 

Exhibit C.) 

4. Medical malpractice insurance losses have risen very slowly. Incurred 

losses, including loss adjustment expense (LAE) has risen by one-half of one 

percent over the last decade on a per-capita basis more than medical inflation. 

114

(See Exhibits A and C.) Furthermore, Exhibit D shows that medical malpractice 

losses haven’t come anywhere close to approaching or exceeding premiums, as 

they did in the early 1980s. In other words, losses have increased on a fairly 

regular, predictable basis, like most goods and services subject to inflation. The 

problem, as pointed out in 1 above, is that premiums have not kept up with 

losses. 

5. Medical Malpractice profitability over the last decade has been excellent.

Despite a decline in profitability in the last three years, the average return on 

net worth for medical malpractice lines was still a handsome 12.3% over the 

last decade. (See Exhibit E.) 

III. SOLUTIONS

Both the states and Congress must act to deal with the true source of the malpractice insurance price increases: insurer pricing practices and the volatile insurance cycle. As usual with insurance issues, state regulators must take the lead. CFA 

has called on the National Association of Insurance Commissioners to thoroughly investigate rate hikes in both personal and property/casualty lines and to consider a 

number of specific reforms to freeze or rollback unwarranted rate hikes and to prevent rate shock in the future. States can also take steps to spur private market development of increased insurance alternatives (such as captive insurance companies, 

risk retention groups, purchasing groups and the creation of new mutual insurance 

companies) and to increase the availability of insurance through public resources 

(such as joint underwriting associations and insurance facilities.) 

The states could also act to provide relief to the medical specialists, such as obstetricians and neurologists, who bear the brunt of medical malpractice costs. The 

problem, from an insurance point-of-view, is that the risk is too concentrated on too 

few providers. The highest risk patients, who have illnesses or conditions where a 

slight provider error can cause grave harm or death, are usually ‘‘referred up’’ from 

general practitioners and internists to specialists. For example, only the very worst 

risks of all bad backs in a particular state end up being treated by neurosurgeons. 

Yet a few neurosurgeons bear the full cost of these risks; none of the risk is borne 

by referring physicians. This risk should be spread somewhat, because non-specialist physicians benefit financially from this structure (lower risk patients are less 

costly in malpractice terms.) States should consider requiring insurers to impose a 

‘‘high-risk referral’’ fee on all physicians, that could then be adjusted upward for 

risk depending on the class of practitioner and used to lower insurer costs in the 

highest-risk classes. 

Congress could act to address rising malpractice rates by creating a national reinsurance facility. All insurers writing medical malpractice would be 

members of the facility. Members would cede the premiums and claims over a set 

catastrophic amount to the facility. The facility would take all risk over this retention and would charge an actuarially-based premium for this coverage. The premium would NOT be allowed to fluctuate downward during the economic cycle of 

the medical malpractice insurance market, thereby serving to stabilize the premium 

cycle as well as make insurance more readily available through spreading the cost 

of large injuries to a national base. The reinsurance plan would have to be administered by a federal agency—the Department of Health and Human Services is probably the best bet—but there would be no taxpayer funding. Cost of premiums and 

of program administration would be paid out of the premiums ceded to the facility. 

HHS would utilize the data generated on these catastrophic claims to report to Congress on ways to decrease medical errors and malpractice. 

There have been three medical malpractice crises, in the mid-1970s, the mid1980s and currently. This appears to be (so far) the mildest of the three events in 

terms of price increases and coverage unavailability, even with the withdrawal of 

malpractice insurer St. Paul from the market. 

The crises are caused by the economic cycle of the insurance industry. The cost 

of claims has been relatively flat, of the order of $110,000 per claim closed with payment and under $30,000 per claim closed when those claims closed without payment 

are included in the averages (as they must be since the adjustment expense for such 

claims is included in the data). 

Thus, in order to control the periodic malpractice insurance rate flare-ups, the 

cycle must be controlled. This requires the discipline of a regulator to do a very difficult thing, keep prices somewhat higher than competition would dictate during the 

‘‘soft’’ phase of the cycle and escrow the excess to help when the ‘‘hard’’ phase sets 

in. 

The ‘‘hard’’ phase is related to reinsurance becoming unavailable or high priced. 

This is why a national reinsurance facility makes sense. Further, if the facility is 

115

13To Err is Human, Building a Safer Health System, Institute of Medicine, National Academy 

of Sciences; November, 1999. 

regulated by the federal government, the government would have incentives to 

make sure that rates remained actuarially sound and stable throughout the cycle 

and would be able to use the data on large claims for risk reduction research. 

IV. CONCLUSION

A lot is at stake in this debate. The 1999 report regarding medical errors by the 

Institute on Medicine (IOM) demonstrates that far too many Americans face the serious possibility of an injury, or even death, due to medical mistakes in the hospital. 

Using the IOM’s low estimate of 44,000 deaths per year, medical errors are the 

eighth leading cause of death in this country, ahead of breast cancer and AIDS. The 

IOM’s high-range estimate of 98,000 deaths a year would make medical errors the 

fifth leading cause of death, more than all accidental deaths.13 Of course, some medical errors are directly attributable to physician negligence and some are not, but 

the IOM report clearly demonstrates the serious implications of rolling back the 

legal rights of Americans who have been harmed or killed by malpractice. If Congress gets it wrong, the pain and suffering incurred by many families across the 

country will only increase. 

Before this Committee rushes through tort reform legislation, I urge you get to 

get the facts. As the evidence I’ve presented you with today shows, insurers have 

only themselves to blame for the predicament they—and physicians and patients 

throughout the country—face.

EXHIBIT A: MEDICAL MALPRACTICE PREMIUMS 1991-2000

Year U.S.A. Number 

of Doctors 

U.S.A. Medical 

Malpractice 

Premm Earned 

(in thousands) 

Average Med 

Mal Premium 

per Doctor 

U.S.A 

Medical Care 

Services CPI-U 

7/1 of Year 

Med Mal Average Premium 

at 2000 Dollars 

1991 ...................................................................... 631400 4862170 7700.62 176.1 11614.33

1992 ...................................................................... 652100 5138395 7879.77 189.7 11032.50

1993 ...................................................................... 670300 5174055 7719.01 202.6 10119.30

1994 ...................................................................... 684400 5931898 8667.30 212.6 10828.01

1995 ...................................................................... 720300 6080639 8441.81 223.5 10031.97

1996 ...................................................................... 737800 5992394 8121.98 231.9 9302.27

1997 ...................................................................... 756700 5917038 7819.53 238.7 8700.74

1998 ...................................................................... 777900 6195047 7963.81 246.5 8580.88

1999 ...................................................................... 797600 6155241 7717.20 254.6 8050.62

2000 ...................................................................... 812800 6375401 7843.75 265.6 7843.75

1991 to 2000 Percent Change ............................. 50.8 -32.5

Rate increase required to bring 2000 to 1991 

price level ......................................................... 48.10%

Sources: 

Doctors USA: Statistical Abstract of the United States 

Earned Premiums: NAIC Report on Profit By Line By State 

Medical Care Services Inflation: Bureau of Labor Statistics 

EXHIBIT B: RATIO OF MEDICAL MALPRACTICE PREMIUM COSTS TO NATIONAL HEALTH CARE 

EXPENDITURES 

Year 

Diect Plus Assumed 

Medical Malpractice 

Pemiums Earned 1

National Health Ex- penditures 2

Medical Malpractice 

Pemium as a % of Health Costs 

1988 .................................................................................... $5322 $562,000 0.95

1989 .................................................................................... 5379 623,900 0.86

1990 .................................................................................... 5157 699,400 0.74

1991 .................................................................................... 5015 766,800 0.65

1992 .................................................................................... 5127 836,500 0.61

1993 .................................................................................... 5367 898,500 0.60

1994 .................................................................................... 5896 947,700 0.62

1995 .................................................................................... 6207 993,700 0.66

1996 .................................................................................... 6190 1,042,500 0.59

1997 .................................................................................... 6402 1,092,400 0.59

1998 .................................................................................... 6559 1,146,000 0.57

1999 .................................................................................... 6703 1,211,000 0.55

116

EXHIBIT B: RATIO OF MEDICAL MALPRACTICE PREMIUM COSTS TO NATIONAL HEALTH CARE 

EXPENDITURES—Continued

Year 

Diect Plus Assumed 

Medical Malpractice 

Pemiums Earned 1

National Health Expenditures 2

Medical Malpractice 

Pemium as a % of 

Health Costs 

2000 .................................................................................... 7360 1,311,000 0.56

TOTAL .................................................................................. $56,062 $8,463,400 0.66

1 Best’s Aggregates and Averages, 1998 and 2001 Editions. Figures in millions of dollars. Using direct plus assumed slightly overstates the 

size of medical malpractice premiums. 2 U.S. Department of Health and Human Services web site. 

EXHIBIT C: MEDICAL MALPRACTICE CLAIMS BY AMERICANS 1991-2000

Year 

Claims 

closed with 

payment 

Claims 

closed 

without 

payment 

USA pumber of 

poctors 

Claims 

w/pay 

per 

100 

poctors 

Total 

claims 

closed 

per 100 

poctors 

Percent 

of total 

claims 

with 

payment 

Paid losses 

and LAE expense (000) 

Average loss 

for all claims closed 

Average loss 

for paid 

claims only 

1991 ........... 30841 75348 631400 4.9 16.8 29.0 3089412 29093.52 100172.24

1992 ........... 31079 82737 652100 4.8 17.5 27.3 3270128 28731.71 105219.86

1993 ........... 32821 87728 670300 4.9 18.0 27.2 3438042 28519.87 104751.29

1994 ........... 31147 92788 684400 4.6 18.1 25.1 3696608 29826.99 118682.63

1995 ........... 31237 94180 720300 4.3 17.4 24.9 3903960 31127.84 124978.71

1996 ........... 30522 92888 737800 4.1 16.7 24.7 3641179 29504.73 119296.87

1997 ........... 24326 79178 756700 3.2 13.7 23.5 2560484 24738.02 105257.09

1998 ........... 17835 67094 777900 2.3 10.9 21.0 2488737 29303.74 139542.30

1999 ........... 10419 50363 797600 1.3 7.6 17.1 1192560 19620.28 114460.12

2000 ........... 3035 22280 812800 0.4 3.1 12.0 204248 8068.26 67297.53

TOTAL ......... 243262 744584 7241300 3.4 13.6 24.6 27485358 27823.53 112986.65

EXHIBIT E: MEDICAL MALPRACTICE INSURANCE PROFITABILITY 1991-2000

PROFITABILITY DATA—RETURN ON NET WORTH 

Year National 

Return 

1991 ............................................................................................................................................................................... 15.9

1992 ............................................................................................................................................................................... 15.5

1993 ............................................................................................................................................................................... 15.3


g:\graphics\81491.014
117

EXHIBIT E: MEDICAL MALPRACTICE INSURANCE PROFITABILITY 1991-2000—Continued

PROFITABILITY DATA—RETURN ON NET WORTH 

Year National 

Return 

1994 ................................................................................................................................................................................. 13.7

1995 ................................................................................................................................................................................. 12.7

1996 ................................................................................................................................................................................. 12.6

1997 ................................................................................................................................................................................. 12.6

1998 ................................................................................................................................................................................. 7.6

1999 ................................................................................................................................................................................. 5.1

2000 ................................................................................................................................................................................. 5.4

Average ROR ..................................................................................................................................................................... 12.3

Source: Profitability By-Line, By-State, National Association of Insurance Commissioners, 2000 Edition. 

Mr. BILIRAKIS. Thank you, sir. 

Mr. Schwartz. Your mike, please. 

STATEMENT OF VICTOR E. SCHWARTZ 

Mr. SCHWARTZ. Chairman Bilirakis, Ranking Member Brown, 

members of the committee I appreciate your inviting me here today 

to talk about the medical malpractice crisis. I’ve studied liability 

law as a law professor. I’ve practiced law for the plaintiff’s side for 

15 years. The past 22, I’ve been on the defense side. I also chair 

the Public Policy Group at Shook, Hardy, & Bacon. I served as 

General Counsel to the American Tort Reform Association, but 

today my views are my own, not that of the association or any 

member. 

One reason why the committee thought it would be important for 

me to testify today is that some quotes of mine have been put before this committee and the Judiciary Committee, that medical 

malpractice liability reform in H.R. 4600 will do no good. Those 

quotes were taken from statements I’ve made about another bill 

which had no limits on damages. When I heard about this, I felt 

actually good. In Washington, first you’re not quoted, then you’re 

quoted. Then you’re misquoted. Then you’re quoted out of context. 

That’s when you’ve made it, so I thought there was something satisfactory about that, but I thought I should clear it up. 

The bill is going to limit damages to $250,000 pain and suffering 

is going to ultimately have an effect on insurance. I don’t think the 

bill should be passed simply to limit insurance costs. I don’t think 

that’s right. I think the first thing with tort reform that it should 

be fair and it should be balanced. 

A bill such as H.R. 4600 can limit insurance costs because it limits the amount of payouts. Some members pointed this out. You 

don’t need to study tort law for 3 decades to figure that out. 

Mr. Deutsch, other members raised the issue why not let States 

do it. My view about medical malpractice has been that the States 

should do it. The problem is, and it was adverted to by some of the 

witnesses, that State tort reform, in key States that you’re looking 

at, like Arizona, Nevada, Illinois, Ohio, has been decimated by 

State Supreme Courts holding these laws unconstitutional under 

State constitutions. When they do that, there is no way you can get 

a review of the decisions because they use State constitutions and 

you cannot get to the Supreme Court. Even the Washington Post 

calls it judicial nullification. The Harvard Law Review has roundly 

118

criticized these decisions. We’ve done an article on it. We’ll submit 

it to the committee for the record. But the answer to the question 

of why not let the States do it, is it’s been shown that the States 

can’t do it. And a handful of States can undermine the total national picture. 

Mr. BILIRAKIS. If you would submit that article to the committee 

and without objection, it will be part of the record. 

Mr. SCHWARTZ. We will. 

Mr. BILIRAKIS. Thank you. 

Mr. SCHWARTZ. Another myth is that someone that insurers are 

all going to go to the bank and create a big raid once you pass this 

bill. This committee back in 1981, then in 1986, passed the Federal 

Risk Retention Act. It was not mentioned by anybody today. I’ll 

bring it to your attention because it’s extremely relevant. 

If insurers do not really reflect the savings that would be brought 

about by your bill, doctors have a ready alternative. They can self 

insure or they can group together and purchase insurance on a 

group basis. The Doctor’s Company, which is a principal insurer, 

is a mutual. It’s owned by the doctors. So they’re not there to cheat 

their members or not pass along savings brought by tort reforms. 

The final thing, and I’ve heard it many times, is that the tort reform won’t be effective, it won’t do any good. I heard the same 

thing about the General Aviation Recovery Act in 1994, which was 

signed by Bill Clinton, which limited the liability in a constructive 

way of the general aviation industry. I was told in the Senate 

Room that they would be papier mache ́ airplanes that fall out of 

the sky, that nothing would happen. 

Well, let me share with you what happened and we will submit 

an article that shows this. This Congress passed a tort reform. It’s 

the only real Federal tort reform that affects a substantial business 

in the United States. It brought back Piper. It brought back Cesna. 

It produced 25,000 jobs and there has not been one Member of Congress on either side of the aisle that sought to repeal that bill, because they know if they did they would be in the paper for repealing a bill that was effective. 

So civil liability reform of this type can be effective. It can 

achieve the goals you wish. I’d be happy to answer any questions 

that you might have. I realize there’s a limited amount of time, but 

I would value answering questions because there were a lot of 

things said this morning that really deserve a clear, concise answer. 

[The prepared statement of Victor E. Schwartz follows:]

PREPARED STATEMENT OF VICTOR E. SCHWARTZ, SENIOR PARTNER, SHOOK, HARDY & 

BACON, L.L.P. 

Thank you, Mr. Chairman, and members of this Committee, for your kind invitation to testify today about the medical malpractice liability crisis. 

By way of background, I wish to share with you that I have practiced and taught 

in the area of liability law for over three decades. For almost fifteen years, while 

teaching, I worked exclusively for injured parties. Since 1980, I have been affiliated 

with law firms that have primarily defense practices. I am now a senior partner at 

Shook, Hardy & Bacon, L.L.P. and chair its Public Policy Group. I am senior author 

of the Nation’s leading torts casebook, and have had the privilege to serve on each 

of the Advisory Committees in the American Law Institute’s project that is restating 

the law of torts for this new century. 

119

1See Victor E. Schwartz & Leah Lorber, Judicial Nullification of Civil Justice Reform Violates 

the Fundamental Federal Constitutional Principle of Separation of Powers: How to Restore the 

Right Balance, 32 Rutgers L. J. 907 (2001). 2See Steve Freiss, Malpractice gets costlier; Insurance rate hikes put doctors in a bind, USA 

Today, Apr. 9, 2002 at D7. 3See Roger Mezger, Insurance costs force doctors to quit, The Plain Dealer, Feb. 18, 2002, at 

A1. 

I serve as General Counsel to the American Tort Reform Association (ATRA), but 

the views that I am sharing today are my own, not those necessarily shared with 

members of ATRA or of the various medical groups that are seeking this reform. 

One reason why some members of the Committee thought it would be helpful for 

me to testify here today is because purported quotes that I made about the medical 

liability system and medical malpractice have been placed before this Committee by 

other witnesses. When I read these quotes, it reminded me of a wise insight given 

to me by my former minister, Burt Sikkelee. In his sermons, he admonished our 

congregation that ‘‘something not in context is pretext.’’ In that regard, it has been 

suggested that my views are that a bill such as H.R. 4600 would do nothing to reduce the burgeoning insurance rates and premiums faced by physicians and other 

medical providers throughout our Nation. This suggestion is simply not true. I have 

attached a letter regarding this issue we sent to Mr. Nadler, your colleague on the 

Judiciary Committee. I would like to take a moment to share my response with you. 

Some of the comments that have been quoted to you were made about a completely different piece of legislation that contained no strict limits on the amount 

of damages a plaintiff would receive. Instead, these comments related to a product 

liability bill considered by this body in 1998. That 1998 bill contained general principles of tort law and sought to provide a badly needed balance between plaintiffs 

and defendants in our legal system. 

Again, that 1998 bill did not contain provisions for strict limits on damages which 

ultimately help reduce insurance rates. Reducing insurance rates is an important 

consideration, but it is not and should not be the sole guiding light for enacting tort 

reform. 

First and foremost, tort reform should be fair and balanced, and meet the needs 

of both plaintiffs and defendants. If it is not fair, it is not good. 

Having studied the subject of torts from both perspectives of the court aisle, I believe that tort reform can be fair to both plaintiffs and defendants and that tort reform can achieve stability in the insurance market. Meaningful reforms such as 

those in H.R. 4600 will help bring a degree of predictability and fairness to the civil 

justice system that is critical to solving the growing medial access and affordability 

crisis. 

WHY NOT LET THE STATES DO IT?

When it comes to the specific area of medical malpractice, in the past I have believed that this should be the exclusive function of the States. Medical malpractice 

insurance rates are often set on a state-by-state basis, where state controls could 

lower costs. That good premise and that good practice has been upended in recent 

years, because when States have passed balanced medical malpractice reforms, they 

have been nullified by state courts under obscure portions of very lengthy and prolix 

State Constitutions. 

I am submitting to this Committee a law review article that was authored by my 

colleague, Leah Lorber, and myself that was recently published in the Rutgers Law 

Review,1 and ask that it be made a part of the record. The article demonstrates that 

these decisions do not represent sound State Constitutional law, and also that they 

trespass on the Federal Constitution itself. It is very pertinent to note that not one 

of these decisions held a state medical malpractice law unconstitutional under the 

Constitution of the United States; they would be upheld under that Constitution. 

The state courts that have nullified state tort reform are in key areas, such as 

Arizona, Illinois, and Ohio, all of which have situations that cry out for medical malpractice reform. 

In Arizona, for example, USA Today reports that the medical liability crisis has 

forced the maternity ward in Bisbee, Arizona, to close its doors. Expectant mothers 

must drive more than a half hour to the nearest town to deliver.2 In Ohio, a general 

surgeon named Dr. Joan Palomaki was scheduled to close her practice on June 30, 

the day before the price she paid for medical liability insurance would have jumped 

80 percent, to about $45,000 a year.3 Dr. Palomaki had spent 25 years performing 

biopsies, lumpectomies, mastectomies and other breast surgeries. Had she chosen to 

120

4See id. 

5See General Aviation Manufacturers Association, Five Year Results: A Report to the President 

and Congress on the General Aviation Revitalization Act (1999). 6See Victor E. Schwartz & Leah Lorber, The General Aviation Revitalization Act: How Rational Civil Justice Reform Revitalized an Industry, J. of Air L. & Com. (forthcoming 2002). 

stay in medicine, Dr. Palomaki said she would have had to clock 1,000 office visits—

half a year’s work—just to cover the cost of insurance.4

State court decisions to nullify legislative medical malpractice reforms trespass on 

the needs of others, a fact that can be readily appreciated by members of this Committee. For decades, this Committee has upheld both the principles and purposes 

of the Commerce Clause of the Constitution of the United States. Wayward action 

by a few courts in a few states should not undermine national goals, which is to 

have fair and balanced tort law, and affordable liability insurance. 

At this point in time, the medical malpractice liability crisis is best handled at 

the federal level, with uniform principles, giving states some options to address provisions, such as the cap on pain and suffering damages, where state policy may provide rules that are appropriate for the individual state. This is the approach that 

is taken under H.R. 4600. 

THE MYTH THAT INSURANCE COMPANIES WILL REAP THE PROFITS OF REFORM

I have read statements by the Center for Justice & Democracy and other organizations that suggest that if reform is enacted, either it will not be effective or if it 

is, that the benefits of tort reform will be wrenched away from doctors’ hands by 

commercial insurance companies. This is another myth that I wish to dispose of 

today. 

Back in 1981 and then again in 1986, I worked with members of this Committee 

to support the Federal Risk Retention Act. Those members of this Committee who 

served at that time will recall that I sought the enactment of risk retention, so that 

if a tort reform were enacted into law, we could assure all Americans that the benefits of that reform would go to those who need it—the doctors and, in turn and in 

this instance, the very important needs of the patient who seeks and needs medical 

care at affordable cost. If commercial insurers were to reap and hold profits that 

arose from tort reform, the Federal Risk Retention Act would provide a ready vehicle for doctors’ groups to form their own insurance pool or band together to form 

insurance purchasing groups to shop among commercial insurers for a better price. 

There already is in existence The Doctors Company and other mutual insurance 

groups that can help guard against that possibility. 

It has been noted that on occasion when state tort reforms have been enacted, 

insurance premiums for doctors did not immediately drop. From what I have suggested, that is wise rate-setting policy by commercial, mutual or doctor-owned insurance companies. We now know that state reform may last for a very short period 

of time, up until it is nullified by a state supreme court. If an insurance company, 

again a commercial or mutual company, were to lower reserves based on a tort reform that would be subject to nullification, doctors, patients and our Nation would 

not be well served. 

CAN TORT REFORM BE EFFECTIVE?

It has been strongly suggested by the Center for Justice & Democracy and other 

organizations that bills such as H.R. 4600—or tort reform in general—are not effective. I heard the very same argument from other groups in 1993, when we sought 

enactment of the General Aviation Revitalization Act, signed into law on August 17, 

1994 by President Bill Clinton. This was an act to address a crisis that occurred 

in general aviation. The crisis had some interesting similarities to that faced by 

physician insurers. The tort system had gone haywire, and was driving the general 

aviation industry out of business; Piper, Cessna and other companies had stopped 

producing planes. The promise of tort reform was that it would bring back stability 

within the industry. I am pleased to share with you today a very important fact: 

a promise made was a promise kept. Those companies are now back in business; 

over 25,000 jobs have been created.5 We will submit to this Committee an article 

to be published in the Journal of Air Law and Commerce 6 that details the effectiveness of federal tort reform. 

A bill such as H.R. 4600 can have appropriate and salutary benefits for patients, 

doctors and the medical system in the United States. Doctors are leaving practice 

because insurance is unaffordable. Specialists such as OB/GYNs are particularly hit 

hard. Even professionals who are merely providing care for patients, such as nursVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00124 Fmt 6633 Sfmt 6621 W:\DISC\81491 81491
121

ing homes, have seen insurance soar and have had to go without insurance or close 

their doors. 

CONCLUSION

I have kept my remarks brief because my points, which while I believe are important are very simple. Tort reform should be enacted if it is fair and balanced. A bill 

such as H.R. 4600, which seeks to achieve that balance, will have an important effect on insurance rates, just like MICRA had positive impacts in California, and the 

General Aviation Revitalization Act of 1994 had beneficial effects for the aviation 

industry in America. 

The commercial insurance industry will not steal greater profits for benefits that 

should go to all Americans. That will not take place, but if it ever does, we have 

a guardian at the gate: doctor mutuals and the Risk Retention Act, to ensure that 

the benefits of this legislation will help all Americans. 

It is true that there is one group that will steadfastly oppose this legislation 

under any and all scenarios, those who earn their living by suing people. If I still 

earned my living that way, I would be concerned about it too. The medical malpractice crisis is pervasive. The needs of our country should be put first, and this 

Committee should move forward this legislation as soon as possible. 

Thank you for your attention.

Mr. BILIRAKIS. Thank you, Mr. Schwartz. 

We have three votes, and I think it would be wise to break. You 

haven’t had lunch, too. I was able to grab a piece of pizza in the 

other room. But in any case, we’ll break, for three votes which constitutes a good half hour, so maybe you all can take a break. I 

apologize. I’m sorry for those who aren’t accustomed to doing this, 

this is routine up here, unfortunately. We have these votes so we 

got to make them. We willl return right after the third vote in a 

half hour or so. 

[Brief recess.] 

Mr. BILIRAKIS. Mr. Hurly, you are the chairperson of the Medical 

Malpractice Subcommittee within the American Academy of Actuaries, right? I think that was a yes. 

Mr. HURLY. Yes, sir. 

Mr. BILIRAKIS. Let’s see, you weren’t hired. You’re not being paid 

for testifying here today? 

Mr. HURLY. No. 

Mr. BILIRAKIS. Is an actuary ordinarily hired by an association 

or by a company or whatever the case may be to give answers to 

various questions? 

Mr. HURLY. Frequently, yes. My capacity here today is as a member of the American Academy, I chair the committee that I described, the Medical Malpractice Subcommittee of the American 

Committee, and therefore it’s part of a voluntary participation as 

a member of the Academy that I’m here today. 

Typically, my job is I’m a consulting actuary, so I do work for 

companies or self-insured programs, hospitals and things like that 

that would be interested in sorting out what their medical liability 

is. 

Mr. BILIRAKIS. Okay, your submittal here, your written statement, which certainly is professionally done, in charts a, b, c, d, 

contributing factors, introduction, then and now, et cetera, et 

cetera. All that was done by you in conjunction with your testimony 

here today. Is that right? 

Mr. HURLY. That is correct. 

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Mr. BILIRAKIS. That is correct. So you were not asked to do that 

by either the American Medical Association or medical profession 

by the insurance profession, by the majority up here? 

Mr. HURLY. No, actually I started to draft a document that was 

like this awhile ago at the request of some folks who were interested in getting an overview of what was going on and that just 

formed the basis for this, but this was written specifically for this 

purpose. 

Mr. BILIRAKIS. Sir, you were in the audience. God knows you 

were in the audience for all those hours just waiting patiently. 

Mr. HURLY. I remember that, yes. 

Mr. BILIRAKIS. And you heard Dr. Roberts testifying about his 

rates having doubled and how he’s heard that they will doubling 

again next year, that sort of thing. Why are insurance commissioners of the States allowing something like that to happen? 

Mr. HURLY. Well, as you know, the regulators in the States have, 

depending on the State law, the opportunity either to approve prior 

to the implementation of rates or review after the implementation 

of rates whether the rates are adequate, not excessive, and not unfairly discriminatory. 

Mr. BILIRAKIS. That is inconsistent. In other words, some States 

require them to approve them before they go into effect and others 

do it after the fact? 

Mr. HURLY. That’s correct. Depends on the law of the State in 

question. In the case of West Virginia, it’s a prior approval State, 

and so rates need to be filed in advance. They are subject, if they 

are greater than 10 percent to a rate hearing which is open to the 

public and is held under the auspices of the Insurance Commissioner of the State. In the case of West Virginia, there is an actuary retained by the State to review the filing that’s made and then 

finding of fact made by the Hearing Officer based on the request 

for a rate change. So they’re subject to the review of State regulators and their approval. 

Mr. BILIRAKIS. All right. In your experience, how would you say 

the State insurance commissions, regulators function? Do they—do 

some function in your eyes better than others in terms of allowing 

increases in terms of decreases? I don’t know if they do decrease 

at all in lieu of the fact there may be some documentation to show 

loss in other words or whatever reduction in claims, etcetera. Do 

some reduce? 

Mr. HURLY. If the question is do some State regulators reject the 

rate increases that are filed and adjust them to lower levels, the 

answer is yes, they do. In the case of West Virginia, for example, 

the rate increases and then filed by the most significant writer in 

that State had been reduced the last couple of times that they’ve 

made filing. So they’d win for a rate increase of 25 percent and 

that would get 15 approved by the State. So the State is looking 

at these rate applications carefully and making a determination. 

And some States are more aggressive and more particular about 

that than others. Others believe the market should be allowed to 

operate and may not be as, I guess, careful in reviewing those. 

Mr. BILIRAKIS. Do any of them on their own volition look at the 

rates? For instance, is it only when an application is made by an 

insurance company that they would take a look at them? Or lets 

123

say, for instance, do any of them take a look and say, well claims 

have dropped? You know, whatever all that data is for the past 

year or whatever and they therefore are going to decrease the 

rates? Does that happen at all? 

Mr. HURLY. As a practical matter, once rates are filed and approved, they stay in place as a general proposition until a company 

comes in and requests a change in those rates, whether they be a 

reduction or an increase, those rates would stay in place until such 

times the company would file again. 

Mr. BILIRAKIS. All right, now the rates in West Virginia that 

have doubled for Dr. Roberts, have you looked at those at all? You 

haven’t had an opportunity to look at those, come to any personal 

conclusion as to whether they were right in doing so or right in 

looks like maybe doubling them again or whatever? 

Mr. HURLY. I can’t speak to the specifics about that particular 

rate application. I’ve done work on malpractice exposure in the 

State of West Virginia, but I have not reviewed that particular rate 

analysis. I do believe there was a correct statement of how the 

BRIM program works, and that it is a State run facility and how 

those rates were determined. But I can’t speak to the actual rates. 

Mr. BILIRAKIS. Many members of the minority, Mr. Brown and 

others, and I’m really not at all displeased that they have, because 

the intent here is to do what’s right. Yes, I think the original focus 

was intended and has been on the legislation and on the litigation 

and that sort of thing. But they brought in this insurance business 

and what not, and we would be wrong to not look at the overall 

picture. But the insurers statement, insurers are increasing rates 

because of investment losses particularly their losses in the stock 

market. Now I know you’ve covered this in your written statement, 

very briefly though. Right, wrong? Possible, impossible? 

Mr. HURLY. The answer is no. They cannot increase rates in response to prior losses in the stock market or in their investments. 

They can’t recoup investment losses in pricing prospectively for 

coverage that they will provide in the future. From actuarial standpoint, it’s an actuarial standard of conduct. You can’t do that. You 

make prices prospectively considering what you think is going to be 

in place prospectively, not based on your investment losses from 

prior periods. 

Mr. BILIRAKIS. All right, you say they can’t do that because of the 

violation of actuarial standards. Do any of them do that? Might any 

of them have done that? 

Mr. HURLY. Not to my knowledge, not that I have seen, no. 

Mr. BILIRAKIS. Okay. There are others. My time is really up, but 

companies operated irresponsibly and caused the current problems. 

Companies are reporting losses to justify increasing rates, etcetera. 

We’ve heard that all day today, that sort of thing. And I don’t disagree. I would raise the questions where any of that is possible, 

possibly in the process of others questioning I might have an opportunity to get at that. 

Mr. Brown, to inquire. 

Mr. BROWN. Thanks, Mr. Chairman. We noted earlier that, and 

I come back to this because I’m still sort of intrigued by this, this 

question really is for you, Mr. Schwartz, I think that on page 10 

of H.R. 4600, there’s language the amount of punitive damages 

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awarded in health care lawsuit may be up to as much as two times 

the amount of economic damages awarded, on and on. So I come 

back. I want to make sure I understand this, and you have great 

expertise in tort law, obviously. If it means that someone so that 

candid, if a doctor harms Ken Lay, the punitive damages are higher than if the doctor harms in exactly the same way and the same 

body part or the same injury, whatever, the woman that empties 

the waste basket in Ken Lay’s office. It strikes me as peculiar in 

a country that sort of put the 3⁄5ths rule which is in our Constitution behind us that some human beings are only worth 3⁄5ths of another human being. This isn’t economic damages of what you’re 

going to earn. This is to punish the provider that made the—committed the negligent act. 

Is this something we see in tort law? I’m not a lawyer and I’m 

hardly an expert in tort law. Is this a common sort of thing in our 

law? 

Mr. SCHWARTZ. No, it isn’t common. Most States don’t have caps 

or limits on punitive damages. Some do. And there’s a variety of 

ways to treat them. The Supreme Court has said in one opinion, 

and there are many opinions on this—we probably don’t want to 

get in depth. At some point, the ratio of punitives to 

compensatories could be so extreme that it’s close to the line of 

being unconstitutional. And the court has talked about four to one 

and five to one. But there the court was talking about compensatory damages which include both economic damages and damages for pain and suffering. 

Mr. BROWN. Do you support this part of that bill to——

Mr. SCHWARTZ. Do I personally support it? 

Mr. BROWN. Yes. 

Mr. SCHWARTZ. I think one has to make sure that punishment 

is adequate for a defendant and I would want to give some thought 

to this. I wasn’t really asked to comment on the details of the bill 

and I’ve not supported ratios in the past that would be based on 

punitives to purely economic losses. So the answer would be that 

is not something I’ve supported in the record, no. 

Mr. BROWN. I appreciate that. I wasn’t really here to talk about 

4600 either and——

Mr. SCHWARTZ. I want to mention one thing because you asked 

a lot of questions about it and I thought your questions, I’m surprised you’re not a lawyer because you’re questions were really 

many of them on the mark. And that is economic losses versus noneconomic losses. Believe me, this is a complex thing. There are a 

lot of things in the law that are economic losses, somebody who is 

not a lawyer wouldn’t think of as economic losses. For example, 

somebody who is at home, a house wife or house husband, they’re 

not earning anything. So one might think they have no economic 

losses. But that’s not the way it is if you’re a plaintiff’s lawyer. I 

used to be able to jack those things up to $60,000, $70,000, $80,000 

a year. I’d break down on a chart everything that the woman, it 

was mostly women at the time, did, to cooking, nursing care. So I 

can build their economics up very high. 

With a child, as somebody mentioned a child earlier, you can 

take the child and you bring in neighbors and people who knew 

125

him or her, show his promise of economic losses in the future and 

build him up very, very substantially. 

So some of the remarks about the focus on economics are probably misplaced, or that people haven’t tried cases. So that the distinction that’s made in the bill is an honest distinction. You’re not 

leaving somebody high and dry simply because they may not, at 

that point in time, have a job. And a final point on this, is that 

the California statute was not going to work miracles. Once the 

plaintiffs’ lawyers, and I was one, they do good work. They’re 

smart. They readjust. Figured out what the situation was. They 

moved a lot of things that used to be deemed pain and suffering 

into economic losses. So sure MICRA saved money, but it didn’t 

save a huge ton because thing that had previously been regarded 

as pain and suffering damages were put into economic losses, and 

I think the record should reflect that. 

Mr. BROWN. Thank you. I have one question, Mr. Plunkett. One 

of the witness’s referenced the departure of St. Paul from the malpractice market. Are there other reasons why St. Paul left the market? 

Mr. PLUNKETT. I don’t know. I know that they were the largest 

provider of malpractice insurance. I actually don’t know much 

about their departure from the market. 

Mr. ANDERSON. Perhaps if I could offer a partial explanation of 

that. I am at least somewhat familiar with it. St. Paul lost more 

than a billion dollars in the year 2001 in excess claims costs over 

and above the premium. Not investment market losses, not stock 

market losses; it lost more than a million dollars in actual paid, it 

had losses, in access of approximately a billion dollars in excess of 

the amount of premium that it collected. 

Really what St. Paul was saying, that despite the fact that it was 

the largest carrier of malpractice insurance in the United States for 

the better part of 2 decades, that the insurance market had become 

so unpredictable in the United States, that they, despite 2 decades 

of work in the industry, were unable to predict what adequate premiums would be. And they were unwilling to put their shareholders at risk. 

Mr. BROWN. They lost tens of millions of dollars on Enron too, 

did the not? 

Mr. ANDERSON. I don’t know what they lost in Enron. I know 

what they lost in medical malpractice which I thought was the subject of the hearing. They lost more than a billion dollars in paid 

claims in excess of the premium taken in the year 2001. They 

didn’t choose to exit other lines of insurance. They chose to exit 

malpractice insurance. 

Mr. PLUNKETT. Mr. Brown, since the subject has been brought 

up, let me mention this. There had been concerns that St. Paul 

moved too fast to expand into too many States, to take advantage 

of the positive environment in the 1990’s for medical malpractice 

insurance and that they overreached. In particular, that they 

underpriced premiums, and then when losses started increasing 

moderately, they started increasing. They weren’t in a position to 

deal well with that financially. 

Mr. BROWN. Thanks, Mr. Chairman. 

Mr. NORWOOD [presiding]. Mr. Greenwood to inquire. 

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Mr. GREENWOOD. Thank you, Mr. Chairman. I want to quickly 

follow up on something. There’s been an awful lot of talk throughout this hearing about blaming the insurance industry and saying 

the real reason we have these outrageous rates is because the insurance industry lost so much money in the stock market that they 

had to make it up. Now is there a grain of truth to that? 

Mr. ANDERSON. Barely and probably actually less than a whole 

single grain. Insurance is a highly regulated industry, and insurance company investments are regulated carefully and in detail by 

both insurance commissioners and the National Association—— Mr. GREENWOOD. Since my time is very brief and I have a lot of 

questions less than a half a grain. Mr. Hurly, you said that they 

can’t recoup, that the State insurance commissions don’t allow insurance companies to put into their rates past losses, right? It 

wouldn’t make a jot of difference if St. Paul or anybody lost $100 million to $200 million in Enron or anywhere else in terms of how 

they set their rates. Is that you’ve testified? 

Mr. HURLY. Yes. 

Mr. GREENWOOD. Mr. Schwartz, is it possible that there’s anything built into the rate of an insurance company that has anything in your opinion, that has anything to do with past losses in 

the insurance industry, excuse me, in the investment market? 

Mr. SCHWARTZ. If the insurance commissioners are doing their 

job, no. 

Mr. GREENWOOD. Mr. Plunkett, do you disagree with these other 

three gentlemen on that point? 

Mr. PLUNKETT. Sadly, yes. Investment income affects reserves. 

Reserves affects operating income. The combination there is especially potent for medical malpractice because you have a longer lag 

time for medical malpractice, a pay out period of 6 years than you 

do for other types of insurance. So it actually does have an impact. 

Mr. GREENWOOD. Mr. Anderson, Mr. Hurly, would you care to refute or agree with Mr. Plunkett in that regard? 

Mr. ANDERSON. Investment income does not affect reserves. Reserves are set based on the actual anticipated value of a case. It 

has nothing to do with investment income. Any decrease in investment income is simply money that is no longer available to subsidize the premiums of medical malpractice insurance. 

Mr. GREENWOOD. Mr. Hurly, is Mr. Plunkett right or is Mr. Anderson right? 

Mr. HURLY. I would agree with Dr. Anderson. 

Mr. GREENWOOD. Mr. Anderson is right. Okay. So Mr. Hurly, 

what goes into, what are the components of a rate that a company 

gets to charge a premium that gets a charge? We know that they 

don’t even, in that premium is less than they expect to pay in payouts, right? 

Mr. HURLY. That’s generally correct, yes. 

Mr. GREENWOOD. So that premium, so then out of their future 

investments they have to get all their operating costs and any profit. Is that correct? 

Mr. HURLY. Well, that’s not always the case. What they’ll do is 

they’ll build a rate that includes lost costs and expenses of operating their company. In general, though they anticipate that 

they’re going to lose money, the combined costs of operating the 

127

company and paying losses is going to be greater than the premium 

they collect and they offset that with investment income. But it 

may be that the loss ratio is like 90, 95 percent on an undiscounted 

basis and expenses are 20, 25 percent, something like that. 

Mr. GREENWOOD. There’s a draft Democratic bill that’s called the 

Medical Liability Insurance Crisis Response Act of 2002 that I 

think is going to be offered up as an alternative to H.R. 4600. One 

of the things that they proposed to do is freeze in medical malpractice insurance rates, effective on the date of enactment, rates 

would be frozen at the level of January 1, 2002 until 6 months 

after the filing of the Commission Report. 

What would a 6-month freeze in insurance premium, what would 

be the impact of that, Mr. Anderson? Dr. Anderson? 

Mr. ANDERSON. Well, I think it would be devastating. I think 

we’ve heard allegations before the committee today that the malpractice industry was derelict for not raising rates sooner, which is 

a notion that I find very difficult to understand. It’s hard to know 

why having today’s sky high malpractice rates sooner would make 

them more palatable. 

Mr. GREENWOOD. The bill also provides, says this—preventing 

medical malpractice insurers from exiting the market. Any insurer 

who exits the medical malpractice insurance market must also stop 

offering all types of insurance. 

Mr. Hurly, what do you think about that? 

Mr. HURLY. I think it’s peculiar. I don’t see that as a——

Mr. GREENWOOD. That’s kind of an understatement, isn’t it? 

Mr. HURLY. Yes, I think so. I don’t want to use poor legal terminology here. I’m not a lawyer, but it sounds almost confiscatory and 

sort of binding the company to do something that’s inconsistent 

with good financial activity. 

Mr. GREENWOOD. Mr. Plunkett, since you don’t support the tort 

reform approach, do you concede that the rates are outrageously 

high in places like Pennsylvania? You agree with that, don’t you? 

Mr. PLUNKETT. We have a rate problem in some States. Absolutely. 

Mr. GREENWOOD. A rate problem. Now, you don’t think the tort 

reform is the way to solve the rate problems, so could you outline 

for us what insurance reforms you think would solve this problem? 

Mr. PLUNKETT. Absolutely. We’ve proposed a number of items at 

the State and the Federal level. And some of them are unique and 

recognize the problem; for instance, that the high risk specialties 

you’ve heard about so much today, the obstetricians and the neurologists, some of the specific problems that they face. For example, 

in the written testimony as you have probably seen, we suggest 

that the States consider a sort of a fee based on risk that would 

be adjusted, which——

Mr. GREENWOOD. What fee? 

Mr. PLUNKETT. It would be a fee that insurance companies would 

assess, that they would assess it on all physicians. It would be 

based on the risk of the specialty, so a higher fee for a higher 

risk——

Mr. GREENWOOD. What’s the difference between a higher fee and 

a higher premium? 

128

Mr. PLUNKETT. It could possibly mean that for general practitioners and internists and those who are practicing much lower 

malpractice rates at this current time, but are doing what we call 

referring up. The problem with some of these specialties is that 

they’re seeing patients who are of the highest risk, because neurologists and neurosurgeons are having referred up to them from 

other practitioners, patients who if there’s a minor error——

Mr. GREENWOOD. You would have the family doctor pay higher 

insurance rates to lower——

Mr. PLUNKETT. The family doctor, Mr. Greenwood, is actually 

benefiting from the medical malpractice structure a little bit. So I’d 

have them pay a little bit. Yes, absolutely. And that would actually 

deal with some of the problems that we’ve heard today where we 

have obstetricians leaving practice. Where we have neurologists 

who are facing medical malpractice insurance premiums that are 

extremely high. It would be a slight subsidy for those high risk specialties recognizing that all physicians are part of the care that 

these patients get. Only some of them are taking the risk. 

Mr. GREENWOOD. My time is expired, but I invite you to come to 

Pennsylvania and you’ll find out that there are no physician categories that aren’t gouged as it is. And there’s no room to simply 

transfer the premiums downward to the family practices. They’re 

already struggling. 

Thank you, Mr. Chairman. 

Mr. NORWOOD. Mr. Stupak, you’re recognized for 5 minutes. 

Mr. STUPAK. Thank you, Mr. Chairman. 

Dr. Anderson, you talked a lot about St. Paul and I believe you 

said that St. Paul was the, business was exclusively medical malpractice but everything I’ve seen——

Mr. ANDERSON. I didn’t say that. 

Mr. STUPAK. You didn’t say that. Okay. Ten percent of their business is medical malpractice. Ninety percent is insuring others. So 

when they lost $108 million on Enron, it had to be picked up somewhere. We’re not saying it was in the medical malpractice field, but 

somewhere. If you lose money, next year you got to pick up that 

loss somehow, right? 

Mr. ANDERSON. That’s your testimony. That’s not my testimony. 

What I pointed out was that St. Paul lost more than a billion dollars in medical malpractice paid lawsuits. They chose not to exit 

other lines of business to limit their loses. They chose to exit the 

sale of medical malpractice insurance. 

Mr. STUPAK. And St. Paul, between 1992 and 1997 released $1.1 

billion from the reserves, reserves that were set aside. They released it, which certainly hurt their malpractice business and made 

their bottom line and their profit look very well. But if you have 

a run of claims, it’s going to hurt you if you release $1.1 billion 

from your reserves. 

Mr. ANDERSON. I’m sorry sir, but that logic is incorrect. I can 

talk to you about it in detail if you’d like me to take the time. 

Mr. STUPAK. Well, sir, I refer you to the Wall Street Journal article, June 24, 2002, because that’s exactly what they reported as 

happen and that’s what caused sort of a run under claims for medical malpractice. 

129

Mr. ANDERSON. I think it would be a great mistake for this committee to accept the article in the Wall Street Journal as representing fair, appropriate, and balanced evaluation of the situation before it today. 

Mr. STUPAK. Well, if you look at also their statements for those years, like last year they had $1.8 billion where 10 percent come 

from medical malpractice. If you look at their financial statements 

and go back and see what happened, I think would verified the 

Wall Street Journal article. 

Anyway, moving right on. Mr. Schwartz, you know about the 

Medical Liability Monitor magazine? 

Mr. SCHWARTZ. I’ve heard of it. It is not something that I have 

read, sir. 

Mr. STUPAK. Is it a credible source for a magazine? 

Mr. SCHWARTZ. I have no idea. It’s not something that is in my 

reading box every week. 

Mr. STUPAK. And you have not relied on it then? 

Mr. SCHWARTZ. No, I have not sir. 

Mr. STUPAK. The Medical Liability Monitor indicates that States 

without caps on damages and States with caps on damages, the 

premiums are actually about the same. So the caps found in 4600 

here, how is that going to reduce the malpractice premiums? 

Mr. SCHWARTZ. Well, I can’t evaluate a source that I don’t know 

anything about. I’ve been working in tort law for 30 years and I’ve 

never heard of that journal. 

Mr. STUPAK. Well, then you can’t dispute it either. 

Mr. SCHWARTZ. Well, I just would say that where you have, 

there’s a certain common sense approach to all of this, that if you limit damages in tort law to $250,000 you do a number of things 

that are going to reduce costs. No. 1, obviously if a verdict—work 

with me on this. Before the thing is law, a jury can come back with 

a million dollars pain and suffering. Afterward, it can only come 

out with $250,000. Ninety-five percent, or 97 percent in some instances of these cases are settled. Now I’ve been in a lot of settlement negotiations. Hundreds. And if there is a cap in a State, 

whether I’m on the plaintiff’s side or the defense side, the perimeters of the settlement are going to be narrowed. They just are. So 

I don’t know what this periodical showed, but as a matter of common sense, it should reduce cost. 

Mr. STUPAK. The common sense is based on assumption based 

upon your experience, right? 

Mr. SCHWARTZ. That’s all I have, sir. 

Mr. STUPAK. Well, than tell me this. Then tell me this. Michigan, 

which did pass medical malpractice with caps very similar to 4600, 

but yet the AMA still lists them as one medical malpractice crisis 

States. If these caps work so wonderful, and we’ve been at it about 

10 years now, the verdicts would be through the system, why is 

Michigan still a crisis State? 

Mr. SCHWARTZ. Well, it could be and one has to look at the 

Michigan verdicts and the Michigan experience that after a period 

of time, plaintiff’s lawyers were able to shift enough costs into economic loss so it didn’t make any difference. I haven’t studied it, but 

I would say that would be the answer. And I haven’t labeled Michigan as a crisis State. Michigan law, overall, is pretty fair. It’s a 

130

good court and it isn’t a State that at least comes to my mind as 

being a crisis State. 

Mr. STUPAK. Well, Michigan premium recoveries are $85,000, 

this is based upon National Practitioners Data Base. Michigan, the 

medical malpractice pay out based on 2000 is $85,000, where rest 

of the Nation is $125,000. So they’re actually about $40,000 or almost a third less, but yet they’re still considered a crisis. So you 

have less pay outs. You have the caps. But yet they are still in crisis. 

Mr. SCHWARTZ. I would want to see what the criteria for crisis 

are. 

Mr. NORWOOD. Thank you very much, Mr. Stupak. 

Now I’ll recognize Mr. Cox for 5 minutes. 

Mr. COX. Thank you, Mr. Chairman. 

Let me begin with Mr. Plunkett. Earlier, on the first panel, 

Lauren Townsend with the Coalition for Consumer Justice answered a question concerning trial or contributions to the Coalition 

for Consumer Justice, indicated that a significant portion of that 

organization’s funding comes from trial lawyers. In California, the 

trial lawyers have changed their name to the Consumer Lawyers 

of California. Can you tell me whether or not the Consumer Federation of America takes trial lawyer money? 

Mr. PLUNKETT. No, I can’t tell you. 

Mr. COX. Oh, you cannot tell me? 

Mr. PLUNKETT. I don’t know. But I can tell you this—— Mr. COX. How can we find out the answer to that question? I 

only ask this in the interest of full disclosure. Obviously, we have 

insurers sitting here, we have stakeholders, we have physicians 

and so on. And if we have lawyers being represented indirectly 

then we know that too. 

Mr. PLUNKETT. Okay, here’s what I can tell you. We have an annual awards dinner every year. Mr. Schwartz is a regular attendee. 

I think on occasion trial lawyers—— Mr. COX. I’m sorry, Mr. Plunkett. I’m asking a really direct question. 

Mr. PLUNKETT. Not that I know of. 

Mr. COX. Do you disclose your finances publicly? Is there a way 

for Congress or the public to find out who funds the Consumer Federation of America? 

Mr. PLUNKETT. We can give you our annual report just like we 

will to anybody. 

Mr. COX. Does that include that information of where the money 

comes from? 

Mr. PLUNKETT. I don’t know. I haven’t looked at it recently. 

Mr. COX. All right. Well, thank you for that non-answer. 

Mr. PLUNKETT. The truth is if there’s any, it’s——

Mr. COX. I’m sorry, Mr. Plunkett. 

Mr. PLUNKETT. Less than half of a percent. There’s your answer. 

Mr. COX. Actually, that’s a very direct answer. So the answer 

is——

Mr. PLUNKETT. Well, why I tried to say Mr. Cox but——

Mr. COX. Half of a percent—— Mr. PLUNKETT. We have an annual awards dinner. That’s the 

only time when we accept outside contributions. So if there’s a perVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00134 Fmt 6633 Sfmt 6602 W:\DISC\81491 81491
131

centage, it’s tiny, tiny, tiny, and it’s probably equivalent to what 

Mr. Schwartz here contributes. 

Mr. COX. I’m sorry, outside contributions. And what are the other 

contributions? 

Mr. PLUNKETT. Say, foundation grants and contributions from 

our members. 

Mr. COX. And might those members include trial lawyers? 

Mr. PLUNKETT. No, they don’t. 

Mr. COX. They’re forbidden from contributing? 

Mr. PLUNKETT. Members of the Consumer Federation include legitimate consumer groups. They include other members such as a 

credit unions and public power entities and our association. But we 

don’t include trial lawyers. 

Mr. COX. We’ll try and figure out exactly where that all comes 

from so we know exactly what interests are being represented. But 

I appreciate that. 

Dr. Anderson, the Doctor’s Company which is a significant insurer in the State of California, my State, has been in the market 

throughout that malpractice crisis when Jerry Brown was Governor, when the democratic legislative enacted MICRA and he 

signed it into law. And you’re still around in California. You 

haven’t left. My understanding is the following, and please correct 

me if I’m wrong, that in constant dollars, the 1976 premiums on 

average for malpractice in California were $23,000 and that today, 

the average premium, or at least in 2001 the average premium was 

$14,000. Is that right? 

Mr. ANDERSON. That is correct in constant dollars, yes. 

Mr. COX. So in other words the premium is less now than it was 

a quarter century ago. 

Mr. ANDERSON. That is correct. 

Mr. COX. And that experience I take it is not unique to California, but is experienced in other States with similar kinds of tort 

reform? 

Mr. ANDERSON. Absolutely true. Whenever we do an apples to 

apples comparison, we find the same thing. Colorado has precisely 

the same experience, Indiana has the same experience. States that 

have effective tort reforms have effective decreases in premium. 

The reason that the Medical Liability Monitor and the Consumer 

Federation of America and the Center for Justice and Democracy 

don’t seem to be able to get hold of the fact that limits on non-economic damages decrease rates is because they’re making fish to bicycle comparisons. The cap that we’re talking about here is a 

$250,000 cap on non-economic damages. Where ever that cap has 

been used results are dramatic. Obviously, they would be less dramatic if you have a million dollar cap. They will be less dramatic 

if you have a cap on punitive damages because punitive damages 

are rarely, if ever pled in medical malpractice cases. I point out 

that in general, punitive damages are not insurable, because insuring an illegal act is considered a moral hazard. 

Mr. COX. Dr. Anderson, what is the nature of the law in California, what are the provisions, I mean, the main provisions of it. 

Mr. ANDERSON. MICRA has four principal provisions. One is——

Mr. COX. I’m sorry, did I say California? I meant to say Colorado. 

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Mr. ANDERSON. Colorado has very similar reforms to California, 

generally limiting total medical liability damages to approximately 

a million dollars. 

Mr. COX. And in Colorado, where the experience base is 1986 to 2002, the premium in constant dollars is $30,000 back in 1986 and 

$11,000 in 2002. Is that right? 

Mr. ANDERSON. Yes, that’s correct. 

Mr. COX. So it’s again lower by over 60 percent. 

Mr. ANDERSON. Yes, sir. 

Mr. COX. Now what year did Colorado enact this reform? 

Mr. ANDERSON. 1986. 

Mr. COX. So over the period of time since these reforms have 

been in place, not only have premiums not gone up, but they’ve 

been reduced by over 60 percent? 

Mr. ANDERSON. In constant dollars, yes sir. 

Mr. COX. I’m sorry, Mr. Chairman? I’m being informed that my 

time is up. I apologize to the other witnesses for not being able to 

ask more questions. 

Mr. NORWOOD. But don’t leave, we’ll go around again. 

Mr. Strickland, you are recognized for 5 minutes. 

Mr. STRICKLAND. Thank you, Mr. Chairman. One of the reasons 

I think we have witnesses before this committee is to pick your 

brains and get your judgments, your best opinions. And we’ve 

heard here today something that really bothers me greatly. And 

that has to do not with the economic damages as such and not with 

the non-economic damages as such, but with the punitive damages, 

which are damages that are for the sole purpose of punishing or 

deterring inappropriate behavior. And we’ve been told that this bill 

allows in the area of punitive damages an amount two times the 

amount of the economic damages up to $250,000, whichever of the 

two is greater. 

Now I think that means that if you are a relatively poor person 

and you have been subject to bad behavior so that punitive damages are called for, that you’ve got the possibility perhaps of getting 

a little bit of money. But if you are a very successful, high income 

individual and you qualify for punitive damages, you have the possibility of getting a whole lot of money. I’m just interested in your 

opinion. And I’d like for you to tell me if you would as you go down 

the table there. Do you think this is fair? 

Dr. Anderson? 

Mr. ANDERSON. Punitive damages are rarely pled in medical malpractice. 

Mr. STRICKLAND. But when they are. When they are, this is a 

theoretical question but, I’m trying to get at your best judgment 

and perhaps your values, I don’t know. 

Mr. ANDERSON. What this would imply is that punitive damages 

should be proportionate to the injury. This is a way of making 

that——

Mr. STRICKLAND. But it’s based on the economic damages. It’s not 

based on the severity of the injury as such. 

Mr. ANDERSON. I beg to differ, sir. There is no limitation on actual damages as has been pointed out in previous testimony. 

Mr. STRICKLAND. But this is based not on non-economic damages, 

but on economic damages which means that a person of low income 

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is going to receive less in terms of punitive awards than the person 

of high income. 

Is that fair when the purpose of punitive damages is to deter bad 

behavior? 

Isn’t it appropriate that we have at least an equal punishment 

for bad behavior directed toward a poor person as we would have 

directed toward a wealthy individual? 

Mr. ANDERSON. If the sole purpose of punitive damage is to punish the offender, it would have no relationship to whom they are 

paid, sir. 

Mr. STRICKLAND. It would have no relationship to what, sir? 

Mr. ANDERSON. To whom they are paid. If society wishes to 

use——

Mr. STRICKLAND. But the amount would, would it not? The 

amount would have a deterrent effect. 

Mr. BROWN. Would the gentleman yield? 

Mr. STRICKLAND. I would. 

Mr. BROWN. Does this mean if a physician or physical therapist 

or whatever is working on a wealthy person providing some service 

that they’re going to be a lot more careful because punitive damage 

will be higher, than if they’re working on the wealthy person’s 

maid, where they do injury to that person, punitive damages will 

be very little? 

Mr. STRICKLAND. Reclaiming my time, I hope that’s not the answer. 

Dr. Anderson, could I get a yes or no or a I don’t know answer 

from you to that question? I’ve given you three choices, yes, no, or 

I choose not to say. 

Mr. ANDERSON. I’m sorry, sir. I don’t find the question to be 

something that I can answer. 

Mr. STRICKLAND. Do you not understand the question, sir? I’ll explain it again if you do not understand it. 

Mr. ANDERSON. Go ahead. 

Mr. STRICKLAND. If you are a poor person and you are injured 

and the jury awards punitive damages, you’re going to get less if 

you are a poor person than if you are a wealthy person. 

Can you understand that? 

Mr. ANDERSON. I understand your words. It is not necessarily the 

case. 

Mr. STRICKLAND. Let’s assume it is the case. 

Mr. ANDERSON. That’s your answer. 

Mr. STRICKLAND. I don’t think you want to answer me, sir, so 

we’re going to move on. Next. 

Mr. HURLY. As a representative of the American Academy, I’m 

not speaking on behalf of the Academy. 

Mr. STRICKLAND. Sure, I understand that, sir. 

Mr. HURLY. But it seems to me that punitive damages don’t tend 

to be dealt with in medical malpractice cases because they’re, in a 

lot of cases, not allowed. 

Mr. STRICKLAND. But when they are, when they are should a 

poor person get less than a wealthy person? In your judgment sir. 

I’m just asking for your judgment. 

Mr. HURLY. My personal judgment is that it should be not mitigated by whether they’re poor or rich. 

134

Mr. STRICKLAND. Thank you, sir. Mr. Hurly? 

Mr. PLUNKETT. Plunkett. 

Mr. STRICKLAND. Oh, I’m sorry, Mr. Plunkett. 

Mr. PLUNKETT. Well, as with Mr. Brown, I’m also not an attorney. So I’m going to give you, we have also not taken a formal position on the Greenwood Bill because we’re still looking at it. But in 

general, we are wary of this kind of tort reform. So here’s your general answer. It doesn’t make much sense to me to base punitive 

damages on the income of the person who’s suing. Punitive damages should be based on the deterrent value. 

Mr. STRICKLAND. Thank you. Next. 

Mr. SCHWARTZ. I was asked that question by Mr. Stupak when 

you were out of the room. That’s not an approach that I would advocate. I think there should be reasonable limits on punitive damages. I hate to see this bill sidetrack on what, as a practical matter, 

is a non-issue because as some of the witnesses testified, punitive 

damages rarely come in med. mal. 

Mr. STRICKLAND. I know, but I want to tell you this single issue 

just bothers me greatly. 

Mr. SCHWARTZ. I can understand that and hopefully—there’s 

really three things here and it’s very confusing although this morning having the 5 hours there allowed me to stop and think which 

once in a while I do. I had a good day, so I thought about it. 

There’s three things going on here and everybody keeps mixing 

them up. 

One, is there a problem? And there seems to be at least some 

consensus that there is a problem for some of the doctors. 

Mr. STRICKLAND. There is. 

Mr. SCHWARTZ. No. 2, whether this particular bill would be effective in addressing that problem. And there is considerable debate 

among the members as whether it would or not; whether in California it has worked or it has not worked. I think it’s worked. 

That’s my view. 

And the third, which goes to your question, that last question. 

And that is, whether the contents of this bill are fair. And I think 

it might be helpful over time, as you talk among yourselves to keep 

those three things separate, because that third part I would say 

that’s not an approach that I would advocate on punitive damage 

reform, which I believe in. And that goes to the part three. 

Mr. NORWOOD. Mr. Strickland, your time is up I’m sorry to say. 

Mr. Buyer, you’re recognized for 5 minutes. 

Mr. BUYER. Thank you. Mr. Schwartz, I want to thank you for 

your testimony. I’m relating to you. There are more thoughts, 

though, that we have examining this. I immediately came toward 

you in your thoughts when you spoke about States’ rights, because 

that’s where I am. And so I am concerned about the commerce 

clause and its applicability here and the Federal Government being 

involved in States’ issues. 

Federal Government, you know, reality is over the years depending upon whatever party is in control here in this town, we pick 

and choose. We really do. We don’t like to admit that, but we do. 

We pick and chose when we should intervene and we’re all politicians and we can justify just about anything. 

135

So I’m interested in a reply about the constitutional question. 

The other is with regard to punitives. I’ll just put on my lawyer’s 

cap. Punitives really are in my opinion are about the punishment. 

And it has no idea about justice is completely blind. They have no 

idea about the face of that individual nor care about their wellbeing or economic standing. It was the conduct. So I’d just say to 

my colleague, Mr. Strickland isn’t here, I guess he’s moved. I guess 

I don’t get as emotionally excited as you did on this one because 

I agree with you on it, but anyway, that’s just the way punitives 

works out there as I know it, in the two States that I practiced in. 

So I’m interested about the constitutional question. With regard 

to Mr. Anderson and Mr. Hurly, question for you is this idea on 

I have looked at, I cited to it earlier, this trend in 2001 rates for 

physicians, medical professional liability insurance. And as I look 

at all these increases in rates through all the jurisdictions of 

States, and those of whom have some type of cap, and they all 

got—it’s a hybrid out there. And since you have the Doctor’s Company, you’re dealing with a lot of different ones. 

But my question is to you those States that have made some 

form of an attempt, has there not been some form of an impact 

upon those premiums? Okay, so I’ve got a list of questions for both 

of you and Mr. Schwartz. And I hate to put it that simply, but we’ll 

start with Dr. Anderson first. 

Mr. ANDERSON. I think that’s a very important point. Speaking 

for the Doctor’s Company, but in general this is true for all the 

PIAA companies that insure in multiple States, it’s very important 

to point out that the average rate increase in the United States in 

the year 2000 is about 10 percent. Doctor’s Company actually less 

than that. In the 2001, it’s between 10 and 20 percent. The astronomically high rates that are now being demanded are solely being 

demanded in areas where there is unlimited liability in which we 

have now entered a new era of nine figure hundreds of million of 

dollars a malpractice suit. So this is not a problem in every venue. 

It is only a problem in venues which now have unlimited damages. 

I would point out that even in the State of Nevada, there is a 

big difference between rates in Clark County, which is exceptionally litigious with a very active plaintiffs’ bar, and Reno, which is 

much less so. And the rates fairly reflect that difference. 

Mr. BUYER. Why was is it in Pennsylvania when the legislature 

increased the physicians’ primary limits, then all of a sudden premiums increased also by 69 percent. 

Mr. ANDERSON. I’m sorry, sir, I missed the question. 

Mr. BUYER. In Pennsylvania it looks at though the legislature increased the physicians’ primary limits up to $500,000/$1.5 million 

fund surcharge. And then also we also had these insurance premiums just skyrocket in Pennsylvania even though they have caps 

and a compensation fund. 

Mr. ANDERSON. Because the liability picture in Pennsylvania has 

gone, because there was no check and really is to this day, no check 

on the limitation for damages in Pennsylvania, more or less out of 

the clear blue sky, the State of Pennsylvania has now entered a 

new era of $50 and $100 million malpractice verdicts. 

As I pointed out, the city of Philadelphia alone in the last year 

has had four verdicts in excess of $50 million. That is an enormous 

136

burden to be placed on the limited number of physicians who carry 

that burden. It also means that any insurance company trying to 

set future rates must now be aware of what the upper limit of risk 

is. The alternative is to have the company go bankrupt. 

I would point out that most of the companies whose names have 

been put before the committee already went bankrupt during the 

time when financial returns in the investment markets were highest. It didn’t go bankrupt because they made bad mismanagement 

decisions or mismanaged investment funds. They went bankrupt 

because they thought they had a mechanism for pricing their insurance at less than the cost of the actual claims. 

Insurance is not magic. Insurance companies cannot manufacture money. They must adjust premiums to match risk or they will 

not survive and patients will have no indemnity and physicians 

will have no insurance. 

Mr. BUYER. Mr. Chairman, I see the lights have come on. I’d appreciate it though if Mr. Hurly and Mr. Schwartz could have the 

opportunity to answer those questions. 

Mr. HURLY. As far as tort reforms, which is the second question 

you asked, I don’t think Dr. Anderson addressed that. I think one 

of the clearest examples we have of the impact of tort reforms is 

the body of tort reforms that were passed in the mid 1980’s which 

once they fed in through the system and companies began to get 

a feel for what their impact was going to be because companies will 

tend to defer until they figure out whether the tort reforms are 

going to be upheld, whether they’re going to be effective and to 

measure that, companies did decrease the rates as they went into 

the decade of the 1990’s, and that’s part of the reason why rates 

went down during that timeframe. St. Paul, for example, I happened to run across a piece of paper, they reduced rates in 30 

States in 1989 on average of 15, 20 percent across each of these 

States, and it was largely due to the impact of the implementation 

of these tort reform and the change in social consciousness, because 

tort reforms do have an impact on losses and companies will respond when indicated by adjusting the rates for the most part. 

I think that is true and I agree with what Dr. Anderson said 

about the situation with the pricing. One thing about the Pennsylvania pricing that you mentioned, it’s not clear from what you said 

whether you reflected the fact that when you increase the limits of 

coverage, you need to increase the price that’s paid. And in the 

State of Pennsylvania they’ve iterated up their coverage over time 

from $200- to $300- to $400- to $500,000 as the primary limit. And 

part of that rate increase may have been the steps, part of the 

stepping process up to that limit of coverage, but I don’t know that 

from what you said. So that notwithstanding, Pennsylvania has 

seen a deterioration in its loss experience and rates are responding 

to that deterioration. 

Mr. SCHWARTZ. Mr. Buyer, there’s an article written by former 

Judge Bork and actually a young man at the American Enterprise 

Institute, which I don’t think is a liberal think tank, showing the 

commerce clause’s effect in tort law. It’s a good study. It’s at 3 Harvard Journal of Law and Public Policy. And Judge Bork and his 

colleague show how the commerce clause today would be impacted 

137

by the things that were discussed this morning, that medical malpractice crisis is not really isolated to one State. 

The costs also that are borne by this are borne by this government and by laws passed by this Congress. So they make the argument that this is an area where the Congress of the United States 

can act. 

Now, I agree with you around this great institution, States’ rights is often in the eyes of the beholder. So merely because the 

commerce clause allows this, that doesn’t mean that it should be 

done. The reason I think it should be considered very, very seriously is State tort reform right now is Russian Roulette. You never 

know whether a particular act is or is not going to be held unconstitutional, because it really depends on the vagaries of who’s sitting on a State court. 

In Ohio, they nullified a tort reform. In California, they didn’t. 

In Florida, a lower court, they did. So how can one operate in something as serious as medical mal with that going on? 

Moreover, if I were running an insurance company and a State 

passed a medical malpractice cap, I would not touch my reserves 

or my rates and premiums until I knew whether or not the issue 

would be held constitutional or not and that can take 4 or 5 years. 

Mr. NORWOOD. Thank you, Mr. Buyer. 

Mr. Schwartz, you’re referring to it is found in States, various 

States, unconstitutional according to the State constitution. 

Mr. SCHWARTZ. That’s correct, sir. In State constitutions, and 

we’ll submit this article to you. I just started to read them 10 years 

ago. I didn’t read them in law school. They can be two or three 

hundred pages in length, and they have clauses in them that are 

extremely malleable. Something like open courts. An open courts 

provision to a Judge could say, well, the court should be open 24 

hours a day. Or if you touch $1 of compensatory damages, it’s unconstitutional. And unfortunately for both sides, these decisions 

seemed to have reflected the elected Judge constituency who elected him. 

So if he or she were elected by the business community, they’re 

upheld as constitutional. If he or she were elected by our friends 

in the plaintiffs’ bar, it’s held unconstitutional. And that’s where 

State tort reform is left right now, and it is not a pretty picture. 

Mr. NORWOOD. Mr. Deal, you’re recognized for 5 minutes. 

Mr. DEAL. Thank you, Mr. Chairman. First of all, let me go back 

to the punitive damages issue that Mr. Strickland addressed and 

perhaps another point of view. In my State, and although I’ve been 

out of the practice of law now for 10 years by virtue my position 

here, our State passed an unusual provision. I say unusual, perhaps it’s affected other States, and that is because punitive damages are, by their very nature, not really intended to compensate 

the victim, but rather to punish and therefore take on more of a 

criminal type fine approach rather than reimbursement or restitution, in products liability cases, our State I believe now requires 

that either two thirds or three fourths of that will be paid to the 

State. And as I recall, the challenge to this constitutionality has 

been upheld. 

So Mr. Greenwood, I might suggest we might think about, in 

terms of punitive damages, having a portion of punitive damages 

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aesthete to the State to be used to help States pay the cost of their 

Medicaid program. 

Mr. STRICKLAND. Would the gentlemen yield? 

Mr. DEAL. Sure. 

Mr. STRICKLAND. You know, that seems fair to me if the amount 

was the same regardless of the income of the individual. It’s the 

discrimination that goes between—— Mr. DEAL. Reclaiming my time. I understand the point that 

you’re trying to make. The point though also is that sometimes the 

amount of compensatory damages is not always based on the financial status of the alleged victim. In most times, it is based primarily on the extent of damage and injury, not the financial condition of the individual. Financial condition of the individual would 

primarily be an ingredient only when you’re trying to calculate lost 

earnings or lost wages. And that, of course, has to have an actual 

factual basis for making that calculation. 

Going back to something else, though. I would like Mr. Schwartz, 

and I thank you for being here today. I think all of us would like 

to know what effect these State statutes fixing caps have actually 

had in real terms on reducing the cost of medical malpractice insurance. And one of the procedural things that I have run across 

is, that in most instances, the jury is not advised of the existence 

of caps before they make their awards. Is that generally true? 

Mr. SCHWARTZ. That’s generally true, and the reason that that’s 

done is there is a belief that if they knew what the cap was, that 

they would always award the cap. Now that belief may or may not 

be true, but when these issues are lobbied, one reason they’re not 

told about it is that they always would move to the top of the ladder. Again, I’m not saying they would do it, but that’s the reason 

that’s put in the law so they’re not informed. 

Mr. DEAL. Does anybody have any information that indicates 

how much of jury verdicts that actually been written off as of a result of the caps? In other words, they return verdicts in excess of 

the caps but because they did not know the caps, the Judge was 

required to write off those verdicts. 

Does anybody have any information as to how much those 

amounts might be? And if they are known, what effect would the 

write offs have on premiums had they not had the caps? 

Mr. ANDERSON. The total amount is significant, which again 

proves the efficacy of the caps. The reason why there is no readily 

available figure is because the majority of medical malpractice 

claims in which there is recognized liability are settled. They don’t 

go to court. Settlements do not break out the difference between 

economic and non-economic damages. But the settlements do reflect the upper limit of risk. In other words, a State like Texas 

which has a $268 million verdict, your settlement costs will be 

higher than in a State like California where such a verdict will not 

have been paid. 

Mr. DEAL. I recognize that any time you’re negotiating something 

it’s based on what is your achievable end in the long run. 

Mr. Schwartz, if you would walk us through some other things, 

too. And these are procedural issues. Just as you don’t tell the jury 

about the statutory caps, the debate is ongoing about collateral 

sources as to whether or not an injured plaintiff would have disVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00142 Fmt 6633 Sfmt 6602 W:\DISC\81491 81491
139

closed to the jury of course, what other collateral sources had paid 

for medical expenses, etcetera, and whether or not mandatory offsets should take place. 

The argument on the other side is if you’re going to do that, why 

not disclose to that same jury what the limits of liability of the insurance policy that the defendant is carrying also has so that they 

can take all of these outside sources into account. 

Would you sort of walk us through the debates that have surrounded all of that? 

Mr. SCHWARTZ. Lot of complicated things there, but in some 

States they do let the jury know about the collateral sources. And 

then let them make the judgment as to whether or not the plaintiff 

should, and it really is a false thing, have double recovery or not, 

whether they should know about it. I agree with that, actually. 

I think that the juries are otherwise left to speculate about it, 

and they already know that a lot of people have insurance. So they 

might as well be informed. The reason that, and you have to go, 

I’ll conclude with this the reason for each rule. 

I gave you the reason for the rule on the $250,000. The reason 

for the collateral source rule is that a wrong doer is not supposed 

to benefit from the fact that the plaintiff has been prudent or has 

been paid by a source other than the defendant. That is the reason 

for the rule. Now, wrongdoing varies. Some people are more heinous than others. So my feeling on that issue is let them make a 

decision as to whether or not the defendant’s conduct is so bad that 

the collateral source shouldn’t be considered. So that’s my position 

on that. 

Mr. DEAL. Do you know of any States that have allowed information to be made known to the jury as to the liability coverage of 

the defendant through his insurance policy? 

Mr. SCHWARTZ. No, I do not. 

Mr. DEAL. I believe my time is up. 

Mr. NORWOOD. I now recognize myself for 5 minutes and then do 

you wish to have a closing statement, Mr. Brown? 

Mr. BROWN. I agree with that. You probably have said enough. 

Let me—Mr. Schwartz, first let me say I have liked a lot of 

words you have used today. Fair and balanced, common sense. And 

with that in mind let me ask all of the panelists. Are there any of 

you out there that truly believe in your heart that not having some 

limit on non-economic damages would not improve the health care 

system in lower premiums? Any of you think that’s wrong? 

Mr. BROWN. I think that is correct, sir. 

Mr. PLUNKETT. Once again, our expertise is on the insurance 

side, but for all those out there who aren’t here, it won’t improve 

the health care system for those who are not able to live their 

lives——

Mr. NORWOOD. We’re on my time. Yes or no would have been 

find. Your answer is no. 

Mr. PLUNKETT. You have my answer, Mr. Chairman. 

Mr. NORWOOD. Is there any limit on non-economic damages that 

you could settle or live with? 

Mr. PLUNKETT. Well, I think there might be, Mr. Chairman, but 

we think that it has to be analyzed based on a real sense of what’s 

happening. If you think that jury verdicts are exploding or out of 

140

control, if you rely only on jury verdict research, the firm that is 

the source for much of this information and as described in that 

Wall Street Journal story acknowledges huge gaps in their information. If you don’t understand the insurance cycle, then you’re 

going to come to the wrong conclusion of what has to happen. 

Mr. NORWOOD. The stories that I’ve heard today, the comments, 

the opinions, it’s all over the board. I don’t know whose got what 

State right anymore than you do. But it is all right for me to say 

there is perhaps somewhere a limit that you can agree to that 

might help reduce premium costs. 

Mr. PLUNKETT. If it’s based on a real sense of what’s happening 

and not based on this kind of warfare that goes on at the State 

level and the congressional level. If it looks at the insurance industry and jury verdicts and closed claims and claims that are paid 

for the and the whole bit that I mentioned, we haven’t ruled it out, 

no. 

Mr. NORWOOD. Okay, good. Are you a lawyer? 

Mr. PLUNKETT. No, I’m not. 

Mr. NORWOOD. Just curious. 

Mr. Schwartz, I want you if you would to take a minute and explain to me something that I have been told by a lot of people 

around this town now for at least the last year. And that’s about 

economic damages. 

Are the courts just totally wrong in their awards on economic 

damages or does that actually work? Nobody has ever suggested 

anywhere there be any type of cap on economic damages. 

Do patients actually receive economic damages or do they need 

this other amount of money called pain and suffering? 

Mr. SCHWARTZ. Well, that’s a question that has been debated for 

almost ages. In terms of needs, you used an interesting word 

there—need. When it comes to worker compensation, if somebody 

is hurt in the work place, they don’t get any pain and suffering 

damages. They get their needs. They get their medical costs and 

a percentage of their loss of wages under our Social Security System disability. They do not get pain and suffering. Under auto no 

fault, they don’t. So if we’re focusing on need in the sense of what 

do I really need to survive, pain and suffering is not needed. 

However, you’re in the middle of this crazy tort system. And a 

professor back in 1914 wrote an article that probably told the truth 

as much as anything else. The one third of the costs are going to 

lawyers when you recover. So the person doesn’t get 100 percent 

of their need. So some damage for pain and suffering, he said, and 

for the record the man’s name is Terry on Negligence and I read 

all this stuff and helped me understand what a new idea is versus 

an old idea. 

The pain and suffering damages actually make up, according to 

Terry, for the amount that the person is having to pay to his lawyer, or her lawyer, which is about one third. I think the sort of underground explanation for pain and suffering is that. 

There was an article written by the dean of Washington Law 

School, a very brilliant man named Cornelius Peck, who studied 

whether pain and suffering damages do any good. I give this gentleman a million dollars in pain and suffering. Does he feel any 

better? Does he have any less pain? When he wakes up in the 

141

morning, is the fact that his arm is not there, does he feel better 

about it because he has the money? 

Well, Professor Peck concluded no, he doesn’t. And that there 

really is no relationship between the amount of money and how 

people feel. So that’s as best as I can do with respect to that questions. 

Mr. NORWOOD. Well, on a $50 million verdict, surely that can’t 

then be pain and suffering just to pay the lawyer. There’s a lot of 

other money. 

Mr. SCHWARTZ. That’s right. If you’re getting in the $50 million 

range, but an economic loss can possibly get up there. It’s difficult, 

but you can get there. Remember with economics, and I think one 

thing that I would say from listening this morning, I felt that the 

economic quotient to the verdict was down played too much. 

Economic losses today, with a good plaintiff’s lawyer and boy 

they vary, sir. You got a good one helping you. He or she is going 

to get those economics up because many, many things can translate 

into market value today. And every piece of medical equipment, 

every aid, everything you could have done before that you can’t do 

now can be measured in terms of economic losses. 

And I think the way the definition is in your bill, I don’t know 

whose bill it is has been criticized, I think the bill does a very nice 

job, a good job, of defining what is economic and what is non-economic. So it has guidelines to courts as to dividing these two areas. 

Because believe me, if you, if this ever were to become law, what 

I would be doing, and what all the lawyers would be doing, is arguing what’s on which side of the line. I know that may seem a little 

abstract, but that’s what occurs every day. And the bill does a very 

good job on that. I’m just saying, in summary, that the economic 

portion of this bill should not be down played. It is a significant 

component of awards. 

Mr. NORWOOD. Well, what if we just had unlimited economic 

damages? No non-economic damages, but just pay the lawyers. 

Mr. SCHWARTZ. Well, that would be a very intriguing thing. And 

if Terry’s spirit is up in the sky somewhere, I don’t think any tort 

person gets into heaven, but there may be another place where 

they go, sort of a special tort place, that he would be very pleased 

because that’s what he recommended in 1914. 

Mr. NORWOOD. Well, how do you feel about that? 

Mr. SCHWARTZ. I don’t think that’s a bad idea. I think that’s a 

very intriguing idea. 

Mr. DEAL. Will the chairman yield? 

Mr. NORWOOD. Ye sir. 

Mr. DEAL. If I might follow up on that, we have Federal statutes 

whereby we allow the Judge to fix compensation for the attorneys. 

The one that comes that my mind is in the wage discrimination 

cases in which if the plaintiff is successful, than the Trial Judge 

has the ability to consider what the records are, the costs, etcetera, 

and fix compensation for the attorney. It would be interesting to 

see whether or not the insurance companies would like that one. 

Mr. SCHWARTZ. Well, that is a very intriguing thing. I have the 

feeling, while my friends in ATLA don’t like this bill, if you did 

that I would be running out of the building at the end of the hearing. 

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Mr. NORWOOD. Just quickly, you do believe patients are compensated for their medical damages? 

Mr. SCHWARTZ. Absolutely. 

Mr. NORWOOD. Very well in most cases? 

Mr. SCHWARTZ. Yes, as long as they again, the lawyers that do 

med. mal., plaintiffs’ lawyers. First, you’d be surprised. There’s not 

that many of them. This is not automobile fender bender stuff. This 

is hard stuff on either side. The cases are hard to win and you have 

to be very talented and I’m thinking of a man in this jurisdiction, 

a former ATLA president Berry Nase, a superb lawyer to whom 

I’ve referred many cases. And he will make sure that every medical 

cost to the nearest dime from now to the projected life of that individual, is recovered by that individual. And every possible loss of 

wages is covered by that individual. And any other economic loss 

is compensated to that individual. So the answer is yes, they are 

fully compensated under our tort system, if they have the benefit 

of having a good lawyer. In a medical malpractice, most of the 

plaintiffs’ lawyers know what they’re doing because it is both an 

art and a science. 

Mr. ANDERSON. Mr. Chairman, if I may, I’d like to add to that 

answer. Mr. Court previously cited the Olsen cases, an example of 

MICRA not working. And in fact, really quite the contrary is true. 

The Olsen child was awarded $17 million as a 2-year-old child in 

lost wages. So that I think this is a rather outstanding example of 

the fact that plaintiffs’ lawyers are quite skilled at transferring economic damages, non-economic damages over to the non-economic 

damages. 

Also, I’d like to clarify that despite Mr. Court’s testimony, the 

principal defendant in that case was not a faceless HMO. The principal defendant in that case was the University of California, San 

Diego and the verdict was funded by the tax payers of the State. 

Mr. NORWOOD. Thank all of you. This has been—Mr. Brown? 

Mr. BROWN. I’m just asking unanimous consent, particularly 

since Ms. Visco had to leave for a train and Mr. Court had to fly 

back to California that any questions that any of us would submit 

on either side to either those two witnesses or any of the other half 

dozen or so. 

Mr. NORWOOD. Absolutely. I wanted to ask both of them some 

questions. That’s great. 

Mr. BROWN. Mr. Schwartz, even though I’m not a lawyer, you 

sound like you’d be a good school professor to the point that I almost want to go to law school. 

Mr. SCHWARTZ. Well, I appreciate that I was for many years, I 

was told not to mention this, but I do have this book called 

Schwartz on Torts and I will give a discount to any member who 

is here. 

Mr. NORWOOD. Well, all that, of course, presumes that any law 

school would have, Mr. Brown. 

We do appreciate—— Mr. GREENWOOD. Mr. Chairman, if Mr. Brown would agree to go 

to law school, I think we could take up a collection for tuition. 

Mr. BROWN. Only if I went full time. 

Mr. NORWOOD. I appreciate all of you coming and I want to ask 

Mr. Greenwood, since it is his bill, to close our hearing for us. 

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Mr. GREENWOOD. Well, thank you, Mr. Chairman. I think Mr. 

Schwartz put it very well when he said there are three things we 

have to consider and that is is there a problem. Do the tort reform 

provisions in H.R. 4600 solve the problem, go a long way to solve 

the problem? And three is adjust. 

I think you’re correct that this hearing and any reasonable observation would conclude we got huge problems. And in Pennsylvania, 

to which I can speak most clearly, it is of unimaginable consequence. I do not know what we’re going to do for health care in 

the very near future, if we don’t do something. And it’s beyond the 

reach of the Pennsylvania legislature because we a constitutional 

prohibition against caps. So that there is a crisis only the blind 

would miss. That caps, and tort reform, reduce premiums significantly, I 

think, also, is frankly beyond dispute. All you have to look at is 

California, Indiana, and the other States. You put caps on it a Federal level, you will reduce the cost of these premiums and you will 

solve the problem. 

The only question that I think that the subject to real honest dispute is the fairness question. Is it fair? Do we treat plaintiffs fairly 

enough in this legislation? And for instance, is the deriving punitive of damages as a function of economic damages. Is that fair? Is 

it fair to people of different economic levels? And I think we ought 

to continue to work on that. I look forward to working with Democrats on this committee who want to a bipartisan solution to the 

crisis. I think it’s possible. 

I’m open to adding insurance reforms if they’re real. But frankly, 

I haven’t seen any evidence from our hearing today that there’s 

anything we can do—much to be done on that side that’s going to 

fix the problem. So I think fundamentally we need to find out if 

whether we can come to terms on what’s fair from one side of the 

aisle to the other, and I’m going to try very hard for the rest of the 

summer to accomplish that, Mr. Chairman. 

Mr. BROWN. Mr. Chairman, I didn’t know we were doing opening 

statements again. I’ve never seen this kind of end of a hearing 

when one guy on the other side gets to make another statement. 

You start off this hearing with an assumption that all of the problem, by the name of the hearing, all of the problem rests with trial 

lawyers. Not questions of fairness, no representation from patients, 

and I am just a little surprised that this hearing has been run in 

that direction. I will close with that. 

Mr. NORWOOD. Hearing adjourned. 

[Whereupon, at 4:32 p.m., the hearing was adjourned.] 

[Additional material submitted for the record follows:]

PREPARED STATEMENT OF THE AMERICAN ACADEMY OF DERMATOLOGY ASSOCIATION

On behalf of the American Academy of Dermatology Association (AADA), the largest dermatologic association with approximately 14,000 physician members around 

the world, I appreciate the opportunity to share with you our views regarding health 

care litigation reform. The AADA is very concerned with the current medical malpractice insurance marketplace and requests that the subcommittee favorably act on 

H.R. 4600, the ‘‘Help Efficient, Accessible, Low Cost, Timely Health Care ‘HEALTH’

Act of 2002.’’ The current crisis poses a serious threat to the availability of, and access to, quality health care for all patients. 

Since January, Frontier, St. Paul Global Health Care, PHICO and Reliance have 

all left the medical liability insurance market. As a result, liability premiums are 

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now rising for medical specialties not typically associated with high risk, adding to 

the financial pressures placed on all practicing physicians. 

Physicians across the country have been reporting that they are unable to obtain 

medical liability insurance. Dermatologists, in particular, have reported that premium increases in certain parts of the country are making it difficult for them to 

remain viable at a time when all practice efficiencies have been implemented. In 

some areas, only one insurer remains, forcing physicians to face an all or nothing 

proposition. 

While patient access to care is being threatened in a number of states, there are 

six states where the crisis for dermatologists is most severe: Florida, Mississippi, 

Nevada, Pennsylvania, Texas and West Virginia. The AADA is working with dermatology societies in these states, along with their State medical associations, to provide support for their efforts to procure state-level remedies; however, many states 

are not in session right now and few can agree on the proper course to pursue. For 

those states that have already enacted medical malpractice legislation, H.R. 4600 

would not pre-empt their laws, the legislation only applies to states that have gaps 

in their laws or have not succeeded in passing legislation. 

In 2001, eight states saw two or more liability insurers raise their rates by at 

least 30 percent. This year, physicians in Texas have witnessed skyrocketing insurance rates of over 50 percent. Mississippi is expected to lose over 400 physicians 

this year due to the ongoing medical liability crisis. In the first three months of 

2002, medical jury awards in Mississippi have reached upwards of $27 million. Furthermore, Nevada Governor Kenny Guinn has been forced to call a special session 

of the legislature to respond to the closing of the states only trauma center due to 

the lack of affordable liability coverage. 

A primary cause of this emerging crisis is the unrestrained escalation in jury 

awards that are a part of our judicial system. The reality of being sued is evident 

in all corners of our health care delivery system. A recent Harris Interactive study 

(The Fear of Litigation Study—The Impact on Medicine) for Common Good illustrates the detrimental impact our litigious society has on those who provide care 

to patients. 

The study shows, among other things, that more than three-fourths (76%) of physicians believe that concern for medical liability litigation has hurt their ability to 

provide quality care in recent years, and nearly all physicians feel that unnecessary 

or excessive care is provided because of litigation fears. It also shows that an overwhelming majority of physicians (83%) do not trust the current system of justice to 

achieve a reasonable result to a lawsuit. 

Federal legislation is vital to ensuring that physicians provide appropriate care 

to their patients without fear of litigious action. The present instability of our medical malpractice insurance marketplace is already hampering patient access to care 

in some states. H.R. 4600 contains much needed medical liability reforms that are 

similar to those remedies that have kept the market stable in California since 1975, 

while continuing to ensure that patients who have been injured through negligence 

are fairly compensated. 

According to Medical Liability Monitor, the gap between medical liability insurance rates in California and those in the largest states that do not limit non-economic awards is substantial and growing. One national insurance company (The 

Doctors Company) recently reported a 93 percent difference in average rates between obstetrician/gynecologists in California (with MICRA reforms) and Nevada 

(with no MICRA-type reforms). 

Yet H.R. 4600 would continue to protect injured patients by allowing unlimited 

economic damages with additional non-economic damages of up to $250,000. In addition, this bill would eliminate joint and several liability so that damages are allocated fairly and in proportion to a party’s degree of fault. 

The American Academy of Dermatology Association strongly believes the time to 

act is now. Inaction would put American’s in jeopardy of not receiving the health 

care services they need and deserve. We urge Congress to enact H.R. 4600 to ensure 

the stability and viability of our nation’s health care system. 

On behalf of our 14,000 members, thank you for your consideration of our views. 

PREPARED STATEMENT OF THE AMERICAN ACADEMY OF FAMILY PHYSICIANS

This statement is submitted to the Energy and Commerce Committee on behalf 

of the 93,500 members of the American Academy of Family Physicians. This hearing 

entitled, ‘‘Harming Patient Access to Care: The Impact of Excessive Litigation’’ is 

timely. The current lack of professional liability insurance does threaten patient access to care in some states. The current trend of increasing insurance premiums 

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drive up the cost of health care and force physicians to drop certain services when 

they cannot afford professional liability insurance. 

FAMILY PHYSICIANS AFFECTED BY THE LACK OF MEDICAL LIABILITY INSURANCE

Medical liability insurers have left the medical insurance market in the past year 

in alarming numbers. One reason for this exodus is the unpredictable rise in jury 

awards that exist in states without adequate tort reforms. According to the Physician Insurers Association of America (PIAA), the last decade has seen a dramatic 

increase in awards in excess of $1 million even while the number of suits filed has 

remained the same. As a result of a few record-breaking cases, insurers find it more 

difficult to predict their risk. 

The remaining insurers have been forced to raise rates or to refuse new applications for insurance. Family physicians are beginning to experience difficulty in finding insurance companies to provide liability insurance or are receiving renewal notices with double-digit and triple-digit increases for the second year in a row. 

For example, in Florida, 40 medical liability companies were writing medical liability insurance five years ago. Today, there are six companies and two of them 

will not accept new applications. Family physicians are experiencing increases of 

medical liability insurance rates anywhere from 35 percent up to 300 percent based 

on location and scope of practice. In Pennsylvania, there were 25 medical liability 

insurers in 2000. Currently, there are ten and only one is accepting new applications. Over the last two years, family physicians in Pennsylvania have received a 

30 percent increase on average in liability insurance premiums and premiums increases are expected to be at least that expensive for 2002. 

State laws, hospital accreditation and managed care contracts all require physicians to carry medical liability insurance. If family physicians cannot afford insurance coverage, they must choose between shutting down their practice altogether or 

restricting the range of services they provide. For family physicians in rural settings, this usually means being forced to stop delivering babies or providing prenatal care due to mounting liability premiums. 

FAMILY PHYSICIANS’ DECISION TO DELIVER RURAL MATERNITY CARE

According to data from the Health Research and Services Administration (HRSA), 

family physicians are more likely than other primary care physicians to practice in 

rural areas. Rural family physicians are much more likely to provide maternity and 

prenatal care, although both the fear of litigation and the unavailability or affordability of liability insurance are beginning to force some physicians into limiting the 

services they provide. 

The need for national tort reform has also been clear to family physicians for over 

ten years. The following excerpt from a study published in the Western Journal of 

Medicine, June 1991, entitled, Tort Reform and the Obstetric Access Crisis by 

Rosenblatt, R. et al., may signal what lies ahead as the next liability crisis looms: 

The data are remarkably similar for the four states [Washington, Alaska, Montana, and Idaho]. As in other studies, physicians reported that issues related 

to medical malpractice are the most powerful factors influencing their collective 

decisions to continue basic practice. The cost of medical malpractice insurance 

is the most important factor, often exceeding the fiscal capacity of family physicians to continue to offer this service. To this economic decision is added the 

difficult-to-qualify—but no less important—emotional effects of a climate in 

which obstetrics malpractice suits are perceived as increasingly common and increasingly expensive. 

Although all four states did enact some tort reform in the 1980s, none of them 

enacted a package of tort reforms such as California’s Medical Injury Compensation 

Reform Act of 1975 (MICRA). The MICRA reforms have already brought stability 

and fairness to the California legal system for the past 27 years. Californians Allied 

for Patient Protections (CAPP), a major consumer group supportive of MICRA, have 

found that legal disputes in California are settled 23 percent faster than the national average. At the same time, the number of suits filed in California matches 

the national average. In 1998, the Congressional Budget Office estimated that tort 

reforms such as those effective in California would result in savings of $1.5 billion 

over ten years. 

AAFP SUPPORT FOR H.R. 4600

The American Academy of Family Physicians supports The Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 2002 (H.R. 4600) because it 

would bring the same rational reforms contained in MICRA to all states’ professional liability systems. Given what researchers have shown in the past concerning 

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the impact of high insurance costs on patient access, the AAFP supports federal legislation to stabilize the medical tort reform systems in the states. According to Kenneth S. Abramowitz, in the New York Times (September 9, 2001), ‘‘The rising cost 

of malpractice coverage is becoming one of the most important factors driving inflation for physicians’ services.’’ The AAFP supports several provisions of The HEALTH Act in particular. H.R. 

4600 would require that a party pay damages only to the extent that the party was 

liable for the harm caused. Family physicians provide primary care (comprehensive 

and coordinated care for all life stages and both genders). Because they are the overall medical managers for a vast number of patients in the U.S., with responsibility 

for making referrals to subspecialists, family physicians need the protections of joint 

and several liability reforms to ensure that they are not held responsible for the 

clinical decisions of others. 

H.R. 4600 would limit attorneys’ fees ensuring that a larger proportion of the 

award actually goes to the patient who was harmed. According to PIAA, less than 

two percent of paid claims exceeded $1 million in 1991. By the year 2001, that number increased to seven percent. However, with contingency fees taking upwards of 

forty percent of a settlement, average citizens who seek redress in court will end 

up with only a tiny portion of the award. This provision ensures that they are treated fairly after they leave the courthouse. 

H.R. 4600 includes a cap on non-economic damages. The Office of Technology Assessment drafted an analysis of tort reforms in 1993 entitled, ‘‘Impact of Legal Reforms on Medical Malpractice Costs.’’ That report found that the one reform shown 

to consistently reduce medical liability costs was a cap on non-economic damages. 

While economic losses, such as lost wages, medical expenses and rehabilitation costs 

are fully compensated, non-economic damages reflect the monies collected for intangible losses. 

CONCLUSION

The Academy appreciates the opportunity to address the Energy and Commerce 

Committee regarding the impact of excessive litigation on patient access to care. 

We look forward to working with the Committee to find a workable solution for 

patients and physicians. We believe that the reforms contained in H.R. 4600 are fair 

both to legitimately harmed parties and to medical professionals. 

PREPARED STATEMENT OF AMERICAN ACADEMY OF OTOLARYNGOLOGY—HEAD AND

NECK SURGERY, INC. 

Chairman Bilirakis, Ranking Member Brown and members of the Subcommittee, 

the American Academy of Otolaryngology—Head and Neck Surgery (AAO-HNS) is 

pleased to submit this statement for the record of the Energy and Commerce Subcommittee on Health’s hearing on this country’s growing medical liability insurance 

crisis. AAO-HNS, representing more than 10,000 otolaryngologist—head and neck 

surgeons across the country, is the national medical association of physician specialists dedicated to the care of patients with disorders of the ears, nose and throat and 

related structures of the head and neck. We are often referred to as ENT physician 

specialists. 

In a growing number of states across the country, including Florida, Ohio, Oregon, 

Pennsylvania and West Virginia, the ability to obtain medical liability insurance 

has become either increasingly cost-prohibitive or is simply unavailable. Physicians 

who find it too expensive to maintain their practices appear to be retiring early or 

moving to states with less costly premiums. As this trend continues, access to quality health care for patients in many communities and neighborhoods is seriously 

jeopardized. 

Today, practicing physicians face burdensome regulatory requirements, rising 

practice costs and decreasing reimbursements. These problems are compounded by 

increasing medical liability premiums, which are forcing physicians to practice ‘‘defensive medicine,’’ reduce the number of services and stop performing high-risk procedures in an attempt to keep their practices afloat and avoid litigation. The money 

physicians could use to purchase the latest medical technology or hire another physician is often diverted to pay the skyrocketing insurance premiums. Ultimately, increasing medical liability premiums are forcing physicians to devote a greater 

amount of time and energy away from their number one priority—providing quality 

health care to their patients. 

While numerous states continue to suffer from the tightening grip of increasing 

medical insurance premiums, one state has insulated itself and today remains relatively protected by the high premium costs. In 1975, as a result of soaring liability 

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premiums, California passed the Medical Injury Compensation Reform Act 

(MICRA). The legislation has helped the state of California maintain manageable 

control of insurance premiums and stabilize the industry to the benefit of physicians 

and patients alike. The AAO-HNS believes that in order to create nationwide stability in the medical liability insurance system, while continuing to protect the ability of patients to be compensated when injured by an act of negligence, Congress 

must pass fair and equitable tort reform. To that end, we urge Congress to pass the 

Help Efficient, Accessible, Low-Cost Timely Health Care ‘‘HEALTH’’ Act of 2002 

(H.R. 4600), introduced by your colleague Representative Greenwood. The legislation 

includes provisions similar to those passed in MICRA that would limit non-economic 

damages, provide periodic payment for future damages and establish a reasonable 

statute of limitations. Amending the federal health liability laws through this legislation is a positive step towards ensuring patient access to physicians when and 

where they need care. 

The AAO-HNS is pleased that the Subcommittee is addressing the important 

issue of reforming the medical liability crisis that is plaguing physicians across the 

country. We welcome the opportunity to work with the Subcommittee to ensure passage of meaningful legislation that will give physicians access to affordable insurance and not further jeopardize a patient’s access to quality health care. 

Thank you for the opportunity to submit this statement. 

PREPARED STATEMENT OF THE AMERICAN ASSOCIATION OF ORTHOPAEDIC SURGEONS

On behalf of the American Association of Orthopaedic Surgeons (AAOS), representing 18,000 board-certified orthopaedic surgeons throughout the United States, 

we are pleased to offer a statement to the House Energy and Commerce Committee, 

Subcommittee on Health. We thank Chairman Bilirakis and members of the subcommittee for holding this important hearing and believe the time is right to address problems with the current tort system. AAOS supports the adoption of federal 

measures that will permit orthopaedic surgeons to better provide high quality services at reasonable costs to their patients. Without action, we fear patient access to 

specialty care will be threatened. 

Across the country, surgical practices and emergency rooms are closing or reducing their hours of availability to patients due to substantially increased rates of professional liability insurance and an unavailability of insurers willing to provide coverage. 

Last year, commercial carriers in eight states raised their rates by more than 30 

percent, and another 12 states increased premiums by more than 25 percent. In 

some states, high-risk specialists have had their insurance cancelled or not renewed. 

Our physicians are finding their premiums being raised by 200-300 percent—even 

without ever having a claim filed against them. Patient care has suffered further 

because physicians must increase their patient load in order to afford increased coverage rates, while at the same time reduce the amount of time dedicated to each 

individual. It has become difficult for orthopaedists to provide the kind of care and 

attention they would like to provide their patients. 

This situation was brought to light most dramatically in Nevada, when the University Medical Center Level 1 trauma center in Las Vegas—the only trauma center 

in southern Nevada—was forced to close for 10 days beginning July 3. Fifty-six 

orthopaedists resigned from the trauma center because of concerns with escalating 

medical liability premiums and coverage issues. Although the governor of Nevada 

has called a special legislative session to try to develop a long-term solution, it is 

clear that without action, residents of southern Nevada, as well as neighboring 

states served by the trauma center will lack critical specialty care in the meantime. 

In addition to Nevada, throughout the country, there are startling statistics regarding the cost of practicing medicine in today’s current legal environment. For instance:

• At Temple University in Philadelphia, Pennsylvania, faculty have been unable to 

recruit orthopaedic fellows to fill slots that have remained open for two years, 

despite the qualified specialists that receive training at the University. 

• Health care providers in the Kansas City area experienced 25 percent to 100 percent increases in medical liability insurance rates, after both the St. Paul Cos. 

and Chicago Insurance Co. withdrew from the medical malpractice market, and 

PHICO Insurance Co. declared bankruptcy. The three companies provided malpractice coverage to about one-fourth of the physicians in Missouri. 

• A survey done by North Mississippi Health Services found that 15 percent of the 

company’s doctors are considering early retirement and 30 percent are considering jobs in other states because of legal issues. The survey also revealed that 

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80 percent of the doctors who have found affordable liability insurance are practicing ‘‘defensive medicine,’’ performing extra tests to create a record that can 

be used in case of a lawsuit. 

In a recent survey conducted by the AAOS, we learned that two-thirds of the respondents indicated that the cost of their professional liability has affected their 

practice. Physicians are limiting the scope of their practice, ordering more tests and 

turning away from providing charity care. They are retiring or leaving certain states 

altogether just to survive. As the population continues to age, we are gravely concerned of the consequences of less access to quality orthopaedic care. 

Physicians need relief. One possible solution is H.R. 4600—the ‘‘Help, Efficient, 

Accessible, Low-cost, Timely Health Care (HEALTH) Act of 2002,’’ introduced by 

Representative Greenwood (R-PA) and several others, including Representatives 

Chris Cox (R-CA), John Murtha (D-PA), Patrick Toomey (R-PA), Collin Peterson (DMN), Dave Weldon (R-FL), Charles Stenholm (D-TX), Chip Pickering (R-MS), Ken 

Lucas (D-KY) and James Moran (D-VA). This bipartisan legislation safeguards patients’ access to care through reasonable, comprehensive, and effective health care 

liability reforms. AAOS supports the provisions contained within the HEALTH Act 

and believes a significant measure of relief can be achieved if it is adopted. 

Importantly, the HEALTH Act addresses several critical inconsistencies within 

the current system. H.R. 4600 sets reasonable limits on noneconomic damages and 

implements a system of several liability, in which the physician is liable only to the 

extent he or she is responsible, thus ensuring a more fair allocation of responsibility. 

Another key principle protects payment of all medical expenses yet supports the allowance for periodic payment of future damage awards. This important provisions 

ensures that a physician need not risk bankruptcy, and therefore provide no compensation to the patient. The legislation also allows for the timely resolution of 

claims. 

These reforms work in states that have adopted them. Similar legislation passed 

in California in the mid-1970’s resulted in a stabilization of the professional liability 

situation. However, not every state has enacted legislation. Federal legislation is 

needed to bring uniformity to this situation. 

At the same time, an additional measure of relief could be found within the insurance industry itself. Congress may want to consider examining possible insurance 

reforms. It may prove helpful to assess the rising cost of insurance and what role 

the marketplace plays in setting rates. We believe Congress should carefully examine all possible reasons for the sudden rate increases and devastating market 

withdrawls. 

Thank you again, Chairman Bilirakis, and Representative Brown, for holding this 

hearing. Continued patient access to specialty care will be compromised if steps are 

not immediately taken to address liability concerns. We look forward to working 

with you on this issue. 

PREPARED STATEMENT OF AMERICAN COLLEGE OF PHYSICIANS—AMERICAN SOCIETY

OF INTERNAL MEDICINE

The American College of Physicians-American Society of Internal Medicine (ACPASIM)—representing 115,000 physicians and medical students—is the largest medical specialty society and the second largest medical organization in the United 

States. We congratulate the Subcommittee on Health for holding this important 

hearing on a subject matter that has more relevance today than ever before. Of the 

College’s top priorities for 2002, addressing the health care liability crisis and its 

impact on access to care is one of the most critical to our members. ACP-ASIM 

thanks Congressmen Michael Bilirakis, Chairman of the Subcommittee, Sherrod 

Brown, Ranking Member of the Subcommittee, and other members, for holding this 

hearing to discuss how excessive litigation is impacting patient access to health 

care. 

BACKGROUND

Doctors across the country are experiencing sticker shock when they open their 

medical malpractice insurance renewal notices—if they even get a renewal notice. 

After more than a decade of generally stable rates for professional liability insurance, physicians have seen costs dramatically increase between 2000 and 2002. And 

in some areas of the country, premiums have soared to unaffordable levels. According to the Medical Liability Monitor, in mid-2001, insurance companies writing in 

36 states and the District of Columbia claim to have raised rates well over 25 percent. With the new rate assessments coming in July 2002, rates are expected to increase even further. 

149

While obstetricians, neurosurgeons and other high-risk specialists have been hit 

hard, internists have been one of the hardest hit specialties—having seen a record 

45 percent increase in the last three years. In some cases, physicians, even those 

without a track record of lawsuits, could not find an insurance company willing to 

provide coverage. These physicians are being forced to decide whether to dig deeper 

and pay a steeper bill, change carriers, move out of state, or retire from the practice 

of medicine. 

Of these options, changing carriers may not even be an alternative. Finding replacement coverage won’t be as easy as it was in a buyer’s market. Companies writing professional liability coverage are fleeing or being chased from the market. As 

an example, St. Paul Companies, which insures doctors in 45 states and is the second largest medical underwriter in the country, announced late in 2001 that it no 

longer would write medical liability policies. It plans to phase out coverage as physicians’ contracts expire over the next 18 to 24 months. Also, Frontier and Reliance 

are gone. Other commercial insurers, such as PHICO, CNA and Zurich, are significantly cutting back. Even some provider-owned insurers, committed to this market 

by their founders, are pulling back from some states. 

THE PERFECT STORM

At a time when the market is squeezing physician and hospital margins, the rise 

in professional liability insurance may be the factor that determines whether physician offices and emergency rooms keep their doors open. There are other contributing factors that have limited patient access to health care: the cost of delivering 

health care driven by increased cost of new technologies; increased cost of drugs 

deemed necessary to meet the standard of care; the rising cost of compliance under 

increasing state and federal regulation; the low reimbursement rates under Medicare and Medicaid; and the declining fees from managed care. 

Unquestionably, there is real potential that rising insurance rates ultimately will 

reduce access to care for patients across the country. Indeed, daily press accounts 

from coast to coast are demonstrating exactly that. Physician offices and emergency 

rooms have been closing their doors all across the country due to the exorbitant 

costs of liability coverage. The states most severely affected by the spiraling out-ofcontrol rates are: West Virginia, Florida, New York, Georgia, Illinois, Washington, 

Ohio, Texas, Nevada, Michigan, Pennsylvania, and Oregon. Several other states are 

just beginning to feel the impact. 

Some states have tried to address the dramatic increase in professional medical 

liability insurance rates with very little success. At best, attempts by the states to 

solve this problem have not addressed the underlying problem: the escalation of lawsuit awards and the expense of litigation has led to the increase in medical liability 

premiums. This fact has resulted in many patients not receiving or delaying much 

needed medical care—facts Congress can no longer ignore. ACP-ASIM strongly believes that Congress must act to stabilize the market to avoid further damage to 

the health care system. 

RELIEF FOR PHYSICIANS FROM SOARING MALPRACTICE PREMIUMS

Federal legislation has finally been introduced to help curb the escalating trend 

in malpractice premiums. H.R. 4600, the ‘‘Help Efficient, Accessible, Low Cost, 

Timely Health Care’’ (HEALTH) Act of 2002, will safeguard patient access 

to care, while continuing to ensure that patients who have been injured 

through negligence are fairly compensated. ACP-ASIM strongly endorses 

this legislation as a means to stabilize medical liability insurance market 

and bring balance to our medical liability litigation system. The HEALTH 

Act achieves this balance through the following common sense reforms:

• Limit on pain and suffering (non-economic) awards. This requirement limits 

unquantifiable non-economic damages, such as pain and suffering, to no more 

than $250,000. 

• Unlimited recovery for future medical expenses and loss of future earnings (economic) damages. This provision does not limit the amount a patient can receive 

for physical injuries resulting from a provider’s care, unless otherwise restricted 

by state law. 

• Limitations on punitive damages. This requirement appropriately raises the burden of proof for the award of quasi-criminal penalties to ‘‘clear and convincing’’

evidence to show either malicious intent to injure or deliberate failure to avoid 

injury. This provision does not cap punitive damages, rather, it allows punitive 

damages to be the greater of two times the amount of economic damages awarded or $250,000. 

150

• Periodic payment of future damages. This provision does not reduce the amount 

a patient will receive. Rather, past and current expenses will continue to be 

paid at the time of judgment or settlement while future damages can be funded 

over time. This ensures that the plaintiff will receive all damage awards in a 

timely fashion without risking the bankruptcy of the defendant. • Elimination of double payment of awards. This requirement provides for the jury 

to be duly informed of any payments (or collateral source) already made to the 

plaintiff for his/her injuries. • A reasonable statute of limitation on claims. This requirement guarantees that 

health care lawsuits will be filed no later than 3 years after the date of injury, 

providing health care professionals with ample access to the evidence they need 

to defend themselves. In some circumstances, however, it is important to guarantee patients additional time to file a claim. For example, the legislation extends the statue of limitations for minors injured before age 6. • A sliding scale for contingency fees. This provision will help discourage baseless 

and frivolous lawsuits by limiting attorney incentives to pursue meritless 

claims. Without this provision, attorneys could continue to pocket large percentages of injured patient awards, leaving patients without the money they need 

for their medical care. The sliding scale would look something like this: 

• Forty percent (40%) of the first fifty thousand dollars recovered • Thirty-three and one-third percent (331⁄3%) of the next fifty thousand dollars 

recovered • Twenty-five percent (25%) of the next five hundred thousand dollars recovered • Fifteen percent (15%) of any amount recovered in excess of six hundred thousand dollars • Proportionate liability among all parties. Instead of making a party responsible 

for another’s negligent behavior, this requirement ensures that a party will only 

be liable for his or her own share. Under the current system, defendants who 

are only 1 percent at fault may be held liable for 100 percent of the damages. 

This provision eliminates the incentive for plaintiff’s attorneys to search for ‘‘deep pockets’’ and pursue lawsuits against those minimally liable or not liable 

at all. • These common sense recommendations have been proven to work. The HEALTH 

Act is based on provisions contained in the California Medical Injury Compensation Reform Act (MICRA). Since its enactment in the mid-1970’s, the MICRA 

reforms have helped reduce the overall costs of medical malpractice and have 

contributed to the increase in patient access to care. During this recent malpractice insurance crisis, California’s rates have changed only slightly, while 

rates in other states have escalated to out of control levels. 

CONCLUSION

ACP-ASIM is pleased that the Subcommittee agreed to conduct this hearing to address the serious problem of soaring medical malpractice premiums that physicians 

are facing across the country. We strongly urge the Subcommittee to pass the 

common sense reforms contained in the HEALTH Act that allow greater access to care, while adequately compensating injured patients. We appreciate 

the opportunity to submit this statement for the record. 

PREPARED STATEMENT OF THE AMERICAN DENTAL ASSOCIATION

The American Dental Association (ADA), a professional organization that represents more that 140,000 licensed dentists in the United States, believes that federal legislation is needed to remedy the root cause of excessive liability insurance 

premiums, which can and do threaten patient access to health care services. 

To address this problem, the ADA supports H.R. 4600, the ‘‘Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 2002.’’ This legislation, sponsored by Representative Jim Greenwood (R-PA), would reduce liability costs that are 

burdening the health care delivery system without compromising the legal rights of 

persons truly injured as the result of malpractice. H.R. 4600 would:

• encourage the speedy resolution of claims through implementation of a 3-year 

statute of limitations on health care-related injuries in most cases; 

• provide for a $250,000 limit on noneconomic damages; 

• ensure that each party shall be liable only for the amount of damages that should 

be allocated in direct proportion to his or her responsibility; 

• place express limits on contingency fees that can be collected by plaintiff’s counsel; 

• permit introduction of information concerning collateral source benefits; 

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• state that future damages may be paid by periodic payments; and • permit state statutory limits on compensatory and punitive damages to remain in 

effect, regardless of whether they are greater or smaller than the limits provided in the Act. 

The ADA is concerned that the current sharp increases in malpractice premiums 

are adversely affecting access to medical services, and could soon also affect dental 

services. Some medical specialties are seeing increases of up to 100 percent in liability insurance premiums. As a result, some physicians are no longer providing procedures that would put them at risk of liability suits, and some are moving to areas 

with lower insurance rates or, retiring early. The ADA hopes that congressional action will stem this tide. 

Many insurers cite the skyrocketing amounts of jury awards in medical liability 

cases as their rationale for premium increases. According to Jury Verdict Research’s 

report, ‘‘Medical Malpractice: Verdicts, Settlements and Statistical Analysis’’, the 

median national jury award in medical liability claims jumped 43% in one year—

from $700,000 in 1999 to $1 million in 2000. H.R. 4600 would place fair, reasonable 

limits on such awards. 

While the practice of dentistry differs profoundly from medicine, insurance premiums are still a concern for dentists and should be of concern to dental patients 

and third party payers, such as private sector employers and federal and state governments. Some dental liability insurance experts predict that dentists will face a 

substantial growth in premiums within 3 to 5 years. Significant increases in the cost 

of dental malpractice coverage will necessarily make oral health care services more 

expensive. With more than 50 percent of all dental expenditures paid out-of-pocket 

by the dental consumer, any unnecessary increases in dental costs could make dental care less attainable for many Americans. And because of the progressive nature 

of dental disease, those who choose to forgo care as a result of increased costs will 

face the unfortunate fact that untreated dental disease almost certainly worsens 

over time. 

In addition to recommending the passage of H.R. 4600, we would be remiss if we 

did not also request that Congress seek additional ways to prevent the filing of frivolous lawsuits. We believe that an effort must be made to differentiate between the 

legitimate claims of injured parties and those filed be people who want to play the 

system. 

To better understand our concerns you must understand that, for a health care 

provider, nothing is more devastating than an allegation that he or she has harmed, 

rather than helped, a patient. When one prides oneself on an ability to provide 

sound dental care to a patient, and one’s reputation in the community rests on that 

ability, a public claim to the contrary—regardless of how flimsy or misguided—takes 

a toll. 

Fundamentally, all any health care provider has to offer is a reputation based 

upon the level of care provided. It is this reputation, even more that the time and 

money that must be needlessly expended to defend oneself against a frivolous suit, 

that is at risk when someone looks to make some easy money by filing a frivolous 

malpractice lawsuit. We ask that Congress seek ways to prevent such suits from 

getting filed. For example, some states require that a plaintiff in a malpractice suit 

obtain a certificate of merit—an affidavit from an independent professional that a 

standard of care was not met—before a case can proceed. 

Dentists have worked hard to deliver the best dental care in the world while 

struggling to keep it affordable. Frivolous lawsuits and increased liability premiums 

could jeopardize these efforts, resulting in more expensive dental care for all: patients, employers, and public health programs such as Medicaid. 

Mr. Chairman and members of the committee, thank you for providing the ADA 

with this opportunity to discuss our views on much needed liability reform. We look 

forward to working with you on this issue. 

PREPARED STATEMENT OF AMERICAN HEALTH CARE ASSOCIATION AND THE NATIONAL

CENTER FOR ASSISTED LIVING

On behalf of the American Health Care Association and the National Center for 

Assisted Living, we thank you for holding this important hearing in order to hear 

from providers and patients alike regarding the issue of medical liability reform. We 

commend you for bringing light to an issue that has a significant impact on patient 

access to care and services. 

We support you for your efforts to introduce and work for passage of legislation 

that is pro-patient and will bring common sense reforms to our medical liability 

laws. AHCA and NCAL support legislative efforts to ensure patient access to quality 

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long-term care is safeguarded, and we consider the bill you have put forth as an 

important step towards ensuring care of the vulnerable elderly and disabled is protected. AHCA has endorsed The Help Efficient, Accessible, Low Cost, Timely Health 

Care Act (The HEALTH Act) of 2002. This bipartisan legislation is co-sponsored by 

Rep. James Greenwood, Rep. Christopher Cox, Rep. John Murtha, Rep. Patrick 

Toomey, Rep. James Moran, Rep. Collin Peterson, Rep. Charles Stenholm, Rep. Ken 

Lucas, Rep. Charles (Chip) Pickering, Rep. Dave Weldon and over 80 others. 

THE AON REPORT

New research by AON Risk Consultants, Inc. shows that national trends in General Liability and Professional Liability (GL/PL) losses are increasing at an alarming rate. In the five-year period between 1990 and 1995 costs more than doubled 

from $240 per bed to $590 per bed. Since 1995 costs have quadrupled to an estimated $2,360 per bed. The countrywide increases are the results of an explosion in 

litigation that started in a handful of states and is spreading to a multitude of regions throughout the country. This increase in litigation is raising the number of 

claims individual long-term care operators are incurring each year. In addition, the 

average size of each claim is steadily going up across the country at annual increases well ahead of inflation. In many states, the increase in liability costs is 

largely offsetting annual increases in Medicaid reimbursements. 

Some specific facts revealed by the AON study include:

• The average long term care GL/PL cost per annual occupied skilled nursing bed 

has increased at an annual rate of 24% a year from $240 in 1990 to $2,360 in 

2001. National costs are now ten times higher than they were in the early 

1990’s. • The long-term care operators represented in this study report $1.9 billion in GL/

PL liability claims incurred between 1990 and 2001. The expected ultimate cost 

of claims incurred in this period is $3.7 billion, taking into consideration the 

claims in the pipeline and the as yet to be determined outcomes of open cases. • These same providers, who represent only 26% of the providers in the United 

States, are projected to incur $1 billion in GL/PL claims in 2002 alone. Extrapolated to a national basis, this exposure is a multi-billion dollar a year cost to 

the nursing home industry. • The average size of a GL/PL claim has tripled from $67,000 in 1990 to $219,000 

in 2001. • Florida and Texas were leaders in driving the increase in GL/PL costs for the 

long-term care industry. With trends during the 1990’s in the range of 25% to 35% a year, costs in these two states have risen to close to $11,000 per bed in 

Florida and $5,500 per bed in Texas. • Numerous states across the country are indicating similar annual trends including Georgia (50%), West Virginia (50%), Arkansas (45%), Mississippi (40%), Alabama (31%), and California (29%). With current costs in these states up to 

$3,300 per bed, it won’t take long at these annual trend rates to reach Florida 

level loss costs. 

• GL/PL claim costs have absorbed 20% ($3.78) of the $18.47 increase in the country wide average Medicaid reimbursement rate from 1995 to 2000. 

• Almost half of the total amount of claim costs paid for GL/PL claims in the longterm care industry is going directly to attorneys. 

ACCESS

AHCA believes that a landslide of lawsuits and the associated insurance affordability and availability crisis endangers patient access to quality care. Access to care 

is at risk if insurance is not available or so expensive it is unobtainable. According 

to AON Risk Consultants, Inc., insurance markets have responded to this claim crisis by severely restricting their capacity to write long term care GL/PL insurance. 

Insurance companies continue to exit the marketplace and cannot provide coverage 

when faced with this magnitude of losses, explosion in growth of claims, and extreme unpredictability of results. Some states have laws that require long term care 

facilities to carry insurance as Florida now does. Facilities unable to obtain insurance as required by their states face a crisis in their ability to continue to serve 

patients. 

An alarming reality revealed by the AON report is Medicaid reimbursement increases are being offset by increasing costs of insurance premiums. Increased Medicaid funds as provided by Governors and state legislatures, were intended to help 

increase the quality of care for seniors in nursing homes, but instead the new funds 

are substantially consumed by rising insurance costs. Critical health care dollars are 

being diverted out of patient care for the nation’s poorest and most vulnerable senVerDate Dec 13 2002 15:13 Jan 16, 2003 Jkt 019010 PO 00000 Frm 00156 Fmt 6633 Sfmt 6621 W:\DISC\81491 81491
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iors. We ask that you take steps to maintain the funding that Congress and the 

states’ intended for quality long-term care for seniors. 

Additionally, we ask that you consider additional safeguards for long-term care 

including limiting the evidentiary use of documents designed for ensuring Medicare 

and Medicaid compliance, limiting the use of self-reported data used to improve 

care, and specifically codifying under the law the extension of these legal protections 

to assisted living settings. 

AHCA and NCAL again commend Chairman Bilirakis and the Energy and Commerce Health Subcommittee for examining this issue and its impact on the frail elderly and the disabled who rely on long-term care. 

The following letter is from a patient of a nursing home in Tavernier, Florida:

MARGARET LIMERICK

48 HIGH POINT ROAD, TAVERNIER, FL 33040

July 17, 2001

The Honorable MIKE BILIRAKIS

Chairman, Health Subcommittee 

House Committee on Energy and Commerce 

Room 2125 Rayburn House Office Building 

Washington, DC 20515

DEAR CHAIRMAN BILIRAKIS: My name is Margaret Limerick but my friends call 

me Louise, please feel free to call me Louise. I live in Plantation Key Convalescent 

Center in Tavernier, FL for almost a year now. In my life-time, I have been married 

twice, have a wonderful daughter Bonnie who I am very close with. Have a super 

granddaughter who is an airline pilot for American Airlines. I graduated from High 

School and attended trade school. I worked in a Physicians office and as a travel 

agent. I loved my travel agent job and to travel myself. I had great opportunities 

after WWII. Our company started the first Travel Agencies in Cuba, Bahamas, and 

Miami. I thoroughly enjoyed when I ‘‘island hopped’’ with tours of 20-25 people and 

acted as their tour guide. It was a great opportunity to meet so many different people. I treasure all of those memories and would be glad to tell you more. I was born 

in West Virginia and grew up in Virginia, but have enjoyed the Florida key for some 

time now. Although I never planned on going to a skilled nursing facility (who 

does?) I needed one. Tracy Greene administrates my facility. I think she and her 

staff do a great job of making life not only a little easier for my family and I, but 

pleasant. If I had to need a nursing facility, this is the one for me! 

I count on my caregivers for support and care although I am lucky enough to do 

a lot for myself. Not all are as lucky as I am. I have heard about the number of 

lawsuits. With more comes increases in expenses and I am aware that insurance 

is really hard to get for this and other facilities. I wonder if it keeps going up that 

some facilities, will close and the residents might have to move. In my case, if this 

facility closed I would have to move at least an hour away to the next one at best. 

I see the time that some staff spend to address lawsuits (they make copies, and review, and sort, and mail, and call their attorney, etc.) and I have heard our home 

does not have as many as some. Lawsuits take important staff time away from the 

residents. I know that no one is perfect and maybe some times there are situations 

that have to be looked at. I can’t quote these numbers but have seen the paper, TV 

spoken with our Administrator, Risk Manager, my family, etc. to learn this. 

I think that we live in a great Country, but wonder if people have forgotten that 

we who live here now are citizens, paid taxes, have lives, enjoy families, and so 

forth. I think that the answer is for our government to step in and deal with this 

problem today. I think our congress should pass legislation that will stop the large 

number of lawsuits today or we may not have enough facilities tomorrow. This worries me greatly, as I will soon be one of four generations when my granddaughter 

and her husband make me a great grandmother this August. 

I urge you Sir, please don’t let us lose our home(s). 

Sincerely, 

MARGARET ‘‘LOUISE’’ LIMERICK

PREPARED STATEMENT OF THE AMERICAN OSTEOPATHIC ASSOCIATION

Chairman Bilirakis and Members of the Subcommittee, the American Osteopathic 

Association (AOA) and its 47,000 members nationwide appreciate the opportunity 

to submit comments on this issue. The AOA, like each group here today, is very concerned with the instability of the nation’s professional liability insurance market, 

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and the escalating premiums that have resulted. We agree with the Committee that 

excessive litigation is harming patients access to care. 

BACKGROUND

As you know Mr. Chairman, the medical liability insurance system has severe 

problems. Physicians, hospitals, and other health care providers face increases in 

their liability insurance coverage that range from 30% to 300%. Dramatic increases 

in jury awards have forced numerous liability insurance providers to no longer write 

policies in certain states or geographical areas. This trend makes it difficult for 

thousands of physicians, to secure liability insurance coverage. The dramatic increase in liability insurance premiums and lack of available coverage are forcing 

physicians around the country to make impossible decisions: do they limit the services they provide their patients; do they cease to perform certain high-risk procedures; do they move to a different state that has enacted real reforms, do they ‘‘selfinsure’’ through bonds or lines of credit, or, do they simply close their practices? The 

AOA believes that physicians should not be forced to make these decisions. Furthermore, we believe that when physicians are forced to make these decisions, the patients that we serve suffer the greatest consequences. 

The current medical liability crisis is creating significant ‘‘access-to-care’’ problems 

across the country. It is well documented that physicians in several states are being 

forced to limit services, move to neighboring states, or close their practices as a result of the medical liability crisis in their states. This departure of physicians 

threatens patient access to quality health care. Furthermore, since hospitals are 

also impacted, the problem is expanded, putting patient access to essential health 

care services at serious risk. 

It is important to note that this is not simply a ‘‘specialist’’ problem. The crisis 

has a devastating impact upon the nation’s primary care providers, including family 

physicians such as myself. Additionally, if a rural or underserved community loses 

a primary care provider, the access to care issue is compounded since that community likely lost its only physician. 

Mr. Chairman, there are other entities facing severe problems as a result of this 

crisis. Our nation’s osteopathic and allopathic medical schools, teaching hospitals, 

and teaching clinics also face dramatic increases in their liability insurance premiums. A majority of our 19 colleges of osteopathic medicine and our teaching programs have experienced dramatic increases in premiums. 

As you know, medical schools and teaching institutions are essential elements of 

our health care delivery system. Not only do they educate and train future physicians, they also provide essential health care services to indigent patients. When 

medical schools and teaching hospitals are forced to increase spending on their medical liability coverage, they must find budget offsets. In an effort to reduce overall 

spending, they curtail spending on academic programs and/or limit services to patients. This type of action not only damages the educational process, but it also 

greatly limits access to health care for our most vulnerable citizens. 

THE PROBLEM

Statistics and history allow us to understand that the professional liability insurance crisis begins when physicians in a state or region face limited availability of 

professional liability insurance coverage. Availability problems typically originate 

when insurance companies refuse to provide coverage to physicians in certain states 

or geographic areas, leave the medical liability market, or become insolvent. A major 

factor in an insurance company’s decision to write policies in a particular state is 

the stability of that state’s tort system. States that face the worst availability problems are the same states that have seen dramatic increases in the number and severity of jury awards in the past few years. Jury awards have skyrocketed in the 

past 10 years. A report by Jury Verdict Research demonstrates that jury awards 

and settlements doubled from 1995 to 2000. The median award in 1995 was 

$500,000. Five short years later it was over $1 million and the upward spiral in jury 

awards continues. 

Affordability is a byproduct of availability. With fewer and fewer insurance companies willing to write policies, physicians must pay more for coverage. Companies 

that do elect to provide coverage do so at much higher prices. A multi-specialty practice in Boca Raton was recently informed that its insurance premiums, currently 

$80,000 per year, would rise to $2.5 million--an increase of over 3,000 percent. A 

radiologist in Southeast Florida who specializes in the reading of mammograms was 

recently informed that his premiums would increase from $30,000 to $120,000. 

The final phase is risk-management. In an effort to obtain affordable coverage, 

physicians are forced to conduct risk assessments of their practices. As a result of 

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these assessments, physicians limit services and eliminate high-risk procedures in 

an effort to secure affordable premiums. In many cases, physicians are unable to 

find a company willing to underwrite a policy or provide affordable coverage. The 

only recourse is to close their practices or move to a different state. 

SOLUTION

Mr. Chairman, the AOA is committed to quality health care and improving patient safety. We fully support initiatives that seek to decrease medical errors and 

adverse events. Programs of continuing medical education, the Healthcare Facilities 

Accreditation Program that works to enhance and enforce quality standards at all 

hospitals in which osteopathic medicine is practiced, along with other initiatives designed to improve quality and safety of care demonstrate this commitment. We will 

continue these efforts that begin in our osteopathic medical school and continue 

throughout our member’s careers. The AOA recognizes that in a small percentage of cases, injuries due to negligence 

do occur. We also recognize that these injuries can have devastating impact upon 

the patients and their families. The AOA fully supports an individual’s right to seek 

fair compensation when injured as a result of substandard care. The AOA fully supports patients receiving appropriate reimbursement for ‘‘economic’’ losses, including 

current and future medical expenses, lost wages, and other economic factors. Unfortunately, our medical liability litigation system is ineffective in making a patient 

whole. Recent studies suggest that less than 50 cents of every dollar awarded goes 

to the injured patient. 

Comprehensive medical liability insurance reform legislation must be passed this 

year. This issue, if left uncorrected, will have significant and devastating consequences into the foreseeable future. 

The AOA strongly supports the ‘‘Help, Efficient, Accessible, Low-Cost, Timely, 

Health Care Act of 2002’’ (H.R. 4600). We urge Congress to pass this bipartisan legislation now. H.R. 4600 is based on the health care liability reforms enacted in California under the Medical Injury Compensation Reform Act (MICRA) of 1975. 

For over 25 years, MICRA has demonstrated that patients’ rights can be protected 

at the same time that medical liability costs are kept stable. A recent study shows 

the impact of the MICRA laws on medical liability premiums. Premiums in 2002 

for a family physician in Los Angeles County, California are approximately $12,000. 

Premiums for a family physician in Dade County, Florida are approximately 

$52,000. This trend is consistent across all specialties and subspecialties. Mr. Chairman, we believe the only explanation for this dramatic difference in premiums is 

the simple fact that California has meaningful medical liability laws. 

The AOA, through its Council on Federal Health Programs, endorsed six basic 

principles that we believe, when enacted together, will stabilize the medical malpractice insurance market and ensure patients have access to health care without 

limiting injured patients access to compensation. Each of these provisions is included in the HEALTH Act. The AOA endorsed principles are: a uniform statute of 

limitations, a cap on non-economic damages, collateral source payment offsets, periodic payment of future damages, joint and several liability reforms, limitation of 

plaintiff attorney contingency fees. 

The AOA is not alone in its support for medical liability insurance reforms. Seventy-five percent of Americans questioned in a new Wirthlin Worldwide survey believe that excess litigation has a detrimental effect on our health care system. Conducted for the Health Care Liability Alliance (HCLA), of which AOA is a member, 

the survey shows that 71 percent of Americans agree that a main reason health care 

costs are rising is because of medical liability lawsuits, 78 percent say they are concerned about access to care being affected because doctors are leaving their practices 

due to rising liability costs, and 73 percent support reasonable limits on awards for 

‘‘pain and suffering’’ in medical liability lawsuits. A majority of Americans support 

common sense medical liability reforms. 

CONCLUSION

Without effective reforms, our medical liability litigation system will continue to 

destabilize the medical liability insurance market, increase health care costs, and 

limit patients’ access to quality health care. 

I feel it also important to highlight other factors that contribute, on a secondary 

level, to this issue. We are all aware that reimbursements to physicians by third 

party payers, Medicare, Medicaid, and other entities are decreasing or have been 

‘‘flat’’ for a number of years. Although we firmly believe the liability crisis is independent of the reimbursement issue, we do believe that they jointly contribute to 

a decrease in access for our patients. Physicians can no longer afford to offer care 

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at dramatically reduced prices and, as a result, they are no longer accepting Medicaid and/or Medicare patients. 

The AOA appreciates the leadership you and other Members of the Committee 

demonstrated in June by approving the ‘‘Medicare Modernization and Prescription 

Drug Act of 2002’’ (H.R. 4954). That legislation takes initial steps to restore reimbursements to physicians and hospitals, and the AOA appreciates your efforts. 

We also feel that we must address the role of insurance companies in the current 

crisis. We understand that the insurance industry has made choices to leave the 

medical liability market based upon out-of-control court systems and the escalating 

payments awarded by juries in medical liability cases. We also recognize that there 

is a growing sentiment to examine the industry with eye to systemic change. The 

AOA welcomes any ideas or solutions to the current crisis that promise to increase 

the availability of companies willing to write policies and decrease the cost of medical liability insurance for our members. We believe that this will guarantee patients 

continued access to quality medical care. We also must stress that we do not view 

insurance reform as a replacement for meaningful tort reforms. Tort reforms must 

be approved and if Congress feels that there is a need to address the insurance industry, it should be in addition to the approval of H.R. 4600. 

The ‘‘litigious environment’’ surrounding physicians will continue to lead them to 

the practice of defensive medicine in an effort to eliminate future lawsuits. This type 

of behavior only increases the cost of health care for the patient and our society. 

Physicians, hospitals, nursing homes, medical schools, and patients across the 

country realize that the current medical liability situation is unacceptable. Unless 

the escalating costs of the current medical liability system are addressed at a national level, patients in many states will be forced to deal with a shortage of health 

care providers. The HEALTH Act would provide the same reforms on the national 

level that have brought stability to states that have enacted similar reforms. 

By passing the HEALTH Act, Congress can increase access to medical services, 

eliminate the practice of defensive medicine, improve the patient-physician relationship, improve patient safety, and slow the wasteful use of health care dollars. 

The AOA and our members stand ready to work with you, Mr. Greenwood, and 

all Members of Congress to ensure that osteopathic physicians can continue to provide high quality care to our patients across the nation. 

PREPARED STATEMENT OF THE AMERICAN SOCIETY FOR CLINICAL PATHOLOGY

On behalf of the 151,000 pathologists, clinical scientists, medical technologists and 

technicians represented by the American Society for Clinical Pathology, thank you 

for the opportunity to submit a statement for the hearing record on the medical liability system and its impact on access to health care. 

As an organization representing the pathology and laboratory medicine team, we 

are involved in many aspects of the health care system, including cancer screening. 

We are concerned over the 16,000 new cases of cervical cancer that are diagnosed 

annually. Unfortunately, approximately 4,800 women die from cervical cancer each 

year. 

More women (80%) die of cervical cancer because they have never had a Pap 

smear or they have not had a Pap smear in the last five years than those that die 

of a misread Pap smear. The Pap smear is directly attributable to a 70% decline 

in deaths due to cervical cancer in the last 50 years. With annual screening, the 

chance of developing cervical cancer can be reduced to less than 1%. 

Pap smears have an irreducible false negative rate (10%-40%) due to sampling errors on the part of health care providers and screening errors occurring in laboratories. According to a March 1997 report in the Archives of Pathology and Laboratory Medicine, the continued availability of Pap cancer screening test is threatened 

by lawsuits because the legal system demands a zero error rate which is mathematically unachievable even in the most competent professional hands. 

Changes must be made to the current liability system so that patients continue 

to have access to critical tests, such as the Pap smear. We believe the Help Efficient, 

Accessible, Low Cost, Timely Health Care Act of 2002, or ‘‘HEALTH’’ Act, will assist 

in taming the growing concern over the professional liability crisis in this country 

and ultimately improve patient access to care. 

157

AMERICAN SOCIETY OF ANESTHESIOLOGISTS

July 17, 2002

The Honorable MICHAEL BILIRAKIS, Chairman 

Subcommittee on Health 

Committee on Energy and Commerce 

2125 Rayburn Building 

Washington, D.C. 20515

DEAR CHAIRMAN BILIRAKIS: I write on behalf of the American Society of Anesthesiologists (ASA) to thank you for having scheduled today’s oversight hearing on 

health care litigation reform. ASA is a national medical specialty organization of 

some 37,000 physicians or other scientists engaged or specially interested in the 

practice of anesthesiology. 

A study released by the Institute of Medicine in December 1999 refers repeatedly 

to the specialty of anesthesiology as having assumed a patient safety leadership role 

over the past two decades. Since the late 1970s, this specialty has achieved a 50-

fold decrease in anesthesia mortality, from about one death in every 5,000 anesthetics to less than one death in 250,000 anesthetics. In ASA’s judgment, this radically improved mortality rate was principally the result of a multifaceted effort by 

ASA, at a total approximate cost of $15 million. The purpose of this effort was:

• bto determine the causes of adverse anesthesia-related events, 

• to focus the attention of anesthesia providers on those causes and the ways in 

which to avoid them, 

• to establish national practice parameters designed to raise the quality of anesthesia care in all locations, 

• to foster continuing research on additional means to improve patient safety, and 

• to insist that nonphysician anesthesia providers be supervised by a physician. 

A major byproduct of this ASA patient safety initiative has been, until the very 

recent past, a significant decline or stabilization in the cost to anesthesiologists of 

professional liability insurance. As the risks attendant upon anesthesia care declined, so also did the cost of professional liability insurance for members of our specialty. 

Regrettably, this pattern of declining or stable liability premiums has now ended, 

and members of our specialty are now experiencing radically escalating premiums 

in most states—and indeed, as widely reported, our members in a number of states 

have this year encountered extreme difficulty in obtaining any insurance coverage 

at all. We believe this state of affairs is in part attributable to changes in reserve 

and investment policies of professional liability insurers, but without question it is 

equally do to the explosion, both in size and frequency, of professional liability 

awards in general. 

ASA firmly believes that any patient injured as a result of the delivery of substandard medical care is entitled to be fairly compensated for his or her loss. The 

difficulty, however, is that under the laws of many states, the extent of an injured 

patient’s loss is simply unrestrained by common sense or any reasonable measure 

of actual loss. 

For this reason, although ASA will continue aggressively to pursue its successful 

patient safety initiatives, ASA has joined other medical organizations in supporting 

the Help Efficient Accessible Low-cost Timely Healthcare Act of 2002 (HEALTH) 

(H.R. 4600) introduced by Mr. Greenwood, a member of this Subcommittee. ASA believes that passage of this proposed legislation represents the one true hope at the 

federal level for bringing some semblance of sanity back to the medical liability insurance scene. 

Again, we are grateful to you for shedding light on this important issue through 

the scheduling of these hearings, and to Mr. Greenwood for his authorship of the 

HEALTH bill. 

Sincerely, 

BARRY M. GLAZER, M.D. 

President 

158

ROBIN A. BLEIER

P.O. BOX 1116, CRYSTAL BEACH, FL 34681

July 19, 2002

The Honorable MIKE BILIRAKIS

Chairman, Health Subcommittee 

House Committee on Energy and Commerce 

Room 2125 Rayburn House Office Building 

Washington, DC 20515

DEAR CHAIRMAN BILIRAKIS: Thank you sir for taking the time to read my letter. 

My name is Robin Bleier. I have worked in health care in some way shape or form 

since 1982 (virtually half my life). I am writing this letter as for the first time in 

my career I am afraid of the future for those entrusted in our care. Although we 

do not know each other personally I have worked with Dr. Bilirakis at St, Mark 

Village in Palm Harbor in the mid 90’s as a former Director’s of Clinical Services. 

I stand for now what I did then, quality care and services that I would want my 

family member to have. I am writing you for help to stop this runaway train before 

it becomes to late. 

I see the ‘‘liability crisis’’’ as the pivotal problem. Obviously legal is tied to perception of the public. The current state of legal/insurance affairs is amazing not only 

me but also my professional counterparts in this and other states. The company I 

serve is a small one. We have only five SNFs and a hospital organization. We care 

for and employee approximately 1200 people. I serve as the Chief Operating Officer 

but started in the field as a nursing assistant and love my roots of care giving. To 

this day, I find time weekly to provide some kind of physical and or psychosocial 

assistance to some of our patients/residents to assure my connection to people is not 

lost so that our processes and system reflect this. 

The time we spend addressing legal issues is out of proportion and getting steeper 

by the week. Obviously time translates into labor, thus time with the patient/resident. In Florida, we have steep staffing requirements. In one sense the government 

demands we have more nursing staff. The public and advocacy groups saw as good. 

But the time that the legal efforts require takes some of that back. The time facility 

that administrative staff and corporate staff spend away from the patient/resident 

(to pull, review, copy, records, just to start) is huge. I can not see how this helps 

improve ‘‘quality’’ patient/resident care, services, and outcomes. I think we all know 

that perceptions are reality. When JACHO surveys a hospital they receives a report 

card after the visit. Often the score is 90% or more. That means up to 10% was not 

acceptable. The public sees 90% as an ‘‘A’’ and of course ‘‘A’s’’ are good. In the SNF 

world we get a CMS 2567. This is a deficiency report and it says that right on it. 

Deficiencies are negative thus ‘‘bad’’. Some facilities get very few and low level deficiencies assigned to them. Who wants to be bad and who wants to buy bad things? 

In closing, I think that we all need to realize that punitive action does not result 

in QUALITY and that should be what we all want. Quality is different for all but 

costs money to have. Please help my patients/resident. Please stop this runaway 

train! 

Very Sincerely Yours, 

ROBIN A. BLEIER, RN, CLC, CDON, HCRM 

PREPARED STATEMENT OF THE NATIONAL MEDICAL LIABILITY REFORM COALITION

Chairman Bilirakis, Ranking Member Brown, members of the subcommittee, the 

National Medical Liability Reform Coalition appreciates this opportunity to submit 

for the hearing record a statement noting how excessive litigation negatively impacts patients’ access to health care. 

The National Medical Liability Reform Coalition (NMLRC) is an alliance of associations representing nurses, advanced practice nurses, physicians, hospitals, health 

plans, long-term care providers, and other parties dedicated to improving the nation’s system for resolving healthcare liability claims. 

There is a growing concern that the healthcare liability crisis in this country is 

compromising patient access to care. The goals of the system are to fairly, expeditiously, and cost-effectively compensate injured patients and deter unsafe practices. 

Unfortunately, the current system does not accomplish these goals. 

Limitless liability negatively affects access to health care. According to the Mississippi State Medical Society, 90 percent of the obstetricians in Mississippi and 75 

percent of the general, orthopedic and emergency surgeons have been sued. Every 

single neurologist in Mississippi with more than ten years of experience has been 

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sued. As a result, few Mississippi towns under 20,000 residents have a physician 

who will deliver babies. 

The Institute of Medicine issued a report entitled, ‘‘Medical Professional Liability 

and the Delivery of Obstetrical Care,’’ in which it recommended alternatives to the 

current tort system. In the mid-70s through the mid-80s, the link between diminished access to medical care for patients and the rise in liability premiums was 

clear. A strong economy and stock market held this link in abeyance through most 

of the 1990s, but this complex link is reemerging as a health care access problem— especially in rural areas and especially for those on Medicaid. The National Commission to Prevent Infant Mortality stated over a decade ago that there is a link 

between physicians dropping pregnancy-related care because they could no longer 

afford the professional liability insurance required to provide this service and a loss 

of access to medical care for women. 

Reports from across the country indicate that access to medical care is affected 

by the healthcare liability crisis, including the closing of trauma centers. The Associated Press reported on July 13, 2002, that Nevada’s only top-level trauma center, 

the University Medical Center in Las Vegas, reopened 10 days after it shut down 

because of soaring malpractice insurance rates. ‘‘The county-run trauma center 

closed July 3 after all but one of the medical center’s 58 orthopedic doctors resigned 

because they said they couldn’t afford rising malpractice insurance premiums. Physicians say some medical malpractice insurance premiums have jumped from 

$40,000 to $200,000 annually. To put the trauma center back in business, 10 to 15 

private practice orthopedic surgeons agreed to become Clark County employees for 

45 days, meaning they will be covered by the hospital’s $50,000 liability cap.’’’ The 

Governor of Nevada is expected to call a special session of the legislature by the 

end of July to address this problem. 

The Los Angeles Times reported, ‘‘Already, specialists are becoming harder to find 

around the country and trauma centers that treat life-threatening emergencies are 

closing.’’ Other major news outlets, such as ABC and CBS, are reporting similar 

findings. 

For the past 11 years, Medical Liability Monitor has annually surveyed underwriters for the premium rates for general surgery and obstetrics-gynecology. According to the editor, Carol Golin, because of rapidly rising insurance premiums, this 

is the first year in which the newsletter will conduct a second survey (USA Today, 

December 4, 2001, Soaring Malpractice Premiums Stun Many Doctors). According 

to that survey, some states have experienced unusually large liability insurance rate 

increases: Florida, Mississippi, Ohio, Pennsylvania, Tennessee, Texas, West Virginia. These premium increases are leading to the closing of physician practices and 

health care facilities in these states. In turn, patients who live in smaller or isolated 

communities in these states are the first to feel the loss of a physician’s office or 

nursing home. 

Additionally, AON Risk Consultants, Inc. performed an actuarial analysis of the 

trends in general liability/professional liability for nursing homes. The study found 

that the liability costs per nursing home bed have increased at an annual rate of 

24% a year from $240 in 1990 to $2360 in 2001. Claim costs have absorbed 20% 

of the Medicaid reimbursement increase nursing homes have received since 1995. 

This shows dollars earmarked for patient care are instead offset to pay for increased 

liability insurance premiums. 

As of January 2002, major medical liability insurance underwriters, Frontier, St. 

Paul Global Health Care, PHICO and Reliance, have all left the market or have become insolvent. ‘‘In 2001, eight states saw two or more liability insurers raise rates 

by at least 30 percent last year. Physicians in more than a dozen states saw one 

or more insurers take a 25 percent or higher rate increase.’’ (AMA News, January 

7, 2002, Professional Liability Insurance Rates Go Up; Doctors Go Away) Anticipated 

percentage increases range from the low to upper double digits for those companies 

that continue to write this insurance product. 

Some states are recognizing the link between high professional liability insurance 

premiums and the resulting loss of access to medical care. Pennsylvania’s Attorney 

General, Mike Fisher, sent a letter to Chief Justice Stephan Zappala of the Pennsylvania Supreme Court in which he wrote, 

‘‘Pennsylvania is facing a potential health care crisis due to the unaffordability 

and unavailability of medical professional liability insurance. Insurers have requested increases for 2002 as high as 20 percent on the heels of 20 to 60 percent 

hikes in 2001 . . . In recent months, two of the states largest insurers stopped 

issuing medical malpractice insurance. Doctors are retiring early, relocating 

their offices to neighboring states or discontinuing their practices. Hospitals are 

faced with the possibility of closing trauma units. Perhaps the most important 

consequence is the rising cost of health for all Pennsylvanians.’’

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Pennsylvania is not alone. For example, according to the Mississippi State Medical Society, premiums for pregnancy-related care liability insurance have risen from 

20 percent to 400 percent. According to a Washington Post article, November 23, 

2001, ‘‘Waldemar ‘Lanny’ Prichard, [a family physician in Indianola, MS] said he 

would stop delivering babies next year unless he gets a break on his malpractice 

insurance bill...Prichard’s premium for the coming year: $70,000. His gross salary 

last year: $72,000.’’ The article goes on to cite the lack of physicians willing to deliver babies in rural Mississippi. ‘‘Three of six doctors in Cleveland, MS who deliver 

babies ended that part of their practice in October because of the increase in premiums. Greenwood (Mississippi) soon will go from four to two. Yazoo City, which 

has 145,550 residents, has no one practicing obstetrics.’’

In Florida, 40 medical liability companies were writing medical liability insurance 

five years ago, today there are six companies left and two of those companies will 

not accept new applications. According to the American Academy of Family Physicians, family physicians are experiencing increases of medical liability insurance 

rates anywhere from 35 percent up to 300 percent based on location, scope of practice, and prior claims. 

In the early 1970s, a medical liability insurance crisis gripped California. Liability 

premiums soared more than 300 percent because of more frequent and severe liability claims and larger jury awards. Many physicians—including high-risk specialties 

such as obstetrics and neurosurgery—were forced to close their doors, either unable 

to obtain insurance or unable to afford inflated rates. In 1975, California enacted 

the Medical Injury Reform Act (MICRA), a comprehensive legislative package of tort 

reforms that addressed this concern. 

As a result, California’s patients and physicians are largely unaffected by national 

increases in insurance rates. While U.S. premiums increased 505% from 1976 to 

1999, California premiums increased only 168%. According to the Doctors’ Company, 

medical liability lawsuits in California settle in 1.8 years. The same lawsuits in 

states without limits on non-economic damages settle in an average of 2.4 years, or 

33% longer. 

To achieve health care access, NMLRC believes that Congress should enact a 

package of effective tort reforms, similar to California’s MICRA, including:

• limit on pain and suffering (non-economic) awards; 

• periodic payment of future damages; 

• elimination of double payment of awards; 

• a reasonable statute of limitations; 

• a sliding scale for contingency fees; and 

• proportionate liability among all parties. 

These reforms, which are embodied in HR 4600, the Help Efficient, Accessible, 

Low Cost, Timely Health Care Act of 2002, will meet the intended goals of the system by allowing greater access to care, adequately compensating injured patients, 

and allowing quicker resolutions. 

Again, thank you for the opportunity to share these views. 

NATIONAL MEDICAL LIABILITY REFORM COALITION MEMBERS

American Academy of Dermatology Association; American Academy of Facial Plastic 

and Reconstructive Surgery; American Academy of Family Physicians; American 

Academy of Ophthalmology; American Academy of Otolaryngology—Head and Neck 

Surgery; American Academy of Pediatrics; American Association of Blood Banks; 

American Association of Health Plans; American Association of Homes—and Services for the Aging; American Association of Neurological Surgeons; American Association of Nurse Anesthetists; American Association of Orthopaedic Surgeons; American College of Cardiology; American College of Nurse-Midwives; American College 

of Obstetricians and Gynecologists; American College of Osteopathic Emergency 

Physicians; American College of Osteopathic Family Physicians; American College 

of Physicians—American Society of Internal Medicine; American College of Radiology; American Dental Association; American Gastroenterological Association; 

American Health Care Association; American Insurance Association; American Medical Group Association; American Osteopathic Association; American Society for 

Clinical Pathology; American Society for Reproductive Medicine; American Tort Reform Association; American Urological Association; Cleveland Clinic; Congress of 

Neurological Surgeons; Healthcare Leadership Council; Hospital & Healthsystem 

Association of Pennsylvania; Medical Group Management Association; and VHA Inc.