Source: http://www.gislaw.com/Firm-Articles/Summary-of-M-Care-Act-1802.shtml
Timestamp: 2017-10-18 18:20:05
Document Index: 85096326

Matched Legal Cases: ['§303', '§302', '§513', '§713', '§5101', '§715', '§746', '§5105', '§5108']

The following is a brief summary of the provisions in House Bill 1802. The emphasis in this outline is on changes in the law, e.g. to the extent the bill merely incorporates existing law, little if any mention is made of the provisions. References to the "department" are the Insurance Department of the Commonwealth of Pennsylvania.
• The Act establishes a Patient Safety Authority, made up of eleven (11) people, four (4) of whom are regular citizens appointed by the Senate. They will collect and analyze data regarding reports of "serious events" and "incidents" among other things. [§303]
• A "serious event" is defined as something that results in death or an "unanticipated" injury. An "incident" is defined as something that could have injured the patient, but did not. [§302]
COMMENT: The key to all of this is how one defines a "serious event." What is "unanticipated"? Obviously, this may generate a lot of paperwork for the hospitals because they have to report everything that is unanticipated to the patient, the authority and also to the state. The hospital may say that nothing is really "unanticipated" and therefore, they do not have to report anything. On the other hand, where you have a death, it does not appear as if that death has to be unanticipated. Thus, when read literally, the statute would require any death to be reported to the patient, the authority and the department.
It remains to be seen how diligent doctors or nurses are in reporting serious events and incidents to the hospital. This seems to be the key link in the chain, for if the people "on the floor" do not report an event, the hospital will never know about it.
If a doctor or hospital sends a letter to a patient informing them of a "serious event," is that letter admissible at trial? It could certainly constitute an admission depending on who authors the letter.
COMMENT: The act does not say that the misrepresentation must be "material" but that will likely be required.
• The plaintiff has the option of introducing the medicals into evidence, but they cannot actually recover those amounts unless the plaintiff remains "legally responsible for such payment."
• The annual periodic payments are to be paid quarterly. If payments are late, the plaintiff is entitled to interest at the legal rate.
Another practical problem relates to the jury's inability to foresee the future. Assume that, based on testimony introduced by the plaint0iff, the jury concludes that he/she will need a surgery in the year 2013, and it is estimated that the procedure will cost $25,000. Based on that testimony, the jury awards $25,000 for the year 2013. What happens if it turns out that the surgery is needed in the year 2011, and it ends up costing $45,000, not $25,000. Where does the plaintiff get the money? In the old days of lump sum awards, presumably the plaintiff would have a cushion to draw from and cover the unanticipated expense. Not so under the new rule.
Even assuming that there is adequate money to pay an entire verdict and, therefore, there is no question that future periodic payments are going to be made on the medical expenses, there are a host of other questions that will arise about the payment of attorney's fees. For example, how do you calculate the present value of the future medical payments? The insurance carrier may want to minimize the present value so as to reduce the lump sum amount which they have to pay as counsel fees, whereas plaintiff's counsel might naturally disagree with their figure and argue for a higher present value. Does each side have to get an economist in order to settle this post-verdict dispute in front of the court? Does that create a conflict of interest for plaintiff's counsel to the extent he or she is arguing for a larger lump sum fee?
Ironically, the carriers used to trumpet the high present value that their annuities offered, whereas now they may be trying to hold down the present value so as to reduce the lump sum payment as attorney's fees.
Exactly how is this provision to be applied? Assume that the jury awards future medicals of $100,000/year for 50 years, an aggregate amount of $5,000,000.00. Assume further that the present value of that future stream of payments is $1,200,000.00. It would seem that the defendant would immediately owe as counsel fees the plaintiff's contingency fee as applied to that present value of $1,200,000.00. If that amount is a 1/3 contingency fee, then $400,000.00 would be paid to counsel in a lump sum.
Once attorney's fees are paid, the biggest debate undoubtedly will concern what exactly the defendant must pay to the plaintiff in each future year. Going back to our prior example of a $5,000,000 gross verdict with a present value of $1,200,000, once the attorney's fee of $400,000 has been paid, what does the plaintiff receive every year? The defense may argue that it takes the remaining portion of the present value of the verdict, $800,000, and uses that to purchase an annuity making payments for the next 50 years. That may mean the plaintiff receives something less than $100,000/year as the jury awarded since some of the present value was "used up" to pay attorney's fees, i.e. not all the present value was devoted to purchasing an annuity. On the other hand, plaintiffs may argue that after having paid attorney's fees the defendants still have the obligation to make periodic payments in the full amount of the verdict, $100,000/year. Although this may seem unfair because, in effect, it would require the defendant to pay attorney's fees plus the full verdict, plaintiffs can counter that it is appropriate in the context of this new rule for the following reasons:
• The rule gives the defendant a huge new benefit by providing that payments cease if the plaintiff dies prematurely. In certain cases, this could produce a significant windfall to the insurance carriers, so it is only natural that they should take on some additional burdens under the rule, namely, paying the full verdict plus attorney's fees.
• Subsection (e) of the rule stays that "if full funding of an award pursuant to this section has been provided, the judgment is discharged....." Therefore, the implication is that if "full funding" is not provided, then the judgment is not discharged, and "full funding" means paying the full amount awarded by the jury, in our hypothetical $100,000/year.
• In many instances there will actually be enough money in the present value to cover both attorney's fees and the full amount of the verdict because of advantages available in the annuity marketplace. For example, in our hypothetical verdict having a present value of $1,200,000, the $800,000 of remaining present value might be enough to purchase an annuity paying $100,000 for 50 years because of the concept of "rated age." In other words, while the jury concluded that the plaintiff would live and incur medical expense for an additional 50 years, the insurance company selling the annuity may be more pessimistic about the plaintiff's health and assign him or her a rated age that yields a life expectancy of only 15 years. In that event, the insurance carrier would be willing to sell a 50-year annuity relatively cheaply because they are betting that the plaintiff will only live another 15 years. And remember, under the rule the payments cease as soon as the plaintiff dies! Therefore, the $800,000 of present value that remains after attorney's fees are paid may indeed be enough to purchase an annuity covering a potential 50 year obligation of $100,000 annually. In addition to rated age, another thing that will reduce the cost of the annuity is the issuing company's recognition that they do not have to guarantee the annuity for a given number of years. Most annuities are sold with 20-30 year guarantees to protect the plaintiff in the event of a sudden and unexpected death, but under M-Care, the payments stop automatically when the plaintiff dies, i.e., there is no guarantee that the payments will continue for a minimum number of years. That too should reduce the cost of the annuity.
The requirement of quarterly payments is going to create a lot of paperwork for the insurance carriers. Also, there may now be debates about the security of the funding instrument which a defendant proposes to utilize. The plaintiff may feel that it is not adequately secure to guarantee the payments. Ultimately, the court may be involved in resolving these disputes.
• Alternation or destruction can cause suspension of a person's license.
COMMENT: The major change here is the express permission for the court to give an adverse inference instruction for inaccurate medical records. Obviously, there will be debates over whether the "inaccuracies" are merely benign or intended to deceive.
• There are certain circumstances under which the court can waive these requirements if they are otherwise satisfied with the expert's competence.
• As to minor's, the rule is seven (7) years from the date of the tort or when the child attains the age of 20, whichever is later.
11. DEATH CASES - STATUTE OF LIMITATIONS [§513]
COMMENT: This provision, which is obviously aimed to cure the perceived "problem" in Philadelphia County, may be struck down by the Supreme Court on the basis that the legislature lacks authority to do anything about venue, including the establishment of a commission.
• An appellate court can reverse the decision if it concludes that the trial judge has not "adequately considered" the evidence on impact.
COMMENT: This provision is designed to address huge verdicts where the defendant says they cannot afford to pay. The remittitur can be awarded, not because the verdict "shocks the conscience," but simply because the defendant's having to pay it would adversely effect healthcare in the community. In other words, the judge could conclude that it is a very fair verdict given the size of the damages to the plaintiff, yet he could still order a remittitur because it could potentially put the hospital out of business.
It is unclear what "impact" must be established in order to justify a remittitur. The statute simply says the judge is to consider the impact.
• The plaintiff has to prove that a reasonably prudent person in the patient's position would be justified in believing that the care that was rendered by the hospital or one of its agents.
COMMENT: This standard is probably the statutory equivalent of the "holding out" requirement that currently exists under the Capan case, except this does change the law in the sense that it moves it away from a subjective standard and to an objective standard.
15. CAT FUND - M-CARE FUND [§713, §5101]
• In the year 2006 and thereafter, basic coverage is increased to $750,000.00, unless the Insurance Commissioner finds that basic coverage in that amount is not available, in which event, the limits stay at $500,000.00 for primary, and the situation gets re-evaluated every two years.
COMMENT: This seems to be status quo vis-á-vis the so-called "702(e)" release.
22. EXTENDED CLAIMS a/k/a "605" CASES [§715]
• This refers to those claims where the negligence is at least four (4) years old as of the time the complaint is filed. In these cases, the department defends the claim and pays all damages from "dollar-one," i.e. there is not basic coverage.
• The fund's limit of liability is $1,000,000.00 (one million).
• To qualify as an "extended" claim, virtually all of the negligent treatment must be more than four years old as of the time the complaint is filed, i.e., if some of the negligence is more recent than four (4) years, it is not an "extended" claim and primary coverage depends and pays first.
• Information transmitted is not considered public information under the "Right to Know" law, unless it is used in a formal disciplinary proceeding. [§746(c)]
COMMENT: Will this make it even more difficult to settle cases if the doctors knows that settlement are going not only to the data bank but also to the licensing board. Will the licensing board remain largely a "paper tiger" when it comes to negligence claims?
• The effective date of the Act is March 20, 2002, and therefore, most of the provisions are going to apply to causes of action accruing after that date. However, certain of the sections take effect immediately. For a specific listing of which sections apply immediately and which apply to claims arising after March 20, 2002, you must consult §5105 and §5108 of the final printer's copy of House Bill 1802; this information is not contained in Purdons.