Opinion ID: 1787098
Heading Depth: 1
Heading Rank: 9

Heading: The Cap Protects the Fund's Financial Status

Text: ś 274. In December 1994, the nonpartisan Wisconsin Legislative Audit Bureau compiled an accounting estimate revealing that the Fund was in dire economic straits. [43] The Fund had an accounting deficit of $67.9 million. [44] As the majority notes, this deficit dated from the Fund's first 10 years of operation. Majority op., ś 150 n.195. For a number of years, the Board ha[d] been studying ways to ... retire its financial deficit. [45] ś 275. The Office of the Commissioner of Insurance prepared a fiscal estimate in connection with 1995 Assembly Bill 36, and concluded as follows: In evaluating the fiscal impact of 1995 AB 35, [46] OCI concentrated on its effect on the Fund.... . . . . ... If a cap had been in place as of June 30, 1994, the break-even Fund levels could have been reduced by 19.0% or approximately $10.5 million. Over a five-year period the total cumulative savings resulting from a cap of $250,000 enacted June 30, 1994, is projected to be $67.8 million. [47] ś 276. Later, as the majority notes, the bill was revised to reflect an increased cap of $350,000. A revised fiscal estimate was never done. Cumulative savings may have been used simply to reduce provider assessments. In retrospect, though, is it merely a fascinating coincidence that the Fund had a deficit of $67.9 million, and the Commissioner of Insurance estimated the five-year savings to the Fund at $67.8 million? ś 277. It is interesting to examine the Fund's deficit through the past twenty years, keeping in mind that the effects of tort reform often take three to five years to become apparent, [48] probably because of the lag time between enactment and the filing of claims based on events that occurred after enactment. With that in mind, consider the following data and commentary: Year Surplus (Deficit) [49] 1980-1981 (8,000,000) 1981-1982 (9,000,000) 1982-1983 (20,000,000) 1983-1984 (50,000,000) 1984-1985 (80,000,000) Prior to 1985, no cap on noneconomic damages existed. 1985 Act 340 capped noneconomic damages at $1,000,000. 1985-86 (100,000,000) 1986-87 (112,000,000) 1987-88 (122,700,000) Three years after 1985 Act 340 became law, the Fund's deficit began to decrease. 1988-89 (108,300,000) 1989-90 (73,597,992) 1990-91 (71,679,588) In 1991 the damage caps enacted in 1985 Act 340 were sunset, meaning that no cap existed. 1991-92 (78,982,681) 1992-93 (71,613,641) 1993-94 (67,903,761) 1994-95 (57,722,800) In 1994 the legislature studied whether to reenact caps. 1995 Act 10, reenacting caps, became law in May 1995. 1995-96 (41,795,500) 1996-97 (44,094,200) 1997-98 (22,166,700) Three years after the passage of 1995 Act 10, the Fund's fortunes dramatically improved, and it began to show an accounting surplus for the first time. 1998-99 8,579,800 1999-00 27,229,700 2000-01 28,460,500 2001-02 6,604,100 2002-03 7,935,026 ś 278. The majority relies on its expertise in accounting to conduct a detailed fiscal analysis [50] and then declares The Fund has flourished both with and without a cap. If the amount of the cap did not impact the Fund's fiscal stability and cash flow in any appreciable manner when no caps existed or when a $1,000,000 cap existed, then the rational basis standard requires more to justify the $350,000 cap as rationally related to the Fund's fiscal condition. Majority op., ś 158. ś 279. This analysis, while admittedly an inexact science, shows that the caps do have an impact on the Fund's fiscal stability. Recent estimates confirm this analysis. ś 280. On May 17, 2005, the Legislative Fiscal Bureau released Paper #450, relating to the Patients Compensation Fund. The paper notes that this court upheld the cap on noneconomic damages in wrongful death cases, and had accepted review in the case at bar. The study notes that, according to actuarial estimates, if Wisconsin's cap on noneconomic damages were to be declared unconstitutional, the potential fund liabilities may be increased by an estimated $150 million to $200 million. [51] ś 281. In 2001, the nonpartisan Legislative Audit Bureau reached the same findings: Action by the Board of Governors and the Legislature ... have contributed to a significant improvement in the Fund's financial position, which showed an accounting surplus of $27.2 million as of June 30, 2000. [52] The 2001 study specifically cited the legislature's re-establishment of a limit on awards for non-economic damages in 1995 as one of the reasons behind the Fund's stabilization. [53] ś 282. The nonpartisan study provided concrete evidence for this finding: the Fund's claim payments were below $20 million in each year from FY 1997-98 through FY 1999-2000. In contrast, a number of recent medical malpractice cases in other states have resulted in verdicts of more than $30 million, including a $79 million verdict in New York, a $55 million verdict in Illinois, and a $40 million verdict in Texas. [54] In other words, thanks to the majority's action today, the Fund may be held liable for an award in a single case that dwarfs the Fund's current yearly expenditures. It is impossible to conceive that this would not have a deleterious effect on the Fund. ś 283. The majority ignores this evidence. The legislature had a rational basis to believe that the cap would increase the financial stability of the fund.