By: Health Insurance
Submitted: 2009-10-14 11:00:44 | Word Count: 853
A statewide fund to cover large medical malpractice judgments -- built with yearly assessments imposed on hospitals, physicians and other health professionals -- is about to get $100 million poorer.
A House Democratic spokesman this week confirmed that the money, representing two-thirds of the fund's balance, almost certainly will be transferred to the general fund when Pennsylvania's state budget is finalized.
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"This is not an element of the budget that currently is in dispute," said Brett Marcy, an aide to House Majority Leader Todd Eachus, D-Hazleton. "This money would be used as part of our overall strategy at plugging a $3.2 billion deficit that we face this year. If we don't do this ... we face a significant tax increase next year."
However, professional associations representing Pennsylvania physicians, hospitals, midwives and others say the state is using them as its personal piggy bank and are threatening to sue if the money is transferred.
"We believe we have a vested property right to that money," said Scot Chadwick, director of governmental affairs for the Pennsylvania Medical Society.
The MCare Fund has collected an annual payment from physicians and other health care workers since the mid-1970s as a hedge against large medical malpractice judgments. It was formed because physicians were having trouble finding insurers who would offer them coverage.
State law requires all doctors to obtain malpractice insurance on their own and through the Mcare insurance fund, which charges doctors a fee and then pays malpractice claims out of the fund.
The Pennsylvania Medical Society and the Hospital and Healthsystem Association of Pennsylvania have already sued the state for allowing yearly surplus MCare funds to accumulate instead of using the money to reduce the next year's assessments. As a result, they say, the assessments have continued to grow.
"The whole idea of the MCare Fund was to lower the cost of medical liability, not to increase it or shift it to others," said Jim Redmond, senior vice president for legislative services at Healthsystem Association.
In December, the same associations filed suit over a second fund, the Healthcare Provider Retention Account, which was created in 2003 to reduce MCare assessments. The money for that fund comes from a cigarette tax.
Two years ago, though, the physician and hospital groups learned that state officials had not been transferring the money into the MCare Fund since 2005 -- totaling about $616 million, Mr. Chadwick said -- and sued when the state said it was not required to make the transfer.
In July, Commonwealth Court denied the state's 2009 motion to throw out the lawsuit.
Now, the Pennsylvania Medical Society and the Hospital and Healthsystem Association of Pennsylvania may be looking at filing a third lawsuit to prevent what they see as an unfair and illegal raid on MCare funds.
"Obviously, physicians are concerned," said John Krah, Allegheny County Medical Society executive director. "Our state malpractice liability premiums are still significantly higher than many other states, including surrounding states, and we do compete with other locations for attracting physicians."
He said physicians understood the state's need to balance a budget. "It's as if they essentially were placing a special tax on physicians. Why doesn't anyone suggest a special tax on plaintiff attorneys' contingency fees?"
Further darkening the picture for physicians is the possibility that the state insurance commissioner soon may begin phasing out MCare, as availability of insurance is no longer as big an issue. That's because more physicians are either employed by hospitals or get malpractice insurance coverage through a hospital, which also is why hospitals have a major stake in how MCare money is used.
The problem: MCare has an unfunded liability of an estimated $1.66 billion that is expected to be needed for future judgments and settlements, Mr. Chadwick said. That means the newly graduated doctors will be levied to cover those debts over a period of perhaps 20 years, even though they had no personal responsibility for the debt nor will they receive any benefit from the fund.
"It's like paying the MCare mortgage, but you don't get the MCare house," he said.
Mr. Marcy said legislators knew physicians were unhappy but noted that "this is a tremendously difficult budget year" due to higher unemployment and decreased revenues.
"There is an awful lot of pain throughout this budget. There are an awful lot of people who are not going to be happy about it, and we understand that. But we need help" to continue programs such as children's health insurance, child welfare and senior services and programs for veterans.
"We need to find the revenue to keep these services running."
While physicians may feel unfairly singled out, he added, "The people who are hurting the most are the people who are unemployed and don't have health insurance."
