november 2, 2006 mcare commission public hearing1 pennsylvania insurance department overview of the...

November 2, 2006 Mcare Commission Public Hearing 1

Pennsylvania Insurance Department

Overview of the

Medical Care Availability and Reduction of Error Fund


What is Mcare?

The Medical Care Availability and Reduction of Error Fund (“Mcare”) was created by Act 13 of 2002 and is a deputate of the Pennsylvania Insurance DepartmentMcare is the successor to the Medical Professional Liability Catastrophe Loss Fund, better known as the “CAT Fund”


What is Mcare’s Mission?

Mcare main purpose is to ensure reasonable compensation for persons injured due to medical negligence


How does Mcare Implement its Mission?

By administering various sources of funds to pay for judgments, awards or settlements in medical malpractice claims against participating health care providers and eligible entities, which exceed the primary limits of coverage


Who is required to participate in Mcare?

Participation is mandatory for physiciansosteopathic physicianspodiatristsnurse midwiveshospitalsnursing homes birth centersprimary health centers

Professional corporations**Most professional corporations, associations or partnerships owned entirely by health care providers may choose to insure their basic (primary) layer of liability

– If they so choose, then their participation in Mcare is mandatory


Who is NOT Subject to Mandatory Mcare Coverage Participation?

1. providers who practice less than 50% in PA2. providers who practice exclusively as federal government

employees3. providers who practice exclusively as Commonwealth or

City of Philadelphia employees4. providers who are exclusively forensic pathologists5. providers who are retired, but who provide care for his or

herself and immediate family members6. providers who practice exclusively as members of the PA or

U.S. military forces7. providers who practice exclusively under a volunteer license8. providers who practice exclusively with coverage under the

Federal Tort Claims Act


National Coverage Limits

8 states require some level of mandatory coverage

Only New Jersey and Wisconsin require the same level of mandatory coverage as Pennsylvania


PA’s Mandatory Coverage Limits

Since the Fund’s creation in 1976, the required coverage limits for health care providers has varied to meet changes in the law

The primary rates increase or decrease in part to reflect the risk associated with the changes to the primary layer


What are the Coverage Requirements?

Providers must insurer their professional medical services within the Commonwealth by purchasing medical professional liability insurance as follows:

Primary Layer from an insurance carrier licensed or approved by the PA

Insurance Department or with an approved self-insurance plan

and an

Excess Layer from Mcare


Market Rates

Premium rates for primary malpractice insurance are increasing annually at lower percentages

Since 2003, the Pennsylvania Insurance Department has licensed or approved 4 new insurance companies and 29 risk retention groups


What is the history of coverage limits?

From 1976 to 1982 coverage remained consistent

History of Coverage Limits

Coverage Limits (per Occurrence/per Annum)

Mcare Layer Basic (Primary) Layer

Year

Policy Effective Date All HCPs Non-Hospital Hospital

1976

01/13/76 - 12/31/82

$1,000,000 / $3,000,000 $100,000 / $300,000 $100,000 / $1,000,000

1977

1978

1979

1980

1981

1982


Coverage in 1983

Increase in primary layer




YearPolicy Effective

Date All HCPs Non-Hospital Hospital

1983

01/01/83 - 12/31/83 $1,000,000 / $3,000,000 $150,000 / $450,000 $150,000 / $1,000,000


Coverage from 1984 to 1996

Increase in primary layer History of Coverage

LimitsCoverage Limits (per Occurrence/per Annum)


Year


1984

01/01/84 - 12/31/96 $1,000,000 / $3,000,000$200,000 /

$600,000$200,000 / $1,000,000

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996


Coverage from 1997 to present

Fund layer decreasesPrimary layer increases




Year


199701/01/97 - 12/31/98

$900,000 / $2,700,000

$300,000 / $900,000$300,000 / $1,500,0001998

199901/01/99 - 12/31/00

$800,000 / $2,400,000

$400,000 / $1,200,000

$400,000 / $2,000,0002000

200101/01/01 - 12/31/02

$700,000 / $2,100,000

$500,000 / $1,500,000

$500,000 / $2,500,0002002

2003

01/01/2003 to present

$500,000 / $1,500,000

$500,000 / $1,500,000

$500,000 / $2,500,000

2004

2005

2006


Primary Market Rates

The following slide illustrates recent rates for a select group of carriers


Annual Percentage Changes in Select Medical

Malpractice Carriers’ Base Premium Rates (Year Increases Are Effective)

2000 2001 2002 2003 2004 2005 2006 2007

JUA 3.2% 16.4% 20.0% 48.0% 4.2% 0.6% -1.9% 7.5%

PMSLIC 15.0% 10.0% 40.0% 54.0% 15.1% 10.8% 0.0% 0.0%

Medical Protective Not Available 15.0% 45.0% 15.7% 25.0% 15.0% 0.0% Not Available


Mcare Layer Rates

The Mcare rates increase or decrease to reflect the changes in coverage, claims payout and operational expensesMcare rates were simply a percentage of providers’ primary premiums until 1996Since 1997, Mcare rates were a percentage of the JUA base rates


What is the History of Mcare rates?

The following slide illustrates assessment rates from 2000 to 2007

The rate went from 61% in 2000

to 23% in 2007


Assessment Rate History

Mcare Annual Assessment Rates

61% 61%

50%43% 46%

39%

29%23%

0%

10%

20%

30%

40%

50%

60%

70%

2000 2001 2002 2003 2004 2005 2006 2007


Medical Malpractice Crises…

Periodic medical malpractice crises date back to the mid-1970’sIn 2000, several national medical malpractice insurers withdrew from the market and thereby reduced the total medical malpractice insurance capacity in PA and the nationThe 9/11 attack exacerbated the malpractice insurance crisis by increasing reinsurance costsIncreased malpractice expenses created financial stress on providers


How did the Administration and the Legislature React?

Act 13 of 2002 was enacted in order to address the concerns of the health care provider community and private marketplace


Legislative Reforms and Rule Changes by the PA Supreme Court

Prohibited venue shopping

Curtailed the number of cases filed in Philadelphia

Established guidelines for Motion of Remittitur

Gives judges more power to limit runaway jury awards for non-economic damages

Certificate of MeritCertified medical expert must confirm that malpractice has occurred

Encourage the use of Alternative Dispute Resolution Methods


Some Other Key Provisions of Act 13 of 2003

Reduced mandatory malpractice coverage limits from $1.2 million in 2002 to $1 million in 2006

Reduced Mcare’s coverage layer from $1,200,000 by $200,000 in 2002 to $500,000 to $1,000,000 in 2003

Continue to provide fair and reasonable compensation to injured claimants

Provided for a gradual phase-out of Mcare


Access to quality health care was an immediate concern

Something was needed that would allow time for the Act 13 reforms to take effect


An interim measure was needed…

The General Assembly passed Act 44 of 2003 and Governor Rendell signed it into law thus establishing the Health Care Provider Retention Program

Commonly referred to as the Mcare “Abatement Program”


How is the Abatement Program Funded?

Act 44 provides funding for the Abatement Program from a 25 cents per pack tax on cigarettes, providing $180 million annually

$42 million annually has been dedicated from the Auto CAT Fund

Funding for Mcare from the Auto CAT Fund is scheduled to sunset in 2013


What are the Goals of the Abatement Program?

Mcare’s Abatement Program isdesigned so Pennsylvanians willhave continued availability of andaccess to quality health care


How is this goal achieved?Pennsylvania’s innovative Abatement Program defrays providers’ malpractice insurance expenses until legislative and judicial reforms have time to take effect

Through 2006, more than $830 million of public funds have been committed to help defray providers’ malpractice insurance expenses

Encourages physicians to continue practicing in Pennsylvania

The number of physicians paying Mcare assessments remained fairly constant over the past few years at more than 35,000


Abatement Program*Note: Through October 25, 2006, 33,660 unique providers submitted 2006 abatement applications, which is many thousands more than the number of abatement applications in October in prior years. More than 36,500 unique providers are expected to apply for 2006 abatements because nursing homes became eligible for 2006 abatements, and it appears that more than 700 nursing homes will apply for abatements. Likewise, Podiatrists became eligible for abatements in 2005, which accounts for most of the 2005 increase.

Unique Providers Who Applied for Mcare Abatement2006 is Projected

32,497

34,265

35,815 36,500*

30,000

35,000

40,000

2003 2004 2005 2006

Provider is defined as either a physician (MD/DO), podiatrist, certified nurse midwife, nursing home, birth center, medical corporation or hospital


Providers Eligible for Abatement of their Mcare Assessments

Approximately 14% of all physicians participating in the Mcare program are eligible for 100% abatements of their Mcare assessments, as are midwives

Physicians who are not eligible for 100% abatements are eligible for 50% abatements, as are Podiatrists (as of 2005) and Nursing Homes (as of 2006)


100% Abated Providers

The following slide illustrates The total amount of Mcare savings realized to date (2003 – 2006) for those providers abated at 100%

The top line demonstrates the value to those providers in the JUA’s highest rated territory (Philadelphia)

The bottom line demonstrates those providers in the JUA’s lowest rate territory (Dauphin)



2003 to 2006 Aggregate Mcare Assessments Abated per Provider Typein the Highest and Lowest Rated JUA Territories

$68,174 $82,011

$154,608 $154,784$177,966

$194,168

$36,979 $44,537

$82,278 $82,801 $95,486 $104,148$29,119

$15,699

Highest Rated TerritoryLowest Rated Territory



Program began for 2003 and included only MDs and DOs not abated at 100%

Podiatrists added effective 2005

Nursing Homes added effective 2006


50% Abated

2003 to 2006 Aggregate Mcare Assessments Abated per Provider Typein the Highest and Lowest Rated JUA Territories

$-$10,000$20,000$30,000$40,000$50,000

Highest Rated TerritoryLow est Rated Territory


Abatement Program Improvements

e-Signature implemented mid-’06

1. Relieves providers of requirement to print, sign and return abatement applications

2. Increases efficiency of the eligibility process

3. Allows providers to confirm their eligibility status within 24 hours


What is occurring in the Mcare Claims environment?

Mcare’s claim expenses decreased each

year since 2003, and Mcare’s assessment

rates decreased each year since 2001


Claims & Assessments

Mcare’s claim payments have declined each year since 2003

Mcare’s assessment rate has declined each year since 2001

Total Mcare assessments paid by providers (net of abatements) have declined each year since 2001


History of Mcare Claim Payments

Mcare Annual Claims Payments

$341$322

$348$379

$320

$233$210

$100

$150

$200

$250

$300

$350

$400

2000 2001 2002 2003 2004 2005 2006

Mil

lio

ns


Count of Paid Cases and Claims

Mcare Claim and Case Counts by Year"Claims" are against individuals providers that result in Mcare payments

A "case" encompass all claims paid to one plaintiff

544 547 534 543476

373322

699 692 674 701620

471424

100200300400500600700800

2000 2001 2002 2003 2004 2005 2006

Cases Claims


Alternative Dispute Resolution Procedures

Mediation was used in 114 cases between September 1, 2005, and August 31, 2006, a 46% increase when compared to 78 for the previous yearArbitration used in an additional 21 cases in 2006 Trials with pre-determined award ranges (high/low) were used in 4 cases ADR techniques were used in a total of 139 cases in the 2006 Mcare claim year


Mcare claims appear to be in line with the recent Supreme Court study


Trends in Case Filings for All Pennsylvania Medical Malpractice

2,632 2,6592,903

1,712 1,816 1,698

0

500

1000

1500

2000

2500

3000

2000 2001 2002 2003 2004 2005

Trend in Medical Liability Case FilingsNote: Act 13, The Mcare Act, and Act 127 (Venue Reform) became effective in mid-2002.

Source: Administrative Office of PA Courts, Medical Malpractice Statistics

http://www.courts.state.pa.us/Index/MedicalMalpractice/2005StatewideFilings.pdf

41.5% decline in case filings since 2002


Communication Efforts

Governor Rendell’s desire for more communication between Mcare and the malpractice insurance community has resulted in more than 10 carriers meetings since 2002 On average,125 insurance industry representatives were present at each meetingMore than 30 individualized carrier meetings/educational seminars since 2002


So where are we today?

Since April 2006, the Mcare Commission has met 6 times to study the future scope and obligations of the Fund as mandated by Act 88 of 2005

PricewaterhouseCoopers has made several in-depth presentations in an effort to educate the Commission and the public

Various proposals have been presented to the Commission for consideration


Where are we today? cont’d

To consider….

Whether or not or when to phase-out Mcare

Whether or not or when to change the total mandatory coverage limits

Whether or not taxpayer monies should continue to be used to fund assessment abatements

How best to deal with the unfunded liability


Unfunded LiabilityMcare’s unfunded liability is the amount of money Mcare is projected to pay for claims reported to date as well as claims that occurred but are unreported

PricewaterhouseCoopers calculates the unfunded liability to be $2.33 billion as of December 31, 2005

Mcare's Unfunded Liabilities

$2.28 $2.24 $2.33 $2.40 $2.39 $2.33

0. 00

1. 50

3. 00

2000 2001 2002 2003 2004 2005

Billi

ons


Abatement Program Continues………

Governor Ed Rendell signed Senate Bill 972 (Act 128 of 2006) on October 27, 2006 that extends the Abatement Program for 2007


Commission Report

The Commission is required to submit a report to the Governor and General Assembly by November 15, 2006


Thank you for attending the Commission’s Public Hearing today.

november 2, 2006 mcare commission public hearing1 pennsylvania insurance department overview of the...

Documents

primary malpractice

coverage requirements

insurance carrier

required coverage limits

professional medical

history of coverage

pa insurance department

reduction of error fund