Pennsylvania Insurance Department

1
Pennsylvania Insurance Department

• Overview of the
• Medical Care Availability and Reduction of Error
  Fund

2
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 Department
• Mcare is the successor to the Medical
  Professional Liability Catastrophe Loss Fund,
  better known as the CAT Fund

3
What is Mcares Mission?

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

4
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

5
Who is required to participate in Mcare?

• Participation is mandatory for
• physicians
• osteopathic physicians
• podiatrists
• nurse midwives
• hospitals
• nursing homes
• birth centers
• primary 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

6
Who is NOT Subject to Mandatory Mcare Coverage
Participation?

• providers who practice less than 50 in PA
• providers who practice exclusively as federal
  government employees
• providers who practice exclusively as
  Commonwealth or City of Philadelphia employees
• providers who are exclusively forensic
  pathologists
• providers who are retired, but who provide care
  for his or herself and immediate family members
• providers who practice exclusively as members of
  the PA or U.S. military forces
• providers who practice exclusively under a
  volunteer license
• providers who practice exclusively with coverage
  under the Federal Tort Claims Act

7
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

8
PAs Mandatory Coverage Limits

• Since the Funds 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

9
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

10
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

11
What is the history of coverage limits?

• From 1976 to 1982 coverage remained consistent

12
Coverage in 1983

• Increase in primary layer

13
Coverage from 1984 to 1996

• Increase in primary layer

14
Coverage from 1997 to present

• Fund layer decreases
• Primary layer increases

15
Primary Market Rates

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

16
Annual Percentage Changes in Select Medical
Malpractice Carriers Base Premium Rates
(Year Increases Are Effective)
17
Mcare Layer Rates

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

18
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

19
Assessment Rate History
20
Medical Malpractice Crises

• Periodic medical malpractice crises date back to
  the mid-1970s
• In 2000, several national medical malpractice
  insurers withdrew from the market and thereby
  reduced the total medical malpractice insurance
  capacity in PA and the nation
• The 9/11 attack exacerbated the malpractice
  insurance crisis by increasing reinsurance costs
• Increased malpractice expenses created financial
  stress on providers

21
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

22
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 Merit
• Certified medical expert must confirm that
  malpractice has occurred
• Encourage the use of Alternative Dispute
  Resolution Methods

23
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 Mcares 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

24
Access to quality health care was an immediate
concern

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

25
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

26
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

27
What are the Goals of the Abatement Program?

• Mcares Abatement Program is
• designed so Pennsylvanians will
• have continued availability of and
• access to quality health care

28
How is this goal achieved?

• Pennsylvanias 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

29
Abatement ProgramNote 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.
Provider is defined as either a physician
(MD/DO), podiatrist, certified nurse midwife,
nursing home, birth center, medical corporation
or hospital
30
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)

31
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 JUAs highest rated territory
  (Philadelphia)
• The bottom line demonstrates those providers in
  the JUAs lowest rate territory (Dauphin)

32
100 Abated Providers
33
50 Abated Providers

• Program began for 2003 and included only MDs and
  DOs not abated at 100
• Podiatrists added effective 2005
• Nursing Homes added effective 2006

34
50 Abated
35
Abatement Program Improvements

• e-Signature implemented mid-06
• Relieves providers of requirement to print, sign
  and return abatement applications
• Increases efficiency of the eligibility process
• Allows providers to confirm their eligibility
  status within 24 hours

36
What is occurring in the Mcare Claims environment?

• Mcares claim expenses decreased each
• year since 2003, and Mcares assessment
• rates decreased each year since 2001

37
Claims Assessments

• Mcares claim payments have declined each year
  since 2003
• Mcares assessment rate has declined each year
  since 2001
• Total Mcare assessments paid by providers (net of
  abatements) have declined each year since 2001

38
History of Mcare Claim Payments
39
Count of Paid Cases and Claims
40
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 year
• Arbitration 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

41
Mcare claims appear to be in line with the recent
Supreme Court study
42
Trends in Case Filings for All Pennsylvania
Medical Malpractice
Note Act 13, The Mcare Act, and Act 127 (Venue
Reform) became effective in mid-2002.
41.5 decline in case filings since 2002
Source Administrative Office of PA Courts,
Medical Malpractice Statistics http//www.courts.s
tate.pa.us/Index/MedicalMalpractice/2005StatewideF
ilings.pdf
43
Communication Efforts

• Governor Rendells 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 meeting
• More than 30 individualized carrier
  meetings/educational seminars since 2002

44
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

45
Where are we today? contd

• 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

46
Unfunded Liability

• Mcares 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

47
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

48
Commission Report

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

49
Thank you for attending the Commissions Public
Hearing today.