Med mal cap debate moves to Senate

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The state Senate Agriculture and Insurance Committee heard testimony on Oct 27, concerning legislation which would reinstate caps for noneconomic damages in medical malpractice actions.

The proposed legislation comes from Assembly Bill 766 and Senate Bill 393. Earlier in the week, the Assembly passed AB 766 by a vote of 64-30.

If passed, the law would cap noneconomic damages at $450,000 for adults, and $550,000 for children.

The measure was prompted by the recent Wisconsin Supreme Court decision in Ferdon v. Wisconsin Patients Compensation Fund, 2005 WI 125, 701 N.W.2d 440, which struck down the Legislature’s previous caps as unconstitutional under the state’s Equal Protection Clause. Those caps, which had been initially set at $350,000 and which, adjusted for inflation, stood at $445,775 when struck down. The new caps, if enacted, would not be adjusted annually.

The measure was introduced by state Representative Curt Gielow. Speaking in favor of the legislation, and addressing how the measure could pass constitutional muster, when the previous caps were struck down, Gielow emphasized legislative findings.

New Proposal

Describing the cap that was set in the previous statute, Gielow observed that it was nothing more than a political compromise between those who wanted a higher cap, and those who wanted a lower one.

In contrast, Gielow noted the current numbers are the consensus of a state Task Force on Medical Malpractice, which Gielow chaired. Gielow stated, “The cap was developed by rational, logical findings, based on past cases, and past awards. After looking around the country, this number pops out as a rational point.”

Gielow stated that those caps in other states that are higher do not function as caps at all. The measure should pass equal protection analysis, Gielow maintained, because the emphasis in Ferdon was less on the amount of the cap, but on how the Legislature got to the cap.

Gielow conceded the absence of studies directly linking malpractice caps to lower health care costs, but asserted that doctors take the malpractice environment into account when they decide where to practice.

Singling out Ohio as a state where doctors quit practicing early, and quit delivering babies, because of malpractice premiums, Gielow warned that failure to reenact caps would result in health care shortages.

Calling the previous caps, and the existence of the patients compensation fund, as two legs in a “ladder” that has stabilized health care in Wisconsin, and provided a model for other states, Geilow stted, “If one leg is taken out, the stability disappears.”

Answering questions from the committee members on whether the new cap would pass constitutional muster, Gielow admitted, “I can’t tell you it will satisfy the Supreme Court; that is a shot in the dark. But these numbers come from actuarial studies looking at what other states are doing. The study shows that, if the cap is above [the amounts in the legislation], there is essentially no cap at all. The amount is designed to be fair to deserving plaintiffs, and to those affected by tangential issues of accessibility and added health care costs.”

Doctors Stop Delivering

Laura Leitch, Vice President and General Counsel for the Wisconsin Hospital Association also spoke in favor of the bill.

Continuing the theme of availability of health care, Leitch noted that, in states with caps, there are 24 more doctors per 100,000 people than in states without caps. In Oregon, in contrast, where caps on non-economic damages were struck down in 1999, 34 percent of physicians delivering babies had quit performing deliveries by 2002. In Illinois, in 2002, when no caps were in place, non-economic damages accounted for 91 percent of the average jury award.

Leitch argued, “Some will have you believe that Wisconsin is somehow immune from the escalating damages and increasing out of court settlements that have taken hold in states without caps. They will try to sidetrack this debate by pointing to the few Wisconsin jury verdicts in the last 10 years that exceeded the then-existing cap.

But, make no mistake, without a cap, we will see more lawsuits, higher damages and higher out-of-court settlements, all adding to instability within the system, increased liability premiums, and reduced access to care.”

Addressing the Supreme Court’s concerns in Ferdon, Leitch observed, “Two justices [of the four-justice majority] said there must be a rational basis. That’s what you’re doing, and hopefully, the Supreme Court will respect that process. The previous cap was pulled out of thin air. This bill did not do that.”

Leitch concluded, “We do not need to experience the dismantling of the health care system experienced in other states; we need to prevent it from happening.”

Jeffrey E. Thompson, MD, CEO of Gunderson Lutheran Hospital, in LaCrosse, also spoke in favor of the bill, linking physicians’ perceptions of the malpractice environment and the availability of health care.

Thompson said, “As a physician and as a recruiting physician, I can attest that this issue takes on a life bigger than the dollars and cents. It’s a very emotional issue.

When good clinicians have options as to where they can practice, this bill is another piece that will bring them here”

Thompson added, “There might not be a crisis now, but if you don’t reinstate a cap on no economic damages, the ability to recruit decreases, and the exodus of doctors increases. It isn’t the end-all-be-all, but if you don’t reinstate caps, you’ve taken away one of my assets when recruiting.”

Bill Opposition

The Wisconsin Academy of Trial Lawyers opposed the bill, challenging both the merits of the bill, and its likelihood of passing constitutional muster.

David M. Skoglind, an attorney with the Milwaukee firm of Aiken and Scoptur, and President of WATL, argued, “The Supreme Court gave the Legislature some very clear signals — if they are going to restrict the rights of Wisconsin citizens, it had better show some very good reasons and a rationale that justifies taking this extreme step. The evidence presented to the Legislature to date does not present any clear rationale that justifies a cap, especially one at such a low amount.”

Disputing the finding of the Task Force that the bill ensures adequate compensation for victims of malpractice, Skoglind asked, “If one of the members of the Senate were to have a family member who is rendered quadriplegic for life as a result of medical negligence, and if the person had a life expectancy of 50 years, would that member of the Senate really think that a maximum award of $450,000 or $550,000 for noneconomic damages would be adequate compensation? It is a patently ridiculous ‘finding.’”

Rejecting the contention that the cap will ensure the availability of malpractice insurance providers, Skoglind opined, “The drafter of the bill has apparently forgotten that in 1975 the Legislature created the Wisconsin Health Care Liability Insurance Plan, a statutorily-created insurer that was created to provide insurance to any doctor in the state, no matter what the claims experience of that doctor has been. There is no possibility that doctors will be unable to obtain liability insurance coverage in Wisconsin.”

Turning to the argument that the absence of caps causes doctors to practice “defensive medicine,” Skoglind maintained, “The whole notion of defensive medicine is misplaced. Are doctors really saying that they order unnecessary tests because caps are not in place? The fact is that insurance companies and Medicare look over bills to make sure that diagnostic tests are indicated. If not, the bills do not get paid. The notion that doctors are dishonestly performing unnecessary tests does not say a lot for the integrity of medical professionals.”

Addressing the constitutionality of the proposed law in light of Ferdon, Skoglind testified, “Whatever the objective is for a cap, the evidence — doctors fleeing or lower malpractice insurance premiums — is merely speculative, which the Court held could not support the constitutionality of the cap.”

Skoglind listed a number of reasons cited by the court in Ferdon that would be applicable to the new cap as well: medical malpractice premiums account for less than 40 cents out of every $100 spent on health care, and are declining as a proportion; only nine jury verdicts exceeded the cap between 1995 and 2005; and the Fund has $750 million in assets, and has flourished both when there was a cap, and when there wasn’t.

Malpractice Claims Decreasing

Noting that only 240 malpractice claims were filed in 2004 (one per every 22, 916 Wisconsin citizens), and that the number has been steadily decreasing, both when there was a cap, and when there was not, Skoglind maintained the cap was unnecessary to prevent an explosion of claims: “The imposition of a cap is simply an additional, but wholly arbitrary, barrier to justice for most families.”

Skoglind concluded, “In practice over the past decade, the tradeoff of legal rights for public benefits proved to be disastrous. While our legal rights certainly were diminished, the promised benefits have never appeared. Wisconsin does not have lower health care costs, doctors are still not going to underserved areas and the Fund was never in jeopardy; it had been in surplus since 1990, the year the $1 million cap expired. The Legislature is following down the same trail again to impose a cap that asks the most severely injured patients and their families to bear the burden of fixing the legal malpractice system alone. We believe that is not only immoral, but unconstitutional.”

The Senate is also considering whether to include first-year post-graduate medical residents within the fund, and to provide for the reduction of malpractice awards by the amount of collateral source payments, offset by subrogation or reimbursement. The former bill passed the Assembly 96-0, and the latter passed 60-34.

David Ziemer can be reached by email.