Doctors and lawyers wait for the Illinois Supreme Court to decide whether the state's 2005 medical malpractice reforms are constitutional
by Bethany Jaeger
Before state reforms in 2005, Dr. Richard Byrne considered leaving Chicago 's Rush University Medical Center to practice brain surgery in another state.
He says he didn’t think Illinois’ medical malpractice environment was likely to improve. He refers to rising medical liability insurance rates that peaked in 2003 and 2004. Physician groups called it a crisis.
Brain surgeons were particularly hard-hit by the increasing cost of monthly premiums because everything they do or don’t do carries a risk for patients, Byrne says.
“I don’t know a neurosurgeon who hasn’t been [sued],” he says, citing a March 2004 study by the State Neuro-surgical Society that shows 90 percent of Illinois neurosurgeons surveyed reported that they had been sued. They also had an average of five claims each against them.
In the state Capitol, the phrase “there are no neurosurgeons south of Springfield” came to represent the threat of the medical liability issue, but doctors of all specialties statewide were retiring or leaving Illinois to practice where they could pay more affordable premiums.
Byrne ultimately stayed in his native Chicago for family reasons but says brain surgeons had numerous incentives to leave. “Imagine writing checks for $230,000 just to start the year when you could go to a bordering state and pay $60,000. I think that’s a strong motivator for a lot of people.”
The environment has changed since Illinois enacted medical malpractice reforms in 2005. Insurance premiums have dropped, new insurance companies have started in this state, and brain surgeons again are practicing south of Springfield.
This after two years of polarizing debate that pitted physician groups against trial lawyers. The largest sticking point between those massive lobbying groups was whether to cap the amount that juries could award patients for pain and suffering because of medical negligence. Lawmakers struck a deal and enacted so-called caps on jury awards for pain and suffering. They also enacted tougher insurance regulations and stricter monitoring of doctor discipline.
Caps on noneconomic damages is a fancy way of saying juries are limited in the amount they can award patients for pain and suffering. The state law now sets a limit of $500,000 for cases against doctors and $1 million for cases against hospitals.
Insurance companies say those caps add stability to the volatile medical liability market. Lawyers say they’re unfair to patients and their families and are ineffective as price controls.
Both sides of the debate agree the 2005 reform package is working, but they cite different reasons. The effect of the compromise, however, could drastically change, pending an Illinois Supreme Court decision. For the third time in about 30 years, the high court has to decide whether to strike down limits on jury awards. They were struck down twice before, but this time around, the scope of the law is narrower and the political makeup of the court is different.
Sen. Bill Haine, an Alton Democrat and active lawmaker in the malpractice debates, says his area was in “near collapse,” with two of four hospitals teetering on closure before the 2005 reforms. Now those hospitals plan to expand.
Haine says while every portion of the reforms is important to enacting a balanced and effective law, he highlights caps on jury awards as the element that calms doctors’ nerves so they can focus on practicing rather than on being sued. Caps create a perception that things are better and will stay that way, he says.
“There were many things that came out of this give-and-take and negotiation that made it a better bill. The caps were an anathema for lawyers for well-founded reasons, but the caps were the only way to stem these losses that could not be actualized.”
Even with the 2005 trade-off, all sides of the debate expected the law to spend months, if not years, in legal battles.
A constitutional challenge advanced to the Illinois Supreme Court last fall.
It involves Abigaile LeBron, who has severe brain damage due to lack of oxygen during her birth in October 2005. The family sued Gottlieb Memorial Hospital, a nonprofit medical facility in Melrose Park near Chicago, along with the doctor and nurse who delivered the infant.
Cook County Circuit Court Judge Diane Larsen ruled in November that the 2005 state law violates the separation of powers. In other words, the portion of the statute that limits pain and suffering awards would take power away from juries to decide the amount patients could receive. She ruled that the entire law, not just the portion on caps, should be revoked.
That ruling repeats Illinois history.
Caps on jury awards were overturned in 1976, when a $500,000 limit would have applied to all awards, including economic damages, in medical malpractice cases. In 1997, the court overturned caps for noneconomic damages in all tort cases, not just medical malpractice lawsuits.
The political split of the Illinois Supreme Court could be key in this divisive debate. If the four Democratic justices side with the trial lawyers to oppose caps and the three Republicans back doctor groups to support caps, the law will be revoked.
If that happens, the trade-off between tort reform and insurance reform could become out of whack.
The effectiveness of those reforms is uncertain, with contradictory and convoluted evidence, depending on the source.
Doctors, hospitals and insurance companies say caps are the key to a more stable insurance industry that has allowed rates to drop and doctors to stay.
Dr. Rodney Osborn, president of the Illinois State Medical Society and a practicing anesthesiologist in Peoria, says if the state Supreme Court overrules caps on noneconomic damages, doctors again will leave the state. Since caps have been enacted, lower insurance premiums have made it easier for doctors to pay their operating costs, especially when state and federal Medicaid reimbursement rates are low and overhead costs are high.
“It’s an access-to-care issue,” Osborn says. “If the doctors leave the state,
citizens of Illinois have a much tougher time getting medical care. The fact that the rates have stabilized and actually reduced a little bit helps in terms of recruiting, retaining physicians and then helps with patients having access to those physicians.”
Legal groups beg to differ. The Illinois Trial Lawyers Association argues that insurance reforms, not the caps on noneconomic damages, stabilize the climate, decrease premiums and increase competition.
“There is a lot of information and data that has become available since 2005 because of the insurance reforms that were enacted,” says Chicago attorney Bruce Kohen, president of the association. “I want to put an exclamation point on that: Not because of any caps on medical malpractice but because of reforms in the insurance area.”
Medical liability insurers now are required to report to the state all malpractice claims paid, including whether they were settled out of court or through a verdict in court.
Kohen says public information shows that facts and figures are inconsistent with what doctors and insurance companies told the public and the legislature during the debate on the issue. He cites ISMIE Mutual Insurance Co., based in Chicago, as an example. The company is owned and operated by physicians and is the largest medical malpractice insurer in Illinois, with 13,000 policyholders.
From 2003 to 2006, ISMIE collected hundreds of millions of dollars more in premiums than it paid out in claims and defense costs. In 2006, the company’s net income doubled to $50.2 million. Some of the state’s 11 other medical malpractice insurance providers also doubled their net incomes but on smaller scales.
The profits gained and the premiums collected all happened before the 2005 reforms went into effect. In fact, no medical malpractice case with a claim that would exceed the award limit has gone to trial yet, according to the trial lawyers, the insurance companies and the state.
Kohen says the timing of ISMIE’s profit reports undermines its claim that the caps are necessary for a stable climate. “They are making staggering and record profits that just continue to increase while telling the public and the legislature that there’s this crisis.”
ISMIE chairman Dr. Harold Jensen rebuts, “Yes, those figures are correct, but they don’t mean what the lawyers say they mean.”
What ISMIE collects in premiums in 2008 is based on what actuaries expect up to 2013. Therefore, the amount paid out in 2003 reflects premiums collected in 1999.
That’s because it takes an average of more than five years between the time an alleged injury happens and a settlement or a verdict is reached. “Seven years after the alleged injury is when things finally settle down,” Jensen says.
Limiting the amount patients can seek in damages for pain and suffering at least helps take the guessing game out of the amount of money insurance companies need to cover those so-called jackpot jury awards, Jensen says.
“Putting a cap on noneconomic losses stabilizes [the insurance market] because it gets rid of big outliers, the $18 million and $20 million figures, that ruin the figures for everybody else and result in raised premiums, which were inappropriate for most of the people we insured.”
The cause-and-effect relationships are clouded by different interpretations of events that happened at the same time. When Illinois enacted caps, the insurance industry also calmed down and lowered rates.
Kohen maintains that’s partially because competition among insurance companies increased when their financial data became public record.
Ann Storberg, vice president of investor relations for Michigan-based American Physicians Capital Inc., says it helped to have access to ISMIE’s data as a benchmark. Yet APCapital’s 13.7 percent rate decrease was possible because the number of reported claims against the company dropped by double digits in all seven states where it insures doctors.
It also helped that the company has covered Illinois doctors for a decade and can use its own information about state trends to set rates and to decide where to offer policies.
Even with more competition, ISMIE started accepting new policyholders last year after putting a moratorium on new business in 2003. It also started a dividend program that returned money to doctors when total monthly premiums collected exceeded the amount needed to protect a rainy day fund, which is available if a steep jury award threatens the company’s ability to cover policyholders.
Jensen says ISMIE stopped accepting new policyholders before the 2005 reforms because “when the world started collapsing on us in 2002, we were at the point where every dollar we took in in premiums required an extra 19 or 20 cents surcharge on it because things were deteriorating so rapidly.” That surcharge put a dent in the surplus set aside for large jury awards, he says.
The surplus was rebuilt and allowed the company to insure 124 more doctors, he says, partially because fewer claims were filed against doctors in Illinois and across the nation.
Those doctors could face financial risk if the Illinois Supreme Court invalidates the 2005 reforms, he says.
While the tumultuous debate over medical malpractice regulations is expected to reach some finality with an Illinois Supreme Court decision this year, doctor and lawyer Thomas Pliura warns that politics plague the debate, even in the courts.
An emergency room physician by training and a LeRoy lawyer who takes cases related to health care, Pliura supports an amendment to the state Constitution to let voters, not politicians, decide once and for all whether to limit pain and suffering awards.
Until either the courts or the electorate decides the fate of caps, however, at least neurosurgeons are practicing south of Springfield.
Issues, March 2008
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