[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                 HELP EFFICIENT, ACCESSIBLE, LOW-COST,
                 TIMELY HEALTHCARE (HEALTH) ACT OF 2003
=======================================================================





                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

                                 H.R. 5

                               __________

                             MARCH 4, 2003

                               __________

                              Serial No. 3

                               __________

         Printed for the use of the Committee on the Judiciary


    Available via the World Wide Web: http://www.house.gov/judiciary

                                  _______

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                       COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
CHRIS CANNON, Utah                   SHEILA JACKSON LEE, Texas
SPENCER BACHUS, Alabama              MAXINE WATERS, California
JOHN N. HOSTETTLER, Indiana          MARTIN T. MEEHAN, Massachusetts
MARK GREEN, Wisconsin                WILLIAM D. DELAHUNT, Massachusetts
RIC KELLER, Florida                  ROBERT WEXLER, Florida
MELISSA A. HART, Pennsylvania        TAMMY BALDWIN, Wisconsin
JEFF FLAKE, Arizona                  ANTHONY D. WEINER, New York
MIKE PENCE, Indiana                  ADAM B. SCHIFF, California
J. RANDY FORBES, Virginia            LINDA T. SANCHEZ, California
STEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee

             Philip G. Kiko, Chief of Staff-General Counsel
               Perry H. Apelbaum, Minority Chief Counsel



















                            C O N T E N T S

                              ----------                              

                             MARCH 4, 2003

                           OPENING STATEMENT

                                                                   Page
The Honorable Lamar Smith, a Representative in Congress From the 
  State of Texas, and Chairman, Subcommittee on Courts, the 
  Internet, and Intellectual Property............................     1
The Honorable John Conyers, Jr., a Representative in Congress 
  From the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     3

                               WITNESSES

Mrs. Sherry Keller, Conyers, GA
  Oral Testimony.................................................     4
  Prepared Statement.............................................     6
Mrs. Leanne Dyess, Member, Coalition for Affordable and Reliable 
  Health Care
  Oral Testimony.................................................     7
  Prepared Statement.............................................     9
Dr. Donald J. Palmisano, M.D., President-Elect, American Medical 
  Association
  Oral Testimony.................................................    11
  Prepared Statement.............................................    12
Mr. Lawrence E. Smarr, President, Physician Insurers Association 
  of America
  Oral Testimony.................................................    38
  Prepared Statement.............................................    40

                                APPENDIX
              Statements Submitted for the Hearing Record

Statement of the Alliance of Specialty Medicine..................   910
Statement of Mary R. Grealy, President, Healthcare Leadership 
  Council........................................................    98
Statement of Frank Clemente, Director, Public Citizen's Congress 
  Watch..........................................................    99
Statement of the American College of Physicians-American Society 
  of Internal Medicine...........................................   178
Statement of the College of American Pathologists................   180
Statement of the American Academy of Family Physicians...........   182
Statement of Rodney C. Lester, President of the American 
  Association of Nurse Anesthetists..............................   183
Statement of the American College of Obstetricians and 
  Gynecologists..................................................   186
Statement of Mr. John McCormack, Pembroke, Massachusetts 
  submitted by Representative Delahunt...........................   189

               Material Submitted for the Hearing Record

Department of Health and Human Services report: Addressing the 
  New Health Care Crisis: Reforming the Medical Litigation System 
  to Improve the quality of Health Care, March 3, 2003...........   192
Ten questions and answers on H.R.5, the HEALTH Act...............   238
Remarks by the President on Medical Liability Reform at the 
  University of Scranton.........................................   246
The Washington Times Editorial by Bruce Bartlett, ``Toll of 
  Torrential Torts''.............................................   252
The Washington Times Editorial by Gary J. Andres and Michael 
  McKenna, ``Malpractice Remedies''..............................   253
Letter from Premier to the Honorable Jim Greenwood, a 
  Representative in Congress From the State of Pennsylvania, in 
  support of H.R. 5..............................................   254














HELP EFFICIENT, ACCESSIBLE, LOW-COST, TIMELY HEALTHCARE (HEALTH) ACT OF 
                                  2003

                              ----------                              


                         TUESDAY, MARCH 4, 2003

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 9:20 a.m., in Room 
2141, Rayburn House Office Building, Hon. Lamar S. Smith 
presiding.
    Mr. Smith. [Presiding.] The Judiciary Committee will come 
to order. Today's hearing is on H.R. 5, the ``Help Efficient, 
Accessible, Low-Cost, Timely Healthcare Act of 2003'', 
otherwise known as the HEALTH Act.
    We will start with opening statements by me and by the 
Ranking Member, Mr. Conyers, and without objection, the opening 
statements of all other Members will be made part of the 
record.
    Mr. Smith. After the opening statements, we will look 
forward to hearing from our witnesses.
    I will recognize myself first for an opening statement.
    Today America faces a national insurance crisis that is 
destroying our health care system. Medical liability insurance 
rates have soared, causing major insurers either to drop their 
coverage or raise premiums to unaffordable levels.
    Doctors and other health care providers have been forced to 
abandon patients and practices, particularly in high-risk 
specialties such as emergency medicine, brain surgery, 
obstetrics and gynecology.
    Women are particularly hard hit, as are low-income 
individuals and rural residents. This is an intolerable problem 
that cries out for action.
    H.R. 5, the HEALTH Act, is modeled after California's 
quarter-century-old and highly successful health care 
litigation reforms. Like California's Medical Injury 
Compensation Reform Act, known as MICRA, the HEALTH Act 
includes a $250,000 cap on noneconomic damages, limits on the 
contingency fees lawyers can charge, and authorization for 
defendants to introduce evidence to prevent double recoveries.
    As a result of MICRA, since 1975 premiums paid in 
California increased only 167 percent, while premiums paid in 
the rest of the country increased 505 percent, or three times 
as much. What works in California might work across America.
    The Congressional Budget Office has found that, ``In States 
that currently do not have controls on malpractice torts, the 
HEALTH Act would significantly lower premiums for medical 
malpractice insurance from what they would otherwise be under 
current law.''
    If California's legal reforms were implemented nationwide, 
we could spend billions of dollars more annually on patient 
care.
    Nothing in the HEALTH Act limits in any way the award of 
economic damages. Economic damages include anything of value 
that can be quantified, including lost wages, lost services, 
medical costs, and the cost of pain-reducing drugs and lifetime 
rehabilitation care. Reasonable legal reforms, such as those in 
the HEALTH Act, still allow for very large multimillion-dollar 
awards to deserving victims. In just the last year, for 
example, an injured child in California received an award of 
$84 million, and a 30-year-old homemaker received an award of 
$12 million for economic damages.
    According to the Department of Health and Human Services, 
``Unless a State has adopted limitations on noneconomic 
damages, the cost of these awards is paid by all other 
Americans through higher health care costs, higher health 
insurance premiums, higher taxes, reduced access to quality 
care, and threats to quality of care.''
    The American people understand this problem. A poll 
conducted in early February shows that 59 percent of Americans 
believe the crisis should be solved, either by reining in 
personal injury lawyers or by placing caps on the amounts 
juries can award. The obvious cause of skyrocketing medical 
liability premiums is escalating jury verdicts. The median 
malpractice jury award doubled between 1995 and 2000 from a 
half a million to $1 million, and that doesn't reflect the huge 
cost of cases that don't result in jury awards. In fact, 70 
percent of all medical malpractice claims result in no 
payments, because claims are either dismissed or withdrawn.
    The CEO of Methodist Children's Hospital in San Antonio, 
and also one of the only three pediatric neurosurgeons in the 
area, someone I met with just a few weeks ago, has seen his 
premiums increase from less than $20,000 to $85,000 over the 
last 10 years. He has been sued three times. In one case his 
only interaction with the person suing was that he stepped into 
her child's hospital room and asked how the child was doing. 
Each jury cleared him of any wrongdoing, and the total amount 
of time all three juries spent deliberating was less than 1 
hour. Of course, the doctor's insurance company did spend a 
great deal of time, money and effort on his defense.
    Another doctor from Texas, a family physician, was sued 12 
times in 13 years. All of the suits were dropped, but her 
insurance went up nearly 200 percent.
    An out-of control health care litigation system also costs 
taxpayers billions of dollars annually. As former Democratic 
Senator George McGovern has written, ``The legal fear drives 
doctors to prescribe medicines and order tests, even invasive 
procedures, that they feel are unnecessary. Reputable studies 
estimate that this defensive medicine squanders $50 billion a 
year, enough to provide medical care to millions of uninsured 
Americans.''
    As Representatives of the American people, Congress has a 
choice. Will we help solve the current health care crisis by 
passing the HEALTH Act?
    Now, that concludes my opening statement, and now I will 
recognize the gentleman from Michigan, Mr. Conyers, for his 
opening statement.
    Mr. Conyers. Thank you, Mr. Chairman. Good morning, Members 
and friends. I am happy to be here. We are confronted with a 
very important problem, and like many legislative problems, it 
depends on what perspective you are looking at; it depends on 
what experience you bring to the subject.
    So I would like to begin with an economic consideration. 
The reason malpractice insurance premiums are rising, the basic 
reason, is that investment income by insurance companies is 
plummeting. As we all know, insurers make their money, really, 
mostly from investment income. During years of high stock 
market returns and interest rates, malpractice premiums go 
down. When investment income decreases, and we are in the 
middle of a 4-year bear market, the industry responds by 
sharply increasing premiums and reducing coverage, creating a 
liability insurance crisis. This boom-bust cycle took place in 
the 1970's and 1980's, and it is happening again now.
    Another reason is that draconian laws capping damages do 
not reduce insurance premiums. A comparison of States that have 
enacted severe tort restrictions and those that have not, which 
was performed by the Center for Justice and Democracy, found no 
correlation between tort reform and insurance rates. Indeed, 
some of the resisting States experienced lower increases in 
insurance rates, while some States that enacted tort reforms 
experienced higher rate increases relative to the national 
trends.
    For example, last year's data showed that in the practice 
of internal medicine, States with caps on damages had higher 
premiums than States without caps. For general surgeons, 
insurance premiums were 2.3 percent higher in States with caps 
on damages. On average, malpractice premiums were no higher in 
the 27 States that have no limitation on malpractice damages 
than in the 23 States that do have such limits.
    Now, Mrs. Sherry Keller is here, so I am not going to tell 
you about her situation, but with this bill the big insurance 
companies are trying to convince us that the cause of 
skyrocketing medical malpractice premiums is trial lawyers. And 
they have really been bashed these last few years, haven't 
they?
    My colleagues, the reality is grossly negligent health care 
professionals unfortunately have more to do with the high 
awards than the lawyers. The reality is approximately 100,000 
people die each and every year from medical malpractice. 
Whatever the reasons for the anger the President has toward 
lawyers, and he is one, his proposal doesn't hurt lawyers 
nearly as much as it hurts innocent victims of medical 
malpractice. We will all be watching very carefully and 
listening to his remarks before the American Medical 
Association, which will come on shortly.
    I thank you for this opportunity, Mr. Chairman.
    Mr. Smith. Thank you, Mr. Conyers.
    I would like to thank all Members for their attendance 
today. This is an important subject, and we appreciate their 
interest and their presence, and also the interest shown by 
those who are in the audience today as well.
    Let's proceed to our witnesses, and our first witness is 
Sherry Keller. Mrs. Keller is here today to tell us how her 
experience with medical care left her severely injured.
    Our next witness is Leanne Dyess, from Vicksburg, 
Mississippi. She is here to testify about how this patient 
access crisis has affected the lives of herself and her family. 
Her husband Tony suffered from permanent brain injury because 
neurosurgeons near the site of the car accident had been priced 
out of the profession by unaffordable medical malpractice 
liability insurance rates.
    Our third witness is Donald J. Palmisano, who is a doctor 
and a lawyer, as well as the president-elect of the American 
Medical Association, which represents the Nation's physicians. 
Dr. Palmisano is a general and vascular surgeon from New 
Orleans, Louisiana, where he was selected recently as one of 
the top doctors in New Orleans. Dr. Palmisano is also on the 
board of directors of the National Patient Safety Foundation.
    Our final witness is Lawrence E. Smarr, President of the 
Physician Insurers Association of America. The Physician 
Insurers Association of America is a trade association of more 
than 60 medical professional liability companies owned and 
operated by doctors and dentists. Collectively these companies 
insure 60 percent of America's private practice physicians as 
well as dentists, hospitals and other health care providers.
    I thank you all for being with us here this morning. I need 
to alert you to the fact that testimony will be limited to 5 
minutes or less, if you want to summarize it, and we appreciate 
your participating today. As I mentioned a while ago, your 
complete statements will be made part of the record.
    Speaking of that, let me take care of one matter here. 
Without objection, I would also like to be made a part of the 
record a new Health and Human Services report on medical 
liability that was released yesterday, and two articles in The 
Washington Times from yesterday on the President's speech at 
the University of Scranton, in Pennsylvania on January 16th in 
regard to medical malpractice reforms, and also 10 questions 
and answers regarding the HEALTH Act. And without objection, so 
ordered.
    [The information referred to follows in the Appendix]
    Mr. Smith. The gentleman from Massachusetts.
    Mr. Delahunt. Thank you, Mr. Chairman. And before we begin, 
I would also like to submit for the record a statement by Mr. 
John McCormack of Pembroke, MA, who is a constituent of mine. 
In there he explains what happened to his daughter as a result 
of medical errors that had severe and profound consequences, 
not just resulting in her death, but for the entire family.
    Mr. Smith. Without objection, that will be made a part of 
the record as well, Mr. Delahunt. Thank you.
    [The information referred to follows in the Appendix]
    Mr. Smith. Let's begin. Mrs. Keller, if you will start, 
please.

            STATEMENT OF SHERRY KELLER, CONYERS, GA

    Mrs. Keller. Good day, ladies and gentlemen. I thank you 
for the opportunity to speak to you today. My name is Sherry 
Keller. I am a victim of medical malpractice, and I beg for 
your consideration of my story and the McConnell amendment.
    I come here at risk of my own best interests, but my 
commitment to this cause commands my heart to do so without any 
reservation. This is the issue, not the money. One week after a 
complete hysterectomy, the staples were removed from my 
incision site. That night the wound oozed, and upon 
notification to my doctor, she told me to come into the office 
so she could clean the wound.
    I was placed up on the gyno bed. She began to clean the 
wound, and when she did so, she pulled on it. And when she 
pulled on it, I opened up like a Ziplock bag, hip to hip. While 
I was now going to take a little bit more time than what she 
had planned, she left me there like that, in the interim, to 
see other patients, make a few phone calls. I had gone into 
shock, lost consciousness, and fell from the bed, hitting my 
head on the way down, C2 through C7 spinal cord injury, quite 
similar to that of actor Christopher Reeve or that killed Dale 
Earnhardt.
    I lost and regained consciousness at least five times on 
the floor of the doctor's office, in an effort to try to get 
out into the hallway, in order to be found. Making it out to 
the hallway, I called, ``Help me.'' the doctor and the nurses 
then scrambled, saw me laying there like that, naked from the 
waist down, my intestines hanging out, in severe shock. They 
picked me up from the hallway, and that is when I began 
screaming in pain and lost the use of my arms.
    My husband was called back from the waiting room; an 
argument between the two of them about whether or not I needed 
an ambulance. She wanted him to take me to the ER on his own, 
and he insisted that he could not handle me in that condition. 
An ambulance was called, but I was not even afforded a neck 
collar due to the doctor's orders of transport only.
    Patient care meant nothing. Doctor's power meant 
everything. Unbeknownst to me, she had called ahead to the ER 
and let them know that I was her patient, and she would take 
care of it.
    I was left in the ER for 2\1/2\ hours before she was able 
to get to the ER to dress my wound, my complaints of pain, the 
obvious contusion to my head ignored, arm function limited by 
that point, unable to stand completely on my own. I was just 
sore from the fall. Go home. I was sent home with a broken neck 
because of doctor power and doctor protocol. Patient care meant 
nothing.
    This is not to impugn all doctors. This is not to say all 
doctors are bad. I do not hold resentment toward all doctors. 
My neurosurgeon was a miracle worker. He saved me. But just as 
there are good and bad lawyers, good and bad policemen, there 
are good and bad doctors.
    Our bad doctors need to be held accountable. Just as 
President Bush has called for the executives of Enron to be 
held accountable, doctors need to be held accountable, and the 
only recourse I as a citizen have is our jury system. That is 
my right. That is the only right and the only venue I have to 
hold the physician accountable for the care and trust that we 
are conditioned to give them. Even in a doctor office visit 
they hold our lives in their hands, and far too often with far 
too cavalier an attitude.
    I had chosen to give up any form of a career in order to 
raise my children, both college scholarship award winners, both 
academically excelling very well, my younger is now straight 
A's, both contributing to this society. But because of my 
choice to bring in responsible members to society, my value 
through this, through the McConnell bill, will be nothing. 
Because I had no economic input, my value as a person is 
nothing. The only award, the only recourse, the only 
accountability I will have is through the pain and suffering.
    I have heard several Representatives mention a malpractice 
lawsuit is like winning the lottery. Well, I would like to ask 
any of you who would turn over a limb or a lung or a life for a 
lottery ticket. It is not a lottery. I am not in the position 
to win anything. I would gladly give back Bill Gates' money if 
I could trade it back for my spinal cord. No amount of 
compensation is going to pay me back for what I have lost, the 
ability for me to reach for this paper takes extraordinary 
effort; the ability to just go to the bathroom, gone. Things 
that we take--everyday movement, taken from me. I will never 
have the freedom a healthy body has; never the complete use of 
my arms, legs. I suffer every day, 24 hours a day. Every time I 
have to try to reach for something, the pain is excruciating. 
No amount of medicine can take the pain away. It can subside, 
but it is always there. In my dreams I suffer. I am awakened 
many times during the night because of problems in my spinal 
cord. I can't even sleep through the night.
    What kind of money is going to compensate that? None. But 
to say that $250,000 is more than enough is an insult. I now 
have to hire cleaning people, a driver to do basic errands, go 
to the bank. A 10-minute trip to the grocery store now takes 3 
hours, of which I have to hire somebody to do. I will have to 
do so forever. These are out-of-pocket expenses that would not 
be covered. All of the chores, the errands, gardening, 
landscaping, cleaning, you name it, and for the rest of my life 
I now have to hire somebody else to do it, and not only is it 
degrading, but it is coming out of my pocket.
    Mr. Smith. Mrs. Keller, thank you for your testimony.
    [The prepared statement of Mrs. Keller follows:]
                  Prepared Statement of Sherry Keller
    First, I want to thank Chairman Sensenbrenner and Congressman 
Conyers. I greatly appreciate the opportunity you have given me. My 
name is Sherry Keller and I am a victim of medical malpractice.
    I am 44 years old. I live with my husband in Conyers, Georgia, a 
suburb of Atlanta, and have two college-age sons. This is my story.
    About 4 years ago, I underwent a complete hysterectomy. The doctor 
failed to suture and staple the incision site, instead only stapling me 
shut. One week after the staples were removed, I noticed that one area 
of the wound was oozing. After reporting this to my doctor, I was 
called into her office the next day so she could clean the wound.
    Once there, she had me lie on the examination table. She pulled on 
the incision, and I opened up like a zip-lock bag, just as though I 
were in surgery. The doctor said she was going to call a wound care 
specialist and then left me alone for 35-45 minutes while she saw other 
patients and made personal calls to her home.
    I went into shock, lost consciousness and fell from the table, 
hitting my head on the counter on the way down, causing c2-c7 spinal 
cord injury similar to that sustained by actor Christopher Reeve and 
deceased race car legend Dale Earnhardt. I also suffered traumatic 
brain injury and a severe concussion.
    Eventually, after going in and out of consciousness at least 5 
times, drenched in sweat and with my guts hanging out, I was able to 
pull myself out into the hallway to get help. I was immediately picked 
up out of the hallway so that other patients wouldn't see me, causing 
me to lose all function in my arms.
    The doctor then began arguing with my husband about why he, not an 
ambulance, should take me to an emergency room. My husband finally 
prevailed, and the doctor called for an ambulance. When the ambulance 
came, I was not given a neck collar, because, as I later found out, the 
doctor had requested transport only and the EMS workers were required 
to follow her orders.
    After arriving at the emergency room, I was basically given no 
medical attention, because my doctor had instructed the ER that she 
would take care of me when she arrived at the hospital. Two and a half 
hours later, the doctor arrived, cleaned my wound and sent me home, 
explaining that any pain and soreness I was experiencing were caused by 
the fall. I was never given steroids, which could have reduced some of 
the swelling and prevented the damage from progressing. Once home, I 
kept falling down and could barely walk.
    Now, four years later, I am an incomplete quadriplegic. I will 
never have the freedom a healthy body has, never be able to use my arms 
for the simplest of tasks, never walk holding a child's hand, never 
explore and see the splendour of this country. Even a simple trip to 
the bathroom is now gone. Every day, each and every day, for the rest 
of my life.
    We, as victims, endure pain and suffering 24 hours a day, with 
physical pain that no amount of medicine can take away. Suffering comes 
even in sleep, in dreams and in one's physical state every day and 
every night. It will be so for the rest of my life, all at the hands of 
one negligent physician, whom we as a society are conditioned to trust.
    Far too cavalier an attitude within the medical ranks regarding 
public trust results in untold pain and suffering within the general 
public, to be lived constantly for our entire lives. The inability to 
reach, sit, anything and everything the average person takes for 
granted, also produces incalculable suffering. If pain and suffering 
cannot be measured, how can it possibly be capped?
    I gave my life to raising my 2 sons and taking care of my family. I 
feel I've contributed more to society by the choice I made. But under 
H.R. 5, my value is nothing. Despite the extent of my physical pain and 
suffering, which forced me to abandon my hopes of becoming a painter, 
the only compensation I would receive is $250,000. So when I hear 
doctors and legislators say that medical malpractice awards are like 
winning the lawsuit lottery, it really burns my butt.
    It is an outrage that victims of medical malpractice are to be 
trivialized for the profit margin of big business. In the shadow of 
Enron, where President Bush called for the accountability of all 
responsible, how can physicians not be held accountable for the extent 
to which their errors have devastated lives?
    Limiting compensation to victims while still fully protecting 
doctors is not only terribly unfair, it is immoral, outrageous and 
reeks of injustice. We are the innocent victims. To punish us a second 
time literally adds insult to injury.
    Doctors are meticulously trained to cure us, keep us alive and 
improve our quality of life. They take a solemn oath to ``do no harm.'' 
It is a noble profession, a calling of sorts. We put our trust in 
doctors unlike any other profession. They are human. Mistakes are made, 
sometimes honest mistakes and sometimes blatantly incompetent ones. 
Mistakes cost lives, create medical nightmares and destroy the lives of 
victims and their families.
    The goal must be to reduce medical negligence. This can only happen 
if physicians are held accountable. Laws and proposals that increase 
the obstacles sick and injured patients face in the already difficult 
process of prevailing in court are the wrong way to respond to any 
medical malpractice insurance ``crisis.'' Tort restrictions only reduce 
the financial incentive of institutions like hospitals and HMOs to 
operate safely, when our objectives should be deterring unsafe and 
substandard medical practices while safeguarding patients' rights.
    Caps cannot be allowed, not in a great society like ours that bases 
itself on fairness and equality to all.
    Thank you for your time and consideration.

    Mr. Smith. Mrs. Dyess.

STATEMENT OF LEANNE DYESS, MEMBER, COALITION FOR AFFORDABLE AND 
                      RELIABLE HEALTH CARE

    Ms. Dyess. Chairman Smith, Ranking Member Conyers, 
distinguished Members of the House Judiciary Committee, it is 
an honor for me to sit here before you this morning to open up 
my life and the life of my family in an attempt to demonstrate 
how medical liability costs are hurting people across America.
    While others may talk in terms of economics and policy 
today, I want to speak to you from the heart. I want to share 
with you the life my two children and I are now forced to live 
because of a crisis in health care that I believe can be fixed. 
And when I leave and the lights are turned off and the 
television cameras go away, I want you and all America to know 
one thing, and that is this crisis isn't about insurance. It is 
not about doctors or even hospitals or personal injury lawyers. 
It is a crisis about individuals and their access to what I 
believe is otherwise the greatest health care in the world.
    Our story began on July 5 of last year when my husband Tony 
was returning from work in Gulfport, MI. We had started a new 
business. Tony was working hard, as I was. We were doing our 
best to build a life for our children, and their futures were 
filled with promise. Everything looked bright.
    Then in an instant everything changed. Tony was involved in 
a single-car accident. They suspect he may have fallen asleep, 
though we will never know. What we do know is that after 
removing him from the car, they rushed Tony to Garden Park 
Hospital in Gulfport. He had injuries and required immediate 
attention.
    Shortly thereafter, I received a phone call I pray no other 
wife will ever have to receive. I was informed of the accident 
and told the injuries were serious, but I cannot describe to 
you the panic that gave way to hopelessness when they told me, 
we don't have the specialists necessary to take care of him. We 
will have to airlift him to another hospital.
    I couldn't understand this. Gulfport is one of the fastest 
growing and most prosperous regions in Mississippi. Garden Park 
is a good hospital. Where were the specialists who could have 
taken care of my husband?
    Almost 6 hours passed before Tony was airlifted to 
University Medical Center, 6 hours for the damage to his brain 
to continue before they had a specialist capable of putting a 
shunt into the back of his head to relieve the pressure on the 
brain, 6 unforgettable hours that changed our life.
    Today Tony is permanently brain-damaged. He is mentally 
incompetent, unable to care for himself, unable to provide for 
his children, unable to live the vibrant, active and loving 
life he was living just moments before the accident.
    I could share with you the panic of a women suddenly forced 
into the role of both mother and father to her teenaged 
children, of a women whose life is suddenly caught in limbo, 
unable to move forward or backwards. I could tell you about a 
woman who now had to worry about the constant care of her 
husband, who had to make concessions she never thought she 
would have to make in order to be able to pay for his care and 
therapy.
    But to describe this would be to take us away from the most 
important point and value of what I have learned. Mr. Chairman, 
I have learned that there was no specialist on staff that night 
in Gulfport because rising medical liability costs had forced 
physicians in that community to abandon their practices. In 
that area, in that time, there was only one doctor who had the 
expertise to take care of Tony, and he was forced to cover 
multiple hospitals, stretching him thin and unable to care for 
everyone. Another doctor quit his practice just days before 
Tony was admitted because his insurance company terminated all 
of the medical liability policies nationwide. That doctor could 
not obtain affordable coverage. He couldn't practice. And on 
that hot night in July, my husband and our family drew the 
short straw.
    I have also learned that Mississippi is not unique, that 
this crisis rages in States all across America. It rages in 
Nevada where young expectant mothers cannot find OB-GYNs. It 
rages in Florida where children cannot find pediatric 
neurosurgeons. It rages in Pennsylvania, where the elderly who 
have come to depend on their orthopedic surgeons are being told 
that those trusted doctors are moving to States where 
practicing medicine is affordable and less risky.
    The real danger of this crisis is that it is not readily 
seen. It is like termites in the structure of a home. They get 
into the woodwork, but you cannot see the damage. The walls of 
the house remain beautiful, but you don't know what is going on 
beneath the surface, at least not for a season. Then one day 
you go to hang a picture or a shelf, and the whole wall comes 
down. Everything is destroyed.
    Before July 5, I was like most Americans, completely 
unaware that just below the surface of our Nation's health care 
delivery system serious damage was being done by excessive and 
frivolous litigation.
    Mr. Smith. Could I ask you to summarize the rest of your 
testimony?
    Ms. Dyess. In all of these cases, all across America, if 
you go somewhere, to an emergency room, you expect there to be 
a doctor there, all of us. We have to do whatever it takes, 
whatever it takes, to get your child some care, your parents, 
your grandparents, ourselves care when we need it. If we don't 
do something, down the road she might not have a doctor to take 
care of her, one that really does her the--like the 
neurosurgeon she was talking about. We might not have anybody 
to take care of us, any of us. We don't need to stand still.
    Mr. Smith. Thank you, Mrs. Dyess.
    [The prepared statement of Mrs. Dyess follows:]
                   Prepared Statement of Leanne Dyess
    Chairman Sensenbrenner, Ranking Member Conyers, distinguished 
members of the House Judiciary Committee:
    It's an honor for me to sit before you this afternoon--to open up 
my life, and the life of my family, in an attempt to demonstrate how 
medical liability costs are hurting people all across America. While 
others may talk in terms of economics and policy today, I want to speak 
from the heart.
    I want to share with you the life my two children and I are now 
forced to live because of a crisis in health care that I believe can be 
fixed. And when I leave and the lights turn off and the television 
cameras go away, I want you--and all America--to know one thing, and 
that is that this crisis is not about insurance. It's not about 
doctors, or hospitals, or even personal injury lawyers. It's a crisis 
about individuals and their access to what I believe is, otherwise, the 
greatest health care in the world.
    Our story began on July 5th of last year, when my husband Tony was 
returning from work in Gulfport, Mississippi. We had started a new 
business. Tony was working hard, as was I. We were doing our best to 
build a life for our children, and their futures were filled with 
promise. Everything looked bright. Then, in an instant, it changed. 
Tony was involved in a single car accident. They suspect he may have 
fallen asleep, though we'll never know.
    What we do know is that after removing him from the car, they 
rushed Tony to Garden Park hospital in Gulfport. He had head injuries 
and required immediate attention. Shortly thereafter, I received the 
telephone call that I pray no other wife will ever have to receive. I 
was informed of the accident and told that the injuries were serious. 
But I cannot describe to you the panic that gave way to hopelessness 
when they somberly said, ``We don't have the specialist necessary to 
take care of him. We need to airlift him to another hospital.''
    I couldn't understand this. Gulfport is one of the fastest growing 
and most prosperous regions of Mississippi. Garden Park is a good 
hospital. Where, I wondered, was the specialist--the specialist who 
could have taken care of my husband?
    Almost six hours passed before Tony was airlifted to the University 
Medical Center--six hours for the damage to his brain to continue 
before they had a specialist capable of putting a drain into his head 
to relieve the pressure on his brain--six unforgettable hours that 
changed our life.
    Today Tony is permanently brain damaged. He is mentally 
incompetent, unable to care for himself--unable to provide for his 
children--unable to live the vibrant, active and loving life he was 
living only moments before his accident.
    I could share with you the panic of a woman suddenly forced into 
the role of both mother and father to her teenage children--of a woman 
whose life is suddenly caught in limbo, unable to move forward or 
backward. I could tell you about a woman who now had to worry about the 
constant care of her husband, who had to make concessions she thought 
she'd never have to make to be able to pay for his therapy and care. 
But to describe this would be to take us away from the most important 
point and the value of what I learned.
    Chairman Sensenbrenner, I learned that there was no specialist on 
staff that night in Gulfport because rising medical liability costs had 
forced physicians in that community to abandon their practices. In that 
area, at that time, there was only one doctor who had the expertise to 
care for Tony and he was forced to cover multiple hospitals--stretched 
thin and unable to care for everyone. Another doctor had recently quit 
his practice just days before Tony was admitted because his insurance 
company terminated all of the medical liability policies nationwide. 
That doctor could not obtain affordable coverage. He could not 
practice. And on that hot night in July, my husband and our family drew 
the short straw.
    I have also learned that Mississippi is not unique, that this 
crisis rages in states all across America. It rages in Nevada, where 
young expectant mothers cannot find ob/gyns. It rages in Florida, where 
children cannot find pediatric neurosurgeons. And it rages in 
Pennsylvania, where the elderly who have come to depend on their 
orthopedic surgeons are being told that those trusted doctors are 
moving to states where practicing medicine is affordable and less 
risky.
    The real danger of this crisis is that it is not readily seen. It's 
insidious, like termites in the structure of a home. They get into the 
woodwork, but you cannot see the damage. The walls of the house remain 
beautiful. You don't know what's going on just beneath the surface. At 
least not for a season. Then, one day you go to hang a picture or shelf 
and the whole wall comes down; everything is destroyed. Before July 
5th, I was like most Americans, completely unaware that just below the 
surface of our nation's health care delivery system, serious damage was 
being done by excessive and frivolous litigation--litigation that was 
forcing liability costs beyond the ability of doctors to pay. I had 
heard about some of the frivolous cases and, of course, the awards that 
climbed into the hundreds of millions of dollars. And like most 
Americans I shook my head and said, ``Someone hit the lottery.''
    But I never asked, ``At what cost?'' I never asked, ``Who has to 
pay for those incredible awards?'' It is a tragedy when a medical 
mistake results in serious injury. But when that injury--often an 
accident or oversight by an otherwise skilled physician--is compounded 
by a lottery-like award, and that award along with others make it too 
expensive to practice medicine, there is a cost. And believe me, it's a 
terrible cost to pay.
    Like most Americans, I did not know the cost. I did not know the 
damage. You see, Mr. Chairman, it's not until your spouse needs a 
specialist, or you're the expectant mother who needs an ob/gyn, or it's 
your child who needs a pediatric neurosurgeon, that you realize the 
damage beneath the surface.
    From my perspective, sitting here today, this problem far exceeds 
any other challenge facing America's health care--even the challenge of 
the uninsured. My family had insurance when Tony was injured. We had 
good insurance. What we didn't have was a doctor. And now, no amount of 
money can relieve our pain and suffering. But knowing that others may 
not have to go through what we've gone through could go a long way 
toward helping us heal.
    Congressman Sensenbrenner, I know of your efforts to see America 
through this crisis. I know this is important to you, and that it's 
important to the President. I know of the priority Congress is placing 
upon doing something... and doing it now. Today, I pledge to you my 
complete support. It is my prayer that no woman--or anyone else--
anywhere will ever have to go through what I've gone through, and what 
I continue to go through every day with my two beautiful children and a 
husband I dearly love.

    Mr. Smith. Dr. Palmisano.

   STATEMENT OF DONALD J. PALMISANO, M.D., PRESIDENT-ELECT, 
                  AMERICAN MEDICAL ASSOCIATION

    Dr. Palmisano. Thank you, Mr. Chairman. Good morning. I am 
Donald Palmisano, president-elect of the American Medical 
Association, and a surgeon from New Orleans.
    The policy of the American Medical Association is decided 
through a democratic policymaking process involving physician 
delegates representing every State, nearly 100 national 
specialty societies, Federal service agencies and other group 
sections. AMA policy dictates support for national medical 
liability reform. My testimony represents this policy.
    So again, Mr. Chairman, thank you for inviting the AMA to 
participate in today's hearing. I want to express our gratitude 
to you and the other cosponsors of H.R. 5 for your efforts to 
bring reasonable reforms to our broken medical liability 
system.
    Mr. Chairman, you know that our health care system is 
facing a crisis when patients have to leave their State to 
receive urgent surgical care, or when a pregnant woman cannot 
find an OB-GYN physician to monitor her pregnancy and deliver 
her baby, or when community health centers have to reduce their 
services or close their doors because of liability insurance 
concerns.
    You know that our health care system is facing a crisis 
when efforts to improve patient safety and quality are stifled 
because of lawsuit fears. Escalating jury awards and the high 
costs of defending against lawsuits, even meritless suits, are 
causing medical liability insurance premiums to soar. Several 
recent Government and private sector reports referenced in our 
written testimony confirm this. Over the past 2 years, many 
physicians have been hit with medical liability premium 
increases of 25 percent to 400 percent, and reports show that 
the average jury award is reaching $3.5 million.
    The medical liability crisis is a growing national problem 
that affects more than just physicians and other health care 
professionals and institutions. The medical liability crisis 
has become a serious problem for patients, affecting their 
ability to access health care services that would otherwise be 
available to them, including services provided to Medicare and 
Medicaid patients. As medical liability insurance becomes 
unaffordable or unavailable, physicians are being forced to 
close their practices or drop vital services, seriously 
affecting patient access to care.
    There are now 18 States that are in crisis, up from 12 
States last year, and in many other States a crisis is looming. 
A key provision of H.R. 5 is a $250,000 limit on noneconomic 
damages.
    There is a direct and compelling Federal interest in 
reforming our outmoded medical liability system. According to 
estimates by HHS, excessive medical liability adds $47 billion 
annually to what the Federal Government pays for Medicare, 
Medicaid and other Government programs. We need a national 
solution. And I mention--that is why the AMA is supporting H.R. 
5, and that is why we join with numerous other members of a 
broad-based coalition known as the Health Coalition on 
Liability and Access to urge this Congress to promptly reform 
the medical liability system.
    A key provision is the $250,000 noneconomic cap, and there 
is flexibility in the bill for States to adjust the cap to suit 
their particular circumstances. In Florida, a nonpartisan task 
force recently found that the greatest long-term impact on 
health care provider liability insurance rates is a $250,000 
cap on noneconomic damages, which would eliminate crisis of 
availability and affordability of health care in Florida.
    As discussed in our written statement, this limit on 
noneconomic damages has worked in California, and it can work 
nationwide.
    Mr. Chairman, as you have recognized, the time for action 
is past due. We must act now to fix our broken medical 
liability system. Recent polls show that the American public is 
in favor of reasonable limits on noneconomic damages. We must 
bring common sense back to our courtrooms so patients can have 
access to their physicians, whether in emergency rooms, 
delivery rooms or operating rooms. Thank you very much.
    Mr. Smith. Thank you, Dr. Palmisano.
    [The prepared statement of Dr. Palmisano follows:]
           Prepared Statement of Donald J. Palmisano, MD, JD
    On behalf of the physician members of the American Medical 
Association (AMA), I appreciate the opportunity to testify before you 
today regarding an issue that is seriously threatening the availability 
of and access to quality health care for patients. I would especially 
like to express our gratitude to you, Mr. Chair, and other Members of 
the Committee who are cosponsors of H.R. 5, for providing a much needed 
focus for action at the national level.
    I am Donald Palmisano, MD, JD, President-elect of the AMA and a 
general and vascular surgeon from New Orleans, LA. The policy of the 
AMA is decided through its democratic policy-making process in the AMA 
House of Delegates, which meets twice a year. Our House is comprised of 
physician delegates representing every state, nearly 100 national 
medical specialty societies, federal service agencies (including the 
Surgeon General of the United States), and six sections representing 
hospital and clinic staffs, resident physicians, medical students, 
young physicians, medical schools, and international medical graduates. 
AMA policy dictates support for national medical liability reform. In 
particular, the AMA supports H.R. 5, the HEALTH Act.
    Mr. Chair, you know that our health care system is facing a crisis 
when patients have to leave their state to receive urgent surgical 
care. You know that our health care system is facing a crisis when 
pregnant women cannot find an OB/GYN to monitor their pregnancy and 
deliver their baby. You know that our health care system is facing a 
crisis when community health centers have to reduce their services or 
close their doors because of liability insurance concerns. You know 
that our health care system is facing a crisis when dedicated 
professionals, who have trained for years, want to give up the work of 
a lifetime and retire. You know that our health care system is facing a 
crisis when physicians and other health care professionals believe they 
work in a culture of fear, rather than a culture of safety. You know 
that our health care system is facing a crisis when efforts to improve 
patient safety and quality are stifled because of lawsuit fears. An 
unrestrained medical liability system is driving our health care system 
into crisis.
    As you have recognized, the time for action is past due. Physicians 
across the country are making decisions now, and more and more patients 
are wondering, ``Will their doctor be there?'' We must act now to fix 
our broken medical liability system. That is why we are here supporting 
H.R. 5, and that is why we join with numerous other members of a broad-
based coalition known as the Health Coalition for Liability and Access 
to urge this Congress to promptly reform the medical liability system.
                       access to care is at risk
    The crisis facing our nation's medical liability system has not 
waned--in fact, it is getting worse. Escalating jury awards and the 
high cost of defending against lawsuits, even frivolous ones, have 
caused medical liability insurance premiums to reach unprecedented 
levels. As a result, a growing number of physicians can no longer find 
or afford liability insurance. Over the past two years, many physicians 
have been hit with medical liability premium increases of 25 to 400 
percent. Some hospitals have seen premiums increase 140 percent in the 
same time period.
    The most troubling aspect of this crisis is its impact on patients. 
As insurance becomes unaffordable or unavailable, physicians are being 
forced to close their practices or drop vital services--all of which 
seriously impede patient access to care. Emergency departments are 
losing staff and scaling back certain services such as trauma units. 
Many obstetrician-gynecologists and family physicians have stopped 
delivering babies, and some advanced and high-risk procedures (such as 
neurosurgery) are being postponed because physicians can no longer 
afford or even find the liability insurance they need to practice. 
According to the American Hospital Association's 2002 TrendWatch 1, 
more than 26% of health care institutions have reacted to the liability 
crisis by cutting back on services, or even eliminating some units.
    A 2002 survey conducted by Wirthlin Worldwide shows that 78 percent 
of Americans say they are concerned about access to care being affected 
because doctors are leaving their practices due to rising liability 
costs.
    Virtually every day for the past year there has been at least one 
major media story on the plight of American patients and physicians as 
the liability crisis reaches across the country. Access to health care 
is now seriously threatened in states such as Florida, Georgia, 
Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, 
Texas, Washington, and West Virginia. On top of this, we expect at 
least five more states to be in a full blown crisis in the near future, 
with a crisis looming in at least 26 other states. A sample of media 
reports in the appendices to this testimony illustrates the problems 
faced by patients and physicians in some of these states--problems many 
other states will face if effective tort reforms are not enacted.
    We must bring common sense back to our courtrooms so that patients 
have access to their emergency rooms, delivery rooms, operating rooms, 
and physicians' offices.
              the litigation system is causing the crisis
    The primary cause of the growing liability crisis is the 
unrestrained escalation in jury awards that are a part of a legal 
system that in many states is simply out of control. While there have 
been several articles published since the mid-1990s indicating that 
increases in jury awards lead to higher liability premiums, in the last 
year a growing number of government and private sector reports show 
that increasing medical liability premiums are being driven primarily 
by increases in lawsuit awards and litigation expenses.
    In his State of the Union Address last month, President Bush 
stressed that we all are threatened by a legal system that is out of 
control. The President stated that ``Because of excessive litigation, 
everybody pays more for health care and many parts of America are 
losing fine doctors.'' The President's remarks are substantiated in 
several recent government and private sector reports--reports making 
clear that the medical liability litigation system in the United States 
has evolved into a ``lawsuit lottery,'' where a few patients and their 
lawyers receive astronomical awards and the rest of society pays the 
price as access to health care professionals and services are reduced.
RECENT FEDERAL GOVERNMENT REPORTS
    In a July 2002 report released by the U.S. Department of Health and 
Human Services (HHS), the federal government concluded that the 
excesses of the litigation system are threatening patients' access to 
health care. This federal government report states that insurance 
premiums are largely determined by the litigation system, and that the 
litigation system is inherently costly, unpredictable, and slow to 
resolve claims. Just to defend a claim now costs on average over 
$24,000. Further, the fact that about 70 percent of claims end with no 
payment to the patient indicates the degree to which substantial 
economic resources are being squandered on fruitless legal wrangling--
resources that could be used to reduce health costs so that more 
Americans could find health insurance.
    Even when there is a large award in favor of an injured patient, a 
large percentage of the award never reaches the patient. Attorney 
contingent fees, added with court costs, expert witness costs, and 
other ``overhead'' costs, can consume 40-50 percent of the compensation 
meant to help the patient.
    On September 25, 2002, HHS issued an update on the medical 
liability crisis. This update reported on the results of a survey 
conducted by Medical Liability Monitor (MLM), an independent reporting 
service that tracks medical professional liability trends and issues. 
According to MLM, the survey determined that the crisis identified in 
HHS's July report had become worse. The federal government reported 
that:

        The cost of the excesses of the litigation system are reflected 
        in the rapid increases in the cost of malpractice insurance 
        coverage. Premiums are spiking across all specialties in 2002. 
        When viewed alongside previous double-digit increases in 2000 
        and 2001, the new information further demonstrates that the 
        litigation system is threatening health care quality for all 
        Americans as well as raising the costs of health care for all 
        Americans. (emphasis added)

    This federal government update further highlights that liability 
insurance rates are escalating faster in states that have not 
established reasonable limits on unquantifiable and arbitrary non-
economic damages. The government's report states that:

        . . . 2001 premium increases in states without litigation 
        reform ranged from 30-75%. In 2002, the situation has 
        deteriorated. States without reasonable limits on non-economic 
        damages have experienced the largest increases by far, with 
        increases of between 36-113% in 2002. States with reasonable 
        limits on non-economic damages have not experienced the same 
        rate spiking. (emphasis added)

    HHS also compared the range of physician liability insurance 
premiums for certain specialties in California, which has established 
reasonable limits on awards for non-economic damages, to the premiums 
in states that have not enacted similar limits. The results reveal how 
excessive awards for non-economic damages affect premiums. For example, 
in 2002, OB/GYNs in California paid up to $72,000 in medical liability 
premiums. In Florida, which does not limit non-economic damage awards, 
OB/GYNs paid up to $211,000 for liability coverage.
    Further, a 2002 Congressional Budget Office study on H.R. 4600 
(107th Congress), which included a limitation on non-economic damages, 
asserts that:

        CBO's analysis indicated that certain tort limitations, 
        primarily caps on awards and rules governing offsets from 
        collateral-source benefits, effectively reduce average premiums 
        for medical malpractice insurance. Consequently, CBO estimates 
        that, in states that currently do not have controls on 
        malpractice torts, H.R. 4600 would significantly lower premiums 
        for medical malpractice insurance from what they would 
        otherwise be under current law.

    In Florida, as indicated in the example given above, medical 
liability premiums are among the highest in the nation. The situation 
in Florida has become so dire that Governor Bush created a special Task 
Force to examine the availability and affordability of liability 
insurance. This Task Force held ten hearings over a five month period 
and received extensive testimony and information from numerous, diverse 
sources.
    Among the many findings in its report released on January 29, 2003, 
the Governor's Task Force found that the level of liability claims paid 
was the main cause of the increases in medical liability insurance 
rates. The Task Force ultimately concluded that ``the centerpiece and 
the recommendation that will have the greatest long-term impact on 
healthcare provider liability insurance rates, and thus eliminate the 
crisis of availability and affordability of healthcare in Florida, is a 
$250,000 cap on non-economic damages.''
RECENT PRIVATE SECTOR REPORTS
    Evidence that the litigation system is broken, and that the medical 
liability crisis is growing, is further established in a study released 
by Tillinghast-Towers Perrin on February 11, 2003. Tillinghast reported 
that ``The cost of the U.S. tort system grew by 14.3% in 2001, the 
highest single-year percentage increase since 1986,'' which is 
``equivalent to a 5% tax on wages.'' This is the only study that tracks 
the cost of the U.S. tort system from 1950 to 2001 and compares the 
growth of tort costs with increases in various U.S. economic 
indicators. Some of the key findings of this study are stunning:

         The U.S. tort system is a highly inefficient method 
        of compensating injured parties, returning less than 50 cents 
        on the dollar to people it is designed to help and returning 
        only 22 cents to compensate for actual economic loss.

         As of 2001, U.S. tort costs accounted for slightly 
        more than 2% of GDP, signaling an increase after a 13-year 
        decline in the ratio of tort costs to GDP.

         While the cost of the U.S. tort system has increased 
        one hundred fold over the last fifty years, GDP has grown by a 
        factor of only 34.

         Medical malpractice costs have risen an average of 
        11.6% a year since 1975 in contrast to an average annual 
        increase of 9.4% for overall tort costs, outpacing increases in 
        overall U.S. tort costs.

    The study also adds that ``These trends continued in 2002, with no 
sign of abatement in the near future.'' In a press release accompanying 
this study, a Tillinghast principal stated that, ``Absent sweeping tort 
reform measures, we expect most of these trends to continue in 2003 and 
beyond.''
    In a 2001 report by Jury Verdict Research, data show that in just a 
one year period (between 1999 and 2000) the median jury award increased 
43 percent. Further, median jury awards for medical liability claims 
grew at 7 times the rate of inflation, while settlement payouts grew at 
nearly 3 times the rate of inflation. Even more telling, however, is 
that the proportion of jury awards topping $1 million increased from 34 
percent in 1996 to 52 percent in 2000. More than half of all jury 
awards today top $1 million, and the average jury award has increased 
to about $3.5 million.
    These are just a few examples of growing evidence that reveal that 
out-of-control jury awards are inexorably linked to the severe 
increases in medical liability insurance premiums. It is clear that 
corrective action through federal legislation is urgently needed.
BLAMING INSURANCE INDUSTRY INVESTMENTS IS A RED HERRING
    Organizations opposing H.R. 5 have claimed that soaring medical 
liability insurance premiums are the result of declining investments in 
the insurance industry, and that liability reforms do not stabilize the 
insurance market. The reports discussed above, as well as several other 
authoritative and credible studies, reveal such claims to be 
misleading, based on flawed analysis, and contrary to the facts.
    Last month, Brown Brothers Harriman & Co. (BBH) released a report 
(``Did Investments Affect Medical Malpractice Premiums?'') that 
analyzed the impact of insurers' asset allocation and investment income 
on the premiums they charge. BBH concluded that there is no correlation 
between the premiums charged by the medical liability insurance 
industry, on the one hand, and the industry's investment yield, the 
performance of the U.S. economy, or interest rates, on the other hand.
    In addition, on February 4, 2003, BBH released an addendum to this 
study that analyzed National Association of Insurance Commissioners 
(NAIC) data to determine whether investment gains by medical liability 
insurance companies declined in the recent bear market. BBH asked the 
question: ``Did medical malpractice companies raise premiums because 
they had come to expect a certain percentage gain that was not achieved 
due to market conditions?'' BBH determined that the decline in equities 
(which are a small percentage of insurance company investments) was 
more than offset by the capital gains by bonds (which make up a 
substantial part of insurance company investments) due to a decline in 
interest rates. BBH concluded that ``investments did not precipitate 
the current crisis.''
    BBH's findings are corroborated by other recent reports. On 
September 25, 2002, HHS released an update on the medical liability 
crisis addressing claims that the crisis is caused by the management 
practices of the insurance industry. HHS concluded that such claims are 
not supported by facts, stating ``Comparisons of states with and 
without meaningful medical liability reforms provide clear evidence 
that the broken medical litigation system is responsible.''
    In addition, a summary of medical liability insurer annual 
statement data in A.M. Best's Aggregates & Averages, Property-Casualty, 
2002 edition shows that the investment yields of medical malpractice 
insurers have been stable and positive since 1997. A.M. Best reports 
that medical liability insurers have approximately 80% of their 
investments in the bond market. Also, recent NAIC data show that 
physicians' medical liability insurance premiums between 1976-2000 have 
risen 167% in California (which established effective liability reforms 
in 1975) compared to 505% in the rest of the United States.
    The report on which H.R. 5 opponents base most of their 
speculations, produced under the direction of J. Robert Hunter for the 
Americans for Insurance Reform (AIR), is flawed in a number of ways. 
The AIR/Hunter study purports that there is no current explosion in 
medical liability insurance payouts, and that the explosion in medical 
liability insurance premiums is due to the insurance underwriting 
cycle. While medical liability insurance premiums, medical liability 
award payouts, and tort law factors differ across states, the premium 
and payout data presented in AIR's report are at the national level. 
One cannot use national data to draw valid conclusions about how state-
specific changes in premiums may be related to state-specific changes 
in payouts. Conclusions about what has or has not caused recent premium 
escalation without accounting for the state-level factors listed above 
are unsupportable.
    In addition to claiming that the current medical liability crisis 
is an insurance issue, there have been attempts to argue that medical 
liability insurance premium rates in California have remained stable 
because of Proposition 103, not because of the successful medical 
liability reforms (known as MICRA-discussed later) that have been in 
place in California since 1975. Such claims are misguided. Proposition 
103, also known as the Insurance Rate Reduction and Reform Act, applies 
to all lines of insurance, not just medical liability insurance. It was 
passed as an initiative by the voters in 1988 (thirteen years after 
MICRA), yet did not take effect until 1989. This is when the state's 
high court struck down its rate rollback provisions while maintaining 
the remainder of the law.
    Proposition 103 implemented a basic standard that ``no rate shall 
be approved or remain in effect which is excessive, inadequate, 
unfairly discriminatory or otherwise in violation of this chapter.'' 
However, Proposition 103 provides that ``every insurer which desires to 
change any rate shall file a complete rate application with the 
commissioner.'' Proposition 103 also requires that the Department of 
Insurance grant a hearing for a challenge to any increase above 15 
percent for commercial lines of insurance.
    According to Californians Allied for Patient Protection, ``Insurers 
have regularly applied for and obtained significant rate increases in 
all lines of insurance, except medical liability where MICRA has kept 
the rates from rising astronomically. Between September and the end of 
October, 2002, for instance, the Insurance Department approved more 
than 75 applications for double-digit increases in insurance rates.'' 
None of these approved increases included medical liability insurance. 
This illustrates that Proposition 103 is not responsible for keeping 
medical liability premiums down. Rather, as we discuss later, it is 
MICRA that has been the force behind California's success.
    Such misdirected claims as discussed above are a disservice to 
patients who are losing access to health care services, and an affront 
to the physicians and other health care professionals who dedicate 
their lives to healing and caring for the sick and working to find ways 
to improve the quality of care. America's medical liability crisis is 
too serious and the consequences of inaction too grave for the public 
and Congress to use anything but the facts to make decisions about 
reform. In short, these claims are counterproductive to the debate on 
resolving the medical liability crisis.
FEDERAL SOLUTION
    The medical liability crisis is a growing national problem that 
requires a national solution. If the crisis was just a matter of 
physicians obtaining or affording medical liability insurance in one 
state, we might agree that a national approach would not necessarily be 
required. However, the problem goes far beyond physicians and other 
health care professionals and institutions. The medical liability 
crisis has become a serious problem for patients and their ability to 
access health care services that would otherwise be available to them, 
including services provided to Medicare and Medicaid patients.
    Also, the premise that it is within the ability of every state to 
enact legislation to effectively resolve their respective medical 
liability crisis has been shattered by the fact that many state 
liability reform laws have been nullified by activist state courts or 
stripped of their most effective provisions under state constitutions 
that limit reforms. Taking into consideration that studies show the 
litigation system to be an ineffective, and often unfair, mechanism for 
resolving medical liability claims, we believe that the time is ripe 
for a uniform, federal approach to resolving the liability crisis.
    Moreover, there is a direct and compelling federal interest in 
reforming our outmoded medical liability system. According to estimates 
by HHS, altogether medical liability adds $60 billion to $108 billion 
to the cost of health care each year. This means higher health 
insurance premiums and higher medical costs for all Americans, and 
especially for the federal government given that one-third of the total 
health care spending in our country is paid by the Medicare and 
Medicaid Programs. Further, HHS estimates that excessive medical 
liability adds $47 billion annually to what the federal government pays 
for Medicare, Medicaid, the State Children's Health Insurance Program, 
Veterans' Administration health care, health care for federal 
employees, and other government programs.
THE LIABILITY CRISIS AND PATIENT SAFETY
    The AMA's policy is to be part of the solution to improving patient 
safety and quality. The AMA believes that one preventable error is one 
error too many. In fact, the AMA helped launch the National Patient 
Safety Foundation (NPSF) in 1996 to address patient safety issues, well 
before publication of the IOM report. The NPSF's approach is to create 
a culture of cooperative learning and mutual improvement, as opposed to 
a culture of shame and blame.
    Quality of care improves when there is greater access to physicians 
and health care services. A culture of safety requires a legal 
environment that encourages professionals and organizations to work 
together to identify problems in providing care, evaluate the causes, 
and use that information to improve care for all patients. An over-
litigious system is anathema to building a strong and effective 
national patient safety program.
    Under our current liability system, the reality of being sued is 
daunting to just about everyone in the medical community. A 2002 Harris 
Interactive study (The Fear of Litigation Study--The Impact on 
Medicine) illustrates just how detrimental the litigious nature of our 
society is to physicians and other health care professionals. This 
study reveals the extent to which the fear of litigation affects the 
practice of medicine and the delivery of health care--``From the 
increased ordering of tests, medications, referrals, and procedures to 
increased paperwork and reluctance to offer off-duty medical 
assistance, the impact of the fear of litigation is far-reaching and 
profound.''
    The study shows, among other things, that more than three-fourths 
(76%) of physicians believe that concern about medical liability 
litigation has negatively affected their ability to provide quality 
care in recent years, and nearly all physicians and hospital 
administrators feel that unnecessary or excessive care is provided 
because of litigation fears. It also shows that an overwhelming 
majority of physicians (83%) and hospital administrators (72%) do not 
trust the current system of justice to achieve a reasonable result to a 
lawsuit.
    The Harris study found that a majority (59%) of physicians believe 
(``a lot'') that the fear of liability discourages open discussion and 
thinking about ways to reduce health care errors. The AMA has long 
believed that health professionals and organizations should be 
encouraged to report and evaluate health care errors and to share their 
experiences with others in order to prevent similar occurrences. 
However, this ``culture of fear'' caused by our over-litigious society 
suppresses such information.
    The AMA strongly supports the principle underlying the 1999 
Institute of Medicine (IOM) report entitled, To Err is Human: Building 
a Safer Health System, that the health care system needs to transform 
the existing culture of blame and punishment, which suppresses 
information about errors, into a ``culture of safety'' that focuses on 
openness and information-sharing to improve health care and prevent 
adverse outcomes. The AMA also supports the IOM's focus on the need for 
a system-wide approach to eliminating adverse outcomes and improving 
safety and quality, instead of focusing on individual components of the 
health system in an isolated or punitive way.
    Toward this end, the AMA supports H.R. 663, the ``Patient Safety 
and Quality Improvement Act,'' which was favorably reported by the 
House Energy & Commerce Committee on February 12, 2003. H.R. 663 would 
provide a framework to create a ``culture of safety'' by establishing a 
confidential, non-punitive, and evidence-based system for reporting 
health care errors. There is a very broad and strong consensus of 
agreement on this legislative approach within the health care 
community. By implementing this approach, errors can be identified and 
analyzed to improve patient safety by preventing future errors.
    In addition to patient safety and quality improvement, the fear of 
litigation stifles the advancement of new medical treatments and 
medications, encourages physicians to practice defensive medicine, 
overwhelms the health care system with paperwork--leaving less time for 
patient care, and discourages qualified candidates from pursuing a 
career in medicine or from moving to a state with a bad liability 
climate.
THE PRACTICAL SOLUTION
    The AMA recognizes that injuries due to negligence do occur in a 
small percentage of health care interactions, and that they can be as 
devastating or worse to patients and their families than injury due to 
natural illness or unpreventable accident. When injuries occur and are 
caused by a breach in the standard of care, the AMA believes that 
patients are entitled to prompt and fair compensation.
    This compensation should include, first and foremost, full payment 
of all out of pocket ``economic'' losses. The AMA also believes that 
patients should receive reasonable compensation for intangible ``non-
economic'' losses such as pain and suffering and, where appropriate, 
the right to pursue punitive damages.
    Unfortunately, our medical liability litigation system is neither 
fair nor cost effective in making a patient whole. Transformed by high-
stakes financial incentives, it has become an increasingly irrational 
``lottery'' driven by open-ended non-economic damage awards. As 
mentioned above, studies show that our tort system, in general, is an 
extremely inefficient mechanism for compensating claimants--returning 
less than 45 cents on the dollar to claimants and only 20 cents of tort 
cost dollars to compensate for actual economic losses.
    To ensure that all patients who have been injured through 
negligence are fairly compensated, the AMA believes that Congress must 
pass fair and reasonable reforms to our medical liability litigation 
system that have proven effective. Toward this end, we strongly urge 
Congress to pass the ``Help Efficient, Accessible, Low-Cost, Timely 
Healthcare (HEALTH) Act,'' a bipartisan bill that would bring balance 
to our medical liability litigation system.
    The major provisions of the HEALTH Act would benefit patients by:

         Awarding injured patients unlimited economic damages 
        (e.g., past and future medical expenses, loss of past and 
        future earnings, cost of domestic services, etc.);

         Awarding injured patients non-economic damages up to 
        $250,000 (e.g., pain and suffering, mental anguish, physical 
        impairment, etc.), with states being given the flexibility to 
        establish or maintain their own laws on damage awards, whether 
        higher or lower than those provided for in this bill;

         Awarding injured patients punitive damages up to 
        $250,000 or up to two times economic damages, whichever is 
        greater;

         Establishing a ``fair share'' rule that allocates 
        damage awards fairly and in proportion to a party's degree of 
        fault; and

         Establishing a sliding-scale for attorneys' 
        contingent fees, therefore maximizing the recovery for 
        patients.

    These reforms are not part of some untested theory--they work. The 
major provisions of the HEALTH Act are based on the successful 
California law known as MICRA (Medical Injury Compensation Reform Act 
of 1975). MICRA reforms have been proven to stabilize the medical 
liability insurance market in California--increasing patient access to 
care and saving more than $1 billion per year in liability premiums--
and have reduced the time it takes to settle a claim by 33 percent. 
MICRA is also saving California from the current medical liability 
insurance crisis brewing in many states that do not have similar 
reforms. In fact, according to MLM, as discussed above, the gap between 
medical liability insurance rates in California and those in the 
largest states that do not limit non-economic awards is substantial and 
growing.
    MICRA-type reforms are effective, especially at controlling non-
economic damages. Several economic studies substantiate this point. One 
study looked at several types of reforms and concluded that capping 
non-economic damages reduced premiums for general surgeons by 13% in 
the year following enactment, and by 34% over the long term. Similar 
results were shown for premiums paid by general practitioners and OB/
GYNs. It was also shown that caps on non-economic damages decrease 
claims severity (i.e., amount of the claim) (Zuckerman et al. 1990).
    Another study published in the Journal of Health Politics, Policy 
and Law concluded that caps on non-economic damages reduced insurer 
payouts by 31%. Caps on total damages reduced payouts by 38% (Sloan, et 
al. 1989). Another study concluded that states adopting direct reforms 
experienced reductions in hospital expenditures of 5% to 9% within 
three to five years. If these figures are extrapolated to all medical 
spending, a $50 billion reduction in national health spending could be 
achieved through such reforms (Kessler and McClellan, Quarterly Journal 
of Economics, 1997).
    Further, as discussed above, a 2002 Congressional Budget Office 
study on H.R. 4600 (107th Congress) asserts caps on non-economic 
damages have been extremely effective in reducing the severity of 
claims and medical liability premiums. Conversely, a 1996 American 
Academy of Actuaries study shows that medical liability costs rose 
sharply in Ohio after the Ohio Supreme Court overturned a liability 
reform law in the 1990s that set limits on non-economic damages. (Ohio 
recently enacted a new liability reform law.)
    Furthermore, a Gallup poll released on February 5, 2003, show that 
72% of those polled favor a limit on the amount patients can be awarded 
for pain and suffering. This Gallup poll is consistent with a 2002 
survey conducted by Wirthlin Worldwide showing that three-quarters of 
Americans understand the detrimental effect that excess litigation has 
on our health care system. The Wirthlin survey shows that the vast 
majority of Americans agree we need common sense medical liability 
reform. In addition to the 78 percent discussed above who said that 
they are concerned about access to care, the survey found that:

         71 percent of Americans agree that a main reason 
        health care costs are rising is because of medical liability 
        lawsuits.

         73 percent support reasonable limits on awards for 
        ``pain and suffering'' in medical liability lawsuits.

         More than 76 percent favor a law limiting the 
        percentage of contingent fees paid by the patient.
CONCLUSION
    Physicians and patients across the country realize more and more 
every day that the current medical liability situation is unacceptable. 
Unless the hemorrhaging costs of the current medical liability system 
are addressed at a national level, patients will continue to face an 
erosion in access to care because their physicians can no longer find 
or afford liability insurance. The reasonable reforms of the HEALTH Act 
have brought stability in those states that have enacted similar 
reforms.
    By enacting meaningful medical liability reforms, Congress has the 
opportunity to increase access to medical services, eliminate much of 
the need for medical treatment motivated primarily as a precaution 
against lawsuits, improve the patient-physician relationship, help 
prevent avoidable patient injury, and curb the single most wasteful use 
of precious health care dollars--the costs, both financial and 
emotional, of health care liability litigation. The modest proposals in 
the HEALTH Act answer these issues head on and would strengthen our 
health care system.
    The AMA appreciates the opportunity to testify on the adverse 
effect that our current medical liability litigation system imposes on 
patient access to health care and urges Congress to pass H.R. 5, the 
HEALTH Act.





                               APPENDIX B

            Medical Liability Crisis Affects Access to Care
                             Crisis States
           the medical liability crisis--a nationwide problem
Florida
 Women are facing waiting lists of four months before being 
able to get an appointment for a mammogram because at least six 
mammography centers in South Florida alone have stopped offering the 
procedure as a result of increasing medical liability insurance 
premiums. ``This trend is troubling. There are a growing number of 
older people and less and less people to provide mammograms,'' said 
Jolean McPherson, a Florida spokeswoman for the American Cancer 
Society. South Florida Sun Sentinel, Nov. 4, 2002.

 Aventura Hospital in South Florida closed its maternity ward 
and cited $1,000 in insurance premiums for each delivery as the prime 
factor. Aventura is one of six maternity wards to close in recent 
months. Now, patients will be forced to drive to other counties and 
other facilities. ``There may be waits getting into a labor-room 
floor,'' said OB/GYN Aaron Elkin, MD. Miami Herald, Oct. 19, 2002.

 ``Without a doubt, access to health coverage is being 
affected. Some of our emergency rooms are losing their effectiveness,'' 
said Dr. Greg Zorman, neurosurgery chief at Memorial Regional Hospital 
in Hollywood. His unit gets several patients a week from smaller ERs 
that have lost neurosurgery coverage. South Florida Sun Sentinel, 
February 5, 2003.

 Port Charlotte cardiologist Leonardo Victores, MD, left for 
Kansas in the face of medical liability premiums that were going to 
increase 100 percent. ``He's moving to Kansas because that state has 
caps on malpractice awards,'' said colleague Mark Asperilla, MD. Sun 
Herald, Jan. 1, 2003.

 Despite having no malpractice claims or disciplinary actions 
on his record, Lakeland OB/GYN John Kaelber, MD, was forced to close 
his practice and leave the state in the wake of insurance premiums that 
doubled. Lakeland Ledger, Nov. 21, 2002.

 More than 50 Bradenton patients had to postpone elective 
surgeries and more than 100 office visits were canceled because two 
physicians were unable to obtain liability insurance. The insurer may 
leave the state altogether. Bradenton Herald, Jan. 24, 2003.

 After recently receiving notice of a premium spike coming in 
July 2002, Vladimir Grnja, MD, decided that he would ``go bare'' and 
drop all medical liability insurance coverage. Rates for the Hollywood, 
FL radiologist were to rise to $112,000 from $35,000 a year (a 220% 
increase), mainly because of litigation over mammograms. ``No doctor 
wants to go bare,'' said Dennis Agliano, MD, chairman of the Florida 
Medical Association's special task force on the Florida medical 
liability crisis. But with significant premium hikes in Florida for 
specialties like OB/GYN, neurosurgery, thoracic surgery, radiology and 
even primary care, ``some doctors have no choice,'' he says. Some 
neurosurgeons in South Florida, are paying a $200,000 premium for 
coverage of $250,000 per occurrence, making insurance practically 
meaningless. The Florida Medical Association reports that more than 
1,000 doctors in Florida have no medical liability insurance. Doctors 
in West Virginia and Ohio are also reportedly going bare. Modern 
Physician, April 1, 2002.

 Ob/Gyns in the ``Sunshine State'' face the highest premiums 
in the nation, some as high as $208,000. Many surgeons also are facing 
premiums in excess of $200,000.

 Fourteen of the 16 neurosurgeons in Broward County cannot 
afford insurance and are going ``bare.'' Neurosurgeons in Pinellas 
County are considering doing the same rather than face increases of 55 
percent or greater to more than $100,000.

 The Miami Herald reports one radiologist saw his premiums 
increase from $32,000 to $112,000 in one year due to ``mushrooming 
lawsuits involving mammograms.'' Another radiologist told the St. 
Petersburg Times he would no longer read mammograms because of the high 
risk of being sued.

 Cardiologists and internists also are seeing insurance rates 
double or triple this year.

 An insurance executive told the South Florida Sun-Sentinel 
that insurance companies are paying out $1.30 for every $1.00 they 
collect in premiums, a fact that cries out for medical liability 
reform.

 And, what's worse $100,000 only buys about $1 million in 
coverage, a small amount compared to soaring jury verdicts. Tallahassee 
Democrat, June 30, 2002.

 PHICO, the third largest professional liability insurer in 
Florida was forced into liquidation earlier this year. Zurich American 
Insurance Co., and Clarendon National also are leaving the Florida 
market. Remaining insurers are on record as saying they will draw 
sharper lines between which physician specialty they will and will not 
insure.

 Florida's community hospitals are considering the drastic 
step of no longer requiring physicians to carry professional liability 
insurance to ensure the hospitals can remain open.

 ``The squeeze is hitting South Florida extremely hard, and 
it's gradually spreading out to the rest of the state,'' Dennis 
Agliano, MD, FMA secretary and chair of its tort reform task force. 
(The South Florida Business Journal)

 Several Florida Supreme Court rulings have weakened tort 
reforms in Florida.

 ``Litigation was and always will be the problem in Florida 
until there are caps,'' said Bob White, COO of First Professionals 
Insurance Co., Florida's largest carrier.

 Medical Specialists of the Palm Beaches, a 50-physician 
group, saw its premiums rise from $800,000 to $2.5 million this year.

 American Physicians Assurance announced on July 17, 2002 that 
it is leaving the state

 Farmer's Insurance has announced its intent to leave the 
state. Among other insurers, MAG is still writing policies, while 
Medical Protective and ProNational are being very selective. FPIC, the 
largest medical liability carrier in the state, endorsed by FMA, is 
only writing very selectively. Both Clarendon and St. Paul have pulled 
out entirely.

 According to the FMA's General Counsel, Florida's existing 
caps simply do not work and are never used. The caps only apply in 
cases where the physician agrees to arbitration and in order for the 
case to go to arbitration the physician must admit liability. In 
addition, the original intent of this Florida provision was to have the 
cap apply to each incident, but it has been interpreted to apply to per 
claimant, which obviously also decreases its effectiveness. The lack of 
a straight cap is the primary reason for the current crisis in Florida. 
Unlike such States as Kansas, Florida, has not seen an increase in 
frequency of claims, but there has been an increase for severity in 
jury awards.

 In a presentation before FMA, the medical liability insurance 
carrier, EPIC, presented facts that demonstrate the medical liability 
crisis in Florida. During 1975, there were 380 health care lawsuits in 
Florida, resulting in $10.8 million in jury awards and costing $1.5 
million to defend. In 2000 there were 880 lawsuits alleging 
malpractice, resulting in awards of $219 million and costing $36 
million to defend.

 Dr. Oliver Bayouth says his medical-malpractice premiums are 
skyrocketing. The Orlando obstetrician is paying about $100,000 for 
insurance this year, up at least 25 percent from two years ago. 
Frustrated, Bayouth says he is thinking about moving his practice out 
of Florida. Orlando Sentinel, January 20, 2002.

 In South Florida, where insurers say litigation is the 
heaviest, ob/gyns pay as much as $202,949 a year--the highest rates in 
the country, according to Medical Liability Monitor, a Chicago-based 
newsletter. Orlando Sentinel, January 20, 2002.

 Dr. Alan Appley, an Orlando neurosurgeon, moved his practice 
to Lafayette, Louisiana, last year in part to escape Florida's soaring 
malpractice rates. Orlando Sentinel, January 20, 2002.

 Dr. Joseph Boyer, an Orlando cardiologist, says his rates 
rose 64.6 percent, to $99,000, in 2002. Orlando Sentinel, January 20, 
2002.

 Central Florida Cardiothoracic Surgery in Orlando says it 
will pay about $140,000 to insure two surgeons in 2002, compared with 
about $54,000 last year. Orlando Sentinel, January 20, 2002.

 Dr. Alexander Jungreis, an Orlando neurosurgeon, said his 
liability insurance premiums tripled this year. Orlando Sentinel, 
January 20, 2002.

 Dr. Jorge Perez, an Orlando internist, said his insurer 
canceled his policy last year even though he never had a claim filed 
against him. His new company is charging him $18,000 per year, compared 
with the $11,000 he previously paid, on top of a $25,000 fee to cover 
possible lawsuits from prior incidents. Orlando Sentinel, January 20, 
2002.

 Nationwide, one out of every 12 doctors gets sued each year, 
while in Florida it's one out of every six, said Bob White, chief 
operating officer of Jacksonville-based First Professionals Insurance 
Co., the state's largest provider of medical liability insurance with 
about 33 percent of the market. Orlando Sentinel, January 20, 2002.
Georgia
 According to a Georgia Board for Physician Workforce study 
released in January 2003, 2,800 physicians in Georgia are expected to 
stop providing high-risk procedures to limit medical liability.

 The study also indicated that 1,750 physicians reported that 
have stopped or plan to stop providing ER coverage and 630 physicians 
plan to quit practicing or leave the state. In addition, 1 in 5 family 
physicians and 1 in 3 Ob-Gyns reported plans to stop providing high-
risk procedures, including delivering babies.

 But numbers alone do not tell the whole story; there is a 
very human side to this crisis. For instance, although she is only in 
her first year of medical school at Medical College of Georgia, the 
liability crisis has already caused Thandeka Myeni, 26, to reconsider 
her preference for obstetrics, one of the specialties hardest hit by 
medical liability increases. ``I definitely think it could be 
discouraging,'' she said. The Augusta Chronicle, Nov. 13, 2002.

 Evans Memorial, a rural hospital in Claxton, decided to ``go 
bare''--have no coverage at all-instead of paying what it considered an 
exorbitant medical liability premium. Only one insurer offered a 
malpractice policy for the hospital and its nursing home, and the 
annual premium for $1 million in coverage would have been $581,000, up 
from $216,000 last year. ``We just thought it was outrageous,'' said 
Eston Price, Evans Memorial administrator. The Atlanta Journal-
Constitution, Oct. 7, 2002.

 The largest hospital in the state's health system has bought 
a new policy--with a deductible of $15 million--covering 953-bed Grady 
Memorial, a nursing home and clinics. On each paid claim below that 
mark, Grady is responsible for every dollar. The $15 million deductible 
starts again with each claim. ``Grady faces open-ended liability,'' 
said Timothy Jefferson, Grady Health System executive vice president 
and chief counsel. The Atlanta Journal-Constitution, Oct. 7, 2002.

 Knowing that malpractice premiums were rising for everyone in 
the industry, Ty Cobb Health System CEO, Chuck Adams earmarked enough 
money for a 100 percent increase. The bill arrived by fax this summer, 
just 24 hours before a check was due. Not only was the insurance 
company increasing his deductible tenfold, but the premium jumped from 
$553,000 to $3.15 million--a 469 percent increase. ``We were numb,'' 
said Adams, who eventually got an extension and another cheaper policy 
at $1.65 million. ``There goes our expansions, like a renovation of the 
Hart County Emergency Room.'' The Atlanta Journal-Constitution, Aug. 
11, 2002.

 ``Dr. Edmund Wright, a Fitzgerald family practitioner who 
performed Caesarian sections, has given up that part of his practice. 
His premiums quadrupled to $80,000 in 2002 and would have been $110,000 
if he had continued the surgical delivery procedure.'' Wright said, ``I 
don't know if I really want to do this anymore.'' The Atlanta Journal-
Constitution, Aug. 11, 2002.

 Insurance costs are rising so high and so quickly because of 
medical malpractice lawsuits that many doctors are quitting medical 
practice, said Michael Greene, who has a family practice in Macon. The 
problem is increasing so fast that Georgia will soon face a critical 
shortage of physician, Greene said. ``It hasn't hit with a tidal wave 
yet, but the waves are beginning to lap at the shore,'' Greene 
continued. The Macon Telegraph, Aug. 3, 2002.

 David Cook, executive director of the Medical Association of 
Georgia, said the malpractice crisis is driving more doctors into early 
retirement. ``One-third of doctors 55 and older say they plan to reduce 
their hours or get out altogether,'' he said. ``These are physicians at 
the peak of their diagnostic powers.'' The Times (Gainesville), July 
17, 2002).

 40 percent of the State's hospitals have seen have seen 
medical liability premium go up 50 percent or more in 2002. A rural 
hospital in Bainbridge actually faced increases from $140,000 to 
$970,000.

 St. Paul was the second largest carrier in Georgia before its 
pull-out. The remaining insurers are raising rates for some specialties 
by 70 percent or greater. Some ER physicians, Ob-Gyns and radiologists 
have not yet found new coverage.

 On average, Georgia physicians are facing premium increases 
of 30 percent or greater for 2002.

 Georgia physicians paid more than $92,000,000 to cover jury 
awards for 2000. That amount was the 11th highest in the nation despite 
Georgia ranking only 38th in total number of physicians in the United 
States.

 The median jury award increased from $225,000 in early 1990s 
to $480,000 by late 1990s.

 The number of paid claims totaling $1 million or more 
increased from one in 1990 to 13 in 2000. There was one claim of $2 
million or more in 1991, and more than 5 so far in 2002; according to 
MAG Mutual, which insures 70% of Georgia physicians. Atlanta Journal & 
Constitution Aug. 11, 2002
Mississippi
 Although Mississippi enacted some medical liability reforms 
late last year, it is still too early to see if this will stem the 
exodus of physicians from the State. The reason: the Mississippi cap on 
non-economic damages has broad exceptions and the trial bar is looking 
for ways to get around its limits. In short, Mississippi remains in 
crisis.

 The Mississippi State Medical Association still estimates 
that the state could lose as many as 10 percent of its 4,000-4,500 
physicians.

 Obstetricians in Mississippi still worry about what is going 
to happen to their patients who face longer trips to the hospital while 
already in labor. Women who used to walk or make a short drive for both 
prenatal visits and delivery now face a 45-minute drive by car to the 
only physician in their area who can still treat OB patients.

 Pregnant women who are considered high-risk, such as someone 
with diabetes, cannot be treated at the Kosciusko Medical Clinic 
because it is too risky for physicians, where seven physicians formerly 
practiced obstetrics and gynecology. Only three were predicted to 
remain in January 2003. The Clarion-Ledger, Aug. 26, 2002.

 Only two neurosurgeons remain in practice in the Gulf Coast-
area of Mississippi, and general surgeons are in short supply because 
of the state's medical liability crisis. ``Everybody is reduced to the 
same low level of trauma care that we had 20 years ago,'' said Steve 
Delahousey, vice president of operations at American Medical Response 
ambulance service. Jan. 29, 2003 Biloxi Sun Herald

 Neurologist Terry Smith, MD said he had applied with 14 
companies, and Medical Assurance was his last hope to find coverage 
before his current policy expired on Aug. 4, 2002. His premium went 
from $55,000 a year to potentially $150,000 with a $132,000 tail to his 
old insurer. ``I'm looking at writing a check for $300,000,'' said 
Smith, who does brain surgery at three hospitals in Jackson and 
Harrison counties. Associated Press, July 11, 2002.

 Four rural hospitals in Ocean Springs faced closure, as their 
insurer, Medical Assurance Company of Alabama, was not renewing their 
coverage because the insurer was leaving Mississippi.

 Greenwood Hospital--the only trauma center in a 55-mile 
radius--was unable to keep its Level-II trauma center rating because 
area neurosurgeons have left, citing the high cost of liability 
insurance. Greenwood also has lost 2 of its 4 Ob-Gyns.

 At least 15 insurers, including St. Paul, have left 
Mississippi in the previous five years.

 Nursing homes in Mississippi have faced insurance increases 
as high as 900 percent in the previous two years according to industry 
representatives.

 Tupelo has lost 3 of its 5 neurosurgeons in the previous two 
years because of the State's legal climate. A physician-delegate to the 
Mississippi Economic Council predicts nearly 100 physicians will leave 
Tupelo in the near future.

 In Cleveland, Mississippi, three of the town's six Ob-Gyns 
have stopped delivering babies. Yazoo City's 14,550 residents have no 
ob-Gyns. According to the Mississippi State Medical Association, 
insurance rates for Ob-Gyns have increased from 20--400 percent in the 
previous year.

 Since 1995, Mississippi has been home to 21 verdicts of $9 
million or greater. Before 1995, there were none. In the first quarter 
of this year, $31 million was awarded in such cases. The total for the 
entirety of last year was $32 million. Daily Mississippean (Oxford, 
MS), July 30, 2002.

 A Natchez doctor's group is seeking to build a $6 million 
medical office building across state lines in Louisiana rather than 
face continuing lawsuits and skyrocketing insurance premiums in 
Mississippi.

 Mississippi has been voted the nation's worst liability 
climate by the U.S. Chamber of Commerce, which has warned businesses 
away from doing business in the state. Rural areas are particularly 
hard hit by the state's liability crisis. Twenty-five of Mississippi's 
80 counties have fewer physicians today than they did in 1990. 21 of 
those counties have 10 or fewer physicians.

 ``The legislative process has slammed the proverbial door in 
the face of the entire business and medical communities,'' 
Mississippi's director of the National Federation of Independent 
Business told the Associated Press.

 Mississippi needs doctors like Kirk Kooyer, MD. He is the 
only pediatrician in Sharkey and Issaquena Counties, where the majority 
of patients live below the poverty level. Kooyer moved to the 
Mississippi Delta to serve those who cannot otherwise get medical 
treatment. Because of increasing litigation risks and high insurance 
premiums, Kooyer has decided to leave the Delta. His absence will put a 
strain on the community hospital because there is no pediatrician to 
take his place.

 In 2001, Bolivar County in western Mississippi had six 
physicians providing obstetrical care; today it has three. Obstetrics 
insurance for a doctor in Bolivar County jumped from $28,000 to 
$105,000, with a $25,000 deductible. The Wall Street Journal, May 1, 
2002

 In neighboring Sunflower County, all four physicians who 
delivered babies have quit private practice. The Wall Street Journal, 
May 1, 2002

 In the northern half of the state last year there were nine 
practicing neurosurgeons; now there are just three on emergency call. 
The Wall Street Journal, May 1, 2002

 In 1998, 227 Mississippians filed malpractice suits. Based on 
the suits filed during the first quarter of 2002, the Medical 
Association Company of Mississippi predicts over 550 medical liability 
suits will be filed this year.

 Across the State, there is a veritable litigation explosion, 
in Jefferson County, for example, there are only about 9,740 
residents--but the number of lawsuits filed in 1999 numbered 10,000. A 
year later, in 2000, the number of plaintiffs on the docket increased 
to 27,000, or nearly three times the number of residents. The 
Washington Times, May 11, 2002.
Nevada
 In August, Nevada Governor Guinn called a special legislative 
session to address medical liability issues. In just four days, Nevada 
legislators enacted a meaningful liability reform bill.

 Unfortunately, while Nevada passed needed reforms, the crisis 
there has not yet been averted due to continued lack of availability 
and affordability of medical liability insurance. Insurers in Nevada 
have not yet reduced their premiums and physicians are still leaving 
the state, particularly in Southern Nevada.

 Why? Because the trial bar has threatened to institute legal 
challenges to this new law that could thwart and delay its 
implementation. Without the full force and effect of reforms right now, 
the scenario that has crippled access to medical care in Nevada will 
continue.

 60 percent of Las Vegas-area Ob-Gyns have said they would 
stop delivering babies in 2002 because of the out-of-control legal 
system and skyrocketing liability premiums.

 as Vegas' only trauma center, which treated more than 11,000 
patients in 2001, closed for 10 days in July 2002 because it did not 
have enough surgeons to staff the center.

 When a trauma center closes, ``some patients are going to die 
that wouldn't die . . . the quicker you're at the trauma center, the 
better chance you have of survival,'' a Las Vegas surgeon told NPR. The 
next closest trauma center is at least 5 hours away.

 ``There is an unavailability of [medical liability] 
insurance,'' said Nevada State Insurance Commissioner Alice Molasky-
Arman, at a March 4, 2002 hearing where insurance officials testified 
they would no longer insure any new obstetricians, surgeons and other 
high-risk specialists.

 A Las Vegas Ob-Gyn was forced to close her practice and leave 
30 pregnant patients behind because her liability insurance increased 
from $37,000 to $150,000 in one year. She now practices in Los Angeles 
and pays only $17,000. Some Nevada women have had to call as many as 50 
Ob-Gyns just to find one who is accepting new patients.

 Nevada ranks 5th among states with the highest physician 
liability premiums (at $94,820 per year), but only 47th out of 50 
states in the number of physicians for its population, according to the 
American College of Obstetricians and Gynecologists. An ACOG survey 
concludes that 6 out of 10 Nevada Ob-Gyns will no longer practice 
obstetrics.

 ``Approximately 100 Las Vegas physicians have already left 
Nevada to practice elsewhere, announced they will be closing their 
practices, or retire early because they cannot afford doubling, 
tripling, or quadrupling rates,'' according to the Nevada State Medical 
Association.

 In Las Vegas, it is expected that more than 10% of the 
physicians will stop practicing or relocate, further adding to the 
crisis in the state. Los Angeles Times, March 4, 2002.

 Recently, five trauma surgeons and 26 specialty surgeons made 
the difficult decision to resign or request leave from the University 
of Las Vegas Medical Center's trauma center. Some plan to leave June 30 
and others July 31. This was expected to reduce by half the number of 
urologists, spinal surgeons, neurosurgeons, orthopedic surgeons, and 
cardiothoracic surgeons who could be on call to aid patients with life-
threatening injuries. Las Vegas Review-Journal, June 6, 2002.

 Obstetricians and gynecologists remain particularly hard hit, 
who, like trauma centers, face premium increases of as much as 500 
percent. Las Vegas Review-Journal, March 6, 2002.

 Earlier this summer President Bush spoke with Jill Barnes, a 
Nevada resident who is more than two months pregnant. Mrs. Barnes and 
her husband were recently told by their home physician that he would 
not be accepting any new obstetrics patients. Unable to find a Las 
Vegas-area obstetrician to treat her, Mrs. Barnes has been forced to go 
out of state to find one. ``When she goes into labor, she'll have to 
drive across the desert for two hours'' to Arizona, her husband told 
the Las Vegas Review-Journal. The Washington Times, July 31, 2002.

 Point in fact, Dr. Shelby Wilbourn, a Las Vegas-area 
obstetrician-gynecologist has cut staff, stopped taking new patients 
and decided to leave the state (he's going to Maine) after his 
insurance premium jumped from $33,000 to $80,000 this year. The 
Washington Times, July 31, 2002.
New Jersey
 A multi-physician practice in Teaneck, NJ, was forced to 
layoff employees and reduce the number of deliveries it performed 
because of medical liability insurance premium increases of more than 
120 percent. ``All of my colleagues are experiencing the same 
pressures,'' said George Ajjan, MD. Bergen Record, May 22, 2002.

 One out of every four hospitals--nearly 27 percent--has been 
forced to increase payments to find physicians to cover Emergency 
Departments. Physicians are increasingly reluctant to take on such 
assignments because of the greater liability exposure. Hospitals report 
that more and more physician specialties are being hit by the crisis. 
While a previous New Jersey Hospital Association survey in March 2002 
found that OB/GYNs and surgeons were primarily affected, the new survey 
finds a deepening impact for neurologists/neurosurgeons, radiologists, 
orthopedists, general practitioners and emergency physicians. New 
Jersey Hospital Association, Jan. 28, 2003 news release.

 ``We have as much to lose as they have,'' said Joan Hamilton, 
a patient who attended a recent rally in New Jersey in support of her 
physician. Bergen Record, Oct. 6, 2002.

 Physicians, nursing homes and hospitals are all in jeopardy. 
Liability premiums for hospitals increased more than 150% over the past 
3 years. A N.J. American Hospital Association survey found that nearly 
2/3 of hospitals had one or more instances where physicians were forced 
out of medicine because of high premiums.

 64.8 percent of all New Jersey hospitals said they have had 
physicians stop practicing medicine or plan to stop because of the 
state's liability crisis.

 New Jersey's largest insurer, the MIIX company, declared May 
9, 2002, it is getting out of the medical liability business. 
Previously, MIIX insured 7,000 physicians--nearly 40% of the state. 
MIIX previously left the medical liability insurance markets in Ohio, 
Pennsylvania and Texas, citing those states' out-of-control legal 
climates as an unacceptable business risk.

 After years of only a few large jury awards, New Jersey had 
26 greater than $1 million in 2001, and is averaging one a week in 
2002, MIIX President Patricia Costante told the Philadelphia Inquirer 
June 4. New Jersey has no limits on non-economic damages in medical 
liability cases.

 New Jersey physicians are also facing difficulty finding new 
insurance because PHICO, which insured 9%, and St. Paul, with 6% of the 
market, have pulled out.

 After making the difficult decision to no longer deliver 
babies, one New Jersey obstetrician will see his liability insurance 
rates plummet from $82,000 to $8,000. ``I'm devastated,'' one of 
patients told the Atlantic City Press.

 New Jersey physicians are predicting as many as 25% of the 
state's Ob-Gyns will be unable to afford liability insurance if nothing 
is done to stabilize the market. According to the Medical Society of 
New Jersey, premiums for Ob-Gyns have risen 50% to 200% over the past 
year.

 The New Jersey Supreme Court ruled May 29, 2002, that ER 
doctors are not immune from lawsuits under the state's good Samaritan 
law and may be sued for malpractice.

 Some general surgeons are seeing rate increases from $30,000 
to $110,000. Zurich, one of the remaining liability insurance carriers 
has informed physicians it will raise rates 120 percent.
New York
 New York physicians still pay, in most instances, the highest 
medical liability premiums in the country. Ob-Gyns' average premium is 
$144,973, according to the American College of Obstetricians and 
Gynecologists.

 New York continues, by far, to lead the country in total 
medical liability payouts, with $633 million total in 2000. That is 80% 
more than the state with the second highest total, Pennsylvania (at 
$352 million), and 300% more than California (at $200 million). Average 
medical liability verdicts have skyrocketed recently, going from an 
average of $1.7 million in 1994 to $6 million in 1999.

 ``The number of doctors leaving Erie County last year doubled 
from the previous year, a trend that continues in 2002,'' wrote Donald 
Copley, MD, an officer of the Erie County Medical Society in Business 
First of Buffalo. ``I've watched sadly as valued colleagues have left 
Erie County and even the profession. A competent young specialist 
recently quit doing high risk diagnostic procedures to become a 
business consultant. Several local obstetricians have stopped 
delivering babies to reduce their insurance expenses. A half dozen 
nationally-known doctors have quietly left Western New York. The number 
of doctors leaving Erie County last year doubled from the previous 
year, a trend that continues in 2002.'' Buffalo Business First, April 
15, 2002.

 The Medical Society of New York says the trend of physicians 
leaving New York State or retiring early is happening across the state.

 ``The rising cost of malpractice coverage is becoming one of 
the most important factors driving inflation for physicians' 
services,'' said a managing director of the Carlyle Group, the 
investment group for The New York Times.
Ohio
 The Ohio Supreme Court has overturned three tort reform 
measures in the past 15 years. Following the state Supreme Court's 1995 
overturning of the state's tort reforms, premium increases and jury 
verdicts began rising. Family physicians in rural areas are 
increasingly no longer performing obstetrical services. Recently, Ohio 
again enacted medical liability reforms, but it is too soon to tell if 
the courts there will let these reforms take root.

 Meanwhile, according to a recent Ohio State Medical 
Association survey, 79% of Ohio physicians reported an increase in 
their medical lawsuit insurance costs over the last two years, with an 
average increase of 41%. And 51% of Ohio physicians are contemplating 
early retirement, while 15% are considering or have relocated their 
practices, as a result of rising costs.

 Physician groups in Cincinnati are seeing increases between 
20 and 100%. ``I expect this to get worse,'' Ken Folz, CEO of Patient 
First, told the Cincinnati Business Courier.

 According to Daniel J. McLaughlin, a vascular surgeon in 
Cleveland, some specialists in the region have seen their malpractice 
premiums increase 600 percent this year, and typical premiums for 
surgeons with just three or four years of experience have doubled or 
tripled, to from $50,000 a year to as much as $100,000 or more. Health 
Leaders Magazine, Sept. 2002.

 In July, Westlake oncologist Dr. Romeo Diaz was faced with an 
insurance premium of $80,000--double what he paid last year. He would 
have gone out of business had it not been for his patients, who raised 
the needed $40,000 to help Diaz stay insured. ''At first I thought he 
was playing,'' said Kathy Fritsch, a patient of Diaz for 10 years. 
''But when he looked up at me, he was crying. He said his insurance 
rose from $40,000 last year to $80,000 this year. It used to be 
$20,000.'' Morning Journal, July 31, 2002.

 Dr. William Hurd, chairman of the department of obstetrics 
and gynecology at the Wright State University School of Medicine, said 
the liability insurance issue already is driving young doctors out of 
the Dayton area. ``In the last two years, not a single one of our (OB/
GYN) residents has set up a practice in Dayton, or even Ohio,'' Hurd 
said. Dayton Daily News, Aug. 28, 2002.

 The average jury verdict in Ohio was $11.7 million in 2001. 
In 2000, it was $8.6 million.

 Physicians in Cleveland are being forced to lay-off staff and 
discontinue high-risk procedures, reported the Cleveland Plain Dealer 
February 18, 2002.

 After not replacing a retiring office manager and moving to a 
smaller office, a 55-year-old Cleveland-area surgeon who was only sued 
once quit practicing medicine rather than accept an 80% liability 
premium insurance increase. Another surgeon, who has never been sued, 
no longer performs high-risk procedures and saw his insurance rates 
jump from $40,000 to $90,000 in one year.

 ``If I were advising medical students now, I would tell them 
to take a real hard look at going into some of these high-risk 
specialties,'' John Bastulli, MD, told the Plain Dealer.

 Ohio ranked among the top five states for premium increases 
according to the Medical Liability Monitor.

 ``My premium jumped this year from $14,000 to $35,000. I 
can't afford to continue obstetrics at that price. I'll have to give up 
delivering babies as of Jan. 1, 2003. I practice in a primarily rural 
area, and there isn't any other obstetrical care here, so expectant 
women will have to drive long distances to receive prenatal care. Some 
75% of my patients don't have the financial resources to do so. Yet, 
studies have shown that proper prenatal care fosters healthier newborns 
and healthier newborns cost society less money. I find it difficult to 
accept that my liability insurance premiums will force me to give up a 
side of my practice that has meant a lot to me and to my patients, but 
I'll have no recourse.''--A Mt. Gilead family practitioner.

 ``We've done the math: If we're going to take care of this 
debt (our annual insurance payment will increase from $100,000 to more 
than $500,000), our service is going to go out the window. To recoup 
the loss, we'd have to add 400 patient visits a month. You can't turn 
Ob-Gyn into a factory.''--A Columbus obstetrician-gynecologist.

 ``I just sat down with paper and pencil, and it became not 
financially rewarding to stay.''--An Athens obstetrician-gynecologist, 
in reference to why he retired from his practice early.

 ``I practice in southern Ohio in a town of 7,000. We have a 
small community hospital with a family birth center. There are three of 
us who do obstetrics--two family practitioners and one OB/GYN. In order 
to break even, our unit needs 150 deliveries a year. That is 50 
deliveries each. If we go over 30 deliveries now, our premiums are in 
the $40-60,000 range, which is impossible financially. We are 
struggling with limiting our ob to 30 each, but that will cause the OB 
unit to go under and close. We all love ob, and are well trained in 
providing high-risk OB care, but we're going to be forced to stop. If 
this occurs, there will be no OB care between Athens and Lancaster, 
Ohio. Tort reform needs to occur yesterday!''--A Logan family 
practitioner

 ``I'm just postponing the inevitable. If the situation 
doesn't change, I could be insolvent in five years and have to close my 
practice. I'm only 49. Who will care for my patients? Discontinuing 
obstetrics is not an option. We need help!''--A Dayton obstetrician

 ``In the past two years, my medical liability premiums have 
increased more than 50%. I have no claims, graduated first in my 
medical school class, and was chief resident at OSU. I had been 
treating some of my chronic pain patients with acupuncture (medical 
research documents decreased pain and decreased inflammation with 
acupuncture). Due to the skyrocketing medical liability premiums, I 
will have to stop offering this treatment for these patients to try to 
decrease my costs of insurance.''--A Columbus physical medicine and 
rehabilitation physician.

 ``My premiums increased significantly, but my reimbursement 
level is down because of the Medicare cuts. In order to stay in 
practice, I had to float a loan from my pension fund. I am actively 
looking to leave this state. I know of one colleague who gave up his 
private practice and went to work at the local VA hospital, so they 
would cover his liability premium.--A Warren cardiologist.

 ``This five physician practice recently had to give up 
obstetrics due to our rates. We have been committed to delivering full-
range family practice...true womb to tomb medicine. We had to send our 
patients to local OBs. We and our patients are devastated by this turn 
of events.''--A Medina family practitioner

 ``After a mad scramble to obtain insurance, it came down to 
5:45 p.m. on the day before my insurance expired to obtain insurance. I 
was literally 15 minutes from having to close a practice that cares for 
over 4,000 people in this town.''--A Coldwater family practitioner

 ``We have an obstetrician-gynecologist retiring because his 
insurance company pulled out of Ohio. To buy a tail and the new policy 
would cost this man $140,000, which he couldn't afford to do.''--A 
Rossford obstetrician-gynecologist.

 ``I was told two months ago that I will have no insurance 
after the 11th of September. I have had no claims filed against me.''--
An Akron general surgeon

 ``My carrier has refused to cover me for bariatric 
procedures. I have had to turn patients away who need this service.''--
A Massilon general surgeon
Oregon
 Rural families in John Day, Hermiston, and Roseburg counties, 
Oregon have either lost obstetric care or have seen services 
drastically reduced. The Business Journal of Portland, Jan. 10, 2003.

 Only by dropping obstetrics were two Hermiston physicians 
able to afford their liability insurance premiums. ``It's something you 
don't like to tell patients,'' said Doug Flaiz, MD. The Oregonian, Oct. 
29, 2002.

 ``No one with $100,000 in debt from medical school wants to 
start a practice in a place where they could find themselves completely 
broke and having to pick up and go somewhere else to start all over 
again,'' said Rosemari Davis, CEO of Willamette Valley Medical Center, 
who has seen three of her center's family practitioners stop delivering 
babies. The News Register, Jan. 28, 2003.

 In 1999, the Oregon Supreme Court overturned the State's law 
capping non-economic damages. Since then, multi-million dollar claims 
have become commonplace, according to the Oregon Medical Association.

 Since the 1999 decision, Oregon physicians are experiencing 
rapidly rising premiums and insurers becoming more reluctant to offer 
policies to physicians, such as Ob-Gyns and surgeons, who perform high-
risk procedures.

 Recent jury verdicts include: $8 million, $8.5 million, $10 
million and $17 million.

 Rural patients in Oregon are being particularly hard hit. A 
small town clinic, Roseburg Women's Healthcare, which delivered 80% of 
the babies for the area, closed its doors in May 2002 because its 
liability insurance was canceled after one large lawsuit. ``We consider 
this a medical crisis for the community,'' Mercy Medical CEO Vic 
Fresolone told the Associated Press.

 The Roseburg clinic physicians paid $17,000 per physician per 
year in 2001 for medical liability insurance and are now receiving 
quotes for $80,000-100,000 per physician.

 Oregon's only academic health center--the Oregon Health & 
Science Center--reports fewer medical students are applying for its Ob-
Gyn residency positions. Ob-Gyn residents elsewhere reportedly are 
increasingly concerned about setting up practice in Oregon due to the 
state's broken liability system.

 A major liability insurer, Northwest Physicians Mutual 
Insurance Company, announced in 2002 it would not write new policies to 
obstetricians. Remaining insurers are raising rates by 60% or more.

 ``We lost $12.5 million last year (2001),'' Jim Dorigan, CEO 
of Northwest Physicians Mutual, told the Portland Business Journal June 
21st. Dorigan also said the company no longer is renewing policies for 
any physician who delivers babies.

 A level-III trauma center in Rogue Valley is dropping its 
trauma designation to obtain professional liability insurance. Rates 
would have been unaffordable if neurosurgery continued to be performed.
Pennsylvania
 According to the Pennsylvania Medical Society Alliance, 919 
doctors have decided to leave the Keystone State or have scaled back 
their practices as premiums spiraled upward over the past three years. 
The Baltimore Sun, Feb. 5, 2003.

 Dr. Anthony Clay never thought he would have to leave 
Philadelphia. He has spent his whole life there--growing up and 
attending college, medical school, and residency to become a 
cardiologist. He treats families he has known since boyhood. He likes 
knowing where his patients live, work, and shop. All nine of his 
siblings still live there. But, Dr. Clay is leaving his practice in 
Philadelphia this Spring because of surging malpractice insurance 
rates. He is starting over in Delaware, where his insurance costs will 
drop from roughly $70,000 a year to $8,000. ``It's been terrible,'' 
said Dr. Clay, 40. ``In this field, you've been with the patient, and 
also the family, in some of their most life-defining moments--in the 
throes of a heart attack with no blood pressure. Wrongly or rightly, 
the patient credits you with being there when they weren't doing so 
well. You realize you've created a bond. I take that very seriously.'' 
Baltimore Sun, February 5, 2003.

 Brian Holmes, MD, is one of an estimated 18 percent of 
Pennsylvania neurosurgeons to have left the state, retired, or limited 
his or her practices because of the medical liability crisis. ``It 
saddened me to move, but I had no choice. It was either move or go out 
of business.'' Philadelphia Business Journal, Sept. 25, 2002.

 After 25 years of practice, OB/GYN Michael Horn, MD, stopped 
delivering babies in 2002 because of the fear of getting sued. ``It's 
just the potential, the not knowing if someone will seek an outlandish 
reward. I don't want to expose myself or my family.'' Burlington County 
Times, Oct. 2, 2002.

 Medical students are less likely to seek residencies in 
Philadelphia, and residents are less likely to stay and practice in the 
area because of ``prohibitively high'' medical liability insurance 
rates, according to Jefferson Medical College professor Stephen L. 
Schwartz, MD. Associated Press, Oct. 4, 2002.

 OB/GYN Lawrence Glad, MD, used to deliver about 500 babies a 
year--40 percent of all the babies born in Fayette County annually. 
After his premiums skyrocketed from $57,000 to $135,000, however, he 
closed his practice in the fall of 2002. Pittsburgh Business Times, 
Nov. 18, 2002.

 Mercy Hospital chief of surgery Charles Bannon, MD, has 
watched numerous physicians leave Scranton and Lackawanna County--
creating a shortage of surgeons, fewer medical school applications and 
residencies. ``It will take generations to get back the quality of 
medicine in Philadelphia.'' Scranton Times, Nov. 20, 2002.

 Physicians across the ``Keystone State'' have left, retired, 
and stopped performing high-risk procedures. Those who have stayed face 
skyrocketing premiums, extremely nasty legal climate. Methodist 
Hospital in South Philadelphia closed its maternity ward and prenatal 
program last year because of unaffordable medical liability insurance 
rates. Mercy Hospital of (South) Philadelphia announced June 19, 2002 
it would closed its ob ward August 23rd.

 Pennsylvania has the second highest payouts in the country 
for medical liability lawsuits. Pennsylvania's total in 2000 was 
$352,309,905--nearly 10 percent of the national total despite having 
less than five percent of the national population.

 Orthopedic surgeons in Pennsylvania face insurance premiums 
of nearly $100,000. In California, which has strong tort reforms, 
orthopedic surgeons pay an average of $36,310 for yearly liability 
insurance coverage.

 A recent poll, conducted by Susquehanna Polling Research, 
shows that 31 percent of doctors participating in the study had their 
existing liability insurance cancelled or non-renewed for 2002.

 72% of Pennsylvania doctors have deferred the purchase of new 
equipment or hiring of new staff because of out-of-control liability 
costs.

 270 employees at the Jefferson Health System in Philadelphia 
have recently lost their jobs to skyrocketing liability insurance 
costs. The Einstein Network laid-off 127 workers and eliminated 52 
vacant positions in April 2002, citing rising liability costs as the 
prime factor.

 Philadelphia County, which has one of the worst liability 
climates in the nation, has seen its surgical specialist population 
decrease 13.4% from 1995 to 1999. The average jury award in 
Philadelphia County is $970,000 while the rest of state's average is 
$420,000.

 A shortage of radiologists willing to read mammograms has 
increased the wait time for screening mammograms at most major 
hospitals to two to three months, according to the Pennsylvania patient 
advocacy group Concerned Citizens for Care.

 The Level-II trauma center at Brandywine Hospital in 
Coatesville closed June 10th, because of rising malpractice insurance 
rates. Area trauma patients are now being transported more than 30 
miles away to hospitals in Philadelphia and Lancaster. The Washington 
Times, July 17, 2002.

 ``As I look around and see my friends retiring early or 
leaving Pennsylvania, I wonder who will be next,'' Meadville physician 
Tom Arno, MD, wrote in USA Today.

 414 medical liability lawsuits were filed in Philadelphia 
County in February 2002--five times the average number filed during the 
month over the previous decade, reported the Philadelphia Inquirer.

 One-quarter of respondents to an informal poll conducted by 
the American College of Obstetricians and Gynecologists say they have 
stopped or are planning to stop practicing obstetrics.

 Statistics compiled for the Pennsylvania Medical Association 
by Caso Consulting indicate it costs $96,199 to cover an orthopedic 
surgeon in Pennsylvania, compared with $37,783 in Delaware, and $36,291 
in New Jersey. Best's Insurance News, January 7, 2002.

 Howard A. Richter, a neurosurgeon and president of the 
Pennsylvania Medical Society, said a 2001 survey by the medical society 
showed that 72% of doctors have either deferred the purchase of new 
medical equipment or have not hired needed staff because of ``sudden 
and sharp increases'' in insurance rates. Best's Insurance News, 
January 21, 2002.

 ``To lower their risk and insurance premiums, doctors who 
normally would take on high-risk medical procedures are opting not to 
do so. For example, we've seen obstetrician/gynecologists give up 
delivering babies. Virtually every medical liability insurance carrier 
increased their rates in recent years. From the beginning of 1997 
through September 2001, major liability insurance carriers writing in 
Pennsylvania increased their overall rates between 80.7 percent and 
147.8 percent.'' York Daily Record, January 20, 2002.

 Driving premiums through the roof are excessive sums awarded 
in malpractice suits. Medical liability payments for physicians in 2000 
totaled $3,908,113,303. York Daily Record, January 20, 2002.
Texas
 In the ``Lone Star State'' medical liability insurance 
premiums for physicians have skyrocketed as much as 300 percent in some 
regions and for some specialties, acccording to the Texas Medical 
Association. As a result, there is only one neurosurgeon serving 
600,000 people in the McAllen area.

 In the past two years, four South Texas patients with head 
injuries died before they could be flown out of the area for medical 
attention. As reported in a July 10, 2002, article in The Courier, a 
community family practice clinic in Conroe (just north of Houston) was 
recently forced to turn away half of its normal patient load because 
its liability insurance provider would not provide coverage while 
``highly lawsuit-risky obstetrics training was conducted.''

 Even though the Texas legislature has passed medical 
liability reforms, the Texas Supreme Court has regularly overturned 
them.

 Medical liability premiums were expected to increase by at 
least 20 percent and perhaps as much as 75 percent in 2002, according 
to the Texas Department of Insurance. San Antonio Express-News, April 
8, 2002.

 In 1999, 17 companies offered malpractice coverage to doctors 
in Texas. Today, the field has dwindled to only four, and Texas is 
considered the least profitable state for liability carriers. The 
Dallas Morning News, September 1, 2002.

 Moreover, premiums this year have climbed at triple-digit 
rates for many of Texas' 36,000 physicians. That's on top of double-
digit increases in prior years. Now it's not uncommon for doctors in 
high-risk specialties such as trauma surgery, emergency medicine, and 
orthopedic surgeries and obstetrics to pay more than $ 100,000 annually 
for coverage. This means that some 6,100 Texas physicians are 
scrambling to find liability insurance.

 The Doctor's Company, a national insurer, told the Dallas 
Morning News the company is selective about which types of physicians 
it will cover. ``Texas is a very dangerous venue, and we don't really 
encourage . . . [growth] from there--not without tort reform,'' said 
senior vice president Jack Myer.

 In South Texas, one jury awarded $43 million to a woman who 
claimed a diabetes drug damaged her liver, while another gave $15 
million to three women who received faulty hip implants. The Wall 
Street Journal, May 1, 2002.

 6 of every 7 medical liability claims in Texas are closed 
with no fault found on the doctor's part. Nonetheless, tens of millions 
of dollars are spent fighting these cases.

 Family physician Marissa Iniga, MD, has been sued 12 times in 
the past 13 years. All of the lawsuits were dropped but her insurance 
premiums still went up 200 percent. Her situation is mirrored by many 
physicians throughout Texas.

 Several physicians in Corpus Christi have been sued by 
patients they have never seen, but it required thousands of dollars to 
have the cases dismissed.

 Currently obstetrician/gynecologists in Cameron, El Paso and 
Hidalgo Counties are paying one carrier a premium of $102,584 annually 
compared to their counterparts in Dallas County who pay $59,221. 
Another carrier charges thoracic surgeons in Cameron, El Paso and 
Hidalgo Counties $79,218 annually compared to $57,395 for those 
practicing in Dallas County.

 70% of Texas physicians who practice near the U.S.-Mexico 
border have had medical liability claims filed against them, and 60% 
have been sued, according to the Texas Medical Association. 55% of 
physicians there are inclined to leave the border and practice 
elsewhere or retire during the next 12 months; 71% to 76% of border 
doctors say they cannot recruit new doctors to the border due to 
lawsuit crisis, and 1 out of 3 border physicians have had insurance 
carriers decide to stop writing coverage.

 The high cost of malpractice insurance for local doctors is 
driving them away from Laredo. The three main issues for this exodus 
are the high price of malpractice insurance for border area physicians, 
tort reform and the fact that Medicaid and Medicare do not reimburse 
border area physicians proportionate to what they do farther north, 
director of Community education/Physician Relations Mindy Casso said. 
Laredo [Texas] Morning Times.

 The second-highest premiums for obstetricians/gynecologists 
are paid in Houston, Dallas and Galveston, Texas, where the bills 
amounts to some $160,746 a year. Orlando Sentinel, January 20, 2002.

 ``Dr. William F. Tucker, an orthopedic surgeon, figured he'd 
try to curb the cost of his malpractice insurance premium by abandoning 
spinal surgeries and reducing his emergency room calls. Both decisions 
cut down on his income but provided him with a greater sense of 
security as malpractice lawsuits against doctors become more common in 
Texas and the nation. Then came the shocking news that his premium 
would rise by 63 percent to $38,000.'' The Dallas Morning News, January 
20, 2002.

 The problem is particularly acute in Texas, where 51.7 
percent of all physicians in 2000 had claims filed against them, 
according to the Texas Medical Examiners Board. Although no concrete 
numbers are available as a comparison, several industry experts say the 
frequency is twice the national average. The Dallas Morning News, 
January 20, 2002.

 In Texas, about 85 percent of cases are closed without 
payment to plaintiff, yet they still cost money to resolve, said Texas 
Medical Liability Trust president W. Thomas Cotton. The Dallas Morning 
News, January 20, 2002.

 Insurance carriers in Texas paid more than $381 million in 
claims in 2000, according to the Texas Department of Insurance--costs 
passed on to policyholders. That's an 87 percent increase since 1995. 
Nationally, the median malpractice award more than doubled from 1994 to 
1999, to $800,000. The Dallas Morning News, January 20, 2002.

 Texans filed 4,501 claims in 2000, up 51 percent from 1990, 
according to the Texas Medical Examiners Board. More troublesome is the 
rise in expenses involved in resolving a case. Each claim cost an 
average of $68,681 to litigate in 2000, compared with $46,079 in 1995. 
The figure does not include the amount of settlement or award. The 
Dallas Morning News, January 20, 2002.

 Meanwhile, physicians in the Rio Grande Valley are in crisis, 
said Texas Medical Liability Trust president W. Thomas Cotton. An Ob-
Gyn in North Texas pays $47,500 annually for $500,000 in coverage, 
while his Rio Grande Valley counterparts pay $82,300. Neurosurgeons pay 
even higher premiums. The Dallas Morning News, January 20, 2002.

 Seven in 10 Rio Grande Valley doctors have had medical 
liability claims filed against them. A February 2001 survey by the 
Texas Medical Association found that 1 in 3 Valley doctors say their 
insurance providers have stopped writing liability insurance. The 
Dallas Morning News, January 20, 2002.

 In Rio Grande Valley, half of the physicians admitted to 
being inclined to leave the area or to retire, according to a survey 
conducted in February 2001 by the Texas Medical Association. Many 
doctors in the Valley said they profile patients and refuse to treat 
some, because they fear the patients are prone to sue. They said they 
deny care for people who pay with cash, because the patients are most 
likely poor and may look at a lawsuit like a lottery opportunity. Some 
physicians are even hesitant to respond to a ``code blue,'' which 
indicates a medical crisis, in a hospital. Dr. Carlos Cardinez, a 
gastroenterologist in McAllen, said he doesn't want to respond anymore 
because of the legal uncertainty. The Dallas Morning News, January 20, 
2002.

 Increases in medical practice costs have outstripped revenue 
increases over the last 10 years, according to the Medical Group 
Management Association's 2000 cost survey. Operating costs for 
multispecialty groups went up an average of 35 percent over the past 10 
years, while revenue increased 21 percent over that same period. The 
Dallas Morning News, January 20, 2002.
Washington
 ``There is a growing crisis in medical malpractice in 
Washington state and nationally,'' state insurance commissioner Mike 
Kriedler said in an April 2002 news release.

 `Patients in many communities are finding that their 
physicians have either started limiting their services or have closed 
their doors completely due to rising malpractice premiums,'' said Dr. 
Maureen Callaghan, president of the Washington State Medical 
Association. PR Newswire, Feb. 3, 2003.

 ``I went through my mourning and my grieving, and now I have 
to find a place for my [380] patients,'' said a South Send internist 
who has not been sued but can no longer afford liability insurance 
coverage.

 The cost of medical malpractice insurance has soared so high 
that Mount Vernon obstetrician Robert Pringle, MD, has stopped 
delivering babies, according to the Puget Sound Business Journal.

 So have his two colleagues at the North Cascade Women's 
Clinic, and so have others. ``Of the nine obstetricians in our 
community, six have stopped delivering babies or left the area,'' 
Pringle said.

 When he began his practice 20 years ago, Pringle paid a 
premium of $1,000 for medical malpractice insurance, which covers 
physicians against claims of injury resulting from negligent medical 
care. ``Now it's in the neighborhood of $60,000,'' he said. ``From an 
economic standpoint, you would have to be a lunatic to continue private 
practice of obstetrics.'' Puget Sound Business Journal.

 The severe premium hikes besetting many doctors ``could not 
come at a worse time,'' said Dr. Sam Cullison, president of the 
Washington State Medical Association. Cullison said the high cost of 
malpractice insurance has combined with low reimbursement rates from 
Medicaid, Medicare and private insurers to clamp many doctors in a 
financial squeeze. As a result more physicians are retiring early, or 
leaving the State, he said. Also, it's increasingly difficult to 
recruit doctors from other states.'' Puget Sound Business Journal.

 ``Everyone is in the same situation in terms of increasing 
premiums, increasing overhead and decreasing reimbursement,'' said 
Olympia neurologist Maureen Callaghan, MD. ``The final end point,'' she 
added, ``is that people are not to be able to get in to see a doctor.'' 
Puget Sound Business Journal.

 During the past five years, medical liability premiums paid 
by orthopedic surgeons increased 30 percent, to nearly $40,000, and 
premiums paid by family physicians who neither deliver babies nor do 
surgery rose 29 percent, to almost $10,000. Washington State Medical 
Association.

 In Washington, from 1999 to 2000, the median jury award rose 
43 percent. Last year, seven medical malpractice verdicts or 
settlements exceeded $1 million. They totaled $44.7 million, and ranged 
from $1.2 million to $16.2 million.

 Washington's Supreme Court overturned the state's tort reform 
law in 1989. As a result skyrocketing medical liability insurance 
premiums are forcing physicians to limit patient loads and services. 
Some physicians are choosing to move out of State and retire early as 
well.

 In the past five years, the average medical liability premium 
for a family physician has increased a staggering 74 percent, according 
to the Washington State Medical Association. For obstetricians, the 
increase has been more alarming--79 percent since 1997.

 The departure of liability insurers St. Paul and Washington 
Casualty Company from Washington have left thousands of physicians 
scrambling to find coverage.

 The Steck Medical Group, which serves 60,000 patients in 
mostly rural Washington, was forced to close its doors for a few days 
this year because it could not find liability insurance coverage. It 
re-opened only after the state insurance commissioner intervened, but 
the new policy was at a 160% increase.

 Clinics in Lewis County and Waterville also have been forced 
to close temporarily according to The Olympian.

 Recent large jury awards in Washington State include $13 
million and $16 million verdicts.
West Virginia
 The ``Mountaineer State'' was one of the first states to 
experience wide-spread medical liability insurance problems.

 According to the West Virginia State Medical Association, 
some 100 doctors have already retired early or moved out of the state 
within the previous two years.

 That has helped drive 1 out of every 20 doctors out of West 
Virginia or into early retirement in the past two years. CNN, Jan. 2, 
2003.

 General surgeon Gregory Saracco, MD, only 49 years old, was 
forced to borrow money twice in 2002 to pay $73,000 for his liability 
insurance. His premiums for 2003 are expected to rise to $100,000. He 
is considering leaving West Virginia and while he has taken time away 
from his practice this year to decide what his options are, he said 
``my job is to help people--I couldn't drive past an accident on the 
road and not stop. I don't know any doctor that could.'' Associated 
Press, Jan. 2, 2003.

 Although orthopedic surgeon George Zakaib, MD, was raised and 
went to school in Charleston, WV, he and his family left because of the 
state's medical liability crisis. Dr. Zakaib's premiums had increased 
to $80,000 plus $94,000 in ``tail'' coverage. Charleston Daily Mail, 
July 27, 2002.

 Fourth-year medical school student Jennifer Knight isn't sure 
she'll stay in West Virginia. The Charleston Area Medical Center says 
fewer medical students are applying to its residency programs, and 
fewer students are applying to Marshall University's medical school. 
``I think the problem is, we have too many frivolous lawsuits,'' said 
Ms. Knight. Sunday Gazette-Mail, Nov. 24, 2002.

 The state legislature has been trying for more than a year to 
come up with a solution that will prevent more physicians from 
curtailing services or leaving the state. A state medical association 
poll found that 40% of the State's doctors are considering similar 
action to stop practicing or leave the State.

 ``It's a 'code blue' emergency'' threatening the state's 
trauma centers and other health care services in the state, WVSMA 
President Ahmed D. Faheen, MD, told The New York Times.

 Wheeling, West Virginia, has no remaining neurosurgeons, 
forcing closure of its only trauma center. Trauma patients must be 
flown by helicopter for care elsewhere.

 Across the State, the pattern is the same, trauma centers are 
closing or headed in that direction, and there is incredible difficulty 
in recruiting high-risk specialty residents.

 Earlier this year, in the State Capital, the Charleston Area 
Medical Center (CAMC) was able to keep its level-I trauma center open 
only after agreeing to help surgeons pay their liability premiums. The 
one part-time and three full-time surgeons are paying $800,000 in 
liability premiums this year, according to a report in the April 25, 
2002 Charleston Gazette.

 Now, after the loss of several orthopedic surgeons, CAMC can 
no longer offer 24-hour coverage seven days a week. That means patients 
with serious multiple injuries, usually car wreck victims, must be 
transported to other cities. Precious time that could mean the 
difference between life and death will be lost. The Charleston Daily 
Mail, August 29, 2002.

 The Medical Liability Monitor reported that West Virginia 
surgeons paid premiums of $36,094 to $56,371 a year in 2001--the 
seventh highest in the nation. This year these premiums have continued 
climbing dramatically. The Charleston Daily Mail, August 29, 2002.

 As the The New York Times has reported, the Bluefield 
Regional Center--a rural hospital--has lost 12 physicians in the 
previous two years but only has been able to find two physicians to 
replace them.

 A survey of state Ob-Gyn residents by the American College of 
Obstetricians and Gynecologists found more than half plan to leave when 
they finish training.

 Without action, the future is not bright. The Charleston 
hospital faces an 11%-41% drop in residency applications this year. 
``We are concerned that students will not think the residency 
opportunities in West Virginia favorable in light of the recent 
problems with malpractice insurance,'' Dean James Griffith, MD, told 
the Charleston Gazette.
                               __________
                               APPENDIX C
            Medical Liability Crisis Affects Access to Care
                 Selected States Showing Problem Signs
           the medical liability crisis--a nationwide problem
Alabama
 The severe liability crisis in the neighboring States of 
Mississippi, Georgia and Florida has not left Alabama untouched.

 Atmore Community Hospital has had to close its maternity ward 
because of soaring medical liability premiums, forcing pregnant mothers 
to travel 15 miles to the nearest hospital with an obstetrics 
department.
Arizona
 Arizona has not been immune to the medical liability crisis. 
Serious access problems are already developing.

 The Copper Queen Community Hospital, was forced to stop 
delivering babies in January after a group of family physicians said 
they could no longer afford medical liability insurance.

 Pregnant mothers in this part of Arizona must now travel over 
35 miles to the nearest hospital--the only hospital left in that County 
that is still delivering babies.
Connecticut
 The crisis may be spreading to Connecticut as evidenced by 
the recent decisions of 28 OB/GYNs to stop delivering babies.

 Some OB/GYNs in Connecticut are now paying between $120,000-
160,000 per year in insurance premiums, according to state medical 
society executive Tim Norbeck.

 Connecticut already is on a ``watch'' list issued by the 
American College of Obstetricians and Gynecologists. Hartford Courant, 
Jan. 3, 2003.

 The average payment made by one of Connecticut's major 
insurers to resolve a claim rose from $271,000 in 1995 to $536,000 in 
2001.

 OB/GYN Jose Pacheco, MD's, insurer stopped offering medical 
liability insurance, and he had to seek another carrier. However, 
because of the high cost of new insurance--estimated around $60,000--
combined with ``tail'' coverage of $80,000, Dr. Pacheco retired after a 
27-year career. Hartford Courant, Nov. 17, 2002.
Kentucky
 Health care access problems will worsen in the ``Blue Grass 
State,'' as medical liability premiums continue moving rapidly upward.

 Based on a survey by the Kentucky Medical Association, 
physicians in Kentucky have faced a recent average increase in medical 
liability premiums of 78 percent.

 Kentucky emergency department physicians have reported an 
average increase of 204 percent, with orthopedists facing a 122 percent 
increase; general surgeons facing an 87-percent average increase, and 
Ob-Gyns seeing an average increase of 64 percent.

 Deep in Appalachia, the only provider of obstetrical services 
in Barbourville soon may have to close its practice due to the 
liability crisis. Previously, this physician group had liability 
insurance coverage through St. Paul Company, the nations second largest 
malpractice insurer that pulled out of the market last year.

 This same 9-physician practice also has an office in Corbin, 
where two resident physicians from the University of Kentucky College 
of Medicine train in conjunction with Baptist Regional Medical Center. 
If the physicians are forced to close the practice, the residents will 
have to be placed out of State for the remainder of their training. 
leaving a tremendous access problem for the Kentucky women they treat.
Massachusetts
 In the Bay State, eight of 55 OB/GYNs in Springfield, 
Massachusetts, a state which has broad exceptions to the state limits 
on non-economic damages, will no longer be offering Obstetrics care to 
their patients because of sharply escalating liability insurance costs. 
``I got into obstetrics because it's a very happy specialty. But there 
comes a point where you can't make ends meet,'' said James Wong, MD, 
one of two OB/GYNs at a western Massachusetts clinic giving up 
delivering babies. Boston Globe, Jan. 8, 2003.

 ``The real issue is runaway juries,'' according to Barry 
Manual, MD, who serves as insurer ProMutual's chairman, and said the 
number of $1 million-plus claims paid out doubled between 1990 and 
2001. Boston Globe, Jan. 8, 2003.
Missouri
 The State of Missouri is starting the slide into a full-blown 
medical liability crisis.

 Missouri Ob-Gyns are routinely seeing premium increases of 
200-300 percent and even upwards of 1,000 percent in some cases, 
forcing some physicians to close part or all of their practice.

 A recent survey completed by the Missouri State Medical 
Association found that 31.4 percent of the responding physicians were 
considering leaving their practice, and 28.6 percent said they would 
consider limiting their practice because of rising liability insurance 
premiums.

 This same survey showed an average premium increase for 
medical liability insurance of 61.2 percent for 2002, on top of a 22.4 
percent average increase last year.

 Neurosurgeons in Kansas City are facing an increase in 
premiums of $12,000 to $42,000 this year, with further increases 
expected next year.

 The 2002 premiums for Ob-Gyns have increased by as much as 
$50,000 from 2001. Again, further increases are expected next year.

 According to a separate survey by the Metropolitan Medical 
Society of Greater Kansas City, 40% of practices are looking for new 
coverage because their insurer has stopped writing medical liability 
coverage.

 Predictably, an access crisis to needed health care is 
developing. The St. Joseph Health Center in Kansas City recently lost 
another trauma doctor. It is now down to three. The situation is even 
worse because a local nearby trauma center has been virtually shut 
down, meaning St.Joseph's must treat double the number of patients, and 
it is having trouble finding other surgeons willing to cover trauma.

 According to the St. Louis Business Journal, access issues 
are spreading. Dr. John Anstey, an obstetrician/gynecologist, recently 
faced a difficult choice. He knew he had to cut expenses after learning 
his medical malpractice insurance premium, which cost about $26,000 
this year, would jump to $50,000 next year. Consequently, he closed his 
office in St. Ann effective July 30th. Previously, Anstey and his 
partner, Dr. Fred Monterubio, Jr., deliver about 400 babies a year 
through their practice, St. Ann OB/GYN. As a stopgap measure, Drs. 
Anstey and Monterubio were forced to move their practice to a hospital-
based setting where they await news of their 2003 premium by October.

 The current medical liability insurance market in Missouri is 
extremely tight, with at least three insurers having pulled out of the 
market over the past year.

 Intermed Insurance Company, based in Springfield, is the 
largest provider of medical liability insurance coverage in Missouri. 
The Missouri Department of Insurance said the company had a 34 percent 
market share in 2001. The company imposed an 18 percent hike, effective 
July 1, and also put a moratorium on writing new business in Missouri.

 Andy Bennett, president and chief executive of Intermed, said 
rates went up because the severity, or average amount paid per 
settlement or verdict, has continued to go up fairly dramatically in 
Missouri. St. Louis Business Journal.
North Carolina
 The ``Tar Heel'' state is on the verge of lapsing into a 
full-scale medical liability crisis that could seriously endanger 
access to needed health care.

 Hospitals in the Charlotte area are currently facing 
liability insurance premium increases of up to 400% this year.

 Dr. Harold Pollard, a physician with Lyndhurst Gynecological 
Associates, said ``North Carolina is on its way to being one of those 
crisis states.'' Dr. Pollard has said that liability costs are creating 
a shortage of necessary health care services. ``What that results in is 
a lack of good obstetricians. We have counties in this State that have 
no obstetricians.''

 Recently, Dr. John Schmitt, an Ob-Gyn whose insurance 
premiums tripled from $17,000 to $46,000, causing him to give up his 
practice to join the medical school faculty at the University of 
Virginia. Former patient Laurie Peel said, ``he was a great doctor. 
When you are a woman, you try to find a gynecologist who will take you 
through lots of things in life. I suffered a miscarriage. You develop a 
relationship with your doctor. To lose someone like that is very 
hard.'' Charlotte Observer, Jul. 25, 2002.

 According to the North Carolina State Administrative Office 
of the Courts, the number of medical malpractice lawsuits filed has 
increased 18 percent in the past five years.

 A greater number of medical malpractice lawsuits are ending 
in multi-million jury awards or settlements across North Carolina. In 
2001, 21 lawsuits in North Carolina resulted in multi-million awards or 
settlements. According to N.C. Lawyers Weekly, the top five recoveries 
ranged from $4.5 million to $15 million.

 Facing a 660% increase in medical liability premiums from 
$53,000 to $350,000 a year, a practicing physician who runs a chain of 
six North Carolina urgent care clinics fears that soon he will have to 
stop practicing medicine and close his clinics' doors. He needs 
liability coverage for both himself and nine other physicians employed 
by the clinics. For this year, the insurer agreed to renew at a 79 
percent increase, allowing the clinics to stay open for now. Increases 
like this will make staying in business and treating patients very 
difficult if not unsustainable.
Oklahoma
 Oklahoma physicians are beginning to face problems in 
obtaining affordable medical liability coverage. The Oklahoman, July 
17, 2002

 According to The Tulsa World, that makes Oklahoma one of 30 
states with a problem in this area.

 The World cites the example of a Tulsa pediatrician whose 
malpractice insurance doubled this year. The Oklahoman, July 17, 2002

 Oklahoma pediatricians have far less to worry about than the 
State's obstetricians and surgeons, whose rates in Oklahoma in 2003are 
expected to rise by 25 percent to 30 percent, says the Oklahoma State 
Medical Association.
South Carolina
 The medical liability crisis is rapidly spreading to the 
Palmetto State.

 A 10-physician OB/GYN group in Columbia had to take out a 
$400,000 loan this year to continue to provide OB services and pay 
malpractice premiums.

 In rural Oconee County, just four physicians deliver babies 
now, down from 11 physicians one year ago.

 A family practice group in Seneca was forced to drop OB 
coverage for four of their six physicians because of skyrocketing 
premiums. There are currently a total of four physicians in Seneca 
treating pregnant women.

 A solo practitioner practicing geriatrics in Charleston has 
had to quit treating patients in nursing homes because of high 
premiums.
Tennessee
 Professional liability premiums for physicians in Tennessee 
have been steadily rising in recent years.

 According to State Volunteer Mutual Insurance Company, which 
covers most practitioners in Tennessee, premiums have increased by 45% 
over the past three years, in order to keep up with rapidly escalating 
losses in medical liability lawsuits.

 Only approximately 4% of this 45% increase was related to 
lower investment yield, with the remainder being due to increasing 
medical malpractice losses. (State Volunteer Mutual Insurance Company 
is a policyholder owned mutual company with no outside investors).

 In recent years both juries and judges in Tennessee have made 
multi-million dollar awards for non-economic damages, over and above a 
patient's actual economic losses.

 In one recent case, a jury awarded only $25,000 in economic 
damages but awarded non-economic damages of $1.6 million.

 Another case resulted in a jury award of $100,000 economic 
loss and $1.9 non-economic damages.

 A judge in another cases awarded $1,062,080 in economic loss 
and gave $4.5 million in non-economic damages. Yet another court 
awarded $687,691 in economic loss and gave $3 million in non-economic 
damages. One other jury awarded $7,811 in economic loss and a 
staggering $2.65 billion in non-economic damages.

 Award in PI and wrongful death cases are dramatically 
increasing. Tennessee's Administrative Office of the Courts reported 
that in FY 2001, even though fewer cases were disposed of in Tennessee 
than in the previous fiscal year, damages awarded statewide were more 
than $94 million, representing an increase of more than $51 million 
over the previous year. These totals were the largest since the courts 
began reporting these statistics.

 According to the same report, the average award for FY01 was 
$209,284 up $95,064 from the previous year.
Vermont
 The current medical liability insurance crisis continue to 
show that events in one State can have a devastating effect and cause 
severe problems elsewhere.

 The failure of medical liability insurer, PHICO, which was 
shut down by the Pennsylvania Insurance Department on February 1 of 
this year, left more than a quarter of Vermont's physicians scrambling 
for medical liability insurance.

 Whenever medical liability insurance becomes too expensive or 
difficult to obtain, access to needed health care is threatened and 
typically results.
Virginia
 Physicians in Virginia are starting to see the warning signs 
of a full-blown medical liability crisis that has engulfed their 
neighbors to the north in West Virginia, Pennsylvania and other States. 
The telltale sign is a sharp upswing in liability premiums. Over the 
past two years physician premiums have increased on average over 30 
percent.

 For some specialists, medical liability premiums in Virginia 
have increased upwards of 60 percent for this same recent two-year 
period.

 A case in point is Manuel Belandres, MD, a general surgeon 
who was is in the twilight of his career but still practicing until 
recently when he was unable to obtain tail coverage. He subsequently 
closed his practice rather than expose himself to open-ended future 
liability.

 In Virginia's western border, many physicians are no longer 
treating West Virginia patients who cross the State-line due to 
aggressive personal injury attorneys attempting to bring suit against 
Virginia physician in West Virginia courts. This has further aggravated 
the access problem for pregnant West Virginia Medicaid patients, in 
particular, and their access to needed care.

    Mr. Smith. Mr. Smarr.

 STATEMENT OF LAWRENCE E. SMARR, PRESIDENT, PHYSICIAN INSURERS 
                     ASSOCIATION OF AMERICA

    Mr. Smarr. Thank you, Mr. Chairman. I am Larry Smarr, 
president of the Physician Insurers Association of America. The 
PIAA is an association comprised of professional liability 
insurance companies owned and/or operated by physicians, 
dentists, hospitals and other health care providers.
    The PIAA members can be characterized as health care 
professionals caring for the professional liability risks of 
their colleagues; doctors insuring doctors, hospitals insuring 
hospitals. But we believe that the physician-owned/operated 
insurance company members--that PIAA insures over 60 percent of 
America's doctors.
    Over the past 3 years, medical liability insurers have seen 
their financial performance deteriorate substantially, due to 
the rapidly rising costs of medical liability claims. According 
to A.M. Best, the leading insurance industry rating agency, the 
medical liability insurance industry incurred $1.53 in losses 
for every dollar of premium it collected in 2001. The industry 
data for 2002 is not yet available, but we expect this to be a 
losing year as well.
    The primary driver of the deterioration in the medical 
malpractice insurance performance has been paid claims 
severity, or the average cost of a paid claim. This has been 
confirmed by the president of the National Association of 
Insurance Commissioners in his February 7, 2003, letter to 
Senator Gregg, which is attached to my written testimony. 
Exhibit A, and you have these exhibits before you, shows the 
average dollar amounts paid in indemnity to plaintiffs on 
behalf of individual physicians since 1988. The mean payment 
amount has risen by a compound annual growth of 6.9 percent 
over the past 10 years, as compared to 2.6 percent for the 
Consumer Price Index.
    The data for this exhibit comes from the PIAA data-sharing 
project, a medical cause of loss database which was created in 
1985 for the purpose of identifying common trends among 
malpractice claims, which are used for patient safety purposes 
by the PIAA member companies.
    To date over 180,000 claims and suits have been reported. 
One very troubling aspect is the proportion of those claims and 
suits filed which are ultimately determined to be without 
merit. As shown on Exhibit B, 61 percent of all claims closed 
in 2001 were dropped or dismissed by the court. An additional 
5.7 percent were won by the doctor at trial. Only 33 percent of 
all claims were found to be meritorious, with most of these 
being paid through settlement. When claims were concluded at 
verdict, the defendant prevailed an astonishing 80 percent of 
the time.
    As shown on Exhibit C, the mean settlement amount on behalf 
of an individual defendant was just over $299,000. Most medical 
malpractice cases have multiple defendants, and thus these 
values are below those which may be reported on a case basis. 
The mean verdict amount last year was almost $497,000.
    Exhibit D shows the mean expense payment for claims by 
category of disposition. As can be seen, the cost for taking a 
claim for each doctor named in a case all of the way through 
trial is fast approaching $100,000.
    Exhibit E shows the distribution of claims payments at 
various payment thresholds. It can be readily seen that the 
number of larger payments, represented by the top segments on 
this exhibit, are growing as a percentage of the total number 
of payments. This is especially true for payments at or 
exceeding $1 million, which comprise almost 8 percent of all 
claims paid on behalf of individual doctors in 2001, as shown 
on Exhibit F. This percentage has doubled in the past 4 years.
    Investment income is very important to insurers. We rely on 
it to offset premium needs. Medical malpractice insurers are 80 
percent invested in high-grade bonds and have not lost large 
sums in the stock market. Brown Brothers Harriman, a leading 
investment and asset management firm, in a recent investment 
research report states that over the last 5 years the amount 
medical malpractice companies have invested in equities has 
remained fairly constant.
    In 2001, the equity allocation was 9 percent. As Exhibit G 
shows, medical liability insurance companies invested 
significantly less in equities than did all property casualty 
insurers. While insurers' interest income has declined due to 
falling market interest rates, when interest rates declined, 
bond values increased. This has had a beneficial effect in 
keeping total investment income level when measured as a 
percentage of total assets. This is shown on Exhibit H. Thus 
the assertion that insurers have been forced to raise their 
rates because of bad investments is simply not true.
    The PIAA firmly believes that the adoption of effective 
Federal health care liability reforms as embodied in H.R. 5 
will have a demonstrable effect on professional liability 
costs. The keystone of these reforms is the $250,0000 cap on 
noneconomic damages as passed in California over 25 years ago. 
These reforms are similar to the provisions of H.R. 4600 passed 
by the House last year and scored by the CBO as providing over 
$14 billion in savings to the Federal Government, an additional 
$7 billion to the States, because tort reforms works.
    Using annual data published by the NAIC, Exhibit I 
documents the savings California practitioners and health care 
consumers have enjoyed since the enactment of MICRA over 25 
years ago. As noted by the Chairman at the opening, total 
malpractice premiums reported to the NAIC since 1976 have grown 
in California by 167 percent, while premiums for the rest of 
the Nation have grown by 505 percent. These savings are clearly 
demonstrated in the rates charged to California doctors as 
shown on Exhibit J.
    Successful experience in California and other States with 
tort reform, such as Wisconsin makes it clear that MICRA style 
tort reforms do work without lowering health care quality or 
limiting access to care.
    The PIAA strongly urges Members of the Committee to support 
and adopt H.R. 5, which will ensure full payment of a truly 
injured patient's economic losses, as well as up to a quarter 
of a million dollars in noneconomic damages, thereby assuring 
fair compensation for patients, and also assuring Americans 
that they will be able to receive necessary health care 
services. Thank you.
    Mr. Smith. Thank you, Mr. Smarr.
    [The prepared statement of Mr. Smarr follows:]
                Prepared Statement of Lawrence E. Smarr

                              introduction

    Chairman Sensenbrenner, Congressman Conyers and Committee Members, 
I am Lawrence E. Smarr, President of the Physician Insurers Association 
of America (PIAA). Thank you for allowing me the opportunity to appear 
before you today and speak about the need for the enactment of H.R.5, 
The Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) 
Act of 2003.
    As we all know, professional liability insurance premiums for 
doctors and hospitals are rapidly rising in many states to levels where 
they cannot afford to pay them. These increased premiums are caused by 
the ever-increasing size of medical liability insurance payments and 
awards. The unavoidable consequence is that physicians are moving away 
from crisis states, reducing the scope of their practices, or leaving 
the practice of medicine altogether. Likewise, hospitals are being 
forced to close facilities and curtail high-risk services because they 
can no longer afford to insure them.

                        doctors insuring doctors

    The PIAA is an association comprised of professional liability 
insurance companies owned and/or operated by physicians, dentists, and 
other health care providers. Collectively, our 43 domestic insurance 
company members insure over 300,000 doctors and 1,200 hospitals in the 
United States and our nine international members insure over 400,000 
health care providers in other countries around the world. The PIAA 
member insurance companies can also be characterized as health care 
professionals caring for the professional liability risks of their 
colleagues--doctors insuring doctors, hospitals insuring hospitals. We 
believe that the physician owned/operated company members of the PIAA 
insure over 60% of America's doctors. Unlike the multi-line commercial 
carriers, medical liability insurance is all that the PIAA companies 
principally do, and they are here in the market to stay.
    The PIAA was formed 26 years ago at a time when commercial 
insurance carriers were experiencing unanticipated losses and exited 
the market, leaving doctors, hospitals and other health care 
professionals no choice other than to form their own insurance 
companies. A quarter century has passed, and I am proud to say that the 
insurers who comprise the PIAA have become the driving force in the 
market, providing stability and availability for those they insure.
    When the PIAA and many of its member companies were formed in the 
1970's, we faced a professional liability market not unlike that which 
we are experiencing today. At that time, insurers, all of which were 
general commercial carriers, were experiencing rapidly increasing 
losses, which caused them to consider their continuance in the market. 
Many of the major carriers did indeed exit the market, leaving a void 
that was filled by state and county medical and hospital associations 
across the country forming their own carriers. Again we see the 
commercial carriers, such as St. Paul, exiting the market. But, this 
time, the provider owned carriers are in place and are indeed providing 
access to insurance and stability to the market.
    Unfortunately, the recent exodus from and transformation of the 
market is of such magnitude that the carriers remaining do not have the 
underwriting capacity to take all comers. Facing ever-escalating losses 
of their own, many of the carriers remaining in the market are forced 
to tighten their underwriting standards and revise their business plans 
with regard to their nature and scope of operations. This includes the 
withdrawal from recently expanded markets, which adds to the access to 
insurance problem caused by carriers exiting altogether.
    My goal here today is to discuss what the PIAA sees as the 
underlying causes of the current medical liability crisis. I want to 
stress that I believe that this situation should be characterized as a 
medical liability crisis, and not a medical liability insurance crisis. 
The PIAA companies covering the majority of the market are in sound 
financial condition. The crisis we face today is a crisis of 
affordability and availability of insurance for health care providers, 
and more importantly, the resulting growing crisis of access to the 
health care system for patients across the country.
              insurance industry underwriting performance
    Medical liability insurance is called a long-tail line of 
insurance. That is because it takes on average two years from the time 
a medical liability incident occurs until a resulting claim is reported 
to the insurer, and another two and one-half years until the average 
claim is closed. This provides great uncertainty in the rate making 
process, as insurers are forced to estimate the cost of claims which 
may ultimately be paid as much as 10 years after the insurance policy 
is issued. By comparison, claims in short-tail lines of insurance, such 
as auto insurance, are paid days or weeks after an incident.
    Over the past three years medical liability insurers have seen 
their financial performance deteriorate substantially due to the 
rapidly rising cost of medical liability claims. According to A.M. Best 
(Best), the leading insurance industry rating agency, the medical 
liability insurance industry incurred $1.53 in losses and expenses for 
every dollar of premium they collected in 2001. While data for 2002 
will not be available until the middle of this year, Best has forecast 
that the industry will incur $1.41 in losses and expenses in 2002, and 
$1.34 in 2003. The impact of insurer rate increases accounts for the 
improvement in this statistic. However, Best also calculates that the 
industry can only incur $1.14\1/2\ in losses and expenses in order to 
operate on a break-even basis. This implies that future rate increases 
can be expected as the carriers move toward profitable operations.
    The physician owned/operated carriers that I represent insure a 
substantial portion of the market (over 60%). Each year, an independent 
actuarial firm (Tillinghast Towers-Perrin) provides the PIAA with a 
detailed analysis of annual statement data filed by our members with 
the National Association of Insurance Commissioners (NAIC). This 
analysis is very revealing with regard to the individual components of 
insurers financial performance.
    Exhibit 1 below details the operating experience of 32 physician 
owned/operated insurance companies included in the analysis. A widely 
relied upon insurance performance parameter is the combined ratio, 
which is computed by dividing insurers' incurred losses and expenses by 
the premiums they earn to offset these costs. For these companies, this 
statistic has been deteriorating (getting larger) since 1997, with 
major increases being experienced in 2000 and 2001.







    For calendar year 2001, the combined ratio (including dividends 
paid) was 141, meaning that total losses and dividends paid were 41% 
more than the premiums collected. Even when considering investment 
income, net income for the year was a negative ten percent. This 
follows a meager 4 percent net income in 2000. This average experience 
is indicative of the problems being experienced by insurers in general, 
and demonstrates the carriers' needs to raise rates to counter 
increasing losses. All of the basic components of the combined ratio 
calculation (loss and loss adjustment expense, underwriting expense) 
have risen as a percentage of premium for all years shown. The only 
declining component has been dividends paid to policyholders.
    To compare this group of PIAA companies with the industry, Exhibit 
2 is taken from the 2002 edition of Best's Aggregates and Averages. 
This shows that medical malpractice is the least profitable property 
and casualty line of insurance in 2001, following reinsurance, which 
has been greatly impacted by the World Trade Center losses. The 
adjusted combined ratio for the entire industry is 153, as compared to 
141 for the PIAA carriers represented on Exhibit 1.








                     the role of investment income

    Investment income plays a major role for medical liability 
insurers. Because medical liability insurance is a ``long tail'' line 
of insurance, insurers are able to invest the premiums they collect for 
substantial periods of time, and use the resulting investment income to 
offset premium needs. As can be seen on Exhibit 3, investment income 
has represented a substantial percentage of premium, and has played a 
major role in determining insurer financial performance. However, 
investment income as a percentage of premium has been declining in 
recent years primarily due to historic lows in market interest rates.












    Contrary to the unfounded allegations of those who oppose effective 
tort reforms, medical liability insurers are primarily invested in high 
grade bonds and have not lost large amounts in the stock market. As can 
be seen in Exhibit 4, the carriers in the PIAA survey have been 
approximately 80% invested in bonds over the past seven years.




    As shown on Exhibit 5, stocks have averaged only about 11% of cash 
and invested assets, thus precluding major losses due to swings in the 
stock market. Unlike stocks, high grade bonds are carried at amortized 
value on insurer's financial statements, with changes in market value 
having no effect on asset valuation unless the underlying securities 
must be sold.



    The experience of the PIAA carriers is confirmed on an industry-
wide basis through data obtained from the NAIC by Brown Brothers 
Harriman, a leading investment and asset management firm. Brown 
Brothers reports that ``Over the last five years, the amount medical 
malpractice companies has invested in equities has remained fairly 
constant. In 2001, the equity allocation was 9.03%.'' As Exhibit 6 
shows, medical liability insurers invested significantly less in 
equities than did all property casualty insurers.



    Brown Brothers states that the equity investments of medical 
liability companies ``. . . had returns similar to the market as a 
whole. This indicates that they maintained a diversified equity 
investment strategy.
    The Brown Brothers report further states:

        Since medical malpractice companies did not have an unusual 
        amount invested in equities and what they did was invested in a 
        reasonable market-like fashion, we conclude that the decline in 
        equity valuations is not the cause of rising medical 
        malpractice premiums.

    While insurer interest income has declined due to falling market 
interest rates, when interest rates decline, bond values increase. This 
has had a beneficial effect in keeping total investment income level 
when measured as a percentage of total invested assets. This is shown 
in Exhibit 7 below. Thus, the assertion that insurers have been forced 
to raise their rates because of bad investments is simply not true.



                          the insurance cycle

    Opponents of effective tort reform claim that insurance premiums in 
constant dollars increase or decrease in direct relationship to the 
strength or weakness of the economy, reflecting the industry's 
investment performance. The researchers at Brown Brothers also tested 
this theory, and found no correlation between changes in generally 
accepted economic parameters (Gross Domestic Product (GDP) and 5-year 
treasury bond rates) with direct medical liability premiums written. In 
fact, Brown Brothers conducted 64 different regression analyses between 
the economy, investment yield, and premiums, and found no meaningful 
relationship. The report produced by Brown Brothers states:

        Therefore, we can state with a fair degree of certainty that 
        investment yield and the performance of the economy and 
        interest rates do not influence medical malpractice premiums.

                            insurer solvency

    A key measure of financial health is the ratio of insurance loss 
and loss adjustment expense (amounts spent to handle claims) reserve to 
surplus. This ratio has deteriorated (risen) for the PIAA carriers 
since 1999 to a point where it is approximately two times the level of 
surplus, as shown on Exhibit 8 below.



    The relationship between reserves (amounts set aside to pay claims) 
and surplus is important, as it is a measure of the insurer's ability 
to contribute additional amounts to pay claims in the event that 
original estimates prove to be deficient. At the current approximately 
two-to-one ratio, these carriers in aggregate are still in sound 
financial shape. However, any further deterioration in surplus due to 
underwriting losses will cause a deterioration in this important 
benchmark ratio indicating an impairment in financial condition. Under 
current market conditions, characterized by increasing losses and 
declining investment interest income, the only way to increase surplus 
is through rate increases.
    Net premiums written as compared to surplus is another key ratio 
considered by regulators and insurance rating agencies, such as A.M. 
Best. This statistic for the companies in the PIAA survey has also been 
deteriorating (rising) since 1999, showing a 50% increase in the two 
years ending in 2001. The premium-to-surplus ratio is a measure of the 
insurer's ability to write new business. In general, a ratio of one-to-
one is considered to be the threshold beyond which an insurer has over-
extended its capital available to support its underwritings.
    As can be seen on Exhibit 9, this statistic has also deteriorated, 
and the carriers in aggregate are approaching one-to-one. As the 
carriers individually approach this benchmark, they will begin to 
decline new risks, causing further availability problems for insureds. 
Rate increases the carriers are taking also have an impact on this 
important ratio as well as new business written.



                        the cause of the crisis

    The effects described in the previous pages were caused by the 
convergence of six driving factors making for the perfect storm, as 
follows:

         Dramatic long term paid claim severity rise

         Paid claim frequency returning and holding at high 
        levels

         Declining market interest rates

         Exhausted reserve redundancies

         Rates becoming too low

         Greater proportion of large losses

    The primary driver of the deterioration in the medical liability 
insurance industry performance has been paid claim severity, or the 
average cost of a paid claim, and their associated expenses. The 
National Association of Insurance Commissioners (NAIC) confirmed this 
in a February 7, 2003 letter to Senator Judd Gregg, which states in 
part: ``The preliminary evidence points to rising loss costs and 
defense costs associated with litigation as the principal drivers of 
medical malpractice prices.'' (letter attached)



    Exhibit 10 shows the average dollar amount paid in indemnity to 
plaintiffs on behalf of individual physicians since 1988. The mean 
payment amount has risen by a compound annual growth of 6.9% during 
this period, as compared to 2.6% for the Consumer Price Index (CPIu). 
The data for Exhibit 10, as well as that for slides which follow, comes 
from the PIAA Data Sharing Project. This is a medical cause-of-loss 
database, which was created in 1985 for the purpose of identifying 
common trends among malpractice claims. PIAA member companies use the 
database for risk management and patient safety purposes. To date, over 
180,000 claims and suits have been reported to the database.
    Allocated loss adjustment expenses (ALAE) for claims reported to 
the Data Sharing Project have also risen at alarming rates. ALAE are 
the amounts insurers pay to handle individual claims, and represent 
payments principally to defense attorneys, and to a lesser extent, 
expert witnesses. Average amounts paid for three categories of claims 
are shown below. As can be seen, the average amount spent for all 
claims in 2001 has risen to just under $30,000.



    One very troubling aspect of medical malpractice claims is the 
proportion of those filed which are ultimately determined to be without 
merit. Exhibit 12 shows the distribution of claims closed in 2001 as 
reported to the PIAA Data Sharing Project. Sixty-one percent of all 
claims filed against individual practitioners were dropped or dismissed 
by the court. An additional 5.7% were won by the doctor at trial. Only 
33.2% of all claims closed were found to be meritorious, with most of 
these being paid through settlement. Of all claims closed, more than 
two-thirds had no indemnity payment to the plaintiff. When the claim 
was concluded at verdict, the defendant prevailed an astonishing 80% of 
the time. This data clearly shows that those attorneys trying these 
cases are woefully deficient in recognizing meritorious actions to be 
pursued to conclusion.
    Analyses performed by the PIAA have shown that of all premium and 
investment income available to pay claims, only 50% ever gets into the 
hands of truly injured patients, with the remainder being principally 
paid to attorneys, both plaintiff and defense. Something is truly wrong 
with any system that consumes 50% of its resources to deliver the 
remainder to a small segment of those seeking remuneration.



    A review of the average claim payment values for the latest year 
reported to the PIAA Data Sharing Project (2001) is revealing. As shown 
on Exhibit 13, the mean settlement amount on behalf of an individual 
defendant was just over $299,000. Most medical malpractice cases have 
multiple defendants, and thus, these values are below those, which may 
be reported on a per case basis. The mean verdict amount last year was 
almost $497,000 per defendant.




    Exhibit 14 shows the mean expense payment for claims by category of 
disposition. As can be seen, the cost of taking a claim for each doctor 
named in a case all the way through trial is fast approaching $100,000.



    Exhibit 15 shows the distribution of claims payments at various 
payment thresholds. It can be readily seen that the number of larger 
payments are growing as a percentage of the total number of payments.



    This is especially true for payments at or exceeding $1 million, 
which comprised almost eight percent of all claims paid on behalf of 
individual practitioners in 2001 (Exhibit 16). This percentage has 
doubled in the past four years, and clearly demonstrates why insurers 
are facing dramatic increases in the amounts they have to pay for 
reinsurance. While medical liability insurers are reinsured by many of 
the same companies having high losses from the World Trade Center 
disaster, their medical liability experience was rapidly deteriorating 
prior to September 11, 2001.



    In addition to rising claim severity, like all other investors, 
medical liability insurers have faced declining market interest rates. 
Eighty percent of PIAA insurers' investments are placed in high-grade 
bonds. Exhibit 17 shows the long-term decline in high-grade bond 
earnings. As can be seen, this is not a recent phenomenon, but a long 
term trend.
    Critics of the medical liability insurance industry say that 
insurers' reliance on investment income to offset premiums has caused 
turmoil in the marketplace, implying that the use of investment income 
is a bad thing. Nothing could be further from the truth. If insurers 
did not ever use investment income to offset premium needs, then rates 
would always be 30-40% higher than otherwise necessary. The role market 
interest rates play in determining pricing in medical liability 
insurance (and other lines as well) is a fact of life which we cannot 
control.



                               the answer

    Medical liability insurers and their insureds have faced dramatic 
long-term rises in paid claim severity, which is now at historically 
high levels. Paid claim frequency (the number of paid claims) is 
currently remaining relative constant, but has risen significantly in 
some states. While interest rates will certainly rise and fall in 
future years, nothing has been done over the past three decades to stem 
the ever-rising values of medical malpractice claim payments or reduce 
the number of meritless claims clogging up our legal system at great 
expense--except in those few states that have effective tort reforms. 
In many states not having tort reforms, costs have truly become 
excessive, and insurers are forced to set rates at levels beyond the 
abilities of doctors and hospitals to pay. States having tort reforms, 
such as California, provide a compelling example that demonstrates how 
such reforms can lower medical liability costs and still provide 
adequate indemnification for patients harmed as a result of the 
delivery of health care.
    The following reforms are those which the PIAA advocates be adopted 
at the federal level, which we also feel should be the standard for any 
state reforms enacted. They are based on the reforms found in the 
Medical Injury Compensation Reform Act (MICRA) which became effective 
in California in 1976 and which have been successful in compensating 
California patients and ensuring access to the health care system since 
their enactment.



    The keystone of the MICRA reforms is the $250,000 cap on non-
economic damages (pain and suffering) on a per-incident basis. Under 
MICRA, injured patients receive full compensation for all quantifiable 
damages, such as lost income, medical expenses, long-term care, etc. In 
addition, injured patients can get as much as one-quarter million 
dollars for pain and suffering. Advising juries of economic damages 
that have already been paid by other sources serves to reduce double 
payment for damages. An important component of MICRA is a reasonable 
limitation on plaintiff attorney contingency fees, which can be 40% or 
more of the total amount of the award. Under MICRA, a trial lawyer must 
be satisfied with only a $220,000 contingency fee for a $1 million 
award.
    A Gallup poll published on February 5, 2003 by the National Journal 
indicates that 57% of adult Americans feel there are too many lawsuits 
against doctors, and 74% feel that we are facing a major crisis 
regarding medical liability in health care today. Seventy-two percent 
of respondents favored a limit on the amount that patients can be 
awarded for their emotional pain and suffering. Only the trial lawyers 
and their front groups disagree, seeing their potential for 
remuneration being reduced. Especially displeasing to them is MICRA's 
contingency fee limitation, which puts more money in the hands of the 
injured patient (at no cost reduction to the insurer).
    The U.S. House of Representatives adopted legislation containing 
tort reforms similar to MICRA, including a $250,000 cap on non-economic 
damages, for the seventh time in September of last year. HR 4600, known 
as the HEALTH Act, was introduced and adopted on a bi-partisan basis. 
The Congressional Budget Office (CBO) conducted an extensive review of 
the provisions of HR 4600, and reported to Congress that if the reforms 
were enacted, ``. . . premiums for medical malpractice insurance 
ultimately would be an average of 25 percent to 30 percent below what 
they would be under current law.''
    The CBO found that HR 4600 reforms would result in savings of $14.1 
billion to the federal government through Medicare and other health 
care programs for the period 2004-2012. An additional $7 billion of 
savings would be enjoyed by the states through their health care 
programs. The CBO's analysis did not consider the effects that federal 
tort reform would have on reducing the incidence of defensive medicine, 
but did acknowledge that savings were likely to result.



    The US Department of Health and Human Services published a report 
on July 24, 2002, which evaluated the effects of tort reforms in those 
states that have enacted them. As stated in Exhibit 20, HHS found that 
practitioners in states with effective caps on non-economic damages 
were currently experiencing premium increases in the 12-15% range, as 
compared to average 44% increases in other states.



    Annual data published by the National Association of Insurance 
Commissioners (NAIC) also documents the savings California 
practitioners and health care consumers have enjoyed since the 
enactment of MICRA over 25 years ago. As shown in Exhibit 21, total 
medical liability premiums reported to the NAIC since 1976 have grown 
in California by 167%, while premiums for the rest of the nation have 
grown by 505%. These savings can only be attributed to MICRA.



    These savings are clearly demonstrated in the rates charged to 
California doctors as shown in Exhibit 22. Successful experience in 
California and other states makes it clear that MICRA style tort 
reforms do work without lowering health care quality or limiting access 
to care.



    prop 103 had no effect on california medical liability premiums

    In an effort to derail desperately needed tort reforms as described 
above, the Association of Trial Lawyers of America and related 
individuals and groups have stated that the beneficial effects of MICRA 
as shown on Exhibit 21 are due to Proposition 103, a ballot initiative 
passed in 1988 aimed primarily at controlling auto insurance costs. The 
ballot initiative passed by a 51% majority vote, with voters in only 7 
of California's 58 counties approving the measure. The major changes 
made by Prop 103 include:

         Making the insurance commissioner of California an 
        elected, rather than appointed, official;

         Giving the insurance commissioner authority to 
        approve rate changes before they can take effect;

         Requiring insurers to reduce rates by 20 percent from 
        their levels on November 8, 1987;

         Requiring auto insurance companies to offer a 20 
        percent ``good driver discount.''

         Requiring auto insurance rates to be determined 
        primarily by four factors;

         Allowing for payment of ``intervenor fees'' to 
        outside groups that intervene in hearings conducted by the 
        Department of Insurance.

    Medical liability insurers were not the intended target of Prop 
103, but were covered by the resulting regulations. However, Prop 103 
did not have any substantive effect on reducing medical liability 
insurance rates. Prop 103 did have the effect of freezing most 
insurance rates in California until as late as 1994. This all came at a 
time when medical liability insurers across the nation were seeing 
their rates level off or even decline.
    Prop 103 added a provision to the California Insurance Code at 
Section 1861.01, which required insurers to roll back their rates to 20 
percent lower than those in effect on November 8, 1987. However, this 
is not what happened to medical malpractice insurers.
    One major California insurer, the NORCAL Mutual Insurance Company 
reached the very first consent agreement of any insurer with the 
California Department of Insurance in November of 1991. To satisfy the 
requirements of Prop 103, NORCAL was specifically permitted to declare 
a one-time 20% return of premium for policyholders insured between 
November 8, 1988 and November 8, 1989 as a dividend by March 31, 1992. 
NORCAL was not required to roll back its rates as a result of Prop 103. 
As NORCAL was already paying dividends exceeding 20% per year during 
the period in question, no additional monies were returned to 
policyholders as a result of Prop 103. The experience of other 
California physician owned companies, such as The Doctors' Company and 
the Medical Insurance Exchange of California, was similar to that of 
NORCAL. Even if California medical liability insurers had been required 
to reduce rates by 20%, this in no way could explain the wide gap in 
experience shown on Exhibit 21.

                               conclusion

    Increasing medical malpractice claim costs, on the rise for over 
three decades, have finally reached the level where the rates that 
insurers must charge can no longer be afforded by doctors and 
hospitals. These same doctors and hospitals cannot simply raise their 
fees, which are limited by government or managed care companies. Many 
doctors will face little choice other than to move to less litigious 
states or leave the practice of medicine altogether.
    Legislators are now challenged with finding a solution to the 
medical liability insurance affordability and availability dilemma--a 
problem long in coming that has truly reached the crisis stage. The 
increased costs being experienced by insurers (largely owned/operated 
by health care providers) are real and documented. It is time for 
Congress to put an end to the wastefulness and inequities of our tort 
legal system, where only 50% of the monies available to pay claims are 
paid to indemnify the only 30% of claims filed with merit and the 
expenses of the remainder. The system works fine for the legal 
profession, which is why trial lawyers and others fight so hard to 
maintain the status quo.
    The PIAA strongly urges members of the House to pass effective 
federal health care liability reform, thereby stopping the exodus of 
health care professionals and institutions which can no longer afford 
to fund an inequitable and inefficient tort system which benefits 
neither injured plaintiffs or the health care community.

    Mr. Smith. And thank you all again for your testimony.
    Mr. Smarr, let me direct my first question to you, and it 
is this: We know for a fact, for example, that jury awards have 
doubled in the last 5 years. We also know that 70 percent of 
all lawsuits filed against health care providers result in no 
payment; they may be frivolous. Those are going to have a 
dramatic impact on insurance premiums. So my question is this: 
If we enact the HEALTH Act, if that becomes law, do you expect 
the medical malpractice insurance premiums to at least not 
increase as projected, to increase as fast as expected?
    Mr. Smarr. Yes. We expect that if the HEALTH Act is 
adopted, and it stands constitutional challenge, that we will 
see medical malpractice stop their increase, and we will 
ultimately see medical malpractice premiums go down. The 
Congressional Budget Office in its scoring of H.R. 4600 stated 
that if that bill were passed into law, that malpractice 
premiums would be 25 to 30 percent lower than they would 
otherwise have been.
    Mr. Smith. Dr. Palmisano, if the HEALTH Act becomes law, 
what impact will that have on health care available to 
Americans generally, and also specifically to health care 
available to women, lower-income individuals, and those who 
live in rural areas?
    Dr. Palmisano. Passage of H.R. 5 would have a favorable 
effect on access to care. And the States that have stable 
liability climates, California, Louisiana, Indiana, New Mexico, 
Colorado and Wisconsin, are States that have patients who have 
access to care. So it would be very favorable.
    Mr. Smith. Thank you, Dr. Palmisano.
    Mrs. Dyess, you today were speaking not only on behalf of 
your husband, but on behalf of thousands and thousands of other 
individuals who might not have received proper care because of 
a broken health care system, and you obviously feel that it is 
not the fault of the doctors that a specialist was not 
available to help your husband when he needed help. A lot of 
people would have suggested that you file suit against the 
hospital. Why did you not think this was the proper action to 
take?
    Ms. Dyess. Never entered my mind. It never--my husband's 
care was of utmost importance to me. I felt like the hospital 
did everything they possibly could do in order to get him the 
help that he needed to have.
    Mr. Smith. You feel it wouldn't solve the problem for you 
to file suit because a specialist wasn't available?
    Ms. Dyess. Filing a suit is not going to bring back my 
husband's brain. It is not going to help anything. It is not 
the right thing to do. It is not their fault.
    Mr. Smith. And again, though, your point is that you want 
to make proper care available to more people, and the way to do 
that is not to have doctors' insurance premiums go up so much 
that they are either priced out of the market, they don't 
practice medicine, or they reduce their practice.
    Ms. Dyess. Absolutely.
    Mr. Smith. Thank you, Mrs. Dyess.
    Mrs. Keller, it is my understanding that no settlement or 
award has been determined in your case yet; is that right?
    Ms. Keller. That is correct. Still in the court system.
    Mr. Smith. I also recognize that whatever the amount might 
be, you would gladly trade it to have your health back and a 
normal life back as well?
    Ms. Keller. Exactly.
    Mr. Smith. You also, I assume, want the victims of medical 
malpractice to be compensated, and I would have to say that we 
all do. If physicians have made a mistake, the victims ought to 
be compensated. But I just wanted to also make you aware that 
in the HEALTH Act that we are considering today, a lot of the 
expenses that you thought were not going to be covered will, in 
fact, be covered. Any expense you have a receipt for, any 
health care provider that helps you with chores, all of those 
individuals, you will be reimbursed for the cost of all of 
those individuals. So it is maybe not as limited as you might 
think.
    I also wanted to point out, in the time that I have left, 
that just because there is a cap on noneconomic damages doesn't 
mean there can't be fair and sufficient and adequate awards. 
The three examples that occurred in California just in the last 
year, you had a 5-year-old boy who received the $84 million 
that I mentioned in my statement, a 3-year-old girl received 
$59 million, and a 30-year-old homemaker with brain damage 
received over $12 million.
    In other words, you do get compensated for lost wages, for 
all medical care, for all rehabilitation expenses and so forth. 
Obviously that can amount to tens of millions of dollars. So I 
don't want you to think that you are going to be left with an 
inadequate amount under the HEALTH Act that we are having a 
hearing on today. There can oftentimes be very substantial 
compensation, and that is simply the point I wanted to make.
    But, again, thank you for your very compelling testimony 
here today. That concludes my questions.
    The gentleman from Michigan, the Ranking Member of the 
Judiciary Committee.
    Mr. Conyers. I will yield to Mr. Berman.
    Mr. Smith. The gentleman from California, Mr. Berman, is 
recognized for his questions.
    Mr. Berman. Well, thank you very much, Mr. Chairman.
    Dr. Palmisano, what this legislation does is essentially 
takes a number of the changes made in California law in 1975 
and seeks to provide it as a Federal law that would preempt any 
less strict limits that now exist in the other 49 States; is 
that a fair statement?
    Dr. Palmisano. It is my understanding, sir, that this law 
has--that this bill, H.R. 5, has a flexibility provision. So if 
the State of Florida, Michigan, Colorado, whatever, that if 
they wanted to have a cap of $500,000, the legislature could do 
that. It also provides----
    Mr. Berman. What, if they have a cap of $500,000 now?
    Dr. Palmisano. It would remain in place.
    Mr. Berman. What if they don't have a cap?
    Dr. Palmisano. The Federal law, H.R. 5, if it was enacted 
into law, would be the cap for that State. They would have the 
flexibility to change it.
    Mr. Berman. And if it were a $5 million cap on pain and 
suffering?
    Dr. Palmisano. If it was a $5 million cap in that State, it 
would remain a $5 million cap in that State.
    Mr. Berman. You are telling States who may not like the 
$250,000 cap on pain and suffering, if you can put a bill 
through and get it signed into law prior to the effective date 
of this law, that cap is okay?
    Dr. Palmisano. No, sir. They can do it after the law, too. 
If this becomes law, they----
    Mr. Berman. The only thing you can't do is be uncapped? You 
can have a cap that has never been reached, but you can't be 
uncapped; is that what you are saying?
    Dr. Palmisano. Yes, sir. For instance----
    Mr. Berman. Okay. Good.
    When California passed its bill--first, I think we should 
just note for the record that the Majority staff report 
incorrectly states, not intentionally, I think they picked up a 
Health and Human Services Department report, I guess is--the 
Department of HHS, in order to sort of stick it to them in a 
way, said that while Henry Waxman, Chairman of the Select 
Committee on Medical Malpractice in 1973 and 1974, proposed the 
limits that became MICRA that are now this law. And 
specifically the cap on pain and suffering of $250,000, Health 
and Human Services got it wrong, and as a result of that, this 
Committee analysis is in error in that sense, because the 
select Committee never proposed a limit on pain and suffering 
of $250,000.
    But that law at that time created a whole series of other 
changes, strengthened medical discipline, made it easier to 
discipline bad doctors, provided higher levels of immunity to 
physicians on a hospital committee who could then testify about 
the practices of a doctor that they felt should have his 
privileges revoked, and protect those people against being sued 
by that doctor, far greater reporting requirements. In other 
words, there was a notion, yes, we are going to put some limits 
on the liability system, but we recognize the problem of 
doctors who aren't performing up to a reasonable standard, and 
we are going to make it tougher for them to practice medicine.
    I notice nothing in this bill that deals--seeks to 
federalize the program or compel States to have certain 
standards of discipline and reporting for doctors who are not 
meeting the appropriate standard of care.
    And I guess aren't you a little embarrassed that you are 
cherry-picking a series of provisions here, claiming that 
California has had great success? You have produced charts, you 
point out those limits, you claim you are taking those limits 
and putting them in Federal law, collateral source rule, 
periodic payments, cap on pain and suffering, limitations on 
contingency fees, and then totally ignoring any efforts to try 
and strengthen regulation of the medical profession such as was 
done in California, including even things like allowing other 
physicians to have immunity if they seek to revoke a bad 
physician's malpractice. Aren't you a little embarrassed by 
that?
    Dr. Palmisano. Well, the California MICRA law has the 
elements that you mentioned, the periodic payments, the 
contingency fee----
    Mr. Berman. Tougher medical discipline, tougher immunity 
provisions to protect doctors who want to testify, requirements 
that every hospital report to the State board of medical 
quality assurance acts of negligence and malpractice suits. 
Aren't you embarrassed that those aren't in this bill?
    Dr. Palmisano. I am not embarrassed, because the Health 
Care Quality Improvement Act, which was a Federal law, which 
was passed later than that, requires that any dollar paid on 
behalf of a physician gets reported to the Federal Government, 
and also gets reported to the State board of medical examiners.
    And so we strongly support State boards of medical 
examiners being adequately funded to do the proper 
investigation so that every case is looked at by the State 
board to make sure if there is any disciplinary situation that 
needs to be done or anyone's license revoked----
    Mr. Berman. Would you be willing to incorporate those--the 
reporting requirements, to the extent that they are stronger 
than that exists at Federal law now, the reporting 
requirements, the immunity provisions, and the disciplinary 
authorities mandating that any State that wants to take 
advantage and have these limits apply also adjust their laws to 
provide that level of protection against malpracticing 
physicians? Would you be willing to accept that kind of an 
amendment to this legislation?
    Dr. Palmisano. Well, the AMA policy would be to look at any 
language that was offered. We do know that we support the----
    Mr. Berman. How about a top-of-the-head reaction?
    Dr. Palmisano. Well, I am not speaking for myself. I am 
speaking for the American Medical Association. The American 
Medical Association believes in strong physician discipline, 
and we have policy on that. It is all on the AMA Website in 
Policy Finder. We also strongly support patient safety. That is 
why we founded the National Patient Safety Foundation.
    Mr. Berman. And where State law doesn't meet the kinds of 
requirements that exist in MICRA, could I then--would it be 
logical to conclude that it would be appropriate for the 
Federal Government to mandate that each State meet that minimum 
standard of discipline, regulation, immunity, encouraging 
testimony by other physicians?
    Dr. Palmisano. Again, anything that would be offered would 
be reviewed by the AMA to see how it fits for policy.
    Mr. Berman. Thank you for your helpful advice.
    Mr. Smith. Thank you, Mr. Berman. The gentleman from 
Florida, Mr. Keller, is recognized for his questions.
    Mr. Keller. Thank you, Mr. Chairman.
    I can tell you there absolutely is a medical liability 
crisis in my home State of Florida. Just this week our major 
hospital in my district, Orlando Regional Medical Center, 
announced it will close its Level 1 Trauma Center, which is the 
only center within 3 or 4 hours to treat head injuries such as 
those suffered by Mrs. Dyess' husband because the neurosurgeons 
can no longer pay the medical liability premiums. So it is a 
real problem facing a lot of physicians throughout this 
country.
    I appreciate you, Mrs. Keller. I especially like your last 
name. I appreciate your courage, which it took quite a bit to 
come here and testify today. I know everybody is very 
sympathetic to your case.
    The Chairman pointed out that we don't yet have a verdict 
or settlement amount in your case, but you said if you had Bill 
Gates' money, you wouldn't trade it for your injuries. I agree. 
You seem like a straightforward person. The challenge facing 
those of us in Congress, though, is if we allowed a jury to 
give you Bill Gates' money, which is approximately $40 billion, 
then you are still not going to be made whole, that hospital is 
going to be shut down, and thousands of people are going to be 
denied access to medical care.
    Ms. Keller. And so what we have got to do is find the 
strike zone somehow, so that you are at least fairly 
compensated and yet we still have access to health care and us 
to of people who need it, and so we are trying to sort our way 
through this to make sure we get the fairest result.
    I would like to play devil's advocate a little bit, Mr. 
Smarr, to you and ask you a few questions here. Some say that 
if Congress passes this $250,000 cap on noneconomic damages, 
the insurance companies aren't going to pass on these savings 
to the doctors. They are just going to put it in their pocket 
and they won't lower premiums. What do you say to that?
    Mr. Smarr. I don't believe that that is correct. As I have 
testified, the majority of doctors in America are insured by 
companies that are owned and are operated by doctors. These 
companies operate largely for the benefit of their insureds and 
are dedicated to providing a stable market and charging a fair 
price for their insurance. And once this law goes into effect, 
this is going to enhance competition. The insurers that have 
gotten out of the market are going to come back in; and that 
competition, if for no other reason, that competition is going 
to drive prices down.
    Mr. Keller. To the best of your knowledge the insurance 
companies you represent will lower their premiums?
    Mr. Smarr. I believe they will once they can be assured 
that the law sticks.
    Mr. Keller. Let me ask you something else that opponents of 
this legislation point out. They say insurance companies are 
just jacking up doctors' premiums this year because they lost a 
bunch of money in the stock market, not because of any medical 
liability crisis. What do you say to that?
    Mr. Smarr. There are two comments here. First of all, 
insurers have not lost large amounts in the stock market; they 
are primarily invested in bonds. And secondly, the State 
insurance departments which approve rates will not allow an 
insurer to take any type of prior-year losses, whether it be 
from underwriting or investment, and impute those values in 
their future rates. It would be illegal for them to do that.
    Mr. Keller. So when you say ``a small percent in the stock 
market,'' give me an idea; for example, one of your major 
companies, what percent?
    Mr. Smarr. Ten percent of their investments are in 
equities.
    Mr. Keller. Okay. And over 90 percent aren't, then.
    Mr. Smarr. Ninety percent aren't. That is correct.
    Mr. Keller. Okay. Another thing opponents say is that that 
1975 California law, MICRA, that capped the noneconomic damage 
at 250 really didn't have anything to do with the malpractice 
premiums being stabilized in California. It was really Prop 
103, a constitutional amendment which dealt mostly with car 
insurance, I guess. But they are saying that is what held 
medical liability insurance premiums down. What are your 
thoughts on that?
    Mr. Smarr. Well Prop 103 had nothing to do with it. As you 
state, it was an auto initiative primarily. However, all 
property and casualty insurance conditions were covered by its 
provisions. Prop 103 required that insurers roll back their 
rates to 20 percent below those in effect on, I believe it was, 
November 8 of 1987. Prop 103 was passed in 1988. This was 
immediately challenged by the insurance industry. And not until 
1991 was some progress made in this regard. The very first 
insurance company that reached agreement with the California 
insurance commissioner about how to handle Prop 103 was one of 
my members called NorCal Mutual Insurance Company. NorCal 
reached a consent agreement with the commissioner whereby they 
were required to refund 20 percent of 1 year's premiums, which 
they could then pay as a normal dividend, but they were not 
required to roll back their rates at all. At that point in 
time, NorCal was paying far in excess of 20 percent annual 
dividends per year.
    Mr. Keller. So if it had any effect, it would have only 
been for 1 year.
    Mr. Smarr. And really had no effect. It was part of the 
normal dividend cycle. Same thing true for other carriers.
    Mr. Keller. Let me ask one more question. Dr. Palmisano, 
some say that this sort of tort reform, this 250 cap on 
noneconomic damages should be left up to the States; that the 
Federal Government shouldn't be meddling. Let me close by 
asking your thoughts. Is this an appropriate bill for Congress 
to be considering?
    Dr. Palmisano. Yes, sir, we believe it is. We believe that 
it affects Medicare beneficiaries. It affects the major health 
programs that I mentioned earlier, and we know that there is a 
crisis in 18 States now. And some States have not been able to 
make changes, and we are concerned about access to care for 
patients. So we believe it is a Federal question.
    Mr. Smith. Thank you, Mr. Keller. The gentleman from New 
York, Mr. Nadler, is recognized for his questions.
    Mr. Nadler. Thank you. Thank you, Mr. Chairman. I think it 
was Dr. Palmisano--you were testifying or answering the 
questions of the gentleman from California a few moments ago 
about noneconomic damages. You testified that under this bill, 
it would not preempt--that the bill, the limit of $250,000 for 
pain and suffering for noneconomic damages would not preempt 
State laws that were more permissive; is that correct?
    Dr. Palmisano. That is correct.
    Mr. Nadler. So if a State now--traditionally State laws 
leave it up to the jury and the courts and have no dollar limit 
in the bill or in the law. Is it your testimony that this 
would--that that would prevail over the $250,000 limit in this 
bill?
    Dr. Palmisano. No. The intent of my statement is that if 
there is no--if there is a cap, then that cap would prevail in 
that particular State.
    Mr. Nadler. If there is a specific money cap listed in the 
law.
    Dr. Palmisano. Yes. If there is no cap, then this would 
become the level.
    Mr. Nadler. Okay. Thank you. Let me ask you the following: 
A number of studies have shown over the years--I particularly 
remember the Harvard study when I was in the New York 
Legislature in 1985 and we put some rather, I don't remember 
what they were, but major changes in the law at that time. They 
were supposed to keep malpractice rates down. And we also 
ordered a study by Harvard which turned out to say that the 
major problem, or a major problem, was that a very small 
proportion of doctors unpoliced by any discipline system were 
causing a very large proportion of the awards, and that the 
premiums were high because this very small number of doctors 
were not properly disciplined.
    This morning, in this morning's New York Times, Dr. Sidney 
Wolfe of the Public Citizen Health Research Group brings up 
some more modern statistics. He says from 1990 to 2002, 5 
percent of doctors were involved in 54 percent of the payouts, 
including jury awards and out-of-court settlements, according 
to the National Practitioner Data Bank of the Department of 
HHS. Of the 35,000 doctors with two or more payouts during that 
period, only 8 percent were disciplined by State medical boards 
in any way. Of the 2,800--27,744 doctors who have made payments 
in five or more cases, five or more judgments or settlements in 
which they had to make payments, only 463, or less than about 
20 percent, 1 out of 6, less than 20 percent had been 
disciplined.
    Would you comment on the assertion, the finding of the 
Harvard study, the assertion currently that one of the major 
problems--one of the major jobs, real causes, of what we all 
agree are high medical insurance premium rates are the failures 
of the States or the medical societies perhaps to crack down on 
the relatively small numbers of doctors who perhaps shouldn't 
be practicing?
    Dr. Palmisano. Well, Mr. Nadler, first off, the American 
Medical Association supports strong State medical boards, and 
we know that any payments paid on behalf of a doctor goes 
before the State medical board. The National Practitioner Data 
Bank, the problem with the data--and the Government Accounting 
Office when they studied the National Practitioner Data Bank 
pointed this out--is that a physician can be listed as having 
multiple claims, when in reality the physician--it may only be 
one incident. And so if different--if different entities such 
as an excess carrier pays on behalf of the physician, that gets 
counted as a claim. If the primary carrier pays some money or 
if the physician also has to pay some money, that will all get 
counted as a claim.
    Mr. Nadler. As a separate claim.
    Dr. Palmisano. It gets counted.
    Mr. Nadler. And there is no way of culling the data to see 
how many actual claims there were.
    Dr. Palmisano. That is what the Government Accounting 
Office criticized the National Practitioner Data Bank. The 
other thing, sir, about that is that it doesn't differentiate. 
It doesn't list the specialties. We were very much interested 
when we heard about that. We wanted to find out who these 
individuals were, their specialties and so on. And we know, for 
instance, in south Florida, a recent study done in South 
Florida points out that every neurosurgeon has been sued in 
this study and the average number of suits against 
neurosurgeons is five in south Florida.
    And so we certainly----
    Mr. Nadler. But that is not the average number of payouts.
    Dr. Palmisano. No, sir. No, an average number of suits. And 
we know in the Harvard study that you mentioned, that one of 
the lead authors, Dr. Troy Brennan, a very respected researcher 
at Harvard, Dr. Brennan wrote in that study that what they 
found in that study, that there was no statistical correlation 
with payment, either as a result of a jury award or the 
insurance company, and negligence. What they did find a direct 
correlation with was disability. And I had the privilege to be 
on a panel, a roundtable Secretary Thompson called a couple of 
months ago, and Dr. Brennan was on the panel with me. And I 
asked him if he still agreed, believed that; and he said yes, 
he did.
    Mr. Nadler. All right. Let me, before my time runs out, ask 
you one more quick question because this goes to the heart of 
this.
    Mr. Smith. Mr. Nadler. Without objection, the gentleman is 
recognized for an additional minute.
    Mr. Nadler. Thank you, sir. Thank you, Mr. Chairman. We 
have any number of statements here which I am not going to read 
for interest of time, by all kinds of insurance companies, 
saying that tort reform that specifically limits noneconomic 
damages would not result in lower--that they could not promise 
lower rates, they could not promise that rates wouldn't go up 
as fast as otherwise. The bill does not require any 
accountability by insurance companies, and in fact we know that 
the truly severe cases where there are large noneconomic 
damages are a small percentage of all claims and the medical 
liability premium dollar that pays the compensation is dwarfed 
by the portion that pays for a lot of other things.
    Given this, why are you so certain that even if we were 
to--that a limit on noneconomic damages would in fact result in 
a solution or any major part of a solution to the premium 
problem?
    Dr. Palmisano. Thank you, Mr. Nadler. The reason we believe 
that is we have observed a quarter of a century of history, 
looking at California, looking at my State of Louisiana, and 
looking at Wisconsin, looking at Indiana, and looking at New 
Mexico, and that is exactly what happened. In 1975 California 
was among the highest. If you went to Los Angeles as an 
obstetrician or you went to Miami as an obstetrician, what 
happened was over these 25, 27 years, now they are paying 
$210,000 in south Florida and the obstetricians in Los Angeles 
will pay anywhere from 57 to 60 or $70,000 per premium. So we 
believe it works. It certainly worked in our case in Louisiana. 
Once the law was passed, my premiums--I didn't have to carry 
excess insurance anymore. My premiums dropped in half.
    Mr. Smith. Thank you, Mr. Nadler.
    The gentleman from North Carolina, Mr. Coble, is recognized 
for his questions.
    Mr. Coble. Thank you, Mr. Chairman. Thank the witnesses. 
Mr. Chairman, last Congress I voted for this med/mal bill in 
Committee because I felt like it deserved full House floor 
attention. When it came to the House floor, you may recall, I 
voted against it because I have problems with legislatures 
imposing caps. I believe when we insert legislative oars into 
those waters, we are invading waters that ought to be more or 
less exclusively reserved for juries. That is my philosophical 
hang-up.
    Now, am I not concerned? You bet I am. When I see that 
specialists are forced to terminate their practices, as you 
pointed out at the outset, Mr. Chairman, that results in a 
crisis and that does bother me. I am also informed by the 
coalition supporting the bill that most of the malpractice 
cases are either dismissed or settled prior to trial. Well, 
even if that is the case, I recognize that defendants incur 
costs even if it never goes to a jury.
    But Dr. Palmisano, if you know, of those that are finally 
litigated and jury awards are forthcoming, do you have any idea 
what the average jury award would be? And if you don't, you can 
get back to us.
    Dr. Palmisano. We will be glad to supply any data we have, 
but I believe Mr. Smarr has some figures that would answer 
that.
    Mr. Coble. Mr. Smarr, do you have that?
    Mr. Smarr. Yes, sir, I do. The mean verdict against an 
individual practitioner----
    Mr. Coble. Oh, you may have said that earlier but repeat it 
for me, if you will.
    Mr. Smarr. It is $496,726 in 2001, and there is usually 
more than one defendant in any case.
    Mr. Coble. Mrs. Keller, the physician you mentioned in your 
testimony, does she continue to practice medicine?
    Ms. Keller. Yes, sir, she does. With more malpractice 
lawsuits filed this year against the same doctor.
    Mr. Coble. In what State does she practice?
    Ms. Keller. Georgia.
    Mr. Coble. Dr. Palmisano, you indicated that the crisis 
States--have been 8 or 10 additional States added to that list 
if I am not mistaken in recent days, in fact, and the total is 
now how many?
    Dr. Palmisano. It is 18, sir. Six additional States were 
added. We will be glad to leave a map with the Committee.
    Mr. Coble. Yeah. In fact I am familiar with that.
    Dr. Palmisano. Yes, sir.
    Mr. Coble. And even though, folks, I have problems with the 
capping and I hope you all understand that, I just think that 
ought to be a jury question. Not to say that I am uncaring or 
insensitive, Mrs. Dyess, for example, about your situation. My 
gosh, you and Mrs. Keller have brought compelling arguments 
that support either side of this issue. And if there was ever 
an issue before us, Mr. Chairman, that invites compelling 
arguments supporting each side, I think it is the matter that 
we have before us today, and I very much appreciate you all 
being here.
    Mr. Chairman, I appreciate the very precise manner in which 
you are conducting this hearing and I yield back my time before 
the red light appears.
    Mr. Smith. It is much appreciated, Mr. Coble. Thank you.
    The gentleman from Virginia, Mr. Scott, is recognized for 
his questions.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Smarr, what portion of your income is investment income 
as opposed to the difference between the premium and the 
expected payments?
    Mr. Smarr. In 2001, the insurers that I represent collected 
31 cents for every dollar in investment income for every dollar 
of premium which they collected. They incurred losses in the 
neighborhood of, and I--it is in my written testimony, 
actually.
    Mr. Scott. Well let me--you said $1.53 for every dollar you 
collected in premium. Are those the numbers you said?
    Mr. Smarr. That is for the industry as a whole, yes. That 
includes the commercial carriers.
    Mr. Scott. Now, were you making money doing that?
    Mr. Smarr. Absolutely not.
    Mr. Scott. How long were you charging only--how long were 
you charging only a dollar for $1.53 in premiums in payouts?
    Mr. Smarr. How long?
    Mr. Scott. Yes.
    Mr. Smarr. That statistic is called the ``combined ratio,'' 
and we have seen that deteriorate over the past 4 or 5 years. 
The industry turned to negative profitability last year.
    Mr. Scott. I mean you make--I mean you can collect less 
than you pay out and still make money, isn't that right?
    Mr. Smarr. Because we have investment income; that is 
correct.
    Mr. Scott. Okay. And you are collecting, knowing you were 
collecting a dollar for $1.53 in expenses, you are going to 
make up the rest in investments; isn't that right?
    Mr. Smarr. That is the intent, yes.
    Mr. Scott. Okay. Now you mentioned 6.9 percent inflation.
    Mr. Smarr. The average cost of a paid claim is going up by 
6.9 percent per year.
    Mr. Scott. And you compared that to the Consumer Price 
Index.
    Mr. Smarr. 2.6 percent.
    Mr. Scott. Did you compare it to the Health Consumer Price 
Index?
    Mr. Smarr. No, I did not.
    Mr. Scott. Wouldn't that be a more accurate figure to 
compare it to?
    Mr. Smarr. I don't believe it would, sir.
    Mr. Scott. Okay. On the collateral source rule, if a 
wrongdoer has created the problems, the plaintiff has paid a 
premium for the benefit of insurance. Why shouldn't either the 
plaintiff get benefit for that payment or at least get a lower 
premium because Blue Cross/Blue Shield will get their money 
back?
    Mr. Smarr. In health insurance, claims are paid relatively 
soon after the incident, if you will, occurs. Oftentimes they 
are paid within--well, we would hope within a week or a month 
or within the same year. It takes over 5 years to conclude a 
medical malpractice case after the time of the incident. And 
the various flows of cash to pay for the premiums actually 
through the market, adjust themselves to accommodate the true 
costs of the insurance.
    Mr. Scott. So you are saying that the wrongdoer ought to 
get benefit from the plaintiffs--two equal plaintiffs, one with 
health insurance and one without, the benefit of the health 
insurance ought to go to the wrongdoer and not to the 
plaintiff, or Blue Cross/Blue Shield getting the money back?
    Mr. Smarr. No, sir I am not; I don't look at it in----
    Mr. Scott. Under this bill, who gets the benefit of the 
insurance? The wrongdoer, isn't that right?
    Mr. Smarr. The wrongdoer pays for the insurance.
    Mr. Scott. No, the wrongdoer, if there is a--if you caused 
a million dollars' worth of damage and the plaintiff has a 
million dollars' worth of health insurance, who gets the 
benefit of the health insurance? There are three possibilities. 
One, the wrongdoer gets the benefit. Two, the plaintiff gets 
the benefit. And third, Blue Cross/Blue Shield can get their 
money back after the wrongdoer has paid. Your idea is that the 
wrongdoer should get the benefit.
    Mrs. Keller, can you state with specificity what portion of 
your damages were caused by the physician, the hospital, the 
hospital personnel and the ambulance personnel?
    Ms. Keller. Well----
    Mr. Scott. I guess not. That would be an impossible burden 
for you to fulfill, wouldn't it.
    Ms. Keller. Correct. There is no--however, I cannot legally 
hold the ambulance liable even though I was given the bill to 
pay.
    Mr. Scott. And if everybody pointed at the ambulance as the 
cause for your problem, you wouldn't know one way or the other.
    Ms. Keller. Exactly. I also cannot----
    Mr. Scott. Wait a minute. Mr. Smarr, can you explain what 
the rationale is to force the plaintiff to go all over to 
figure out who did what and have a separate duty of care, 
violation of duty of care, and proximate cause for each of what 
in her case could be any number of different persons?
    May I ask for 1 additional minute, Mr. Chairman.
    Mr. Smith. The gentleman from Virginia is recognized for an 
additional minute.
    Mr. Smarr. I am not a lawyer but it is my understanding 
that the courts routinely do apportion fault.
    Mr. Scott. Now, on a joint and several, and you know this--
on a joint and several, if you get one of them good, they are 
responsible for the full damage. And if they want to get 
contribution then they go chasing after everybody on their 
dime, not on the plaintiff's dime. Can you explain to me what 
the rationale is to force the plaintiff, who doesn't know--all 
they know is they went in and an operation was botched. Why is 
it their responsibility to apportion how much of it was the 
anesthesiologist, how much of it was the surgeon, how much of 
it was the nurse; having to call in extra witnesses to prove 
each and every step of the way, and if they miss 5 percent, 
then all the rest just pay 95 percent? What is the purpose of 
that?
    Mr. Smarr. Well, first of all, plaintiff attorneys normally 
name many defendants in a case, many who were not even involved 
in the case sometimes. Secondly, it is not the plaintiff's 
responsibility to apportion fault. That is the duty of the 
court. The court does that.
    Mr. Scott. Well the court does it based on the evidence. 
Mr. Chairman, the witness is not being----
    Mr. Smith. Mr. Scott----
    Mr. Scott. Can I make----
    Mr. Smith. I think the witness has done the best he can to 
answer the question. But the gentleman is recognized for one 
last question.
    Mr. Scott. He did the best he could because he didn't want 
to answer the question.
    The court makes the decision based on the evidence that is 
presented. If no evidence is presented then the plaintiff, with 
the burden of proof, loses. And if you have got 5 percent over 
here and 10 percent over there and 8 percent over here, and if 
you don't prove the 3 percent over there, then you lose on the 
3 percent. If everybody is pointing to an empty chair or a 
bankrupt or uninsured person, then the plaintiff will lose that 
little 3 or 5 percent. The normal law is under joint and 
several, and this is how you apportion insurance anyway--if you 
get one you have got them all. And if they want contribution 
then they go chasing after everybody. But you put that burden 
where the plaintiff doesn't know anything about what happened. 
Isn't that an unfair claim?
    Mr. Smarr. I don't understand. If somebody is not 
responsible, then why should they have to pay?
    Mr. Scott. If they are not responsible, they don't have to 
pay at all.
    Mr. Smarr. I believe that is true, yes.
    Mr. Smith. And, Mr. Scott, the gentleman's time has 
expired.
    Mr. Scott. But they don't have to apportion it.
    Mr. Smith. The gentleman from Ohio, Mr. Chabot, is 
recognized for his questions.
    Mr. Chabot. Thank you, Mr. Chairman. I think we all 
appreciate you holding this very important hearing on a topic 
that is clearly timely.
    While the issues of rising health care cost and dramatic 
increases in medical malpractice rates are a national problem, 
families in my district back in Cincinnati, they have been 
especially hard hit by this crisis. I have spoken with dozens 
of families who are not only facing large increases in their 
insurance premiums, but who are finding it increasingly 
difficult to find specialists to treat their families. I have 
also met with many doctors in my district and they are 
extremely concerned about the rising cost of medical 
malpractice insurance and the potential long-term effects on 
patient care.
    Excessive medical liability costs have had a serious impact 
on the health care system in Cincinnati. Medical malpractice 
insurance rates have skyrocketed in recent years and patients 
are paying the price, unfortunately. And insurance costs rise 
to astronomical levels. Health care providers have been forced 
to pass those costs on to their patients and cut back on 
services and even taken the drastic step in many instances of 
closing their practices. And I have had a number of doctors 
that have told me that is what they have had to do as a result 
of this.
    Today Dr. Palmisano has testified that patient access to 
care had reached the crisis level in Ohio and in 17 additional 
States, due to unrestrained medical malpractice litigation. 
According to the October 2002 Medical Liability Monitor, Ohio 
ranked among the top five States for premium increases.
    In Cincinnati, in my district, physician groups have 
experienced premium increases between 20 and 100 percent in 
recent years. But Cincinnati is not the only community 
confronting this issue, as we know. This rising cost of medical 
liability insurance is a growing national problem and it 
requires a national solution, and that is why we are here 
today.
    Just a couple of questions. Dr. Palmisano, and Mr. Smarr, 
you had a chart up here before, ``America's Medical Liability 
Crisis: A National View.'' I wonder if somebody could put that 
chart back up for a moment. The white States which are at this 
point currently okay according to the chart. Now obviously, 
California is one in which the reform has already been under--
in effect for 25 years now. Could you touch on the other 
States. Are there any similarities? Why the other States; 
Colorado, New Mexico, Louisiana, Wisconsin and Indiana also 
seem to be in better shape than the other States?
    Dr. Palmisano. Yes, sir. Those are all States with caps. My 
State of Louisiana is a State that passed a cap in 1975. It is 
a total cap on damages, but future medicals as incurred vary 
similar to New Mexico's law. Colorado has a cap on noneconomic 
damages. Indiana has a total cap and Wisconsin has a cap on 
noneconomic damages.
    Mr. Chabot. Okay. Do any of the other States that are 
either in trouble, or the yellow States which it says they are 
showing problem signs but aren't necessarily in crisis like the 
red States, have any of those enacted any caps?
    Dr. Palmisano. Yes, sir, they have. Some of the States, for 
instance, Missouri, which has now become a crisis State, it has 
a cap. But the cap is a cap per individual, per claimant. So 
you could have multiple caps in one case. Nevada, which closed 
its level one trauma center on July 3, 2000 for 10 days, it 
went into special session and passed a cap but its cap is also 
per claimant and per doctor. So what we have found is that the 
caps that are fixed caps per incident are the ones that have 
resulted in stability.
    Mr. Chabot. Okay, thank you. Could you identify which 
physician specialties are most affected by the medical 
malpractice crisis that we are discussing today and why those 
particular areas would be in difficulty?
    Dr. Palmisano. Yes, sir. The obstetricians, the 
neurosurgeons, the emergency physicians, because these are the 
ones that--the physicians who are involved with complicated 
procedures, with more risky cases, and the outcome sometimes is 
not the--is not a complete cure. The neurologically impaired 
newborn, for instance, can--if a baby is born with neurological 
impairments there can be multiple suits filed as a result of 
babies being born that way.
    A recent study by the American--ACOG, the obstetricians, 
gynecologists, and the pediatricians, their recent studies show 
that the majority of these had nothing to do with events 
surrounding the birth of the child, but were for other reasons, 
in utero, when the baby was in the uterus.
    Mr. Chabot. Thank you. Mr. Chairman, I ask unanimous 
consent for 1 additional minute.
    Mr. Smith. Without objection, the gentleman from Ohio is 
recognized for an additional minute.
    Mr. Chabot. Thank you. Opponents of the HEALTH Act have 
claimed that capping noneconomic damages prevents patients from 
adequately recovering from their injuries. And as you have 
already discussed to some degree, there are still clearly some 
things which are not capped which there are no limits on. Would 
you discuss briefly, again, what you can recover for and where 
there are no limits?
    Dr. Palmisano. The only limit on the damages in H.R. 5 is 
the noneconomic damages, the ones that can't be quantified.
    Mr. Chabot. You are talking about pain and suffering.
    Dr. Palmisano. Pain and suffering-type damages. But 
certainly all medical costs, all rehabilitation, child care, 
and anything that can be economically documented. And I think 
Chairman Smith has pointed out cases in California where 
multiple millions of dollars have been awarded to an individual 
for the rehabilitation, medical expenses, and so on.
    Mr. Chabot. Thank you very much.
    Mr. Smith. Thank you, Mr. Chabot. The gentlewoman from 
Texas, Ms. Jackson Lee, is recognized for her questions.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman. I 
appreciate all of the witnesses' testimony this morning because 
this is an extremely painful process, particularly for the 
victims that are here. And certainly, Dr. Palmisano, I 
appreciate very much the concerns that physicians have. I 
interact extensively with my local medical community and 
realize the importance of having physicians based in the 
community, in the neighborhoods. And representing a 
particularly poor district in this Nation, we face the crisis 
of health care every day. And so I know this is an important 
hearing.
    Let me start with Mrs. Keller, and I want to thank you very 
much. I am not sure if that is a picture of you behind you. 
Maybe I need to put on--it is not yours. Thank you very much. I 
see that. But let me just raise this point with Mrs. Keller. As 
I understand it, you had initially a botched surgery that 
caused you to be in the doctor's office, and you were being 
examined. Is that correct? You were in the doctor's office?
    Ms. Keller. Yes, I was in the doctor's office. Whether or 
not the surgery itself was botched would be argumentative. No 
sutures were used underneath the layers, which is no longer 
substandard of care.
    Ms. Jackson Lee. So you were in there for an examination; 
is that correct? You were in there for an examination?
    Ms. Keller. No, ma'am. I was--the initial surgery, they did 
not use complete and total suturing procedures, which is what 
caused my wound adhesion there in the office a week later.
    Ms. Jackson Lee. Okay. And so you were inside an examining 
room. That is what I am trying to understand.
    Ms. Keller. Yes, ma'am.
    Ms. Jackson Lee. And then you lost consciousness and you 
fell.
    Ms. Keller. Yes, ma'am.
    Ms. Jackson Lee. Okay. The reason why I wanted to just get 
that clear is I wanted to sort of track the scenario. With that 
in mind, let me sort of call the roll of the many people that 
might be involved. I am not in any way suggesting that we have 
all these names, but the doctor whose examining room you were 
in, the nurses, the hospitals, and the surgical individuals who 
may have done the surgery, the nurses, as I said in the 
doctor's office, the ambulances, the ambulance drivers, the 
emergency room staff, physicians and doctors. Ultimately there 
is a long list that may have had some impact on your present 
condition.
    Ms. Keller. Exactly.
    Ms. Jackson Lee. During part of that time you were in great 
pain and during part of that time you were unconscious; is that 
correct.
    Ms. Keller. Correct.
    Ms. Jackson Lee. So part of the legislation that we are now 
talking about would require you to have been at the fullest 
peak of your health, to have a notepad, taking notes, maybe 
even a camera, taking pictures through the entire process of 
this terrible tragedy that has befallen you; is that correct? 
Would that have had to be the case for you to be knowledgeable 
about who you would point the finger at if this legislation we 
are now having a hearing about would pass?
    Ms. Keller. Precisely.
    Ms. Jackson Lee. And let me offer to you my appreciation 
for your courage for being here. I want to cite for the record, 
Mr. Chairman, my State, the State of Texas, approximately 3 to 
7,000 preventable deaths in Texas each year due to medical 
errors. The preventable medical errors in Texas cost between 
1.3 billion to 2.2 billion. Medical malpractice insurance is 
421.2 million. And we have found that medical malpractice 
claims have dropped in the last 2 consecutive years.
    At the same time, we find that Texas is 49 in the quality 
of care. We find that Louisiana is 51, and California is 44. So 
it is interesting to note that States that have had an impact 
by medical malpractice changes or law changes are still at the 
bottom of the totem pole in terms of access to medical care or 
quality of care. And Texas, of course, remains at the bottom of 
the totem pole as well.
    My question, then, is to Dr. Palmisano, to simply ask this 
one question. If, through the devices of the insurance 
companies, they could devise an investment formula or a pricing 
formula that would eliminate or bring down the costs of 
premiums across the Nation, would that be acceptable to the 
American Medical Association?
    Dr. Palmisano. Well, thank you for the question. The 
American Medical Association wants to make sure that patients 
have physicians, and so it is the escalating rates that cause 
us problems. We also are concerned about the number of cases 
that are filed.
    Ms. Jackson Lee. Doctor, you are not answering my question. 
If the insurance companies devise a formula that would bring 
down the rates, would that be acceptable to the American 
Medical Association?
    Dr. Palmisano. If they were reasonable rates and we didn't 
have a crisis, then the American Medical Association wouldn't 
be here today.
    Ms. Jackson Lee. Thank you. Mr. Chairman----
    Mr. Smith. Thank you, Ms. Jackson Lee. The gentleman from 
Virginia, Mr. Goodlatte, is recognized for his questions.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Gentlemen, I support this legislation because I believe 
that the caps are effective. I think the evidence points to 
that. We have a different type of a cap in Virginia and I think 
it has had some effect in Virginia, and I like the fact that 
that legislation provides some flexibility to the States to 
adjust the amount of the cap on noneconomic losses. But I am 
concerned that I don't think this legislation does a great deal 
to screen out the most frivolous and fraudulent lawsuits.
    If you open up the Yellow Pages here in Washington or any 
other city in the country, you will see ad after ad after ad 
and they have one common theme: It says, ``No fee if no 
recovery'' meaning, no risk to you. So, you know, if you think 
you have got a case, go ahead and take it. Now, the attorney 
has got to impose some screening because they are not going to 
want to take a lot of cases in which they get no recovery. 
However, given the pressures that are on insurance companies to 
settle these cases and given the fact that physicians hate to 
have cases settled that are essentially harmful to their 
reputation if they don't believe that any real malpractice has 
occurred, why isn't there something in this legislation to 
penalize those who bring truly frivolous or fraudulent 
lawsuits?
    Right now in our Federal courts and I imagine in many State 
courts that mirror the rule 11 sanctions in Federal courts, 
those are very weak, they are very rarely applied, and why 
aren't there some greater sanctions in here; for example, some 
form of a loser-pays type of mechanism imposed upon those who 
bring frivolous cases that would encourage insurance companies, 
encourage doctors to be able to defend their case and if they 
win, recover some attorneys' fees and know that because of that 
risk, attorneys on the other side are going to be even more 
diligent in screening out those cases that have no merit?
    Dr. Palmisano.
    Dr. Palmisano. Thank you, sir. Well, certainly, the 
American Medical Association has policy regarding loser pays. 
It is not in this particular bill but we will be glad to submit 
to the Committee our policy on loser pays. We have policy on 
medical--I will read it to you just briefly.
    ``Implementation of the Loser-Pays Rule in Medical 
Liability Litigation. Responsibility for prevailing party's 
legal expenses including attorneys' fees should not be shifted 
to a losing party in medical liability litigation unless (a), 
some provision is made for retrieving fees owed to a prevailing 
party from the losing party's attorney in the event the losing 
party has no available assets; (b), some provision is made to 
calculate fees owed to a plaintiff's attorney on the basis of a 
reasonable value of time expended regardless of the existence 
of a contingency fee arrangement.''
    Mr. Goodlatte. I would love to have a copy of that and I 
would suggest to you that the modified loser-pays provision 
that this Committee has passed out attached to other 
legislation, Y2K liabilities and tort reform passed during the 
Contract With America, would meet those criteria. And I would 
commend to you an examination of that, because I think that is 
a weakness in this matter.
    The second thing that concerns me about this is on the 
other hand, I am not a strong believer in the Government 
stepping in and with regard to an individual's right to 
contract with somebody else, to interfere with that. And this 
bill does put caps on attorneys' fees. Every case is different 
and the merit of whether or not a particular case should be 
taken by an attorney based upon how much work is going to have 
to go into the case is measured into what kind of a contingent 
fee they will charge. And when you start capping that, you are, 
in my opinion, being unfair.
    Now, I understand that the reason for doing that, at least 
one of the reasons is that you are in effect having the 
opportunity to reduce your overall costs if the overall amount 
of money that is paid out by insurance companies is reduced. 
But the same--the same standard applies, it seems to me to 
defense attorneys. Why aren't we capping that? So in my 
opinion, I would not cap defense attorneys' fees. I would also 
not cap plaintiffs' attorneys' fees, and I think that is a 
provision in here that I would prefer not to see.
    And I would welcome Mr. Smarr or Dr. Palmisano's response 
to that.
    Mr. Smarr. Well, insurers try their best, I can assure you, 
to cap defense attorneys' fees. In fact, we pay very close 
attention to that. The plaintiff attorney fees in this bill are 
capped on a sliding scale such that the smaller amounts of 
indemnity amounts that might be paid, the plaintiff attorney 
gets a larger percentage of it. But even so, in a million 
dollar case, the plaintiff attorney still gets $220,000 in 
fees.
    Mr. Goodlatte. But, Mr. Smarr, there are million-dollars' 
cases and there are million-dollars' case. One might be a very 
open-and-shut type of case where you might think the attorney 
has been unjustly enriched with their fee, and there might be 
another million-dollar where it is $900,000 worth of economic 
loss, and the fact of the matter is that that attorney had to 
go to tremendous additional efforts to prove the case and to 
bring in a multitude of witnesses. There might be a multiple 
number of defendants in the case. And you are arbitrarily 
setting that fee based simply on the dollar amount in the case 
without recognizing the fact that there is different amounts of 
work in different cases; just like the defense attorney who in 
an open-and-shut million-dollar case will probably submit a 
small bill because the attorney didn't spend a lot of time on 
it, but another million-dollar case, the attorney might have a 
very substantial bill because a tremendous amount of time was 
put into it.
    Mr. Smarr. I agree that there can be outliers, as you are 
describing. But I think the legislation is intended to treat 
the majority of cases that come forward in some rational 
manner, and this system has worked well in California for over 
25 years.
    Mr. Smith. Thank you Mr. Goodlatte.
    The gentleman from Massachusetts, Mr. Delahunt, is 
recognized for his questions.
    Mr. Delahunt. Mr. Smarr, how do you feel about capping 
CEOs' salaries? You wouldn't.
    Mr. Smarr. I don't think that would apply here.
    Mr. Delahunt. Okay. I see it doesn't apply in this case. 
This legislation also benefits HMOs; is that correct? Mr. 
Smarr.
    Mr. Smarr. Would you say that again, sir?
    Mr. Delahunt. This particular proposal before us benefits 
HMOs; is that correct?
    Mr. Smarr. To the extent that they are included in the 
malpractice claim, yes.
    Mr. Delahunt. Thank you. There have been crises in the 
past, haven't there, in the mid-1970's and the mid-1980's?
    Mr. Smarr. There have been periods where we have seen more 
rapid escalation of multi----
    Mr. Delahunt. Let's call them crises. Would you agree with 
me there have been crises in the past.
    Mr. Smarr. Not to the extent we are seeing today. But if 
you wish, yes.
    Mr. Delahunt. Okay. Is part of the problem the fact--and 
you are correct in your statement in terms of percentage of 
bond holdings that various insurers and insurance companies 
hold, the interest rates have gone down.
    Mr. Smarr. That is true.
    Mr. Delahunt. And is that a significant piece of the 
problem?
    Mr. Smarr. It is a piece of the problem, but at the same 
time bond values have gone up.
    Mr. Delahunt. All right. I understand bond values, but in 
terms of the flow of cash and income, you know when we are 
getting 1, 1\1/2\ percent as opposed to 6 or 7 percent, it 
creates a significant cash flow problem.
    Mr. Smarr. We are getting 4 to 5 percent instead of 7.
    Mr. Delahunt. I want to know where you are getting that 4 
or 5 percent and I will change my portfolio accordingly.
    Mr. Smarr. Long-term corporate bonds.
    Mr. Delahunt. Okay. But, again, those long-term corporate 
bonds, presumably 4 or 5 years ago you'd be getting 9 or 10 
percent. What I am saying is that you know there is great 
disagreement in terms of what is causing this particular spike. 
But there have been crises in the past and we have worked our 
way out of them.
    Let me ask you this. Your association, PIAA, is it a for-
profit organization, or--you said it is owned by physicians and 
other stakeholders in the health care system.
    Mr. Smarr. The PIAA is an association, is a 501(c)(6) 
nonprofit. The insurance company members are insurance 
companies, for-profit companies.
    Mr. Delahunt. Okay. And those insurance companies were for 
profit. To a large degree, they are owned by physicians and 
other health care providers.
    Mr. Smarr. Correct.
    Mr. Delahunt. So they are making a profit obviously on the 
return of their investment.
    Mr. Smarr. Yes, sir. It is necessary that they make a 
profit. Especially----
    Mr. Delahunt. Okay. Thank you. That is all, I just wanted 
to know.
    Why 250,000? How was that calculated in terms of a cap?
    Mr. Smarr. Two hundred fifty thousand is the cap, as you 
know, that was enacted in California.
    Mr. Delahunt. But wasn't that enacted back in 1975?
    Mr. Smarr. Yes, it was.
    Mr. Delahunt. Okay. That is all. I am just--I just want to 
continue because, again, we don't have too much time. I have 
seen various studies, and maybe you could help me with this, 
that indicate that deaths as a result of medical malpractice 
vary from 48,000 annually to 98,000 annually. Which is the 
right figure? Mr. Smarr.
    Mr. Smarr. Well, the 98,000 figure comes from an 
extrapolation of data of the Harvard medical practice study. In 
that study, 171 people were determined to have died partially 
because of----
    Mr. Delahunt. Which figure do you accept?
    Mr. Smarr. I don't accept either one of them, sir.
    Mr. Delahunt. You don't?
    Mr. Smarr. No. There is some number. I agree that there is 
some number, but I don't accept----
    Mr. Delahunt. Is it closer to 48,000 or closer to 98,000?
    Mr. Smarr. I do not know.
    Mr. Delahunt. You don't know. Okay. In terms of 
confidentiality agreements, I understand most of these 
settlements that are made are subject to a confidentiality 
agreement. Would you have any objection to an amendment to the 
bill that would allow confidentiality agreements be at the 
discretion or at the option of the patient?
    Mr. Smarr. I can't comment on that because I am just not 
aware of the nature of those agreements.
    Mr. Delahunt. Okay. And the statute of limitations, why 3 
years? What if--let me give you a hypothetical. What if, for 
example, the injury is not discovered during the course of a 3-
year period?
    Mr. Smarr. It's my understanding it is 3 years from the 
time the injury manifests itself.
    Mr. Delahunt. No, you are wrong. It is from the time the 
injury occurred. Would you be willing to change that, 3 years 
from the date that the injury manifests itself?
    Mr. Smarr. I would have to go and look at the legislation, 
sir.
    Mr. Delahunt. Okay. I just have one final question if I 
may. If 1 year after you found out--and, Mrs. Dyess, I know, 
believe me.
    Mr. Smith. Will the gentleman from Massachusetts yield and 
I will read to him from the legislation?
    Mr. Delahunt. I--what I would like to do is have an 
additional minute because I know my questions, and I just want 
to----
    Mr. Smith. Let me read from the legislation and I will be 
happy to grant you an additional minute.
    Mr. Delahunt. Thank you.
    Mr. Smith. The time for the commencement of a health care 
lawsuit shall be 3 years after the date of manifestation of 
injury or 1 year after claimant discovers, or, through the use 
of reasonable diligence, should have discovered the injury.
    Now the gentleman is granted an additional minute.
    Mr. Delahunt. Well, I thank my friend, the Chairman. I 
really--and I know we all sympathize with what you are saying, 
and it really is a problem that has to be addressed in terms of 
access to health care. I recently met a woman who had a son; 
his name, Steve Olsen. He is a 12-year-old from San Diego who 
is blind and brain damaged because of medical negligence. It 
was proven. When he was 2 years old, he fell on a stick in the 
woods. Steve's doctor gave Steve steroids and sent him home. 
Although his parents asked for a CAT scan, the doctor refused. 
The following day Steve returned to the hospital in a coma 
because of the growing brain abscess he had developed which 
would have been detected had the CAT scan been performed. At 
trial, the jury concluded that the doctor had committed medical 
malpractice and awarded $7.1 million in noneconomic damages. 
Remember, this is a 12-year-old. One of the jurors later 
explained that they saw Steve as a boy doomed to a life of 
darkness, loneliness, and pain. He would never play sports, 
work, or enjoy normal relationships with his peers. He would 
have to endure a lifetime of treatment, therapy, prosthesis 
fitting, and around-the-clock supervision. The judge, however, 
was forced to reduce that damage award to $250,000 because of 
the cap in California. What do you say to that mother? What do 
we say to that mother?
    Ms. Dyess. Do we ever hear about the good cases? Do we ever 
hear anything good about what doctors do? No, we are here to 
hear all the bad. We never hear about the good.
    Mr. Delahunt. No, I am not here to bash or criticize 
doctors. And I even think Mrs. Keller in her testimony 
indicated that it was her neurosurgeon who worked a miracle. 
But this is about--it is not about doctors. It is not about 
lawyers. It is not about anything. And it ought to be about 
potential victims and patients like your husband.
    I yield back.
    Mr. Smith. Thank you, Mr. Delahunt. The gentlewoman from 
Pennsylvania, Ms. Hart, is recognized for her questions.
    Ms. Hart. Thank you, Mr. Chairman.
    Mr. Smarr, you noted in your testimony that 61 percent of 
medical malpractice claims are dropped or dismissed. Do you 
find that this is typical across the spectrum of tort claims in 
all different States? I am interested especially in 
Pennsylvania which is my home. Our insurance rates in 
Pennsylvania have increased over 125 percent over the last 4 
years. Have the dropped or dismissed cases impacted our rate 
jump differently and is that a number that changes from State 
to State?
    Mr. Smarr. It is a number that varies slightly from State 
to State. I spent 13 years working in the Pennsylvania market 
and the numbers there are very similar.
    Ms. Hart. Do you think that the dropped or dismissal rate 
is different in States, you know, some of the like white 
States, for example?
    Mr. Smarr. I don't know. I would have to find out.
    Ms. Hart. I would be interested in knowing that.
    Mr. Smarr. I can get that for you.
    Ms. Hart. If you could possibly find that out for us.
    Ms. Hart. Okay. Dr. Palmisano, I happen to be a graduate of 
a liberal arts college and as a result have a lot of friends 
who practice medicine now. They are all in pretty much a good 
spot in their careers, beginning to take over and beginning 
their own practices. One of my best friends is an OB-GYN who 
told me in November that she was going to cease practicing by 
the end of the year because she had lost insurance coverage and 
didn't see any hope of being able to regain it. Aside from that 
problem--fortunately she found insurance at the very last 
minute and is still practicing, but at a much higher rate. 
Eighty percent of the doctors in Pennsylvania, according to the 
Pennsylvania Medical Society, say they can't even recruit new 
physicians for their practices. Do you see that trend in other 
States? Is it more acute in the red States such as mine?
    Dr. Palmisano. Yes, Ms. Hart. We see that in the States 
that are designated as red States in crisis. In Wheeling, West 
Virginia, for instance when I visited there and I met with the 
family practice residents, every one that I--they brought the 
whole residency crew to meet me and every one of them said that 
they were not going to stay in West Virginia because of the 
liability situation. They were going to go somewhere where it 
was more stable.
    Ms. Hart. Okay. Then, as far as this issue--and you say it 
is actually reaching pretty deeply into health care provision. 
Do you find--and it seems to me, from what I have heard about 
Pennsylvania, for example, the Uniontown Hospital, which is in 
Fayette County, which is a very poor area, now doesn't provide 
any obstetric services. It seems that health care for the poor 
has actually been made significantly worse by this crisis. Do 
you see that happening in other regions across the country? Is 
it adversely affecting the poor even more?
    Dr. Palmisano. Yes. We find that people who would volunteer 
to work in clinics are saying that they are unable to do this 
because of the liability problems and some of these clinics are 
closing. We have heard people come forward and say that they 
wouldn't be able to continue their services because of the 
liability for the clinic. We have had physicians come and give 
statements regarding volunteer work that they wanted to do as 
retired physicians and go into areas where they could help, 
where there was no available physicians in that area, that they 
are--because of the liability climate they are unable to do 
that, and they want to do that. So there are a number of people 
that are willing to do that but they are just concerned about 
the liability system.
    Ms. Hart. I read recently in that vein, a story of a 
physician who had wanted to volunteer, had been consistently 
volunteering like 6 months at a time on Indian reservations 
providing medical services, and just recently, just couldn't do 
it because of the liability costs.
    I have one quick final question, and that is--actually I 
think probably both Mr. Palmisano and Mr. Smarr--regarding the 
claim that California's success in this area is not really due 
to MICRA but due to Prop 103. Do either of you have a comment 
on that?
    Mr. Smarr. Yes, I do. Prop 103, as I testified earlier, was 
an auto initiative that also included malpractice insurers. But 
the crux of this matter is that the malpractice insurers 
reached agreements with the insurance commissioner, and I have 
them here and I would like to present them to be included in 
the record, if you would, that they did not have to roll back 
their rates. They made a one-time return of premium equal to 20 
percent of annual premium to be paid as a dividend. This 
happened at a time when the California malpractice carriers 
were paying dividends in excess of 20 percent. And so it was a 
way to break the logjam to get these unintended targets, or 
nontargets rather, out of the way and to go on and deal with 
the auto carriers which were the real focus of the issue. So 
that is--it just didn't have an effect.
    Mr. Smith. Thank you, Ms. Hart.
    The gentleman from California, Mr. Schiff, is recognized 
for his questions.
    Mr. Schiff. I thank the Chairman and in particular want to 
thank Mrs. Keller and Mrs. Dyess for coming today and sharing 
your personal stories with us. I am from California and very 
familiar with the MICRA law out there, and MICRA did impose 
$250,000 limits but that was a quarter of a century ago.
    Doctor, why wouldn't it be appropriate in this bill to 
remedy what many in California see as a flaw of the MICRA bill, 
that MICRA never had a cost-of-living adjustment? Two hundred 
fifty thousand dollars in California a quarter of a century ago 
was very different than today. Why not add a COLA to this bill?
    Dr. Palmisano. That question comes up on a number of 
occasions and what we note is that the California market is 
stable. It is a proven treatment. We know that the Medical 
Society of New Jersey wanted some advice on some bills that 
were introduced in New Jersey and they called in Tilling Haas 
in the last couple of months, and they said that those 
particular bills would not lower rates. But, they did comment 
on caps. They said that a $250,000 fixed cap would stabilize 
the market and decrease the insurance rates, and they said as 
you increase the noneconomic cap to the point that when this 
reaches $500,000 it no longer has any effect. So, that is a 
recent study done by Tilling Haas.
    Mr. Schiff. That really doesn't answer my question. If you 
put a COLA in this bill, then it doesn't get to $500,000 until 
so many years of cost-of-living increases have gone up. Why not 
have a cost-of-living adjustment in this? Plainly it would have 
the same effect on the insurance premiums. It might not be 
quite as dramatic as without the COLA, but isn't what really is 
going on here is that in California there has been an inability 
to pass a COLA because of the institutional difficulty of 
really changing anything in this area? And isn't the lack of a 
COLA in this bill really premised on the same presumption of 
inaction in Congress, that if we pass this bill with no COLA in 
it, it will be at least another quarter of a century before a 
COLA can be provided? What would be unfair about having a cost-
of-living adjustment so that this amount is not static over the 
years?
    Dr. Palmisano. Well, you know, Missouri did--the State of 
Missouri did pass a cap with--that could increase the cost-of-
living. And now they have become--they are now over $500,000 
with their cap and now have turned into a red State, a crisis 
State. Also in H.R. 5----
    Mr. Schiff. Doctor, is your contemplation, then, that this 
cap should go on indefinitely at this amount?
    Dr. Palmisano. It depends what the future holds. What we do 
know it has a flexi-cap provision.
    Mr. Schiff. Well let me ask you, then, another question. I 
do think there is a crisis and a problem here. What I want to 
make sure is that the solution is one that works over time but 
also addresses the problem. And if I could, Mr. Smarr, the 
presumption is if we pass this bill, insurance premiums go 
down, correct?
    Mr. Smarr. Correct.
    Mr. Schiff. Would you be willing to support a sunset 
provision, that if we pass this bill and, in fact, insurance 
premiums do not go down, that rather than the difference is 
merely pocketed by the insurance companies, that the bill will 
be sunsetted?
    Mr. Smarr. I can't speak to that because I am speaking for 
my organization. I don't know.
    Mr. Smith. Would the gentleman from California yield for a 
second? A few minutes ago Mr. Smarr testified that they may not 
go down. They just may not increase as quickly as projected. So 
you might want to incorporate that into your question. Thank 
you for yielding.
    Mr. Schiff. Well, I mean this is really a part of what I am 
trying to wrestle with, which is are we merely going to be 
enhancing the bottom line of the insurance firms without doing 
anything for the patients that are really at the core of this? 
This seems to be a struggle between the doctors, the lawyers, 
and the insurance companies. And I am not clear that the 
outcome is going to really benefit the patients yet, at least 
from what I have learned thus far.
    Let me ask about one other point, Doctor, if I could, on 
the preemption question. Because after your testimony I went 
through the bill because I wasn't sure I understood the 
preemptive impacts. As I read the language of the section now, 
it provides that State limits on compensatory or punitive 
damages would be allowed to maintain, unless there were no such 
limits, whether you passed them before this bill or after this 
bill. They would continue on and not be preempted. But other 
than that, and defenses that are available to hospitals or HMOs 
or health care providers which would also not be preempted, 
everything else would be preempted. So the rules about 
statutory limitations in States would be preempted. Fair share 
rules would be preempted, contingent fees would be preempted, 
collateral source rule would be preempted.
    Mr. Schiff. The standard for punitive damages might be 
preempted; is that your reading? If the bill says that only the 
amounts will not be preempted, does that mean that this Federal 
law would change the standard for when punitive damages can be 
demonstrated in the 50 States, such that if one State felt that 
to protect its patients, it needed to make it easier for people 
to prove the punitive damages standard, that that would not be 
preempted by what we are doing now?
    Mr. Smith. The gentleman is recognized for an additional 
minute to get an answer to his question.
    Dr. Palmisano. Let me make sure. I will talk to counsel to 
make sure that I know how to answer this properly.
    Thank you for your patience. If there are punitive 
damages--if there are no punitive damages, for instance, in 
Louisiana there are no punitive damages unless someone is 
killed. There are two exceptions, but it has nothing to do with 
medical malpractice; it has to do with someone who is drunk and 
kills someone while driving intoxicated.
    So it would not give punitive damages in the State of 
Louisiana. What it would do is, it--if the State had a lesser 
standard, this would preempt it as far as the punitive damages, 
the way I understand it.
    Mr. Schiff. So that while a State could continue to 
maintain a certain limit on punitive damages, the standard of 
proof that you would have to meet would be preempted by this 
bill?
    Dr. Palmisano. If it was lesser.
    Mr. Schiff. If it was less rigorous. In other words, if 
California or any other State----
    Dr. Palmisano. If it was a less rigorous State law.
    Mr. Schiff. So it is not only the naked amounts of the 
damages that are not preempted, but the level of protection 
that a State wishes to give in terms of how it defines when 
punitive damages should be awarded, that would be preempted, as 
well as all of the other provisions that I mentioned?
    Dr. Palmisano. That is correct, talking to legal counsel, 
yes.
    Mr. Smith. Thank you.
    The gentleman from Michigan, the Ranking Member of the 
Judiciary Committee, Mr. Conyers, is recognized for his 
questions.
    Mr. Conyers. Thank you, Mr. Chairman.
    I want to thank Mrs. Keller and Mrs. Dyess for being here 
today. Their testimony was very important. We appreciate you 
helping us out.
    Now, I want to talk to the President-elect of the AMA, who 
is a renowned jazz aficionado from New Orleans. And I 
appreciate my earlier talks with him.
    But this conversation is about a board of trustees of the 
American Medical Association, Report 35, that responds to 
Resolution 212 instructing the board of trustees to make 
professional liability reform the association's highest 
priority and to report back to the House of Delegates on the 
activities initiated.
    And here is the part that we have to talk about. For 
several years, insurers kept prices artificially low while 
competing for market share and new revenue to invest in a 
booming stock market. As the bull market surged, investments by 
these historically conservative insurers rose to 10.6 percent 
in 1999, up from a more typical 3 percent in 1992.
    With the market now in a slump, the insurers can no longer 
use investment gains to subsidize low rates.
    The industry reported realized gains of $381 million last 
year, down 30 percent from the high point in 1998, according to 
the A.M. Best Company, one of the most comprehensive sources of 
insurance industry data. Remember that?
    Dr. Palmisano. Yes, sir.
    Mr. Conyers. Okay. And this phrase, or this sentence, 
``Insurers now acknowledge their miscalculation. 'We should 
have raised prices sooner,' said Mike Miller, the senior 
executive in charge of liability coverage at the St. Paul 
Companies.''
    Remember that?
    Dr. Palmisano. Yes, sir.
    Mr. Conyers. Okay. But in your testimony, Mr. President, 
you made no reference to the economic circumstances that have 
caused malpractice insurance premiums to rise.
    Is that--well, you tell me why there was no reference made.
    Dr. Palmisano. Well, when--this was in the annual report 
2002, Mr. Conyers--and it is good to see you again, sir. We did 
cite the latest information that we could get in our written 
testimony, which talks about the investment income being 
stable. We continue to gather information and knowledge.
    But even if you take this statement, as--the statement that 
the insurers failed to raise the rates sooner, we would have 
had the crisis sooner, because the rates are determined, 
according to these experts, by frequency and severity in the 
defense costs.
    Mr. Conyers. So that is why you left it out?
    Dr. Palmisano. We didn't leave it out intentionally. We are 
just trying to give you something that is the latest 
information that we have.
    Mr. Conyers. I appreciate it.
    If you get any new information along these lines, would you 
make it personally available to me?
    Dr. Palmisano. Yes, sir.
    Mr. Conyers. I am not able to make too many of those 
meetings.
    Dr. Palmisano. Thank you, I will.
    Mr. Conyers. Now, Mr. Smarr, this is known as true or 
false: A comparison of States that have enacted severe tort 
restrictions and those that have not reformed found no 
correlation between tort reform and insurance rates?
    Mr. Smarr. I am not aware of the study.
    Mr. Conyers. But are you aware of the statement?
    Mr. Smarr. I am aware of----
    Mr. Conyers. Is it true or false?
    Mr. Smarr. If it is the statement that I am aware of, then 
that statement is false.
    Mr. Conyers. Okay. Are you aware of the Center for Justice 
and Democracy?
    Mr. Smarr. I am.
    Mr. Conyers. They are the ones that did the report.
    Mr. Smarr. Then the statement is false.
    Mr. Conyers. Because of who it came from?
    Mr. Smarr. Because I have reviewed the work of the Center 
for Justice and Democracy, and I do not agree with it.
    Mr. Conyers. Okay. I see.
    Number two: Some of the resisting States have experienced 
lower increases in rates while some States that enacted tort 
reforms experienced higher rate increases relative to national 
trends. True or false?
    Mr. Smarr. If the source is the Center for Justice and 
Democracy, I do not agree.
    Mr. Conyers. Well, suppose it wasn't from them.
    Mr. Smith. The gentleman is recognized for an additional 
minute.
    Mr. Conyers. But, I mean, in your experience, we are not 
testing the Center for Justice and Democracy, we are testing--
we are trying to seek your experience in this market, of which 
you are a professional, to determine whether you agree with 
these, regardless of where it came from.
    Do you want me to read it again?
    Mr. Smarr. Please.
    Mr. Conyers. Some of the resisting States experienced lower 
increases in insurance rates, while some States that enacted 
tort reforms experienced higher rate increases relative to the 
national trends.
    Mr. Smarr. That statement could be true depending on the 
context and the States.
    Mr. Conyers. All right.
    Mr. Smith. If you will yield, I will grant the gentleman 2 
additional minutes and hope he can conclude.
    Mr. Conyers. I thank you for your kindness.
    In the practice of internal medicine, States with caps on 
damages in some States had higher premiums than States without 
caps.
    Mr. Smarr. Again, sir, it would depend upon the analysis. I 
have seen studies that show that those are not truthful 
analyses.
    Mr. Conyers. Uh-huh. So what do you think about this as a 
general proposition?
    Mr. Smarr. I think, in general, sir, that States that have 
adopted tort reforms have lower rates and have lower rates of 
increase than States that have not adopted tort reforms.
    Mr. Conyers. Good. Thank you very much.
    Okay. Two more and we are through.
    For general surgeons, insurance premiums have been 2.3 
percent higher in States with caps on damages.
    Mr. Smarr. I don't know that that is true.
    Mr. Conyers. Okay. And here is the last one. On average, 
malpractice premiums have been no higher in the 27 States that 
have no limitations on malpractice damages than in the 23 
States that do have such limits.
    Mr. Smarr. Again, I don't know that that is true.
    Mr. Conyers. All right. Well, you have done very well on 
this true and false test. I want to compliment you.
    And I want to thank the Chairman for the additional time.
    Mr. Smith. Thank you, Mr. Conyers.
    Before we adjourn, I want to recognize two Members so that 
they can each ask an additional question. And what I would ask 
them to do is to keep the exchange short out of fairness to the 
Members who have already left, because they were not expecting 
to be able to ask additional questions.
    The first person to be recognized is the gentleman from 
Virginia, Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. And, I will just ask a 
somewhat brief question. We are talking on the joint and 
several problem.
    If Mr. Smarr could indicate what the costs would be in 
terms of expert witness fees to prove all of the cases--in Mrs. 
Keller's case, against the physician, a nurse, an ambulance 
driver, hospital, the neurologist, emergency room at the 
hospital. About what kind of expert witness fees are we talking 
about, and whether or not, under the bill, those fees would be 
covered by--within the attorneys' fees limitation, or would the 
plaintiff just have to pay these out of whatever was left of 
the settlement?
    Mr. Smarr. Those fees--expenses are not paid, generally, 
out of the contingency portion of an award; they are in 
addition to the award.
    As to the level of those fees, I have never seen any data 
on plaintiff expert witness fees and the like. I don't know 
that it is published.
    Mr. Scott. You have expert witness fees on the defense 
side?
    Mr. Smarr. Yes, we do.
    Mr. Scott. How much do you pay your doctors to testify?
    Mr. Smarr. I can't give you an accurate answer. But I do 
have that data, and I will provide it to you and to the 
Committee.
    Mr. Smith. Thank you, Mr. Scott.
    The gentlewoman from Texas, Ms. Jackson Lee, is recognized 
for her question.
    Ms. Jackson Lee. As I indicated, I read some numbers into 
the record that show that whether or not you are in a crisis or 
not, the quality of care, or the quality of care in terms of a 
particular State is no better, no worse--Texas, 49th in quality 
of care; Louisiana, 51; and California, 44. In those States, 
those last two States have implemented some sort of reform.
    Mr. Smith. Are those figures, are they quality of care or 
expenditures, median expenditures?
    Ms. Jackson Lee. Quality of care.
    Mr. Smith. Who did the rankings of those?
    Ms. Jackson Lee. Quality of care, it was reported in the 
Journal for the American Medical Association. It was--the 
source is the American Health Quality Association on Care 
Delivered to Medicare Beneficiaries.
    Mr. Smith. Thank you.
    Ms. Jackson Lee. I don't have a quarrel, Dr. Palmisano, 
with you and the victims that are here in this room. I think 
the important point is, how can we resolve you being able to do 
your job weeding out bad doctors, promoting good doctors and 
saving the lives and helping these victims? So, Mr. Smarr, let 
me ask you these questions regarding who my quarrel actually is 
with.
    First of all, I would like you to provide us with a 5-year 
reading of the profits of your organization. I don't know if it 
is in your documentation. I did not see it. But I would like to 
know whether you would accept amendments regarding the idea 
that if a physician has had a clean record, as many of the 
physicians in my congressional district have had, that they 
will be guaranteed not only a, if you will, tabling or staying 
of their rates, but a decrease in their rates and, as well, 
that we would put in the language that those rates would remain 
in place for 5 years.
    In addition, I would like to ask you the question as to how 
serious is the consideration--I know you are a corporation, and 
I am not sure what the incorporation status is--of your need 
for profits over the ability to ensure those who are seeking 
insurance?
    My understanding is--from the physicians in my community is 
that basically no matter how well they practice medicine the 
insurance rate goes up, up and up, regardless of whether they 
are making profits or not, and mostly it goes up because you 
are attempting to make profits as opposed to serving as 
physicians and helping victims.
    Mr. Smarr. Well, most of the doctors in Texas are insured 
by the Texas Medical Liability Trust, which is a physician-
owned----
    Ms. Jackson Lee. Let us not speak to the Texas issue. I 
just used them as an example.
    I want to ask whether your organization would accept those 
amendments of staying--of decreasing the cost of any physician 
who could show that they have not been sued and, as well, 
staying those costs for 5 years; and also to give me your 
record of profits over the last 5 years.
    Mr. Smarr. The record of profits, I will be glad to provide 
to you. In fact, that is stated in my written testimony, the 
first exhibit.
    Secondly, in terms of freezing rates for physicians that do 
not have claims experience, I can't commit to the members of my 
association that that would do that. But I----
    Ms. Jackson Lee. Wouldn't that be reasonable, that if you 
are not a problem, that your rates should not go up?
    Mr. Smith. We have been generous in allowing you extra 
time. But we will need to conclude our----
    Ms. Jackson Lee. I appreciate it, Mr. Chairman. I will let 
him answer the question.
    Isn't that reasonable, Mr. Smarr?
    Mr. Smarr. It is reasonable. It is being done now. Because 
insurers do employ merit rating plans where doctors that have--
do not have significantly adverse loss experience either 
receive discounts, or those doctors that do have significantly 
adverse loss experience receive surcharges.
    Ms. Jackson Lee. So you wouldn't mind its being federalized 
in this bill?
    Mr. Smith. The gentlewoman's time has expired.
    Ms. Jackson Lee, your time has expired.
    Ms. Jackson Lee. Thank you.
    Mr. Smith. I would like to thank all Members for their 
participation today, and also our witnesses for their input. 
You have been instructive and revealing, which will be helpful 
to us as we consider the HEALTH Act.
    The Judiciary Committee stands adjourned.
    [Whereupon, at 11:30 a.m., the Committee was adjourned.]
                            A P P E N D I X

                              ----------                              


              Statements Submitted for the Hearing Record

        Prepared Statement of the Alliance of Specialty Medicine
          assessing the need to enact medical liability reform
    Chairman Sensenbrenner, and Members of the Committee, the Alliance 
of Specialty Medicine, a coalition of 13 medical organizations 
representing over 160,000 specialty care physicians in the United 
States, appreciates the opportunity to comment on the impact that our 
current medical litigation system is having on patient access to 
medical care and the need to enact medical liability reform 
legislation. The Alliance would also like to take this opportunity to 
thank you for the leadership that you and your committee have shown on 
this issue. We believe that the reforms contained in HR 5, the Help, 
Efficient, Accessible, Low Cost, Timely Health Care Act, which were 
approved by your Committee last year, will go a long way to solve the 
current medical liability crisis.
    And it is a crisis. The media now report on a daily basis that the 
situation has become so critical that many physicians are forced to 
limit services, move to other states where the medical liability system 
is more stable, or retire altogether. Much of the ``face'' of this 
crisis has centered around the great difficulties that pregnant women 
are having in finding obstetricians to deliver their babies, but the 
simple truth is that this is a problem that potentially affects all of 
our citizens: the mother whose little boy has fallen off of the jungle 
gym and needs an orthopaedic surgeon to fix his broken arm; the 
teenager who has been in a serious car accident and needs a 
neurosurgeon to treat his severe head injury; the woman who needs a 
pathologist to evaluate her Pap smear to screen for cervical cancer; 
the elderly man who has a poor heart and needs a cardiologist or 
cardio-thoracic surgeon to unblock a clogged artery or replace a 
failing valve; the woman who has a family history of breast cancer and 
needs a radiologist to perform a mammography to make sure she is cancer 
free; the business man who needs a gastroenterologist to treat his 
ulcer; the man who needs a urologist to screen for prostate cancer; and 
the list goes on and on.
LCause of the Crisis: The Current Medical Litigation System is Out of 
        Control
    The root cause of this problem is quite simple: the unrestrained 
escalation of jury awards and settlements, in even a small number of 
medical liability cases, is driving up doctors' liability insurance 
premiums and is forcing some insurance companies out of business 
altogether. This problem is making it difficult, and sometimes 
impossible, for doctors to obtain affordable liability insurance so 
they can remain in practice. Adding to this is the fact that doctors 
distrust and fear the medical litigation system, causing them to alter 
the way they deliver medical care to their patients, and in some cases 
this fear is causing doctors to cease practicing altogether. There is a 
wide body of evidence to substantiate these conclusions:

    Medical Liability Awards are On the Rise

    LMedical liability awards have been growing steadily, and according 
to Jury Verdict Research data, from 1994 to 2000 the median jury award 
rose by 176 percent. The number of mega-verdicts is also on the rise, 
with the proportion of million dollar plus awards increasing 
dramatically over this same time period. In 1996, 34 percent of all 
jury awards exceeded $1 million. Four years later, the number of 
million dollar awards increased to 52 percent, and the average jury 
award in 2000 was nearly $3.5 million.

    Medical Liability Insurance Premiums are Skyrocketing

    LIt is clear that the increasing number of multi-million dollar 
jury awards is driving up the costs of medical liability insurance and 
insurance companies are now paying out approximately $1.40 for every 
premium dollar collected. Obviously, this is not sustainable, and this 
trend is therefore forcing insurance companies, which must set their 
rates based on anticipated future losses, to steeply increase doctors' 
medical liability premiums to ensure adequate reserves to pay future 
judgments. As a result, over the past several years, physicians across 
the country have faced double, and sometimes triple, digit rate 
increases. Alliance members, including high-risk specialists like 
neurosurgeons, orthopaedic surgeons and emergency physicians, have been 
disproportionately affected by these premium increases. For example:

     According to a national survey of neurosurgeons, between 
2000 and 2002 the national average premium increase was 63%, from 
$44,493 to $72,682. In some states, neurosurgeons are now paying 
medical liability insurance premiums in excess of $300,000 per year.

     Utah orthopaedic surgeons have seen medical liability 
rate increases of 60% since last year and in Texas they are rising by 
more than 50 percent. In Pennsylvania, a survey conducted in June 2002 
revealed rate increases as high as 59 percent. In other areas of the 
country, orthopaedic surgeons are finding that their premiums have 
risen by over 100 percent, even if they have never had a claim filed 
against them.

     Over the past several years, over 95 percent of emergency 
medicine physicians have experienced medical liability premium 
increases, with approximately 69 percent facing increases between 60 to 
500 percent. This is attributed to the fact that emergency medicine 
physicians are almost always named in any litigation that arises from a 
patient encounter that begins in the emergency department. Since most 
hospital admissions now come through the emergency department, these 
doctors are experiencing steep premium rises even though the lawsuits 
against them may have no merit and result in either dismissal or a 
defendant's verdict.

     Even those specialists who are not in high-risk 
categories are affected by this upward trend in premium costs. For 
example, 80 percent of recently surveyed dermatologists reported that 
their premiums increased last year and those dermatologists who were 
insured by a state plan were paying nearly double what their colleagues 
were paying in the private market.

    Medical Liability Insurance is Unavailable

    LNot only are medical liability insurance premiums rising at 
astronomical rates, but many doctors are also finding it increasingly 
difficult to obtain medical liability insurance at any price. Citing 
the increases in liability losses, several companies, including, St. 
Paul, MIXX, PHICO, Frontier Insurance Group and Doctors Insurance 
Reciprocal, have recently stopped selling medical liability insurance 
or have gone out of business, leaving thousands of doctors scrambling 
to find replacement coverage. Of the companies that have remained in 
the market, many are no longer renewing insurance coverage for existing 
policyholders and/or they are not issuing new insurance policies to new 
customers. This is particularly true in states that have no effective 
medical liability reform laws in place, where, for instance, in 
Mississippi fifteen insurers have left the market in the past five 
years. Alliance members have witnessed the impact of this problem first 
hand. For example:

     In 2002, nearly 40 percent of orthopaedic surgeons in 
Pennsylvania were not able to renew their medical liability coverage 
with the same carrier and 31 percent did not find new coverage. Close 
to 50 percent of Pennsylvania orthopaedic surgeons have reported that 
their liability policies will not be renewed for 2003.

     In 2002, 15 percent of dermatologists experienced 
difficulties securing their liability insurance. In some cases, 
dermatologists in solo practice who have never even been sued were 
forced to turn to the state for coverage because the remaining insurers 
in their area made a blanket decision to no longer insure solo practice 
physicians, regardless of specialty.

     Today in Mississippi, the only way a neurosurgeon can 
even be considered for coverage is if he or she joins an existing group 
that already is covered by the state medical society's insurance 
company. The other two companies providing insurance coverage in 
Mississippi will not issue new policies for neurosurgeons at all. In 
addition, neurosurgeons in Florida have been unable to obtain medical 
liability insurance at any cost, forcing them to ``go bare'' or self-
insure.

     Recently one internationally-recognized pathologist, who 
has never had a claim filed against him, was turned down by three 
insurers and a fourth offered him a policy that was simply too 
expensive.

     Three of four insurance carriers with the largest market 
share in Missouri have stopped writing policies in that state. This 
means that physicians can often obtain a quote from only one company. 
For example, one group of 12 cardiologists could get only one quote 
with an 80 percent increase for 2003.

    Medical Litigation System Breeds Fear in Doctors

    LGiven the litigious nature of our society, every physician faces 
the reality that he or she may at some time be named in a medical 
liability lawsuit, whether meritorious or not, and the current medical 
litigation system breeds fear in all doctors. This fear of litigation, 
particularly among high-risk specialists, is a contributing factor in 
doctors' decisions to change the way in which they are practicing 
medicine. Data from a 2002 Harris Interactive study conducted for the 
Common Good, a bipartisan legal reform organization, validates this 
point. According to the data, nearly all physicians feel that 
unnecessary care is provided because of fear about litigation. To 
protect themselves in the event that they might be sued:

     91 percent of doctors are ordering more tests than are 
medically needed;

     85 percent of doctors refer patients to specialists more 
often than is necessary; and

     73 percent of doctors suggest that patients have invasive 
procedures to confirm medical diagnoses

    LThe report aptly concludes: ``From the increased ordering of 
tests, medications, referrals, and procedures to increased paperwork 
and reluctance to offer off-duty medical assistance, the impact of the 
fear of litigation is far-reaching and profound.''
Result of the Crisis: Patient Access to Medical Care is in Jeopardy
    There are many casualties of the current medical liability crisis--
but those affected the most are patients. Because the medical 
litigation system is broken, across the nation patients are finding it 
harder and harder to get access to the care they need, when they need 
it. As medical liability insurance becomes unaffordable or unavailable, 
more and more doctors, especially specialists, are no longer performing 
high-risk procedures, or they are being forced to move their practices 
to states with stable medical liability systems, or they are simply 
retiring from medical practice--all of which seriously impede patient 
access to care. Once gone, these doctors are hard to replace, and those 
states currently facing a medical liability crisis are having a 
difficult time recruiting new physicians to their communities adding to 
the shortage of doctors in many parts of the country. The combination 
of these factors is also now severely straining our nation's already 
stressed emergency medical system, as patients who have no access to 
doctors inevitably end up on the emergency department's doorsteps, 
further exacerbating the hospital emergency department overcrowding 
problem. A growing list of examples demonstrates just how serious this 
crisis is becoming:

    LDoctors are No Longer Performing Complex and High-Risk Medical
    LProcedures

     According to a nationwide survey conducted last year, 43 
percent of neurosurgeons reported that they are no longer performing 
high-risk surgery such as treating brain aneurysms, removing brain and 
spinal tumors, or complex spinal surgery. In addition, many 
neurosurgeons are no longer serving on-call to hospital emergency 
departments or operating on children.

     A recent survey found that 55 percent of orthopaedic 
surgeons nationwide have reduced the type of operational procedures 
they perform, with 39 percent avoiding performing spine surgery and 48 
percent altering their practice in other ways, including eliminating 
emergency room call or trauma call.

     The elderly are particularly affected, as decreases in 
reimbursements for complex medical procedures have declined to the 
point where Medicare no longer even covers the cost of medical 
liability insurance. Specialists with a high volume of Medicare 
patients, such as cardiologists and cardio-thoracic surgeons, and their 
patients who need high-tech, lifesaving heart therapy, will feel the 
effects the most.

    Doctors, Trauma Centers and Other Medical Providers are
    Closing their Doors

     In the case of neurosurgery, in 2001 alone, 327 board 
certified neurosurgeons retired, representing an alarming 10 percent of 
the neurosurgical workforce in the United States. Recently, the only 
neurosurgeon practicing at Cottonwood Hospital in Salt Lake City, Utah 
quit practicing following a steep insurance premium increase.

     Recent press accounts are replete with stories about the 
closure of trauma centers in Pennsylvania, West Virginia, Nevada, 
Mississippi, Missouri and Florida because of a shortage of orthopaedic 
surgeons, neurosurgeons and other specialists available to provide 
emergency medical care. Chicago's trauma centers are also now 
vulnerable to closing or downgrading their status.

     In the last 18 months, nearly 700 mammography facilities 
have closed nationwide. The continued and steady closing of mammography 
facilities throughout the country has led to increased waiting times 
for women seeking both screening mammograms and diagnostic mammograms. 
The longer waiting times are now on the brink of affecting clinical 
outcomes for those women who must wait for a possible diagnosis of 
breast cancer.

    Doctors are Moving to States with a More Favorable Medical 
Liability
    Climate

    LEvery state that is experiencing a medical liability crisis 
reports that doctors are leaving in droves in search of another 
location in which to practice where the medical litigation climate is 
more favorable. The list of states experiencing the exodus of doctors 
continues to grow, and as with other elements of this crisis, 
specialists are most likely to ``hit the road'' in search of a safe 
haven state. For instance:

     Pennsylvania has been especially hard hit, and some 
counties no longer have any practicing orthopaedic surgeons. For 
example, Bedford County's only orthopaedic surgeon left the state in 
October 2001, and Pike and Monroe Counties are down from nine to five 
orthopaedic surgeons. Huntingdon County has just one orthopaedic 
surgeon remaining to take trauma call at two hospitals. The situation 
is the same in West Virginia, and a number of orthopaedic surgeons 
either have left the state or are scaling back their practices. At the 
end of 2002, five orthopaedic surgeons in Parkersburg moved their 
practice to Ohio.

     Neurosurgery's survey data show that nearly 19 percent of 
practicing neurosurgeons either plan to, or are considering, moving 
their practice to another state where the medical liability costs are 
relatively stable. Mississippi, for instance, has lost 35 percent of 
its neurosurgeons in the past two years, and the flight of 
neurosurgeons from Pennsylvania and West Virginia mirrors the 
Mississippi experience.

    The State of America's Health Now and in the Future is at Risk

    LThe combination of all the above factors is clearly placing the 
health of our nation's citizens at considerable risk. Because of the 
medical liability crisis, more and more people are finding it difficult 
to get the specialized medical attention they need, when they need it. 
This is causing a national health care emergency. Thus:

     When patients can't find a specialist close to home, they 
must sometimes travel great distances, often going out of state, to get 
their medical care.

     When fewer specialists are available, hospital emergency 
departments and trauma centers must shut their doors, and patients with 
emergency medical conditions lose critical life-saving time searching 
for an available emergency room.

     When specialists stop performing high-risk medical 
services, patients are often referred to academic medical centers, and 
these medical facilities are already overburdened and are ill equipped 
to handle the increase in patient volume.

     When specialists retire at an early age, the looming 
shortage of doctors is accelerated, which, if left unchecked will place 
additional burdens on the health care system as the population ages and 
requires more medical care from an increasingly shrinking pool of 
practicing doctors.

     When the practice of medicine becomes so uninviting, 
fewer and fewer of our nation's best and brightest will want to become 
doctors, thus jeopardizing our country's status as one of the finest 
health care systems in the world.
Scope of the Crisis: A National Problem that Requires a Federal 
        Solution
    Those who oppose federal legislation to address this crisis cite 
various reasons to support their contention that this is not a national 
problem that merits a federal solution. In particular, they note that 
the regulation of insurance and health care are generally state issues, 
and therefore principles of Federalism preclude federal legislation to 
address this problem. They are, however, wrong. The undisputed truth is 
that this problem now touches nearly every American and a federal 
solution is therefore a national imperative. As the following 
demonstrate:

    Nearly All States are Facing a Medical Liability Crisis

    LThe AMA has identified 12 states that are in a medical liability 
crisis for all physicians. These include: Florida, Georgia, 
Mississippi, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, 
Texas, Washington and West Virginia. However, for many high-risk 
specialties, like neurosurgery and orthopaedic surgery, the situation 
is even more widespread than the AMA reports. A 2002 national survey of 
neurosurgeons identified 25 states that are in a severe medical 
liability crisis, with an additional 12 states in potential crisis. In 
addition to those identified by the AMA, the crisis states for 
neurosurgery include: Alabama, Arkansas, District of Columbia, 
Illinois, Kentucky, Missouri, New Hampshire, North Carolina, South 
Carolina, Rhode Island, Tennessee, Utah and Virginia.

    Every American Pays for the Costs of the Current Medical
    Litigation System

    LAccording to the U.S. Department of Health and Human Services 
(HHS), in its report entitled, ``Confronting the New Health Care 
Crisis: Improving Health Care Quality and Lowering Costs by Fixing our 
Medical Liability System,'' the current medical litigation system 
imposes enormous direct and indirect costs on the health care system. 
These costs are passed on to all Americans in the form of increased 
health insurance premiums, higher out-of-pocket medical expenses and 
higher taxes. The report estimates that enacting federal medical 
liability legislation could save between $60-108 billion in health care 
costs each year. These savings would in turn lower the cost of health 
insurance and make health care more affordable and available to many 
more Americans.

    Federal Medical Liability Reform Will Save the Federal Government
    Money

    LEach year, the Federal Government pays for the increased costs 
associated with the current medical litigation system through various 
health care programs, including Medicare, Medicaid, Community Health 
Centers and other health care programs for veterans and members of the 
armed forces. The Department of Health and Human Services estimates 
that the direct cost of medical liability insurance coverage and the 
indirect cost of defensive medicine, increases the Federal Government's 
costs of these health programs by $28.6 to $47.5 billion each year. In 
the above referenced report, HHS estimates that if reasonable limits 
were placed on non-economic damages, it would reduce Federal Government 
spending by $25.3 to $44.3 billion per year. The Congressional Budget 
Office (CBO), in its cost estimate of HR 4600, the HEALTH Act of 2002, 
confirms that passage of federal medical liability reform legislation 
that includes a cap on non-economic damages will increase federal tax 
revenues, and at the same time reduce the costs of federal health care 
programs.

    States Face Significant Barriers to Implementing Medical Liability
    Reforms

    LMany states face barriers--some legal and some political--to 
enacting effective medical liability reform laws. Some states, 
including Texas, Florida, Ohio and Pennsylvania, have enacted medical 
liability reform laws, only to have their state Supreme Courts strike 
them down as unconstitutional. New laws passed by Mississippi and 
Nevada face certain court challenge, and it will be years before it is 
determined whether these laws pass state constitutional muster. 
Finally, in some other states, the issue has become a political one, 
effectively killing any chances for passage. As a consequence, despite 
the increasing medical liability crisis in many of these states, they 
are effectively powerless to act to effectively solve the problem.
Solution to the Crisis: Medical Liability Reform Legislation Patterned 
        After California's MICRA
    Fortunately, Congress does not need to start from scratch and 
identify and implement a solution that is untested. Faced with a 
similar crisis in the early 1970's, the state of California, with 
bipartisan support, enacted the Medical Injury Compensation Reform Act 
or MICRA. The key elements of MICRA include:

         Providing full compensation for all economic damages, 
        including medical bills, lost wages, future earnings, custodial 
        care and rehabilitation;

         Placing a fair and reasonable limit of $250,000 on 
        non-economic damages, such as pain and suffering;

         Establishing a reasonable statute of limitations for 
        filing a lawsuit;

         Allowing for periodic payments of damages rather than 
        lump sum awards; and

         Ensuring that the bulk of any award goes to the 
        plaintiffs, not attorneys

        The clear and simple truth is that MICRA works. For nearly 
        three decades, this law has ensured that legitimately injured 
        patients get unfettered access to the courts and receive full 
        compensation for their injuries, while at the same time 
        providing stability to the medical liability insurance market 
        to ensure that doctors can remain available to care for their 
        patients. In a similar manner, the HEALTH Act will ensure that 
        patients and doctors nationwide will reap the benefits of this 
        rational approach to solving the professional liability crisis.
    Consider the following points about the effectiveness of MICRA:

    LMICRA Fully Compensates Injured Patients

    LFirst and foremost, under MICRA, patients receive full 
compensation for legitimate injuries resulting from medical negligence. 
Detractors of federal reform legislation are attempting to obfuscate 
the facts by scaring the public and policymakers into believing that 
injured patients will only receive a maximum of $250,000 to compensate 
them for their injuries. This is simply not the case. Patients receive 
full compensation for all of their quantifiable needs, with up to an 
additional $250,000 for non-economic damages, such as pain and 
suffering. To demonstrate this fact, the Californians Allied for 
Patient Protection recently compiled a sample of total awards 
(including both economic and non-economic damages) provided to injured 
patients. For example:

        December 2002
        $84,250,000 total award
        Alameda County
    5-year-old boy with cerebral palsy and quadriplegia because of 
            delayed treatment of jaundice after birth.

        October 2002
        $59,317,500 total award
        Contra Costa County
    3-year-old girl with cerebral palsy as a result of birth injury.

        July 2002
        $12,558,852 total award
        Los Angeles County
    30-year-old homemaker with brain damage because of lack of oxygen 
            during recovery from surgery.

        November 2000
        $27,573,922 total award
        San Bernardino County
    25-year-old woman with quadriplegia because of failure to diagnose 
            a spinal injury.

    MICRA Significantly Minimizes Premium Increases

    LOpponents of reform cite statistics that over the past several 
years, premiums for doctors in California have also been rising; thus 
proving that MICRA does not have any impact in holding down the costs 
of medical liability insurance. While it is true that premiums are on 
the rise in nearly all states, including California, the rate of 
increase of premiums for California doctors is significantly lower than 
in other states, and over time, MICRA has, in fact, stabilized medical 
liability insurance premiums as compared to the rate of increase in the 
rest of the country. As the following chart demonstrates, from 1976 to 
2000, premiums for physicians in California have risen only 167 percent 
as compared to an increase of 505 percent for the entire United States.




    Data collected from high-risk medical specialties from 2000 to 2002 
also validate these trends. For example, according to a nationwide 
survey of neurosurgeons, the national average premium increase for 
California neurosurgeons was 39 percent as compared to 63 percent for 
neurosurgeons in the entire country. In addition, the same survey 
clearly demonstrated that the rate of increase for an individual 
neurosurgeon in Los Angeles, California, as compared to other 
neurosurgeons who practice medicine in crisis states where there are no 
reforms in place, is significantly lower. The average rate of increase 
for the neurosurgeons in these non-reform states was 143 percent as 
compared to just 8 percent in Los Angeles, CA.




    The Alliance does acknowledge that despite the successful reforms 
contained in MICRA, the average medical liability claim in California 
has outpaced the rate of inflation. This is in large part due to the 
fact that economic damages are not limited under MICRA and have grown 
as a component of medical liability claims. Notwithstanding this, 
however, the undisputed fact remains that MICRA prevents runaway juries 
from awarding outrageous awards for subjective, arbitrary and often 
unquantifiable non-economic damages, which allows insurance companies 
to adequately predict future lawsuit awards, bring stability the health 
care delivery system.

    Federal Government Validates that MICRA Works

    LU.S. Government experts agree that MICRA does in fact hold down 
the costs of medical liability insurance, and over the years there have 
been a number of studies that have identified MICRA's $250,000 cap on 
non-economic damages as a critical element in stabilizing premium 
costs. For example, dating back to September 1993, the former U.S. 
Office of Technology Assessment (OTA), in a report entitled, ``Impact 
of Legal Reforms on Medical Malpractice Costs,'' concluded that caps on 
damages were consistently found to be an effective mechanism for 
lowering medical liability insurance premiums. Most recently, the 
previously referenced HHS report, ``Confronting the New Health Care 
Crisis'' and the CBO cost estimate report of the HEALTH Act, came to 
the same conclusion.
Justification for Federal Reform Legislation: Americans Overwhelmingly 
        Support a MICRA-Style Solution
    Americans are becoming acutely aware of the impact that this crisis 
is having on our nation's health care system, and overwhelmingly favor 
having Congress pass legislation to reform the current medical 
liability system and create one that balances the rights of patients to 
seek and obtain appropriate compensation for injuries caused by medical 
negligence against the right of all our citizens to have continued 
access to medical care. Two recent polls clearly demonstrate this 
support. In January 2003, Gallup conducted a poll on this issue and 
found the following:

         Americans believe that the medical liability 
        insurance issue is either a major problem (56%) or a health 
        care crisis (18%);

         72 percent favor passing a law that would limit the 
        amount that patients can be awarded for their emotional pain 
        and suffering; and

         57 percent responded that they think patients bring 
        too many lawsuits against doctors

    This Gallup poll confirms the findings of last year's Wirthlin 
Worldwide study conducted for the Health Care Liability Alliance 
(HCLA), which found that:

         78 percent of Americans are concerned that 
        skyrocketing medical liability costs could limit their access 
        to care;

         73 percent favor a federal law that guarantees 
        injured patients full payment for lost wages and medical costs 
        and reasonable limits on awards for ``pain and suffering'' in 
        medical liability cases; and

         48 percent believe the number of medical liability 
        lawsuits against doctors is higher than justified
                               conclusion
    We have reached a very important juncture in the evolution of the 
U.S. health care system. At a time when lifesaving scientific advances 
are being made in nearly every area of health care, patients across the 
country are facing a situation in which access to health care is in 
serious jeopardy. Thus, as the Congress deliberates the many facets of 
this issue, the Alliance urges you to continue to keep in mind that 
this issue is not about doctors, lawyers and insurance companies. 
Rather, it is about patients and their ability to continue to receive 
timely and consistent access to quality medical care. By reforming the 
medical litigation system, the crisis will ultimately be abated. 
Patients are calling for reform. Doctors are calling for reform. 
President Bush is calling for reform. And the Alliance urges the 
Congress to heed these calls and, at a minimum, pass the HEALTH Act so 
all Americans are able to find a doctor when they most need one. 
Ultimately, when the question ``Will your doctor be there?'' is asked, 
the answer must be an unqualified yes.
    Thank you for considering our comments and recommendations. The 
Alliance of Specialty Medicine, whose mission is to improve access to 
quality medical care for all Americans through the unified voice of 
specialty physicians promoting sound federal policy, stands ready to 
assist you on this and other important health care policy issues facing 
our nation.

                              ----------                              

                  Prepared Statement of Mary R. Grealy
    Our liability system is broken. If it is not fixed soon, it will 
break our health care system as well.
    One of the founding principles of the Healthcare Leadership Council 
(HLC) B which represents the CEO's of the nation's leading health care 
companies and organizations B is that patients should have access to 
high quality health care. Skyrocketing liability costs threaten patient 
access to quality care. This is no longer simply about lawyers and 
doctors. This is about patients.
    The cost of excessive jury awards is causing staggering increases 
in medical liability premiums. Between 1996 and 1999, average jury 
awards in medical liability cases have increased by 76 percent. These 
spiraling increases add directly to the cost of health care, 
contributing significantly to premium costs and the growing number of 
uninsured Americans.
    Just as harmful to patients and consumers, however, are the 
indirect costs of the crisis. Patients are increasingly Apaying@ for 
excessive litigation by losing access to medical specialists such as 
obstetricians and surgeons. An estimated 1 in 11 obstetricians/
gynecologists say they have strictly limited their services solely to 
gynecology due to the malpractice crisis. In some areas, the situation 
is far worse. In Miami, average annual malpractice premiums for Ob-Gyns 
are $210,578, while the average salary for an Ob-Gyn in Florida is 
$118, 435. In Wyoming, premiums average $116,000, while average 
salaries for Ob-Gyns are $108,700.
    As medical malpractice insurance rates skyrocket B or become 
unavailable B medical specialists such as neurosurgeons, orthopaedic 
surgeons and obstetricians/gynecologists are leaving states such as 
Pennsylvania, Mississippi, West Virginia, New Jersey, Florida and 
others. While these states have been in the news lately, the crisis 
goes far beyond the 13 Acrisis@ states. It is estimated that as many as 
30 other states are in Anear crisis@ and will soon join the ranks of 
states where patient access is endangered.
    Patients also are losing access to nearby hospitals, trauma 
centers, and other facilities as a result of the crisis. Patients are 
subjected to, and pay for, unnecessary tests and procedures as 
physicians must practice Adefensive medicine.@ In addition, patients 
ultimately are the ones who suffer when new drug therapies and medical 
technologies are not developed due to litigation or the fear of it.
    The cause of the liability crisis is clear. Medical malpractice 
insurance rates are set prospectively. These rates are set primarily on 
the basis of projections of jury awards. This trend line is in one 
direction: straight up. Solving the cost problem requires dealing with 
the size and unpredictability of these awards. The bottom line is that 
medical malpractice premiums cannot keep up with claims. A typical 
state is Oregon, where a Governor's task force reported that medical 
liability insurers paid out $71 million in losses and defense costs, 
while receiving $50 million in premiums over the same period. In Ohio, 
medical malpractice insurers are losing $1.62 for every $1 in premiums. 
Clearly these trends are unsustainable and will drive more physicians 
out of practice.
    The only proven way to bring these costs under control B while 
actually enhancing patients' ability to recover economic damages for 
injuries B are reforms which include capping non-economic and punitive 
damages, establishing reasonable levels for attorneys' fees, and 
setting fair share rules for joint and several liability.
    HLC strongly supports these and other reforms embodied in the Help 
Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act of 
2003 (H.R. 5). We urge that the Committee favorably report H.R. 5 to 
the full House for consideration. We stand ready to work with you to 
address this growing crisis.

                              ----------                              

                  Prepared Statement of Frank Clemente
    On behalf of Public Citizen's 125,000 members, I am pleased to 
provide this testimony to the Judiciary Committee for the hearing 
record on H.R. 5, the HEALTH Act of 2003.
    Public Citizen strongly opposes H.R. 5. We sympathize with the 
plight of some medical specialists who are experiencing a large spike 
in malpractice insurance premiums. But that is a temporary problem 
caused by the insurance cycle. Yet, H.R. 5 proposes a permanent--and 
draconian--reduction in patients' access to the courts, which plays no 
role in this temporary ``crisis.'' It would be a travesty of justice 
for Congress to take away patients' legal rights in the name of 
protecting insurance company profits and doctors' income. Caps on 
damages hurt those most seriously injured. The fact is that the legal 
system is all patients have to ensure just compensation for injury and 
to force improvements in patient safety. It's clear that the current 
regulatory system is not up to the task.
    This testimony consists of four elements:

 A summary of the key facts about the medical malpractice 
issue, as reported by reputable government and private sources.

 A summary of Public Citizen's objections to this anti-
consumer and anti-patient legislation.

 A briefing book prepared by Public Citizen entitled ``Medical 
Misdiagnosis: Challenging the Malpractice Claims of the Doctors' 
Lobby.'' Perhaps the greatest malpractice in this debate has been the 
promulgation of phony facts from the medical lobby. This report cites 
numerous government studies--many from the Bush Administration--and 
reputable academic studies to challenge the claims of H.R. 5's 
proponents.

 Summaries of Public Citizen reports on the medical 
malpractice ``crisis'' in nine states--Arkansas, Florida, Mississippi, 
Nevada, New Jersey, Pennsylvania, Rhode Island, Texas, and West 
Virginia. The American Medical Association has declared most of these 
states ``crisis'' states. The striking thing about the government data 
contained in these reports is that they provide concrete evidence that 
the ``crisis'' is not a result of the legal system.

    In conclusion, we encourage the committee to focus on the true 
medical malpractice crisis--the 50,000 to 100,000 Americans who are 
killed each year from preventable medical errors, and the many more 
people who get injured each year and whose lives have often been 
shattered.
    It is very unfortunate that rather than reducing the real threats 
that current medical care poses to their patients, the doctor's lobby 
has proposed to shift the costs of injuries onto innocent individuals, 
their families, voluntary organizations and taxpayers. Doctors, 
patients and consumers should be allies on this issue--which 
fundamentally comes down to improving the quality of medical care in 
the U.S.--not be pitted against each other.
                    facts about medical malpractice
    The facts do not support the contention that our tort system needs 
radical change. Here is a summary of findings from key government 
reports and academic studies. They are explored in more detail in the 
attached briefing book.
Costs of Medical Negligence to Patients

 Between 44,000 to 98,000 Americans die in hospitals each year 
due to preventable medical errors. (Institute of Medicine, To Err Is 
Human: Building a Safer Health System, 2000.)

 The annual costs to society for medical errors in hospitals 
at $17 billion to $29 billion. (Institute of Medicine, To Err Is Human: 
Building a Safer Health System, 2000.)

 The total amount spent on medical malpractice insurance in 
2000 was $6.4 billion--at least three to five times less than the 
Institute of Medicine's estimate of the costs of malpractice to 
society. (National Association of Insurance Commissioners, Statistical 
Compilation of Annual Statement Information for Property/Casualty 
Insurance Companies in 2000, (2001).)
Frequency of Medical Malpractice Claims
 Only one in eight preventable medical errors committed in 
hospitals results in a malpractice claim. (Harvard Medical Practice 
Study Group, Patients, Doctors and Lawyers: Medical Injury, Malpractice 
Litigation, and Patient Compensation in New York, 1990.)

 From 1996 through 1999, Florida hospitals reported 19,885 
incidents but only 3,177 medical malpractice claims. In other words, 
for every 6 medical errors only 1 claim is filed. (The Agency for 
Health Care Administration; Division of Health Quality Assurance. 
Reported malpractice claims by district compared to reported adverse 
incidents 1996, 1997, 1998, 1999.)

 The number of new medical malpractice claims declined by 
about four percent between 1995 and 2000. There were 90,212 claims 
filed in 1995 and 86,480 claims filed in 2000. (National Association of 
Insurance Commissioners, Statistical Compilation of Annual Statement 
Information for Property/Casualty Insurance Companies in 2000, 2001.)

 Punitive Damages are awarded in less than 1 percent of 
medical malpractice cases. (Bureau of Justice Statistics, 1996.)
Physicians' Costs of Medical Malpractice Insurance
 Malpractice insurance costs amount to only 3.2 percent of the 
average physician's revenues. (Official Transcript, Medicare Payment 
Advisory Commission, Public Meeting, December 12, 2002.)

 While medical costs have increased by 113 percent since 1987, 
the total amount spent on medical malpractice insurance has increased 
by just 52 percent over that time, less than half of medical services 
inflation. (Bureau of Labor Statistics--Medical Services CPI; Best's 
Aggregates and Averages.)

 The median medical malpractice payout by a physician to a 
patient rose 35 percent from 1997 to 2000, from $100,000 to $135,000. 
(National Practitioner Data Bank Annual Reports, 1997 through 2001.) 
But during the same time, the average premium for single health 
insurance coverage has increased by 39 percent. (Kaiser Family 
Foundation and Health Research and Educational Trust, Employer Health 
Benefits Surveys, 1998-2002; National Practitioner Data Bank Annual 
Reports, 1997 through 2001.)
Medical Malpractice Award Trends
 The size of damage awards has been steady since 1991. The 
mean payout was $135,941 in 2001, up 8.7 percent from $125,000 in 2000. 
Over ten years, malpractice payouts have grown an average of 6.2 
percent per year. That's almost exactly the rate of medical inflation: 
an average of 6.7 percent between 1990 and 2001. (National Practitioner 
Data Bank and the Journal of Health Affairs, as quoted by Lorraine 
Woellert, Commentary: A Second Opinion on the Malpractice Plague, 
Business Week, March 3, 2003.)

 Malpractice payouts by physicians and their insurers were a 
mere $4.5 billion in 2001--less than 1 percent of the country's overall 
health care costs of $1.4 trillion. (National Practitioner Data Bank, 
as quoted in Business Week, March 3, 2003.)

 In 2001, only 895 out of 16,676 payouts, or about 5 percent, 
topped $1 million. (National Practitioner Data Bank, as quoted in 
Business Week, March 3, 2003.)
Insurance Industry Economics Have Caused the Premium Price Spike
 ``For several years, insurers kept prices artificially low 
while competing for market share and new revenue to invest in a booming 
stock market. As the bull market surged, investments by these 
historically conservative insurers rose to 10.6% in 1999, up from a 
more typical 3% in 1992. With the market now in a slump, the insurers 
can no longer use investment gains to subsidize low rates.'' (American 
Medical Association Report 35 of the Board of Trustees (A-02), 
available at http://www.ama-assn.org/ama1/upload/mm/annual02/
bot35a02.rtf.)

 Premiums charged do not track losses paid, but instead rise 
and fall in concert with the state of the economy. When the economy is 
booming and investment returns are high, companies maintain premiums at 
modest levels; however, when the economy falters and interest rates 
fall, companies increase premiums in response. (J. Robert Hunter, 
Americans for Insurance Reform, ``Medical Malpractice Insurance: Stable 
Losses/Unstable Rates,'' October 10, 2002. See also: http://
www.insurance-reform.org/StableLosses.pdf.)
Small Number of Dangerous Doctors Commit Most Malpractice
 Only 5 percent of doctors (1 out of 20) are responsible for 
54 percent of malpractice payouts. (National Practitioner Data Bank, 
Sept. 1, 1990-Sept. 30, 2002.)

 Only 8 percent of doctors (1 out of 12) with 2 or more 
malpractice payouts have been disciplined by their state medical board. 
(National Practitioner Data Bank, Sept. 1, 1990-Sept. 30, 2002.)

 Only 17 percent of doctors (1 out of 6) who have made 5 or 
more malpractice payouts have been disciplined by their state medical 
board. (National Practitioner Data Bank, Sept. 1, 1990-Sept. 30, 2002.)
                        the unfairness of h.r. 5
    H.R. 5 would do nothing to reduce the incidence of medical errors. 
Instead, it would reduce compensation to victims of malpractice and 
make it harder for them to seek justice. Public Citizen's objections to 
H.R. 5 include:
    Broad scope: not just doctors are let off the hook. While sponsors 
say that H.R. 5 is intended to benefit doctors, other special interests 
are along for the ride. Nursing home operators, medical device 
manufacturers, pharmaceutical companies, hospitals, and even HMOs are 
all covered by the bill's definition of ``health care liability claim'' 
and would be equally insulated from liability.
    Reckless conduct no longer subject to punitive damages. Punitive 
damages are rarely awarded in medical malpractice cases, but the threat 
of punitive damages is important to deterring reckless disregard for 
patient safety by HMOs, nursing homes, and drug and medical device 
manufacturers. H.R. 5 would reward these special interests with a 
benefit that even the conservative 104th Congress rejected-a complete 
ban on punitive damages for reckless conduct.
    $250,000 cap on non-economic damages. Awards for non-economic loss 
(pain and suffering resulting from injuries such as lost childbearing 
ability, disfigurement, and paralysis) compensate for the human 
suffering caused by medical negligence and defective medical products. 
Typically, such damages exceed $250,000 only in cases of NAIC Level 6 
injury severity or higher \1\--that is, cases involving permanent 
significant injuries. Thus, the cap will not affect patients with minor 
injuries; instead, it targets only victims of injuries such as 
deafness, blindness, loss of limb or organ, paraplegia, or severe brain 
damage. Since the cap makes no allowance for inflation, its arbitrary 
limits become more unjust as each day passes.
---------------------------------------------------------------------------
    \1\ Institute for Legislative Practice, Jury Verdicts in Medical 
Malpractice Cases and the MICRA Cap (1999); ``Jury Awards for Medical 
Malpractice and Post-verdict Adjustments of Those Awards,'' 48 DePaul 
L. Rev. 265 (1998)
---------------------------------------------------------------------------
    Caps on attorney fees. Conservatives often say that ``price 
controls reduce supply.'' In H.R. 5 they practice what they preach. By 
limiting attorney fees, the sponsors hope to reduce the supply of 
representation for victims. These price controls will almost certainly 
succeed--they reduce the potential rewards of litigation that already 
carries with it high risks in terms of the expenses attorneys must 
advance and the sympathy that juries have for doctors. By drastically 
altering the risk/reward formula, H.R. 5 will prevent many victims from 
obtaining legal counsel.
    Leaves patients holding the bag when a doctor is insolvent. The 
doctrine of joint and several liability says that when two defendants, 
such as a doctor and a hospital, are both found liable for negligence, 
a plaintiff may collect the entire award from either of them if 
necessary. H.R. 5 would change this rule, and leave patients with no 
recovery for the share of damages assigned to an uninsured, 
underinsured, or bankrupt defendant.
    Lets defendants control payouts for future damages. By instituting 
a ``periodic payment rule'' for future damages over $100,000, the bill 
would allow defendants and insurance companies to string out payments 
for future damages over the life expectancy of the victim, rather than 
have to pay up front. This is money the jury has determined rightfully 
belongs to the plaintiff, yet defendants and insurers would be able to 
invest and earn interest on the vast majority of a plaintiff's damage 
award. Victims would be left to cope with unexpected needs or changing 
medical costs and increased transportation and housing costs. The bill 
would provide no protection to the victim if his or her needs change, 
or if the insurance company becomes insolvent.
    Shortened statute of limitations to one year after discovery of the 
injury. This severe limitation will extinguish many meritorious claims. 
Although in most cases an injury is immediately apparent, a victim may 
not know until much later whether the injury was caused by malpractice. 
The law in most states starts the limitation period running from the 
discovery of the malpractice, not discovery of the injury.





                              ----------                              

   Prepared Statement of the American College of Physicians-American 
                      Society of Internal Medicine
    The American College of Physicians-American Society of Internal 
Medicine (ACP-ASIM)--representing 115,000 physicians and medical 
students--is the largest medical specialty society and the second 
largest medical organization in the United States. We congratulate the 
House Committee on the Judiciary for holding this important hearing on 
a subject matter that has more relevance today than ever before. Of the 
College's top priorities for 2003, addressing the health care liability 
crisis and its impact on access to care is one of the most critical to 
our members. ACP-ASIM wishes to thank Committee Chairman Jim 
Sensenbrenner, Jr., Committee Ranking Member John Conyers, Jr., and 
other members, for holding this important hearing to discuss the 
immediate need to enact meaningful medical liability reform.
                               background
    Doctors across the country are experiencing sticker shock when they 
open their medical malpractice insurance renewal notices--if they even 
get a renewal notice. After more than a decade of generally stable 
rates for professional liability insurance, physicians have seen costs 
dramatically increase in 2000-2003. And in some areas of the country, 
premiums have soared to unaffordable levels. According to the Medical 
Liability Monitor, in mid-2001, insurance companies writing in 36 
states and the District of Columbia claim to have raised rates well 
over 25 percent. Unfortunately, rates continue to rise dramatically 
with no sign of the market beginning to stabilize.
    While obstetricians, surgeons and other high-risk specialists have 
been hit hard, internists have been one of the hardest hit 
specialties--having seen a record nearly 50 percent average increase 
over the last two years. In some cases, physicians, even those without 
a track record of lawsuits, cannot find an insurance company willing to 
provide coverage. These physicians are being forced to decide whether 
to dig deeper and pay the steeper bill, change carriers, move out of 
state, or retire from the practice of medicine.
    Of these options, changing carriers may not even be an alternative. 
Finding replacement coverage won't be as easy as it was in a buyer's 
market. Companies writing professional liability coverage are fleeing 
or being chased from the market. As an example, St. Paul Companies, 
which insures doctors in 45 states and is the second largest medical 
underwriter in the country, announced late in 2001 that it no longer 
would write medical liability policies. It plans to phase out coverage 
as physicians contracts expire over the next 18 to 24 months. Frontier 
and Reliance are also gone. Other commercials, such as PHICO, CNA and 
Zurich, are significantly cutting back. Even some provider-owned 
insurers, committed to this market by their founders, are pulling back 
from some states in which they extended sales.
                           the perfect storm
    At a time when the market is squeezing physician and hospital 
margins, the rise in professional liability insurance may be the 
deciding factor that contributes to whether physician offices and 
emergency rooms keep their doors open. Recently, the costs of 
delivering health care have been driven by increased costs of new 
technologies; increased costs of drugs that define the standard of care 
acceptable for modern medicine; the rising costs of compliance under 
increasing state and federal regulation; the low reimbursement rate 
under Medicare and Medicaid; and the declining fees from managed care 
have all been contributing factors that have affected patient access to 
health care.
    Unquestionably, there is real potential that rising insurance rates 
ultimately will reduce access to care for patients across the country. 
Indeed, press accounts on a daily basis are demonstrating exactly that 
from coast to coast. Physician offices and emergency rooms have been 
closing their doors all across the country due to the exorbitant costs. 
The states most severely hampered by the spiraling out-of-control rates 
are: Florida, Georgia, Illinois, Michigan, Mississippi, Nevada, New 
Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Washington, and 
West Virginia. Several other states are just beginning to feel the 
impact.
    Some states have tried to address the dramatic increase in 
professional medical liability insurance rates with very little 
success. At best, attempts by the states to solve this problem have 
resulted in only band-aid approaches to the more underlying problem: 
the escalation of lawsuit awards and the expense of litigation has led 
to the increase in medical liability premiums. This fact has resulted 
in many patients not receiving or delaying much needed medical care--a 
fact Congress can no longer ignore. ACP-ASIM strongly believes that 
Congress must act to stabilize the market to avoid further damage to 
the health care system.
        relief for physicians from soaring malpractice premiums
    Federal legislation has been introduced in the 108th Congress to 
help curb the spiraling upward trend in malpractice premiums. H.R. 5, 
the ``Help Efficient, Accessible, Low Cost, Timely Health Care'' 
(HEALTH) Act of 2003, will attempt to safeguard patient access to care, 
while continuing to ensure that patients who have been injured through 
negligence are fairly compensated. ACP-ASIM strongly endorses this 
legislation as a means to stabilize the medical liability insurance 
market and bring balance to our medical liability litigation system. 
The HEALTH Act achieves this balance through the following common sense 
reforms:

         Limit on pain and suffering (non-economic) awards. 
        This requirement limits unquantifiable non-economic damages, 
        such as pain and suffering, to no more than $250,000.

         Unlimited recovery for future medical expenses and 
        loss of future earnings (economic) damages. This provision does 
        not limit the amount a patient can receive for physical 
        injuries resulting from a provider's care, unless otherwise 
        restricted by state law.

         Limitations on punitive damages. This requirement 
        appropriately raises the burden of proof for the award of 
        quasi-criminal penalties to ``clear and convincing'' evidence 
        to show either malicious intent to injure or deliberate failure 
        to avoid injury. This provision does not cap punitive damages, 
        rather, it allows punitive damages to be the greater of two 
        times the amount of economic damages awarded or $250,000.

         Periodic payment of future damages. This provision 
        does not reduce the amount a patient will receive. Rather, past 
        and current expenses will continue to be paid at the time of 
        judgment or settlement while future damages can be funded over 
        time. This ensures that the plaintiff will receive all damages 
        in a timely fashion without risking the bankruptcy of the 
        defendant.

         Elimination of double payment of awards. This 
        requirement provides for the jury to be duly informed of any 
        payments (or collateral source) already made to the plaintiff 
        for her injuries.

         A reasonable statute of limitation on claims. This 
        requirement guarantees that health care lawsuits will be filed 
        no later than 3 years after the date of injury, providing 
        health care providers with ample access to the evidence they 
        need to defend themselves. In some circumstances, however, it 
        is important to guarantee patients additional time to file a 
        claim. For example, the legislation extends the statue of 
        limitations for minors injured before age 6.

         A sliding scale for contingency fees. This provision 
        will help discourage baseless and frivolous lawsuits by 
        limiting attorney incentives to pursue meritless claims. 
        Without this provision, attorneys could continue to pocket 
        large percentages of an injured patient's award, leaving 
        patients without the money they need for their medical care. 
        The sliding scale would look something like this:

                --LForty percent (40%) of the first fifty thousand 
                dollars recovered

                --LThirty-three and one-third percent (33 1/3%) of the 
                next fifty thousand dollars recovered

                --LTwenty-five percent (25%) of the next five hundred 
                thousand dollars recovered

                --LFifteen percent (15%) of any amount recovered in 
                excess of six hundred thousand dollars

         Proportionate liability among all parties. Instead of 
        making a party responsible for another's negligent behavior, 
        this requirement ensures that a party will only be liable for 
        his or her own share. Under the current system, defendants who 
        are only 1 percent at fault may be held liable for 100 percent 
        of the damages. This provision eliminates the incentive for 
        plaintiff's attorneys to search for ``deep pockets'' and pursue 
        lawsuits against those minimally liable or not liable at all.

    These common sense recommendations have been proven to work. The 
HEALTH Act is largely based on provisions contained in the California 
Medical Injury Compensation Reform Act (MICRA). Since its enactment in 
the mid-1970's, the MICRA reforms have helped reduce the overall costs 
of medical malpractice and have contributed to an increase in patient 
access to care. During this recent malpractice insurance crisis, 
California's rates have changed only slightly, while other states have 
spiraled to out of control levels. ACP-ASIM strongly supports the 
elements contained in MICRA. Further, we believe that any legislation 
proposed must include these basic, proven elements in order to assure 
the stabilization of malpractice premiums.
                               conclusion
    ACP-ASIM is pleased that the House Committee on the Judiciary 
agreed to conduct this important hearing to address the serious problem 
of soaring medical malpractice premiums that physicians are facing 
across the country. We strongly urge the House Judiciary Committee to 
pass common sense reform contained in the HEALTH Act that would allow 
for greater access to care, while adequately compensating injured 
patients. We thank the Committee and appreciate the opportunity to 
present our views.

                              ----------                              

       Prepared Statement of the College of American Pathologists
    The College of American Pathologists (CAP) is pleased to submit 
this statement for the record of the Committee on the Judiciary hearing 
on H.R. 5, the Help Efficient, Accessible, Low-Cost, Timely Healthcare 
Act of 2003. The College is a medical specialty society representing 
more than 16,000 board-certified physicians who practice clinical or 
anatomic pathology, or both, in community hospitals, independent 
clinical laboratories, academic medical centers and federal and state 
health facilities.
    Pathologists, like all physicians, face severe hardships resulting 
from the worsening medical liability insurance crisis. For many, just 
finding coverage has been an arduous task at best and, for some, nearly 
impossible. Those who have found willing insurers are paying 
substantially higher premiums--in some cases, several times the 
previous year's rates--for coverage plans, regardless of their claims 
history.
    The realities of this crisis are clear: Pathologists and other 
physicians can no longer offer certain procedures or are leaving their 
practices altogether because of the exorbitant costs of malpractice 
premiums. These are desperate decisions brought on by a tort system 
with no mechanism to restrain runaway ``pain and suffering'' and 
punitive awards. Damages rise beyond reason and, in the end, all 
patients and providers suffer as the nation's health care costs soar 
and access to quality care declines.
    Real-world examples in the laboratory community highlight the 
problem:

         The chief executive of a small, rural Pennsylvania 
        hospital recently told a Senate Appropriations subcommittee 
        that he nearly was forced to close the facility when an insurer 
        declined to renew a malpractice policy for his pathologist, a 
        17-year practice veteran with no claims history. Only through a 
        last-minute joint underwriting agreement was the pathologist 
        able to retain insurance coverage, which allowed the hospital 
        to continue offering laboratory, blood banking and surgical 
        pathology services and remain open, the executive said.

         A pathology group that provides services to all 
        Hawaii's outer island hospitals and five facilities on Oahu--
        about 20 pathologists, in all--is, like many physician 
        practices, shopping for a new insurance carrier. The group's 
        current insurer recently sent a renewal notice quoting a four-
        fold increase in premiums compared with 2002 rates.

         In general, malpractice insurance premiums for 
        pathologists have doubled in the past year, reports JLT 
        Services Corp., the College's member insurance broker. In some 
        locations, particularly urban areas, the increases have been 
        significantly higher. Pathologists have been particularly hard 
        hit by The St. Paul Companies' December 2001 decision to leave 
        the medical liability insurance marketplace. The St. Paul, 
        which provided about 9 percent of all malpractice insurance 
        nationwide at the time, had been the underwriter of the CAP-
        endorsed Professional Liability plan.

    Pathologists and other physicians are increasingly hard-pressed to 
continue providing services, given the heavy burden rising insurance 
premiums have placed on their practices. Insurance rates of $200,000 or 
more for some high-risk specialties have forced many physicians to 
limit services, retire early or move to states where reforms have 
brought greater stability to premiums. The skyrocketing cost of 
liability insurance comes at a particularly critical time for 
physicians, who also face a widening gap between Medicare 
reimbursements and practice costs.
    Severe patient access problems brought on by the liability 
insurance crisis have been documented in at least a dozen states and it 
is expected that 30 more soon will join that list. In the crisis 
states, obstetrician-gynecologists have been forced to stop delivering 
babies, trauma centers have closed and many physicians are grappling 
with how they can continue to provide other high-risk procedures.
    Congress must act now to bring commonsense reforms to America's 
medical liability system. The CAP strongly supports the approach 
contained in the HEALTH Act of 2003. This critically important bill, 
introduced by Rep. Jim Greenwood, R-Pa., would:

         place a reasonable limit ($250,000) on non-economic 
        damages and no limit on economic damages;

         create mechanisms to ensure that only justifiable 
        punitive damages are paid, with a guideline to limit punitive 
        damages to two times economic damages or $250,000, whichever is 
        greater;

         structure settlements to be paid in increments, 
        rather than lump-sum payments, so that expenses are reimbursed 
        as they occur and earnings, as they would have accrued;

         establish a three-year statute of limitations, with 
        special provisions for minors.

         establish criteria to ensure that defendants would 
        pay damages in proportion to their fault;

         ensure that states with damage caps in place would be 
        permitted to retain them; and

         set a sliding scale for attorney contingency fees to 
        discourage frivolous lawsuits.

    The HEALTH Act can work because it is modeled on a California law 
that has worked well for nearly three decades. It was enacted in 
circumstances much like those the nation faces today. California 
suffered a meltdown of its health care system in the early 1970s and 
physicians saw their premiums soar more than 300 percent. Liability 
carriers left the state and some physicians closed their office doors. 
The Medical Injury Compensation Reform Act, or MICRA, which came into 
effect in 1976, provided a $250,000 limit on non-economic damages, 
unlimited economic damages, a statute of limitations on claims, 
sliding-scale limits on contingency fees, advance notice requirements 
before claims were filed, binding arbitration of disputes and periodic 
payment of future damages.
    The effect of this legislation was dramatic. The average liability 
premiums decreased 40 percent in the 25-year period ending in 2001 
(expressed in constant dollars). In 2001, the Medical Liability Monitor 
published data that demonstrated that the average premium paid by 
California physicians practicing internal medicine, general surgery and 
obstetrics/gynecology ranged from 43 percent to 51 percent of the 
average premiums of their counterparts in Florida, Illinois, New York, 
Texas and Michigan. This was supported by a 53 percent lowering in the 
dollar amounts of settlements in California, compared with the nation 
as a whole.
    Our current liability crisis is not one of increasing litigation, 
but one of unreasonably high judgment amounts. Patients are not eager 
to sue their doctors. In fact, in 1991, the New England Journal of 
Medicine reported that only 1.53 percent of those injured by possible 
medical actions even file a claim. Severity of awards is the problem, 
and that is what the HEALTH Act of 2003 is designed to address.
    The College supports such reforms to promote the basic goal of 
ensuring access to a wide range of health care services and promoting 
patient safety and quality medical care. In particular, the College 
strongly supports the bill's establishment of limits on non-economic 
and punitive damages. These provisions, combined with a sliding scale 
limit on contingency fees, make for a strong, positive step toward 
reforms that benefit the whole health care system and protect patient 
access to affordable, quality care.
    The CAP appreciates the opportunity to present its views to the 
Committee on the Judiciary and offers its support and continued 
assistance as Congress works to meet the challenge posed by the 
nation's liability insurance crisis.

                              ----------                              

    Prepared Statement of the American Academy of Family Physicians
    This statement is submitted to the Judiciary Committee on behalf of 
the 93,400 members of the American Academy of Family Physicians. This 
hearing, concerning
    H.R. 5, The Help Efficient, Accessible, Low Cost, Timely Health 
Care (HEALTH) Act, is especially timely. The current lack of 
professional liability insurance does threaten patient access to care 
in some states. The continued trend of increasing insurance premiums 
drives up the cost of health care and forces physicians to drop certain 
services when they cannot afford professional liability insurance.
      patients affected by the lack of medical liability insurance
    Medical liability insurers have left the medical insurance market 
in the past year in alarming numbers. One major reason for this exodus 
is the unpredictable rise in jury awards that exists in states without 
adequate tort reforms. According to the Physician Insurers Association 
of America (PIAA), the last decade has seen a dramatic increase in 
awards in excess of $1 million even while the number of suits filed has 
remained the same. As a result of the steady rise in record-breaking 
awards, most insurers find it more difficult to predict their risk. The 
remaining insurers have raised rates or refused new applications for 
insurance. Family physicians are beginning to experience difficulty in 
finding insurance companies to provide liability insurance or are 
receiving renewal notices with anywhere between 60 percent and 200 
percent increases for the second year in a row.
    Stories of family physicians closing their practices because of 
liability insurance premiums are turning up across the U.S. Recently, 
for example, AAFP Direct reported
    that AAFP Past President Neil Brooks, M.D., sent a letter recently 
to the Hartford Courant, saying that he was giving up his practice of 
thirty-two years because the liability premiums had become too 
expensive.
    In rural Morrow County, Ohio, Brian Bachelder, M.D., President of 
the Ohio Academy of Family Physicians, decided to stop delivering 
babies after his liability premium increased by $21,000 last year. Dr. 
Bachelder was the only Morrow County physician providing prenatal and 
obstetrical care.
    In rural Chipley, Florida, Greg Sloan M.D., found his malpractice 
premium has risen from $4,500 to $13,600 in one year. This was in spite 
of a 24-year career without a suit being filed against him. Dr. Sloan 
said it has reached the point that he cannot pay his staff and the 
liability premiums.
    Most state laws, hospital accreditation requirements and managed 
care contracts mandate that physicians carry medical liability 
insurance. If family physicians cannot afford insurance coverage, they 
must choose between shutting down their practice altogether or 
restricting the range of services they provide. For family physicians 
in rural settings, this usually means being forced to stop delivering 
babies or providing prenatal care due to mounting liability premiums.
    The tools needed to counteract this alarming trend are derived from 
state experiences. Last year, the Department of Health and Human 
Services released a report entitled, ``Improving Health Care Quality 
and Lowering Costs by Fixing Our Medical Liability System.'' According 
to this study, liability premiums have been growing rapidly in states 
that have failed to place reasonable limits on non-economic damages. 
While economic losses, such as lost wages, medical expenses and 
rehabilitation costs are fully compensated, non-economic damages 
reflect the monies collected for intangible losses.
    Over the previous two years, states without caps on these non-
economic damages have experienced a 44-percent increase in liability 
premiums. In contrast, states with caps on non-economic damages of 
$250,000 experienced on average an increase of only 15 percent in 
medical liability insurance premiums.
    The reforms contained in California's Medical Injury Compensation 
Reform Act of 1975 (MICRA) have already brought stability and fairness 
to the California legal system for the past 27 years. Californians 
Allied for Patient Protections (CAPP), a major consumer group 
supportive of MICRA, found that legal disputes in California are 
settled 23 percent faster than the national average. At the same time, 
the number of suits filed in California matches the national average. 
In the ensuring 27 years, medical liability insurance premiums have 
risen 505 percent nationwide compared with California's increases of 
167 percent.
                aafp support for h.r. 5, the health act
    But the states cannot, by themselves, resolve this national crisis. 
The House of Representatives addressed this issue by passing, H.R. 
4600, The Help Efficient, Accessible, Low Cost, Timely Health Care 
(HEALTH) Act in the 107th Congress. The HEALTH Act has been 
reintroduced into the 108th as H.R. 5. The Academy supports H.R. 5, 
which would bring the same rational reforms contained in MICRA to all 
states' professional liability systems. The AAFP supports federal 
legislation to stabilize the medical tort reform systems in the states 
since spiraling insurance premiums mean increasing numbers of pregnant 
women in rural areas of the U.S. will not be able to find a physician 
to deliver their babies.
    There is an important additional reason that the AAFP supports The 
HEALTH Act. H.R. 5 requires that a party pay damages only to the extent 
that the party was liable for the harm caused. Family physicians 
provide primary care which is comprehensive and coordinated care for 
all life stages and both genders. Because they are the overall medical 
managers for a vast number of patients in the U.S., with responsibility 
for making referrals to subspecialists, family physicians need the 
protections of joint and several liability reforms to ensure that they 
are not held responsible for the clinical decisions of others.
                               conclusion
    The Academy appreciates the opportunity to support passage of H.R. 
5 out of the Judiciary Committee. We look forward to working with the 
Committee to find a workable solution for patients and physicians.

                              ----------                              

                 Prepared Statement of Rodney C. Lester
    Chairman Sensenbrenner, Jr. and Congressman John Conyers, Jr., I am 
Rodney C. Lester, CRNA, PhD, President of the American Association of 
Nurse Anesthetists (AANA). I appreciate the opportunity to submit for 
the record a statement on issues surrounding medical liability reform, 
which are the most challenging facing healthcare today.
    For those of you who may be unfamiliar with the AANA, we represent 
approximately 30,000 Certified Registered Nurse Anesthetists (CRNAs) 
across the United States. In the administration of anesthesia, CRNAs 
perform virtually the same functions as anesthesiologists and work in 
every setting in which anesthesia is delivered including hospital 
surgical suites and obstetrical delivery rooms, ambulatory surgical 
centers, health maintenance organizations' facilities, and the offices 
of dentists, podiatrists, ophthalmologists, and plastic surgeons. 
Today, CRNAs administer approximately 65% of the anesthetics given to 
patients each year in the United States. CRNAs are the sole anesthesia 
provider in at least 65% of rural hospitals, which translates into 
anesthesia services for millions of rural Americans.
    CRNAs have been a part of every type of surgical team since the 
advent of anesthesia in the 1800s. Until the 1920s, nurses almost 
exclusively administered anesthesia. In addition, nurse anesthetists 
have been the principal anesthesia provider in combat areas in every 
war the United States has been engaged in since World War I. CRNAs 
provide anesthesia services in the medical facilities of the Department 
of Defense, the Public Health Service, the Indian Health Service, the 
Department of Veterans Affairs, and countless other public and private 
entities. Given the current state of affairs with Iraq and Afghanistan, 
it is not surprising that our deployed forces depend greatly upon the 
services and skills of CRNAs.
    You may be aware of the widely publicized nursing shortage. While 
we do not have enough rank and file nurses there is an increasingly 
acute shortage of CRNAs. Quite simply, there are not enough CRNAs to 
fulfill the demand. Our News Bulletin tends to be chock full of 
advertisements for vacant positions. Quite simply if the rest of the 
economy was similar to the employment situation for CRNAs, our nation 
would be at full employment.
    Hardly a day goes by for most anesthesia practices when a CRNA is 
not called by an employment recruiter attempting to entice them into 
seeking additional pay at another group or hospital. Practices are 
offering bonuses, attractive benefits, and higher pay in order to 
recruit CRNAs.
    We graduate approximately 1,000 students per year and it is not 
enough to fill the demand. Our Foundation has recently funded a 
manpower shortage study and its results are expected shortly.
How are CRNAs different from anesthesiologists?
    The most substantial difference between CRNAs and anesthesiologists 
is that prior to anesthesia education, anesthesiologists receive 
medical education while CRNAs receive a nursing education. However, the 
anesthesia part of the education is very similar for both providers, 
and both professionals are educated to perform the same clinical 
anesthesia services. CRNAs and anesthesiologists are both educated to 
use the same anesthesia processes and techniques in the provision of 
anesthesia and related services. The practice of anesthesia is a 
recognized specialty within both the nursing and medical professions. 
Both CRNAs and anesthesiologists administer anesthesia for all types of 
surgical procedures, from the simplest to the most complex, either as 
single providers or in a ``care team setting''.
What is our experience on malpractice insurance?
    For the past several years, CRNAs have relied largely on two main 
major malpractice carriers--St. Paul and TIG. On December 12, 2001, 
AANA Insurance Services--a wholly owned subsidiary of the AANA--was 
notified by the St. Paul Companies that it would exit this market and 
would seek to sell their malpractice book and eventually transition out 
of the medical malpractice market. We were advised that this difficult 
decision was based upon ``its anticipated worst annual loss in its 148-
year old history.'' The St. Paul further stated that the decision is 
part of an overall plan ``that will put St. Paul on sound financial 
footing so that they can continue serving their thousands of customers 
in their other businesses.'' Their news release goes into more detail 
concerning losses relative to its losses in malpractice, other 
insurance lines and those associated with the September 11 terrorist 
attack.
    AANA Insurance Services worked to prepare and assist its 
policyholders in this transition period and kept them informed of 
developments relative to their continuing insurance coverage.
    The AANA and AANA Insurance Services Staff prepared strategies to 
respond to this situation proactively to assure a smooth transition for 
our members insured through St. Paul. We contacted our other carrier at 
the time, TIG Insurance, to seek support from them and assessed other 
potential medical malpractice carriers to assure that our members have 
more than one choice for professional liability insurance as we have in 
the past.
    While we were aware that St Paul Companies were experiencing 
difficulties along with the rest of the insurance industry, we--along 
with many other providers and perhaps the general public--were 
surprised by the sudden decision to withdraw completely from the 
medical malpractice market. St Paul stated that they would do 
everything possible to make the transition smooth. We had an excellent 
relationship with the St. Paul and this transition continues.
    Following this announcement, we worked even closer with TIG 
Insurance Company to ensure a smooth transition for the policyholders 
of AANA Insurance Services. A few months ago, TIG Insurance Company 
announced it would no longer be providing medical malpractice 
insurance. Coverage for CRNAs through TIG will not be available after 
June 30, 2003. TIG's announcement comes almost exactly a year after St. 
Paul's announcement that it was withdrawing from the medical 
malpractice marketplace.
    On Monday, December 16, 2002, Fairfax Financial Holdings Limited 
announced that it would be restructuring TIG. Fairfax, the parent 
company of TIG, is a financial services holding company which, through 
its subsidiaries, is engaged in property, casualty and life insurance, 
reinsurance, investment management and insurance claims management.
    As part of the restructuring, TIG indicated that it will be 
discontinuing its program business. Program business, a specialty of 
TIG's that represents a majority of its business, is defined as 
insuring large groups of insured with very similar characteristics. 
According to Fairfax, TIG's program business was not meeting Fairfax's 
financial expectations. Unfortunately, all of TIG's medical malpractice 
business, including the coverage it provides to CRNAs, falls into this 
program business category.
    It should be noted that medical malpractice only accounted for 25% 
of TIG's program business and TIG's CRNA program was only a small part 
of the medical malpractice business. Fairfax representatives have 
informed AANA that the decision to restructure TIG was based neither on 
the performance of its medical malpractice business in general or its 
CRNA business in particular.
    It is no secret that the number of insurance companies willing to 
offer medical malpractice coverage has shrunk dramatically over the 
past few years. Although it's of little consolation, there are many 
classes of healthcare providers who are facing even greater insurance 
challenges than CRNAs. While TIG's decision is disappointing, it is not 
surprising considering the current medical malpractice environment.
    Unlike when St. Paul exited from the medical malpractice 
marketplace, TIG's withdrawal won't be as immediate. TIG will continue 
to offer both new and renewal policies to AANA members through June 30, 
2003. After June 30, 2003, TIG will not provide coverage to new 
applicants.
    Currently AANA Insurance Services provides coverage for members 
through CNA Insurance Company. It is our understanding that CNA has 
been approved to do business in 43 states and the District of Columbia. 
CNA is awaiting approval in the states of Alaska, Nebraska, Nevada, New 
Hampshire, New York, Vermont and Washington. AANA Insurance Services 
expects CNA to have approval in all these states by June 30, 2003.
    Obviously this has become extremely troubling to our members. While 
we have an excellent relationship with CNA Insurance Company, CRNAs are 
increasing concerned that with only one major medical malpractice 
carrier remaining, issues of coverage could become problematic. It 
should be noted that unless a CRNA had a particular issue with claims 
or licensure, coverage could easily be found, whether it was with St. 
Paul or TIG. That remains relatively true today with the CNA Insurance 
Company. But with more carriers leaving the marketplace, what does that 
do to providers? More importantly, what does it mean to patients and 
consumers? How do we attract more carriers to this market? Without 
major reforms, will carriers have any reason to go into the market?
Patient Safety
    Given the strong safety record of CRNAs, we had no reason to 
believe then, nor do we now, that there was any nexus between the 
decision of either St. Paul or TIG to exit the medical malpractice 
market due to bad claims from CRNAs.
    America's CRNAs are committed to advancing patient safety so that 
actual instances of malpractice are reduced. These commitments 
including active membership in the cross-disciplinary National Quality 
Forum (NQF) and the National Patient Safety Foundation (NPSF), closed-
claims research that transforms tough cases into educational and 
practice improvements, and the most stringent continuing education and 
recertification requirements in the field of anesthesia care. With 
CRNAs providing two-thirds of all U.S. anesthetics, the Institute of 
Medicine reported in 1999 that anesthesia is 50 times safer today than 
20 years ago.
Our Dilemma
    Educational programs that prepare nurse anesthetists rely solely on 
hospitals, surgery centers and even office based surgical practices to 
provide students with the required clinical experiences to enable them 
to become competent anesthesia providers. These healthcare facilities 
rely on surgeons and other high-risk specialties for their patient 
admissions. As these high-risk specialties leave, operating rooms close 
and patients have less access to needed care, and students have less 
access to patients for clinical training.
    Looking at Pennsylvania as an example, the hospitals and surgeons 
who are part of a healthcare system located in Southeast Pennsylvania 
have seen their primary premiums increase more than 60%, their CAT fund 
increase more than 30%, and their excess premiums increase more than 
600%, all within the last year.
    The Medical Professional Liability Catastrophe Loss Fund (commonly
    referred to as the CAT Fund) was established to ensure that victims 
of medical malpractice are compensated and that medical malpractice 
insurance is available to health care providers. Health care providers 
(physicians, surgeons, podiatrists, hospitals and nursing homes) are 
required to carry a set minimum amount of primary coverage. The health 
care providers then must pay a surcharge to the CAT Fund in order to 
fund a layer of insurance above the primary insurance coverage. Failure 
to comply with this requirement may result in revocation of one's 
license.
    This is reflective of what other healthcare systems in Pennsylvania 
are experiencing. In addition that system has seen its high-risk 
specialty physicians relocate out of Pennsylvania or give up the 
surgical part of their practice. Each time a physician closes his/her 
office or reduces practice, employees of their practice lose their job. 
Fewer high-risk specialists mean fewer cases requiring anesthesia are 
performed. These are exactly the specialties that nurse anesthesia 
educational programs rely on to provide their students with the 
required clinical cases.
    As surgeons leave the state or reduce surgery because they can not 
afford the malpractice insurance there are fewer surgical cases, 
operating rooms are closed, daily operating room schedules are 
prolonged, overtime costs increase, hospitals' earn less money, layoffs 
occur and hospitals close. This directly affects patients' access to 
needed and timely care, and the ability of our educational programs to 
provide the necessary clinical experiences to educate nurse 
anesthetists. If this trend continues unabated, nurse anesthesia 
educational programs (and other healthcare educational programs) will 
face accreditation issues, declines in student enrollment and delays in 
graduation as they struggle to find enough clinical experiences for 
their students. All of this occurring during a time when there is a 
critical shortage of anesthesia providers nationwide to provide care to 
an older and sicker population.
    The medical malpractice crisis affects all levels of society. 
Unlimited individual awards for pain and suffering will severely limit 
the availability and access to care for the majority. The value we 
place on timely and complete access to care for all our citizens is 
reflected in our allowance of an individual's unlimited right to take 
precedence over the needs of all our people. To insure a healthy 
society, we must insure access to health care even if it means we place 
limits on a single category of damages to the individual.
    If carriers continue to leave the market and if there should be in 
difficulty obtaining coverage, it could ultimately mean a slow down for 
hospitals in providing surgeries. In addition, when CRNAs are employed 
by hospitals or group practices, these entities have to pick up the 
tab. If increasing rates continue to become an issue, hospitals will 
increasingly have to make difficult choices. In those rural hospitals 
where CRNAs are the sole anesthesia provider, hospitals have no choice 
if they wish to keep their doors open.
    That is why the AANA supports medical liability reform. Many can 
point an accusatory finger as to why carriers exit the market. However, 
it makes no sense for an insurer to remain in a market if it cannot do 
so profitably. High costs and runaway juries and large malpractice 
awards have become unrealistic and disproportionately high. This is not 
to say that providers, be they nurses or physicians, should not be held 
responsible for their actions. All providers must take responsibility. 
And those providers who may be disproportionately responsible for rate 
hikes because they have had more than one claim must increasingly take 
responsibility for their actions as do the nursing and medical boards 
regulating providers. But by the same token, awards have become too 
high and many insurers have decided that with the unpredictability of 
determining how to insure a risk that is seems to be increasingly 
incalculable, they simply exit the market.
    In the 108th Congress, the AANA is pleased to support Rep. Jim 
Greenwood's (R-PA) legislation, H.R. 5. The HEALTH Act would permit 
individuals to recover unlimited economic damages and allow for non-
economic damages or ``pain and suffering'' up to $250,000. The states 
would have the flexibility to establish or maintain their own laws on 
damage awards. Other provisions in the HEALTH Act address the 
percentage of damage awards and settlements that go to injured patients 
as well as allocate damage awards fairly and in proportion to a party's 
degree of fault and works to decrease the time it takes for a case to 
settle or go to trial.
    Ultimately, it will be incumbent upon insurers, providers, and yes 
the trial lawyers to work together to find a common solution that works 
for consumers and patients.
    Again, thank you for the opportunity in allowing us to share our 
views on medical liability reform with the members of this committee.

                              ----------                              

      Prepared Statement of the American College of Obstetricians 
                           and Gynecologists
    On behalf of the American College of Obstetricians and 
Gynecologists (ACOG), an organization representing more than 45,000 
physicians dedicated to improving the health care of women, we urge you 
to bring an end to the limitless litigation restricting women's access 
to health care.
    ACOG resoundingly supports HR 5, the bipartisan HEALTH Act of 2003, 
and we urge this Committee, and the House of Representatives as a whole 
body, to pass this meaningful medical liability reform legislation, 
which protects women's access to health care.
    Across the country, the meteoric rise in medical liability premiums 
is threatening women's access to health care. Faced with the 
unaffordability and unavailability of insurance coverage, ob-gyns are 
forced to stop delivering babies, reduce the number of deliveries, 
scale back their practices by eliminating high-risk procedures, or 
close their doors entirely.
    This statement will also highlight how the medical liability crisis 
is acutely affecting a growing number of states, explaining how access 
to basic and important women's health care in those states is severely 
jeopardized because of a liability system gone awry.
   i. medical liability reform: safeguarding patients' access to care
    The common sense provisions of the HEALTH Act safeguard patients' 
access to health care and address the health care crisis:
PROMOTES SPEEDY RESOLUTION OF CLAIMS
    The Act balances the needs of all parties involved in litigation 
and promotes a fair result. Health care lawsuits can be filed no later 
than 3 years after the date of injury. Additionally, the bill 
acknowledges that in some circumstances, it is important to guarantee 
patients additional time to file a claim. Accordingly, the Act extends 
the statute of limitations for minors injured before age 6.
FAIRLY ALLOCATES RESPONSIBILITY
    Under the current system, defendants who are only 1% at fault may 
be held liable for 100% of the damages. This bill eliminates the 
incentive for plaintiffs' attorneys to search for ``deep pockets'' and 
pursue lawsuits against those minimally liable or not liable at all.
COMPENSATES PATIENT INJURY
    HR 5 ensures injured patients are compensated. The Act does not 
limit the amount a patient can receive for physical injuries resulting 
from a provider's care, unless otherwise restricted by state law. The 
Act only limits unquantifiable non-economic damages, such as pain and 
suffering, to no more than $250,000.
MAXIMIZES PATIENT RECOVERY
    Patients will receive the money needed for their health care. HR 5 
discourages baseless lawsuits by limiting the incentive to pursue 
merit-less claims. Without this provision, attorneys could continue to 
routinely pocket large percentages of an injured patient's award.
PUTS REASONABLE LIMITS, NOT CAPS, ON THE AWARD OF PUNITIVE DAMAGES
    The Act provides for reasonable punishment without unnecessarily 
jeopardizing a defendant's fundamental constitutional rights or risking 
the defendant's bankruptcy. It does not cap punitive damages, rather, 
it delineates a guideline, allowing for punitive damages to be the 
greater of two times the amount of economic damages awarded or 
$250,000.
ENSURES PAYMENT OF MEDICAL EXPENSES
    HR 5 ensures that injured patients will receive all of the damages 
to which they are entitled in a timely fashion without risking the 
bankruptcy of the defendant. Past and current expenses will continue to 
be paid at the time of judgment or settlement while future damages can 
be funded over time through the purchase of an annuity or other 
instrument of secured payment.
ALLOWS STATE FLEXIBILITY
    The HEALTH Act establishes a ceiling on non-economic damages, and 
guidelines for the award of punitive damages, only in those states 
where the state legislature has failed to act. A state legislature may 
also act at any time in the future to impose a cap the limits of which 
differ from those provided for in the HEALTH Act.
     ii. how this crisis compromises the delivery of obstetric care
    Obstetrics-gynecology is among the top three specialties in the 
cost of professional liability insurance premiums. Nationally, 
insurance premiums for ob-gyns have increased dramatically: the median 
premium increased 167% between 1982 and 1998. The median rate rose 7% 
in 2000, 12.5% in 2001, and 15.3% in 2002 with increases as high as 
69%, according to a survey by Medical Liability Monitor, a newsletter 
covering the liability insurance industry.
    A number of insurers are abandoning coverage of doctors altogether. 
The St. Paul Companies, Inc., which handled 10% of the physician 
liability market, withdrew from that market last year. One insurance 
ratings firm reported that five medical liability insurers failed in 
2001. One-fourth of the remaining insurers were rated D+ or lower, an 
indicator of serious financial problems.
    According to Physicians Insurance Association of America, ob-gyns 
were first among 28 specialty groups in the number of claims filed 
against them in 2000. Ob-gyns were the highest of all specialty groups 
in the average cost of defending against a claim in 2000, at a cost of 
$34,308. In the 1990s, they were first--along with family physicians-
general practitioners--in the percentage of claims against them closed 
with a payout (36%). They were second, after neurologists, in the 
average claim payment made during that period ($235,059).
    Although the number of claims filed against all physicians climbed 
in recent decades, the phenomenon does not reflect an increased rate of 
medical negligence. In fact, ob-gyns win most of the claims filed 
against them. A 1999 ACOG survey of our membership found that over one-
half (53.9%) of claims against ob-gyns were dropped by plaintiff's 
attorneys, dismissed or settled without a payment. Of cases that did 
proceed, ob-gyns won more than 65% of the cases resolved by court 
verdict, arbitration, or mediation, meaning only 10% of all cases filed 
against ob-gyns were found in favor of the plaintiff. Enormous 
resources are spent to deal with these claims, only 10% of which are 
found to have merit. The costs to defend these claims can be staggering 
and often mean that physicians invest less in new technologies that 
help patients.
    When a jury does grant an award, it can be exorbitant, particularly 
in states with no upper limit on awards. Jury awards in all civil cases 
averaged $3.49 million in 1999, up 79% from 1993 awards, according to 
Jury Verdict Research of Horsham, Pennsylvania. The median medical 
liability award jumped 43% in one year, from $700,000 in 1999, to $1 
million in 2000: it has doubled since 1995.
    Ob-gyns are particularly vulnerable to this trend, because of jury 
awards in birth-related cases involving poor medical outcomes. The 
average jury award in cases of neurologically impaired infants, which 
account for 30% of the claims against obstetricians, is nearly $1 
million, but can soar much higher. One recent award in a Philadelphia 
case reached $100 million.
    We survey our members regularly on the issue of medical 
professional liability. According to our most recent survey, the 
typical ob-gyn is 47 years old, has been in practice for over 15 
years--and can expect to be sued 2.53 times over his or her career. 
Over one-fourth (27.8%) of ACOG Fellows have even been sued for care 
provided during their residency. In 1999, 76.5% of ACOG Fellows 
reported they had been sued at least once so far in their career. The 
average claim takes over four years to resolve.
    This high rate of suits does not equate malpractice. Rather, it 
demonstrates a lawsuit culture where doctors are held responsible for 
less than perfect outcome. And in obstetrics gynecology, there is no 
guarantee of a perfect outcome, no matter how perfect the prenatal care 
and delivery.
        iii. women's health consequences of limitless litigation
    The medical liability crisis is complex, affecting every aspect of 
our nation's ability to deliver health care services. As partners in 
women's health care, we urge Congress to end the medical liability 
insurance crisis. Without legislative intervention, women's access to 
health care will continue to suffer. Bring an end to the meteoric rise 
in liability premiums that is already impeding women's access to health 
care.
    This crisis is obstructing mothers' access to obstetric care. When 
confronted with substantially higher costs for liability coverage, ob-
gyns and other women's health care professionals stop delivering 
babies, reduce the number they do deliver, and further cut back--or 
eliminate--care for high-risk mothers. With fewer women's health care 
professionals, access to early prenatal care will also be reduced, 
depriving them of the proven benefits of early intervention.
    Limitless litigation also threatens women's access to gynecologic 
care. Ob-gyns have, until recently, routinely met women's general 
health care needs--including regular screenings for gynecologic 
cancers, hypertension, high cholesterol, diabetes, osteoporosis, 
sexually transmitted diseases, and other serious health problems. 
Staggering premiums continue to burden women's health care 
professionals and will further diminish the availability of women's 
care.
    Legislative intervention is needed to avert another rural health 
crisis. Women in underserved rural areas have historically been 
particularly hard hit by the loss of physicians and other women's 
health care professionals. With the economic viability of delivering 
babies already marginal due to sparse population and low insurance 
reimbursement for pregnancy services, increases in liability insurance 
costs are forcing rural providers to stop delivering babies. Help 
sustain those providers dedicated to caring for America's rural women 
and mothers.
    Allowing the crisis to continue will mean community clinic 
cutbacks. Also hurt by the medical liability crisis are the nation's 39 
million uninsured patients--the majority of them women and children--
who rely on community clinics for health care. Unable to shift higher 
insurance costs to their patients, these clinics have no alternative 
but to care for fewer people.
    Acting now can save more women from the ranks of the uninsured. 
Health care costs continue to increase overall, including the cost of 
private health care coverage. As costs continue to escalate, employers 
will be discouraged from offering benefits. Many women who would lose 
their coverage, including a large number of single working mothers, 
would not be eligible for Medicaid or SCHIP because their incomes are 
above the eligibility levels. Last year, 11.7 million women of 
childbearing age were uninsured. Without reform, even more women ages 
19 to 44 will move into the ranks of the uninsured.
    As ob-gyns, our primary concern is ensuring women access to 
affordable, quality health care. It is critical that we maintain the 
highest standard of care for America's women and mothers.
                             iv. conclusion
    Thank you, Mr. Chairman, for your leadership on this important 
issue and for the Subcommittee's attention to this crisis. ACOG 
appreciates the opportunity to present our concerns for the panel's 
consideration and again urges the passage of HR 5, the HEALTH Act of 
2003. The College looks forward to working with you as we push for a 
solution.

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               Material Submitted for the Hearing Record







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