[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
           CURRENT ISSUES RELATED TO MEDICAL LIABILITY REFORM

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 10, 2005

                               __________

                           Serial No. 109-36

                               __________

      Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

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                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

      James D. Barnette, Deputy Staff Director and General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                         Subcommittee on Health

                     NATHAN DEAL, Georgia, Chairman

RALPH M. HALL, Texas                 SHERROD BROWN, Ohio
MICHAEL BILIRAKIS, Florida             Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia             FRANK PALLONE, Jr., New Jersey
BARBARA CUBIN, Wyoming               BART GORDON, Tennessee
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOHN B. SHADEGG, Arizona             ANNA G. ESHOO, California
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          TED STRICKLAND, Ohio
STEVE BUYER, Indiana                 DIANA DeGETTE, Colorado
JOSEPH R. PITTS, Pennsylvania        LOIS CAPPS, California
MARY BONO, California                TOM ALLEN, Maine
MIKE FERGUSON, New Jersey            JIM DAVIS, Florida
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
SUE MYRICK, North Carolina           JOHN D. DINGELL, Michigan,
MICHAEL C. BURGESS, Texas              (Ex Officio)
JOE BARTON, Texas,
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Bean, James R., Physician Advisory Council, Alliance of 
      Specialty Medicine.........................................    18
    Campbell, Sherrie............................................    36
    Glenmullen, Joseph P., Psychiatrist, Harvard Law School, 
      Mental Health Law School Health Services...................   110
    Huggins, Monty...............................................    33
    Hunter, J. Robert, Director of Insurance, Consumer Federation 
      of America.................................................    84
    Hurley, James, American Academy of Actuaries.................    91
    Joyce, Sherman ``Tiger'', American Tort Reform Association...   103
    Kingham, Richard F., Covington & Burling.....................   126
    Malone, Dylan................................................    39
    Montemayor, Jose, CPA Insurance Commissioner, Texas 
      Department of Insurance....................................    54
    Rasar, Mary..................................................    42
    Rosenbaum, Sara, Hirsh Professor and Chair, Department of 
      Health Policy, the George Washington University Medical 
      Center, School of Public Health and Health Services........   100
    Schwartz, Victor E., Shook, Hardy & Bacon, L.L.P.............   136
    Singh, Gurkirpal, Adjunct Professor of Medicine, Department 
      of Gastroenterology, Stanford Business Square..............   121
    Wolfe, Sidney M., Director, Health Research Group, Public 
      Citizen....................................................   130
Material submitted for the record by:
    American Bar Association, letter dated February 16, 2005, to 
      Hon. Nathan Deal...........................................    16
    American Medical Association, prepared statement of..........   170
    American Osteopathic Association, letter dated February 10, 
      2005, to Hon. Joe Barton...................................   187
    Hurley, James, American Academy of Actuaries, letter dated 
      February 22, 2005, enclosing clarification for the record..   161
    Joint Commission on Accreditation of Healthcare 
      Organizations, prepared statement of.......................   162

                                 (iii)

  


           CURRENT ISSUES RELATED TO MEDICAL LIABILITY REFORM

                              ----------                              


                      THURSDAY, FEBRUARY 10, 2005

                  House of Representatives,
                  Committee on Energy and Commerce,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1:05 p.m., in 
room 2123 of the Rayburn House Office Building, Hon. Nathan 
Deal (chairman) presiding.
    Members present: Representatives Deal, Hall, Upton, 
Norwood, Shimkus, Shadegg, Pickering, Pitts, Bono, Ferguson, 
Myrick, Burgess, Barton (ex officio), Brown, Rush, DeGette, 
Capps, Allen, Baldwin, and Dingell (ex officio).
    Staff present: Chuck Clapton, chief health counsel; Cheryl 
Jaeger, professional staff; Eugenia Edwards, legislative clerk; 
David Nelson, minority counsel; Jonathan Cordone, minority 
counsel; and Jessica McNiece, research assistant.
    Mr. Deal. The chairman will recognize himself for 5 minutes 
for an opening statement.
    Since this is my first hearing and the first time that I 
have presided over this subcommittee, first of all, let me 
welcome all of the members of the subcommittee on both sides of 
the aisle. I think we do have a very good working group and 
they will improve their tardiness, I am sure, as the year goes 
along. I am sure we will have many other members that will join 
us here in just a few minutes.
    We like to try to start as close to the time as possible, 
but especially today, since we did have a rather long panel to 
testify to our subcommittee.
    I would like, first of all, to thank also those of you who 
are going to testify, because we know that you have taken time 
out of your busy schedules and traveled many miles to be here 
with us. And this is the first time this subcommittee has 
actually taken up the subject of medical liability in this 
session, but it is not the first time the subcommittee has 
visited the issue, obviously.
    We are addressing, in this Congress, the issues that were 
addressed in previous Congress. And since it was not finalized, 
even though the House did act on the issue, it still remains 
unresolved.
    There is no denying, I think, that there is a medical 
liability crisis in this country. And I don't think any of us 
deem it necessary to go to great deal in reporting the 
statistics involved. We have seen about the astronomical 
increases in the rates of medical malpractice insurance and the 
billions of dollars that are probably being placed in the 
litigation costs as well as in, perhaps, unnecessary intensive 
practices. So it is a serious problem.
    I come from a largely rural District in Georgia, and I view 
this problem primarily as one of the access to healthcare. When 
the only ob-gyn within a 200-mile radius of your home refuses 
to see you because you are a high-risk patient, then there is a 
problem. When you have to be flown to a neighboring State just 
to receive a common medicine procedure that you normally would 
have been able to receive in your hometown, then there is a 
problem. And when people are literally dying because of lack of 
access to a local trauma center, I think there is a problem.
    What would any medical student, for example, be interested 
in starting his or her medical practice in rural Mississippi 
where the statistics indicate that the average physician's 
salary is only $72,000? But the annual premium for medical 
malpractice is $70,000. That doesn't sound like a very good 
career move to me.
    Clearly something, I think, has to be done. That is why we 
have invited such a wide range of people and witnesses today to 
testify on this subject. I have spent 23 years of my career as 
a trial lawyer, and I realize if I say that, some of those in 
the position may need to get in step, but I also served as a 
judge and as the chairman of our Senate Judiciary Committee in 
the State of Georgia before coming to Congress, and during that 
period of time, I participated in and was active in the 
introduction of legislative changes to the tort system. Since I 
left there, of course, the problem has gotten significantly 
worse. And I might just add, at this very minute, the Georgia 
House of Representatives is debating a medical liability reform 
bill, and hopefully before the end of the day, we will have 
some resolution on it.
    But I recognize that this problem is not one of a single 
source, and there is no magic bullet or any Band-Aid that is 
going to simply fix everything that we might think is wrong. 
But I do think that if we begin the process, as we do today, by 
listening to those in the community, those that are affected by 
it, and working with our colleagues on both sides of the aisle, 
hopefully we can come up with some solution that will begin to 
heal the process.
    As Members of Congress, we have plenty of venues in which 
we express our opinions in, but we rarely, I think, have an 
opportunity to hear from such a wide variety of witnesses as we 
will have today.
    I would remind the subcommittee that we are not here to 
debate the merits of any particular piece of legislation, 
either past or present. We are here to learn, hopefully, from 
the distinguished panel of witnesses that will address us here 
in just a few minutes.
    I would hope that as this hearing today proceeds and as 
this subcommittee does its work during the year, that on both 
sides of the aisle, we would agree to have two things: open 
minds and hearts that are not hardened.
    I have the great pleasure of having a fellow classmate of 
mine in my freshman class, and my former neighbor, both in 
Longworth and now in the Rayburn building, as the ranking 
chairman of this subcommittee, and it is indeed my pleasure to 
recognize him, Mr. Sherrod Brown from Ohio at this time for his 
opening statement.
    [The prepared statement of Hon. Nathan Deal follows:]

   Prepared Statement of Hon. Nathan Deal, Chairman, Subcommittee on 
                                 Health

    Let me just start off by thanking our witnesses for appearing 
before the subcommittee today. This subcommittee values your expertise 
and we are grateful for your cooperation and attendance. I know several 
of our witnesses have literally traveled thousands of miles and put 
their busy lives on hold in order to be with us today, and I think we 
should be respectful of their time and devote as much of this hearing 
as possible to listening to what they have to say.
    This is not the first time this subcommittee has taken up the 
subject of medical liability reform and the fact we are having to 
address this issue again in the 109th Congress is evidence to the fact 
that we as a legislative body have not yet been able to do the job our 
constituents sent us here to do and find a satisfactory solution to 
this ongoing crisis.
    There is no denying the fact there is a medical liability crisis in 
this country, and I do not need to repeat the staggering statistics 
about the astronomical rates of increase in the cost of medical 
liability insurance over the past few years or talk about the billions 
of dollars wasted each year due to frivolous lawsuits and doctors 
forced to practice defensive medicine in order for us all to recognize 
that we have a serious problem on our hands that must be addressed as 
soon as possible.
    Coming from a largely rural district in North Georgia, I view this 
problem primarily as one of access to heath care. When the only OB/GYN 
within a two-hundred-mile radius of your home refuses to see you 
because you are high-risk patient, there is a problem with the current 
medical liability system. When you have to be flown to a neighboring 
state just to receive a common medical procedure that was once 
available in your own hometown, there is a problem with the current 
medical liability system. And when people are dying because their local 
trauma center closed down, there is a problem with the current medical 
liability system.
    Why would any medical student be interested in starting his or her 
practice in rural Mississippi where the average annual physician salary 
is only $72,000, if he or she expects to pay as much as $70,000 per 
year in malpractice premiums? That doesn't seem like a smart career 
move to me.
    Clearly, something has to be done, and that is why we have invited 
such a wide range of witnesses to appear before us today.
    I have spent over 23 years of my career as a trial lawyer, which 
are two words that often make physicians scowl a little bit. I have 
also served as a judge and was the Chairman of the Judiciary Committee 
in the Georgia State Senate for eight years where I was active in 
introducing legislation to help curb the growing problems in our 
state's tort system. From this experience, I recognize this problem 
does not have a single source and there is not a magic bullet or a 
Band-Aid solution that will make it go away. That is why I am looking 
forward to having a cooperative and productive hearing this afternoon 
and to working with my colleagues on both sides of the aisle to come up 
with effective legislative solutions to this crisis in our healthcare 
delivery system.
    As Members of Congress, we have plenty of other venues available to 
us to express our own opinions, but rarely will we have an opportunity 
like this to get such wide coverage of this complex and important 
issue. Let me remind this subcommittee that we are not here to debate 
the merits of any past or pending legislation; we are here to learn 
from our distinguished panel of witnesses in order for us to work 
toward a solution to this growing crisis.
    And I'll now yield to the ranking member of this subcommittee, my 
freshman class colleague and my former neighbor in both the Longworth 
and Rayburn Buildings, Mr. Brown of Ohio, for his opening statement.

    Mr. Brown. Thank you, Mr. Chairman. And I enthusiastically 
welcome you, applaud the decision of Chairman Barton and of 
your committee for putting you in this position and I look 
forward very much to continuing the relationship we have had 
for 12 years in working together on all of these issues.
    Here is what I hope Congress will do when it comes to 
medical malpractice. First, we should sit down and figure out 
what the medical malpractice system should and should not be. 
Should it be about deterrence, about compensation, about 
punishment, all, or none of the above? Should we look 
dispassionately at how--then we should look dispassionately at 
how the current medical malpractice system measures up. Then we 
should decide without prejudice whether we should fix the 
current system or scrap it. Then we should look, again with 
prejudice, at various fixes or alternatives.
    But I don't think we will do any of that, because special 
interest groups have a chock-hold on the process here in this 
Congress. And by special interest groups, I mean the insurers, 
the doctors, the lawyers, the drug companies, the medical 
device companies, the HMOs, and even consumer groups that have 
a vested interest in the outcome of our debate. But I also mean 
the political parties, of which all of us are members, which 
have close and long-standing relationships with those special 
interests.
    I hope I am wrong. Maybe we can set all of that political 
baggage aside and focus on the terrifying realities of medical 
malpractice, the reality that 100,000 Americans die every year 
from medical errors, the reality that good doctors are leaving 
the medical profession because of rising malpractice premiums, 
the reality that defensive medicine makes America's health care 
system less personal and more expensive, the reality that 
malpractice insurance premiums increases sometimes have more to 
do with insurance company profits than they do with malpractice 
awards.
    I hope we can work together to erect a system that provides 
justice to the victims of malpractice, a system that won't 
punish doctors for honest mistakes, a system that gets to the 
root of the problem by helping to reduce both the frequency and 
the severity of medical errors.
    But to do it, we have to ask difficult questions. We have 
to ask the trial lawyers why doctors are sometimes corralled 
into scattershot lawsuits. Why don't they crack--we have to ask 
them why don't they crackdown on the unsavory characters who 
peddle personal injury lawsuits on television and charge 
exorbitant fees. We have to ask the doctors tough questions, 
too. Just 5 percent of physicians were involved in 54 percent 
of medical malpractice payouts during the 1990's. We have to 
ask the doctors why it is that some of their colleagues with 
track records like that are--with that kind of incompetence, 
remain board certified. We have to ask the health care 
providers why they shouldn't be required to report medical 
errors, since the resulting data would, in fact, greatly 
enhance our efforts to keep such errors from recurring. We 
would have to ask insurers why they should not be held 
accountable for the business decisions they have made that put 
doctors' economic securities--security and patients' health 
security at risk. We would have to ask consumer groups why they 
so adamantly defend a system that fails all too many people. 
And we would politely tell the drug industry, the medical 
device industry, and the HMOs that we are not going to let them 
cash in on this gravy train, cash in on the medical malpractice 
issue, or dodge responsibility when they, the drug industry, 
the insurance industry, and the medical device industry, 
actually do harm. If we didn't know before how low they would 
go, we sure do now.
    Based on recent legislation and legislative approaches in 
the process on this issue, I am not confident we will take that 
approach. I expect, instead, we will hear from the same 
predictable--we will hear the same old predictable inflexible 
story from all sides. I expect we will consider the same old 
partisan bill, a bill that punishes the wrong people and 
provides the wrong response to the wrong problem. But if I am 
wrong, Mr. Chair, I stand ready to talk with you and others 
about a new way to address this problem, a way that puts 
partisanship aside and commits to asking the difficult 
questions and making the difficult choices.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Sherrod Brown follows:]

Prepared Statement of Hon. Sherrod Brown, a Representative in Congress 
                         from the State of Ohio

    Thank you, Mr. Chairman, and thanks to our witnesses for joining us 
this morning.
    Here's what I hope Congress will do when it comes to medical 
malpractice.
    First we should sit down and figure out what the medical 
malpractice system should and should not do. Should it be about 
deterrence? Compensation? Punishment? All or none of the above?
    Then we should look dispassionately at how the current medical 
malpractice system measures up.
    Then decide, without prejudice, whether we should fix the current 
system or scrap it.
    Then we should look again, without prejudice, at various fixes or 
alternate systems.
    But I don't think we'll do any of this, because special interest 
groups have a choke-hold on the process here in Congress.
    And by special interest groups, I mean the insurers, doctors, 
lawyers, drug companies, medical device companies, HMOs, and consumer 
groups that have a vested interest in the outcome of our debate.
    But I also mean the political parties of which we are all members--
which have close and long-standing relationships with those special 
interests.
    Maybe I'm wrong. Maybe we can set all of that political baggage 
aside and focus on the terrifying realities of medical malpractice:
    The reality that 100,000 Americans die every year from medical 
errorsThe reality that good doctors are leaving the medical profession 
because of rising malpractice premiums
    The reality that defensive medicine makes America's health care 
system less personal and more expensive
    And the reality that malpractice insurance premium increases 
sometimes have more to do with insurance company profits than with 
malpractice awards.
    Maybe can work together to erect a system that provides justice to 
the victims of medical malpractice. A system that won't punish doctors 
for honest mistakes. A system that gets to the root of the problem, by 
helping to reduce the frequency and severity of medical errors.
    But to do it, we'd have to ask some hard questions and make some 
tough choices.
    We'd have to ask the trial lawyers why doctors are sometimes 
corralled into scattershot lawsuits.
    And why they don't crack down on the unsavory characters who peddle 
personal injury lawsuits on television and charge exorbitant fees.
    We'd have to ask the doctors some tough questions too.
    Just 5% of doctors were involved in 54% of medical malpractice 
payouts during the 1990s. We'd have to ask the doctors why it is that 
some of their colleagues with track records of incompetence remain 
board-certified.
    We'd have to ask all of the health care providers why they should 
not be required to report medical errors, since the resulting data 
would greatly enhance efforts to keep such errors from occurring.
    We'd have to ask insurers why they should not be held accountable 
for the business decisions that put doctors' economic security and 
patients' health security at risk.
    We'd have to ask consumers groups why they are so adamantly 
defending a system that fails so many people.
    And we'd politely tell the drug industry, the medical device 
industry, and the HMO industry that we're not going to let them cash in 
on the medical malpractice issue or dodge responsibility when they do 
harm. If we didn't know before how low they would go, we sure do now.
    Based on recent legislation and legislative process on this issue, 
I am not confident we will take that approach.
    I expect instead that we will hear the same old, predictable, 
inflexible story from all sides. And I expect we will consider the same 
old partisan bill--a bill that punishes the wrong people and provides 
the wrong response to the wrong problem.
    But if I am wrong, Mr. Chairman, I stand ready to talk with you 
about a new way to address this problem. A way that puts partisanship 
aside and commits to asking the tough questions and making the tough 
choices.

    Mr. Deal. Thank you, Mr. Brown.
    I am going to call on the chairman of the full committee at 
this time, Mr. Barton, for his opening statement.
    Chairman Barton. Thank you, Chairman Deal.
    And I want to say welcome to chairing the Health 
Subcommittee. This is the first subcommittee hearing that you 
are chairing. It won't be the last. And you start off with a 
difficult issue, so I appreciate your leadership on this.
    I want to thank our witnesses for being here today. This is 
an important issue. It is an issue that the Congress has 
attempted to resolve on several occasions the last several 
years, and in each case, bills have passed the House but have 
not passed the Senate.
    I think it is beyond question that the current medical 
liability system is broken. We have statistics that show that 
we had the most expensive tort system in the world, and it cost 
$180 billion last year, which is about 2 percent of our GNP. My 
home State of Texas had medical malpractice claims that were 
skyrocketing. Doctors are leaving practice. Insurers are 
leaving the State. Several years ago, we passed something 
called ``Proposition 12,'' which capped some of these claims, 
changed the system for filing claims. Last year, medical 
malpractice premiums fell about 16 percent, I think, in our 
State.
    So I am looking forward to this hearing and listening to 
this first panel and the other panels. I would hope that this 
would be an issue that we can work with our friends on the 
minority side on a bipartisan basis. In the past, that has not 
been the case, but maybe in this Congress, it will be the case. 
We do need to move legislation and not just move it through the 
committee and through the floor, but we need to go to 
conference with the Senate and put a common sense bill on the 
President's desk for his signature.
    So I look forward to the hearing and look forward to the 
markup and then moving the bills that are going to result from 
this hearing.
    [The prepared statement of Hon. Joe Barton follows:]

 Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy 
                              and Commerce

    Thank you, Chairman Deal, for holding this hearing today. It marks 
the first hearing on health care issues for our Committee in the 109th 
Congress. It is entirely appropriate that the first hearing focuses on 
medical liability, which is one of the most pressing problems currently 
affecting patient access to health care services.
    The current medical liability system is broken. It denies patients 
access to critical health services. It wastes billions of healthcare 
dollars annually, by forcing doctors to practice defensive medicine. It 
also unnecessarily burdens injured patients, by forcing them into a 
liability lottery that denies them access to fair, predictable and 
timely compensation.
    My home state of Texas provides an excellent example of the harm 
that can be done by an out-of-control medical liability system. In the 
years before Texas adopted medical liability reforms, doctors and other 
health providers faced a severe crisis. The price of medical liability 
insurance had increased so dramatically--a 147 percent increase for 
some--that doctors could no longer bear the costs of obtaining 
coverage, forcing them to abandon specialty practices, retire early, or 
move to another state. When this happens, the real victim is the 
patient in need of care who simply can't find a qualified doctor to 
provide it. Insurers began leaving the state, which forced over 6,500 
doctors to seek alternative coverage. More than half of all Texas 
physicians surveyed were considering early retirement and nearly a 
third said they were considering reducing types of services they 
provide.
    In 2003, Texas passed Proposition 12, a voter initiative that 
allowed the state to adopt several meaningful medical liability 
reforms. Passage of these reforms produced real changes in Texas. Since 
2003, premiums charged by the largest medical liability insurer in 
Texas have dropped 16.4 percent. Patients are also now receiving better 
access to care, because of the increases in the number of licensed 
physicians in specialties like neurosurgery. Enactment of Proposition 
12 is reversing the culture that dragged Texas into a crisis in the 
first place. We shouldn't have to reach such crisis in every state 
before we act.
    Today we have the opportunity to learn more about the options 
available to us to improve the medical liability system. I encourage my 
colleagues to listen to the facts, explore the issues carefully, and 
commit to taking action. It's time for this Congress to enact common-
sense reforms that protect injured patients while restoring sanity to 
our judicial process for all Americans. I look forward to this 
challenge.
    I thank the witnesses for their testimony.

    Mr. Deal. Thank you, Mr. Chairman.
    I recognize the ranking member of the full committee, Mr. 
Dingell, for an opening statement.
    Mr. Dingell. Mr. Chairman, thank you for the courtesy.
    Congratulations on your first hearing.
    Mr. Chairman, the rising cost of malpractice insurance is a 
real problem for doctors and patients alike. This is a serious 
concern and it deserves serious and deliberate consideration. 
Unfortunately, the White House and my colleagues on the 
Republican side, are again responding with proposals that would 
overhaul the judicial system well beyond the issues that are 
required to be addressed to deal with the problem of medical 
malpractice.
    While inefficiencies in our courts are a contributing 
factor, they are by no means the only cause or even the largest 
single cause of the current crisis. Physicians and other 
medical providers deserve immediate assistance, not hollow 
promises that are, in fact, designed to shield large 
corporations from their responsibilities to both doctors and 
patients. Past and current Republican proposals would provide 
virtual immunity baths for HMOs, for insurance companies, and 
for drug and device manufacturers. I find it curious that not 
one of these companies has come forward to explain why it needs 
special protections, yet my colleagues on the majority side 
seek to grant them status under the law that is unprecedented. 
Why is this immunity bath necessary, and why must it encumber 
medical malpractice legislation, which has an opportunity to do 
a great deal of good and to be properly focused on a serious 
problem?
    Moreover, it is not enough to say that the regulators alone 
will protect the public. The committee has a long and proud 
history of overseeing the Food and Drug Administration. For 
decades, we have uncovered grave threats to the safety of food, 
drugs, devices, and blood where FDA could not, or would not, 
pay sufficient attention. Recent bipartisan investigations into 
antidepressants and a class of painkillers, known as COX-2 
inhibitors, have again revealed that the FDA by itself cannot 
be relied upon to assure that our prescription medications are 
properly labeled as to the real risks and benefits.
    The leadership on the other side of the aisle is once again 
asking physicians and patients to cross their fingers and hope 
that some of the benefits bestowed upon insurance companies, 
HMOs, and drug and device companies will trickle down to them. 
Lots of luck.
    At the same time, women, seniors, and low-income families 
are being asked to pay the very real human cost of medical 
negligence and misbehavior they are powerless to change. This 
is wrong.
    Thank you, Mr. Chairman.
    Mr. Upton [presiding]. Thank you, my friend from the State 
of Michigan.
    I am the acting chairman for a moment while Chairman Deal 
is visiting with some folks, but I want you to know that I was 
next on the list anyway, so I will make my--it is not just 
because I am the----
    I commend my chairman, both chairmen, Chairman Barton and 
Chairman Deal, for holding today's hearing to address and 
assess the need to enact a Federal medical liability reform 
to--as it pertains to the growing malpractice insurance crisis 
impacting physicians, hospitals, and other health care 
providers in many States and address some of the factors 
fueling the double-digit increases in health care premiums with 
which both large and small employers and individuals and 
families across the Nation are grappling with.
    My State of Michigan has already put into place a number of 
important reforms similar to the Federal reforms that we are 
contemplating today. As a result, Michigan is not experiencing 
this serious medical liability insurance crisis that is 
gripping many other States, but we are not immune from such 
experiences as sharp increases in premiums and insurers 
withdrawing from our market.
    Several years ago, an emergency physician group in my 
District, serving one of the largest hospitals in my District, 
almost lost its medical liability insurance. Had help not come 
at the very last minute, an entire community could have lost 
access to emergency care. Similarly, recently a large physician 
practice serving the poor and uninsured in Southwest Michigan 
could not afford to renew its malpractice insurance policy 
because of a sharp increase in their premium. They were 
eventually able to find more affordable insurance, but only by 
increasing their exposure.
    While I have been, thus far, very supportive of Federal 
medical liability reform, I hope that, as this process moves 
along, we will be mindful of one potential problem that a 
Federal preemption of certain State laws could pose for 
physicians. Specifically, many Michigan physicians are 
concerned that a Federal law which preempts our State's joint 
and several liability provision and replaces it with a fair 
share liability provision will force many of them to purchase 
significantly more coverage than they do now under our own 
State law. With that said, Michigan physicians, like physicians 
across the country, are concerned about the rising costs of 
health care in this country. And whether it be for employers 
who struggle to continue to provide coverage for their 
workforce and retirees, or the double-digit annual increases in 
the growth of Medicare and Medicaid programs, we know that 
defense medicine, and all that it entails in extra costs and 
procedures, is one of those factors fueling the double-digit 
increases and that medical liability reform across the Nation 
is one part of the solution to reigning in health care costs 
for all of us and moving us toward the goal of ensuring that 
every American has ready access to high-quality, affordable 
health care.
    I look forward to working with the members of this 
committee in a bipartisan basis to get this legislation through 
the House, working with the Senate, and on to the President's 
desk. And I would yield my--the balance of my time and 
recognize the good gentleman from Chicago, my friend and member 
of the powerful Subcommittee on Telecommunications, Mr. Rush, 
for an opening statement.
    Mr. Rush. Thank you, Mr. Chairman, for that fine 
introduction, and I want to thank you for recognizing me. And I 
want to thank the subcommittee chairman for holding this 
hearing.
    I want to welcome our panelists, also, that are before us 
today.
    Mr. Chairman, this is a tough issue for me, and I am very 
aware of and sensitive to the problem of rising malpractice 
insurance premiums that doctors are facing. In my Home State of 
Illinois, we are almost at a crisis level. I talk to doctors in 
my State all of the time, and many of them are thinking about 
moving across the border to Wisconsin where premiums are 
considerably cheaper. Many have already done so. And Joe, I am 
always concerned over the lack of quality health care in poor, 
undeserved communities, and I am very worried that rising 
malpractice insurance costs will only exacerbate this problem.
    But the question is how do we reform the system and provide 
premium relief to doctors? Do we reform civil procedures? Do we 
reform the insurance markets? Do we cap damage awards?
    Mr. Chairman, public policy is almost always about cost-
shifting. The problem with capping non-economic damage awards, 
often referred to as ``pain and suffering,'' is that it merely 
shifts costs from doctors onto the patients or the victims. 
This is a simple fact that the proponents of damage caps ignore 
or are unwilling to acknowledge. Such advocates are too quick 
to argue that doctors would immediately benefit from lower 
insurance premiums. But they refuse to, on the other hand, 
acknowledge that the people who will suffer most from such caps 
are lower-income adults who suffer from egregious, inexcusable, 
and devastating medical errors, such as the death of a spouse. 
These lower-income victims do not, relatively speaking, benefit 
from unlimited economic damage awards, because their financial 
horizons are not as rosy as higher-income victims. Thus, in the 
proposal to cap non-economic damage awards is a discrimination 
against lower-income victims.
    Proponents of such strict damage caps should at least be 
honest and acknowledge that they are advocating for this type 
of cost-shifting from doctors to lower-income victims. I think 
this type of honesty and candor will serve to elevate this 
debate. I, for one, am open-minded on this issue, and I am 
willing to look at all solutions that will serve my 
constituents and Illinois doctors as well. But let us be honest 
about the costs and benefits of all of these myriad of 
proposals.
    With that, Mr. Chairman, I--again, I want to thank you, and 
I yield back the balance of my time.
    Mr. Upton. The gentleman's time has expired.
    The gentleman from Georgia for an opening statement, Mr. 
Norwood.
    Mr. Norwood. Thank you, Mr. Chairman. I am going to defer 
my time for questioning, but I would like to take a minute and 
welcome my constituent from Watkinsville, Georgia, Sherrie 
Campbell. I know what her problem has been very well, because 
it is in my District, and I am very excited about her coming up 
here and telling this committee what happens when you don't 
have Congress act on tort reform.
    Welcome, Sherrie.
    Mr. Upton. The gentleman defers.
    Mr. Burgess for an opening statement.
    Mr. Burgess. Well, thank you, Mr. Chairman.
    And I, too, want to thank you for holding this hearing on 
an issue that is important to me and to patients throughout the 
country.
    Before I came to Congress, I was a simple country doctor 
with 25 years of experience, and I have seen up close and 
personal how the liability crisis has impacted others in my 
profession and the patients that we serve. And I would agree 
with the ranking member from Ohio. In a perfect world, we would 
have a perfect bill, but this is Congress. And the best we can 
hope for is a common sense bill, and perhaps a bill that takes 
good ideas that have worked in those great laboratories across 
the land, called States, to take these good ideas from State 
legislation that would work on a national basis. Texas--my home 
State of Texas, has new legislation. In the past 18 months, 
this legislation has provided real relief. And in fact, 
premiums in my State, medical liability premiums have decreased 
or remained flat or, if they have increased, they have 
increased at one-half to one-third the rate of neighboring 
States, most importantly in a State that had gone from 17 
insurers down to 2. We now have new insurers coming back into 
the marketplace, which is just absolutely critical.
    A perineotologist in from my District, a young man who had 
studied in obstetrics and gynecology and gone on to do 
specialty work in high-risk pregnancies, they have made him a 
target for liability suits, had to stop his practice after 2 or 
3 years, because he simply could not afford the $125,000 
premium that he was faced with. This is a young man that had 
trained in our State institutions. So we, the taxpayers of 
Texas, had, essentially, paid for his education, and now he was 
going off to work in private business, because he could not 
afford to continue to practice his medicine. Our community lost 
a young man in the prime of his career in a sorely needed 
specialty because of the medical liability situation.
    On a recent trip to Alaska, I went through the town of 
Gnome. And you can imagine Gnome, Alaska, a Congressional 
delegation coming through causes a lot of excitement. And the 
doctors from the hospital were there to meet us for lunch as 
part of a big chamber group. Well, they heard that I was a 
doctor. One of them came up to me and said, ``Boy, I sure hope 
you do something about liability reform, because we can't 
afford an anesthesiologist at our hospital because of the 
premiums.'' And I said, ``Well, what type of medicine do you 
practice?'' He said, ``Just like you, I am an ob-gyn.'' And I 
said, ``Bubba,'' that is a Texas expression, ``Bubba, what do 
you mean you practice ob without an anesthesiologist? What do 
you do if you have to do a C-section?'' He said, ``Then we call 
a plane, and we transfer the patient to Anchorage.'' And 
Anchorage is about a 1\1/2\ hour flight from Gnome, Alaska. And 
they do, on occasion, have bad weather in that State. I fail to 
see how we are advancing the cause of patients' safety by 
allowing this situation to continue.
    And I will yield back.
    Mr. Upton. The gentleman's time has expired.
    The gentlelady from Wisconsin, Ms. Baldwin.
    Ms. Baldwin. Thank you, Mr. Chairman.
    I wanted to start out by taking a moment to describe the 
medical liability insurance situation in my Home State of 
Wisconsin.
    In short, we don't have a crisis in Wisconsin. Medical 
liability insurance is both available and affordable for 
Wisconsin's physicians. When Wisconsin addressed this issue in 
1975, we started from the premise that you don't deal with 
rising malpractice insurance costs by blaming the victims. You 
start by addressing the insurance issues. And Wisconsin did 
this in three ways.
    First, we required that all doctors have malpractice 
insurance.
    Second, we created an insurer of last resort, the Wisconsin 
Health Care Liability Insurance Plan, commonly known as WICLIP 
in Wisconsin, to provide affordable malpractice insurance to 
those who couldn't find any in the private market. WICLIP has 
been very successful, keeping the rate of increase at or near 
inflation in recent years.
    Finally, we created the Wisconsin Patients Compensation 
Fund. The Patients Compensation Fund covers all economic 
damages exceeding $1 million per occurrence or $3 million per 
year. The Patient Compensation Fund rates, paid by all health 
care providers in the State, have fallen during recent years. 
By pooling risk and making sure all doctors have coverage, 
Wisconsin has successfully addressed this issue. And these 
actions controlled malpractice costs long before Wisconsin 
capped non-economic damage.
    This brings me to my final point. This should be a State 
issue. Each State has the authority and capacity to address any 
problems they have. A one-size-fits-all approach can be overly 
broad and encroach upon traditional State authority. Soaring 
malpractice insurance rates need to be addressed with two 
principles in mind. First, do no harm to the victims in medical 
errors. And second, start by addressing the problems of 
inadequate or expensive insurance.
    In light of these two principles, narrow Federal caps on 
non-economic damages are not the way to address the problems 
with malpractice insurance. We need to put victims first in 
this debate and find constructive and effective ways to reduce 
medical errors.
    Thank you, Mr. Chair. I yield back.
    [The prepared statement of Hon. Tammy Baldwin follows:]

Prepared Statement of Hon. Tammy Baldwin, a Representative in Congress 
                      from the State of Wisconsin

    Thank you Mr. Chairman. And thank you to the witnesses who have 
come to testify before us today.
    I want to start out by talking just a little bit about the medical 
liability insurance situation in my home state of Wisconsin. In short, 
we don't have any sort of crisis in Wisconsin. Medical liability 
insurance is both available and affordable for Wisconsin's physicians.
    When Wisconsin addressed this issue in 1975, we started from the 
premise that you don't deal with rising malpractice insurance costs by 
blaming the victims. You start by addressing the insurance issues.
    And we did this in three ways. First, we required that all doctors 
have malpractice insurance.
    Second, we created an insurer of last resort--the Wisconsin Health 
Care Liability Insurance Plan--to provide affordable malpractice 
insurance to those who couldn't find any in the private market. WICLIP 
has been very successful, keeping rate increases at or near inflation 
in recent years.
    Finally, we created the Wisconsin Patients Compensation Fund. The 
Patients Compensation Fund covers all economic damages exceeding $1 
million per occurrence or $3 million per year. The PCF rates--paid by 
all health care providers in the state--have fallen during recent 
years.
    By pooling risk and making sure all doctors have coverage, 
Wisconsin has successfully addressed this issue. And these actions 
controlled malpractice costs long before Wisconsin capped non-economic 
damages.
    That brings me to my final point. This should be a state issue. 
Each state has the authority and capacity to address any problems they 
have. One-size-fits-all approaches are overly broad and encroach on 
traditional state authority.
    Soaring malpractice insurance rates need to be addressed with two 
principles in mind. First, do no harm to the victims of medical errors. 
Second, start by addressing the problems of inadequate or expensive 
insurance. In light of these two principles, narrow federal caps on 
non-economic damages are not the way to address the problems with 
malpractice insurance.
    Caps in Wisconsin have not resulted in lower heath care costs. 
Health care costs are rising for many other reasons. We need to put 
victims first in this debate and find constructive and effective ways 
to reduce medical errors.

    Mr. Deal. The Chair recognizes Ms. Bono.
    Ms. Bono. Thank you, Mr. Chairman. I will waive other than 
to thank you for this very important hearing and look forward 
to hearing from all of our witnesses.
    And with that, I yield back.
    Mr. Deal. Ms. DeGette, you are next. Would you like to go 
ahead and try to get your statement in----
    Ms. DeGette. Yes, sir.
    Mr. Deal. [continuing] before we go vote?
    Ms. DeGette. Thank you, Mr. Chairman.
    Mr. Chairman, I welcome your leadership of this committee 
and also your opening remarks about bipartisan solutions. I 
truly hope that this hearing marks a fresh start for the 109th 
Congress on this issue, because, frankly, we had a disgraceful 
record on this issue in the 108th Congress.
    Sitting on this subcommittee when we marked up the medical 
malpractice bill in the 108th Congress, I was dismayed, to say 
the least, about the complete lack of willingness on the part 
of the majority to negotiate with anybody. It got to the point, 
for example, when there was a problem with the definition of 
the statute of repose in the bill, when I approached the 
sponsor of the legislation and asked him to work with me on 
making the definition of that narrow technical term, the common 
standard definition, he said, ``I can't make one change to this 
bill without going back and talking to the groups who wrote the 
bill.'' And he went back and talked to the groups who wrote the 
bill, and they said no, and they wouldn't even change that one 
thing.
    We can have medical malpractice reform, if we want to. We 
could come up with a negotiated agreement, but it really is 
going to take bipartisan cooperation and discussion. Issues 
like should we really put caps on non-economic damages but, at 
the same time, not spend one instant in the bill talking about 
insurance companies and insurance practices for malpractice 
insurance. Doctors in many parts of the country are getting 
hammered with increasing malpractice insurance costs, but the 
bill in the 108th Congress did nothing, not even a study, to 
look at the malpractice insurance industry.
    Now if we really wanted to fix this crisis, I would suggest 
any legislation would involve an examination of malpractice 
insurance writing policies and how we can fix that. That is 
what worked in California.
    To give you an example, in Colorado, my home State, where 
we have had insurance reform for many years, insurance--or I am 
sorry, malpractice reform and caps on non-economic damages, 
insurance companies took in over $119 million in premiums in 
2001, but yet they paid out only $36 million in claims. So I 
think everything needs to be on the table. And the first thing 
that needs to be on the table, Mr. Chairman, is the question of 
is Congress really the uber State legislature. Is the issue of 
the inaction of State legislatures, in some states, an issue 
that we should take to Congress and take rights away from 
victims of medical malpractice in order to try to help a 
problem that, frankly, is not going to be helped unless we look 
at every aspect of the issue?
    With that, Mr. Chairman, I ask unanimous consent to put my 
full statement in the record and yield back.
    Mr. Deal. Without objection.
    We are going to try one more quickly.
    Mr. Ferguson, are you prepared to make an opening 
statement?
    Mr. Ferguson. Thank you, Mr. Chairman.
    Mr. Deal. I will recognize you for 3 minutes.
    Mr. Ferguson. Thank you.
    Good afternoon. Thank you, Mr. Chairman. Congratulations on 
your chairmanship, and I look forward to working with you and 
all of the members of the subcommittee. And thank you, too, for 
bringing this important issue before the subcommittee. This 
affects our Nation's doctors. It affects so many people, but it 
ultimately affects every single one of us and our families. I 
became familiar with this issue when we had our--a child a 
couple of years ago, and my wife's doctor said, ``Well, I am 
trying to find someone who can cover for me if I am not going 
to be there, because my partner,'' this--my--our physician's 
medical practice partner had just left New Jersey because she 
couldn't afford the insurance premiums any longer. My wife's 
physician, her insurance premiums had gone up 40 percent that 
very year, and this is a bright, talented physician who was 
considering giving up the practice of obstetrics altogether, 
because she couldn't afford her insurance premiums any longer. 
This is clearly a crisis. We had physicians and hospitals and 
medical specialists, they are severely limiting their practices 
because of the cost of insurance and overburdening this fear of 
litigation. Some health care providers are even leaving the 
State, as I mentioned, and others are just leaving the practice 
of medicine.
    In November 2002, a study by the Medical Society of New 
Jersey, in my Home State, discovered that 45 percent of medical 
practices reported that they had adjusted their operations 
because of problems with the costs of medical liability 
insurance. These are making changes in the practices, which had 
a severely negative impact on patient care. They were declining 
to purchase new equipment. They were laying off staff. They 
were refusing to accept new patients. According to the American 
College of Obstetricians and Gynecologists in New Jersey, 65 
percent of the hospitals report that physicians are leaving 
because of insurance--higher increased insurance premiums.
    This longer--this problem can't be--go unaddressed any 
longer. It is imperative that this committee and the Congress 
act in a way that it can ensure that all Americans have access 
to quality health care. We have to preserve the sacred 
relationships between patients and doctors. We have to 
encourage bright, young, talented professionals. We have to 
encourage them to go into the field of medicine. So many young 
people today are not even considering going into the field of 
medicine today because of the fear of litigation and the fear 
that they won't even be able to make ends meet as a trained 
health care professional.
    The message is clear. Physicians and other health care 
providers want to continue helping patients in need. And 
patients don't want to lose these trusted relationships that 
they enjoy with their doctors. Without Federal legislation--I 
would love it if every State handled this problem in a way that 
was best for them, but in my Home State of New Jersey, they 
passed a bill. Frankly, it was a substanceless bill. It was--
put a little Band-Aid on a gaping wound. It did not solve the 
problem.
    There is a need for Federal legislation. This problem is 
not going to go away. We need to address it, and I look forward 
to addressing it this Congress.
    Thank you, Mr. Chairman.
    Mr. Deal. Thank you.
    I am going to recognize Mr. Brown very quickly.
    Mr. Brown. Yes, thank you, Mr. Chairman.
    Before we break, I would like to recognize Tammy Baldwin 
for her first hearing on--it is her first year on the full 
committee, her first day on this subcommittee and recognize 
Congressman Allen, who is a second-termer on the full committee 
and his first time on this subcommittee, and Lois Capps, who 
has been on this subcommittee for a long time.
    Ms. Baldwin. I want to make a statement, if I could----
    Mr. Deal. Well, we don't have time. We are going to have to 
go vote. I would like to also recognize our two new members who 
are here, Ms. Bono from California, and Dr. Burgess from Texas.
    With that, we are getting close on this vote. We are going 
to stand in recess. And the best estimate I can give you is 
probably going to be 45 minutes, it looks like, at least, 
before we get back. We will stand in recess.
    [Brief recess.]
    Mr. Deal. The subcommittee will come to order.
    We are in a time bind for some of our witnesses, and so we 
are going to try to get this opening statement process 
completed as quickly as possible.
    Ms. Capps, you would be next.
    Ms. Capps. Thank you, Mr. Chairman.
    I do think it is important for the Congress and this 
committee to address barriers to access to health care. One 
emerging barrier seems to be the rise in medical malpractice 
insurance rates taking place in various parts of the country. 
We should do something about this, but we should be sure we are 
actually solving the problem and not making a bigger mess. 
There is serious debate about why premiums are rising and what 
should be done to stem their growth.
    The truth is that the experts are uncertain what exactly is 
driving premiums. The evidence is mixed. The majority has put 
forth proposals in the last two Congresses to limit consumers' 
ability to hold accountable negligent doctors, profit-driven 
HMOs, insurance companies, and prescription drug companies. 
They claim that excessive or frivolous lawsuits are the cause 
of rising premiums. The problem is that these lawsuits are, by 
definition, not frivolous. Where the large damages are awarded, 
a jury has found that the patient has been severely harmed. We 
should not leap to the conclusion that capping the damages an 
injured person receives because of malpractice is the way to 
solve the problem. The majority proposal will penalize innocent 
victims of medical negligence.
    Furthermore, this proposal goes far beyond patients and 
doctors. The majority's bill would protect drug companies, HMOs 
from lawsuits filed by injured people. In 3 years of 
considering this issue, the majority has not presented a shred 
of evidence that drug companies that make billions of dollars 
in profits need these protections. If the majority's proposal 
were to become law, the ability of injured patients to hold 
negligent drug companies would be dramatically limited, and we 
have all seen the recent stories about Vioxx. They highlight 
the fact that drug companies may harm patients. They expose how 
dangerous the majority's bill could be.
    I believe the majority should be given a chance to defend 
their proposal, so I hope, Mr. Chairman, you will hold 
additional hearings on the legislation itself, and I hope we 
will hold a markup on any legislation to be considered on the 
floor. The Energy and Commerce Committee has a rich legislative 
history. We should not allow ourselves to simply become a 
select committee without a legislative role.
    I yield back.
    Mr. Deal. I thank the gentlelady.
    I believe we have now finished opening statements.
    Mr. Brown. Mr. Chairman, I think Congressman Allen is--do 
you want to make a statement? Okay. Yes, he was--I know he was 
on his way, and none of those people look like Tom Allen. I was 
talking about the other three.
    [Additional statements submitted for the record follow:]

 Prepared Statement of Hon. John Shimkus, a Representative in Congress 
                       from the State of Illinois

    Thank you, Chairman Deal, for organizing this hearing, the first of 
our Subcommittee in the 109th Congress. I'm pleased to be here today to 
address what I feel is the most crucial health care issue in my 
district today: the medical liability crisis.
    We have all heard the stats on the lack of physicians in our areas, 
and my home county is probably the hardest hit due to the legal climate 
that we face.
    As the representatives from the American Tort Reform Association 
can testify today, their group has named Madison County its ``Number 
One Judicial Hellhole'' in the country for 2004.
    Some may suggest moving to another county to avoid this situation. 
Unfortunately for my constituents, our neighboring county of St. Clair 
has been named ``Number Two'' on the list!
    Hospitals in those two counties have lost more than 160 doctors 
because of the medical liability crisis. These physicians just cannot 
afford to pay their premiums, which have skyrocketed in recent years.
    President Bush outlined his plan for addressing this issue when he 
visited my district on January 5th. He is committed to Medical 
Liability Reform this year--and I believe that the House and Senate 
should be, too.
    In rural areas like my district, we already have ``access-to-care'' 
problems strictly by nature. But when we hear the staggering news of 
physician resignations, it affects all aspects of life-not just health 
care.
    Without immediate action, the possibility for economic growth in 
Southern Illinois will be seriously threatened. To stay competitive in 
a global marketplace and keep jobs in America, we must ensure that our 
nation's health care delivery system is fully intact.
    I again would like to thank Chairman Deal for holding this hearing, 
and I look forward to the testimony from our witnesses.
                                 ______
                                 
    Prepared Statement of Hon. Paul E. Gillmor, a Representative in 
                    Congress from the State of Ohio

    Mr. Chairman, I congratulate you on your new position and thank you 
for kicking-off the 109th Congress by delving into our nation's medical 
liability system and the need to reform it. Furthermore, I am honored 
to be sitting as a member of this subcommittee for the first time in my 
career.
    I'd also like to commend the well-balanced panel of witnesses. I am 
confident we will hear from all sides of this issue today. Of note, 
like many other states, the current medical liability system continues 
to be of great concern to Ohio physicians and patients alike. In 
particular, I look forward to learning more about the relationship 
between health care costs and malpractice litigation, and whether 
patients are being compensated fairly. I am also anxious to hear about 
the level of impact that tort reform and medical liability measures, 
passed previously by the House, could have on our current crisis.
    Over the last two Congresses our body has aggressively pursued 
reform that is both fair and efficient. Once more, I am glad that we 
continue to bang away at this issue and remain optimistic that our 
panel will be instrumental in improving a patient's care and access to 
specialty services, as well as our nation's healthcare delivery system 
as a whole.
     Again, I thank the Chairman, and yield back the remainder of my 
time.
                                 ______
                                 
  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas

    Thank you, Mr. Chairman, for holding this hearing on the medical 
malpractice situation in many of our states. This is an important issue 
that has been discussed exhaustively in this committee in the past 
several Congresses. However, in years past, the committee has been able 
to address this issue with respect to specific legislation. Then, I 
expressed concerns that the committee was rushing to pass legislation 
which I thought would do little to solve the problem of escalating 
malpractice premiums. But now, we can't even effectively discuss our 
options in addressing this issue because we have no piece of 
legislation to examine. On top of that, once a legislative vehicle is 
eventually identified, we have no assurance that the committee will 
address it through regular order. Yet again, the committee's response 
to this issue is occurring too soon and too fast.
    In addition to procedural concerns, I remain concerned that we're 
overstepping our jurisdictional boundaries with our action on this 
issue. For more than 200 years, the states have had jurisdiction over 
this issue, and it should continue to be that way. At least 38 states 
have addressed this issue by capping either punitive damages, non-
economic damages, or both. Having served in the Texas State 
Legislature, I know first-hand that state legislatures are best 
positioned to determine whether and how to address the medical 
malpractice situation in their individual states. The situation is 
different in each state, and a Washington-knows-best approach ignores 
the hard work and tough decisions that individual states have made.
    The legislation we've considered in years past has had significant 
flaws, and I hope that the majority's delay in producing a legislative 
vehicle indicates their intent to remedy some of the problems 
associated with their previous bills. Two particular provisions come to 
mind. First, previous bills have included a firm $250,000 cap on non-
economic damages without providing for inflation adjustment in future 
years. While that figure mirrors California's MICRA law, it is 
important to recognize that California's cap has not been adjusted for 
inflation in approximately thirty years. Further, California's law was 
crafted during a time when a $250,000 cap would have sufficed for all 
but the most egregious jury awards--which, I might add, the judge has 
the discretion to overturn. That is certainly not the case in the 21st 
Century, and who are we to put a price on pain and suffering? A cap on 
non-economic damages would create a one-size-fits-all figure for each 
and every case of medical malpractice. Members of Congress do not hear 
the details of each medical malpractice case. Members of juries do, 
which is why they are best equipped to determine the appropriate non-
economic damages based on the facts of each case.
    The medical liability reform bills previously passed by the House 
also contained a dangerous provision that would provide drug companies 
and device manufacturers with an affirmative defense against punitive 
damages as long as their products had FDA approval. This provision 
presupposes that FDA approval is an air-tight process whose integrity 
need not--and legally cannot--be questioned. Considering the FDA's 
recent track record with regard to Vioxx and other pharmaceuticals that 
have been removed from the pharmacy shelves, it is clear that the 
integrity of the FDA approval process has been compromised. Until some 
serious reforms are implemented at the FDA, the FDA stamp of approval 
should not provide any company with an affirmative defense against 
punitive damages. Such a provision would only provide drug and device 
manufacturers with even less of an incentive to report known adverse 
events before their products go to market and ensure that their 
products are as safe as possible.
    Given these serious outstanding issues, Mr. Chairman, I think it is 
unwise to proceed with this discussion until we have a specific 
proposal to discuss. Above all, I would hope that the committee would 
recognize the grave issues surrounding this debate--both substantively 
and jurisdictionally--and afford us the regular order that should 
accompany any reform as serious as medical liability reform.
    Thank you, and I look forward to the witness testimony.
                                 ______
                                 
    Prepared Statement of Hon. Thomas H. Allen, a Representative in 
                    Congress from the State of Maine

    Thank you, Mr. Chairman.
    President Bush says there is a medical liability crisis and his 
medical malpractice proposals will stop frivolous lawsuits against 
doctors. The President has not told the public that his proposals will 
probably contain unrelated liability protection to the drug and medical 
device industries, HMOs and other health insurance companies.
    No medical malpractice reform should protect pharmaceutical and 
medical device companies from punitive damages. They are fully capable 
of defending themselves. The Food and Drug Administration approves 
drugs or medical devices for safety and efficacy, but numerous examples 
exist of companies not disclosing all their data. The Republican plan 
to introduce the bill after this hearing, by-pass Subcommittee and Full 
Committee mark-ups and move the bill to the House floor should be 
reconsidered.
    This Committee knows better than to trust the FDA to provide the 
prescribing community and the American people with timely, appropriate 
information about the risks and benefits of specific drug therapies.
    We know better than to rely on the competency and independence of 
the FDA on matters related to drug safety, particularly post-market 
safety, because our Subcommittee on Oversight and Investigations has 
conducted investigations for decades that have exposed glaring 
weaknesses in the regulatory framework and performance of the FDA 
relating to the safety of prescription drugs (including blood which is 
classified as a drug) and medical devices.
    In the past Congress alone, we examined the systemic and personnel 
weakness in that Agency that have led doctors and their patients to 
rely on the claims of the makers of Accutane and the antidepressants 
Zoloft, Paxil, Effexor, Serizone, Remeron, and Celexa when the FDA knew 
of dangers that were not addressed in the labeling of those drugs.
    From public accounts, we can expect that the O&I investigation into 
the marketed Cox2 drugs, Vioxx, Celebrex and Bextra, will ultimately 
reach the same conclusion.
    This is not the hearing to go into the specifics of these case 
studies; Accutane and the SSRI case studies are in our record. Nor is 
it the time and place to hash out the various causes, insufficiencies 
in the law, questionable policy choices or failures at the FDA, 
including incompetence and possible malfeasance.
    But, given this Committee's experience, we must not allow a medical 
malpractice bill to limit the tort liability of companies with great 
financial resources simply because they received FDA approval for a 
harmful product.
    Republicans and Democrats alike have recognized the FDA's recent 
incompetence when it comes to protecting the public and ensuring drug 
safety. At our first Oversight hearing on September 9th, 2004 Chairman 
Barton stated, ``The conduct by the FDA has only reinforced my past 
sentiments that the Food and Drug Administration really stands for Foot 
Dragging and Alibis, and that is not acceptable.'' Also at that 
hearing, Rep. Walden noted, ``The regulatory agency charged with 
protecting the public health is preventing a company from disseminating 
important safety information to parents, the public, and physicians.''
    On September 23rd Chairman Barton said, ``Time after time in 
reviewing the documents and reviewing the transcripts and the 
testimony, it really does appear to me that the FDA has gone out of its 
way to short circuit findings.''
    Senate Republicans concur that the FDA has proven unable to do its 
job effectively. At a Senate Finance hearing on November 18th of last 
year, Senator Grassley stated, ``What's come to light about Vioxx since 
September 30th makes people wonder if the FDA has lost its way when it 
comes to making sure drugs are safe.'' He continued on to say, ``One of 
my concerns is that the FDA has a relationship with drug companies that 
is too cozy,'' and that, ``The FDA has also stood watch over failures 
when it comes to drug safety.''
    My Republican colleagues are clearly aware of the FDA's recent 
failures and yet it seems only a matter of time before they will 
introduce tort reform legislation that contains, once again, the FDA 
defense. But we all know that the FDA is unable--on a continuing 
basis--to protect the public from dangerous drugs. To rely upon the FDA 
for assurance that approved medicines are sold with the most recent and 
relevant information regarding their safety and efficacy profiles is 
simply folly. Stripping patients of their right to legal recourse is 
not the answer. The FDA defense for tort claims against companies 
making drugs or medical devices has no place in any bill, certainly not 
one dealing with malpractice claims against physicians.

    Mr. Deal. We do have some witnesses that have got some 
airplanes to catch, I know, and you know, we always have the 
right. I would ask the ranking member if they do want to make 
an opening statement, if they will stick around until after 
this second panel, we would be glad to have a closing 
statement, if they would like to do that, or they can submit it 
for the record, obviously.
    Let us begin with our first panel. And thank you for being 
patient. And thanks to the others, also.
    First of all, Dr. James R. Bean, a neurosurgeon from 
Kentucky, would be the first person to testify. I understand 
you have been in surgery yesterday. We do appreciate your 
taking time to come to be with us today.
    We also have Dylan Malone, Sherrie Campbell, Monty Huggins, 
and Mary Rasar. And you each have 5 minutes.
    And Dr. Bean, we will start with you.

    STATEMENTS OF JAMES R. BEAN, PHYSICIAN ADVISORY COUNCIL, 
    ALLIANCE OF SPECIALTY MEDICINE; MONTY HUGGINS; SHERRIE 
             CAMPBELL; DYLAN MALONE; AND MARY RASAR

    Mr. Bean. Mr. Chairman, I appreciate the opportunity to 
come and speak. My name is Jim Bean, and I am a neurosurgeon. I 
have been in practice for 20 years in Lexington, Kentucky, so I 
have had some chance to view what has been going on. I do speak 
for the Alliance of Specialty Medicine, 13 special societies 
also.
    Before I make my statement, though, I just want to recount 
a story that happened to me when I was in practice in about 
1982. When I was in surgery, we had a call from the emergency 
room. A girl of 3 years old, had come to the emergency room, 
had fallen down stairs. Her mother was a realtor. She had been 
in a house and fell down the stairs and 15 minutes later 
vomited. Fifteen minutes later, the child is in the emergency 
room drowsy. We did a quick CAT scan and saw that there was a 
growing blood clot, called an epidural hematoma. So he called 
up there. Knowing that this child had only a limited time, I 
said, ``Vinnie, I will finish my surgery. Put her in the other 
room.'' I left there in 10 minutes, did the surgery, took out 
the blood clot. By that time, she was in a coma with a dilated 
pupil, meaning the end was near, and she recovered. And the 
point was, it was fast. It was a child, and it was fast. And I 
got a letter and a picture from her mother about 15 years 
later, back in the mid-1990's. She graduated from high school.
    The point of the story, though, is this is unlikely to 
happen in today's environment, because what we have is 
neurosurgeons no longer treating pediatric patients. 75 
percent, because of liability, won't see them. And if a child 
were in that hospital, they would be transferred another hour 
or 2 away, and that is too late. So we have disasters that not 
only are waiting to happen, but they are happening. I hear 
about them. I hear about them in Illinois. I hear about them in 
Oregon and other places where the liability crisis is 
occurring. And it is not just neurosurgery. We have 
obstetricians. 15 percent of them are baby doctors, and they 
don't deliver babies. You have heard about it, but I want to 
emphasize. Even high-risk treatment, 25 percent of 
obstetricians won't take a reduced, high-risk treatment. Why? 
Because they can't afford the liability.
    We think the cause is simple. We know that there is debate 
about it, but we see the rising jury awards, and we see our 
premiums going up. And what it appears to us, from the data, is 
that the amount of money going out has to be an amount matched 
by the amount of money going in. That is how you pay those 
things. We have seen our premiums rise, across the country, 
among neurosurgeons, 84 percent, on an average, good States and 
bad, over the last 4 years, since the year 2000. Some States 
have had enormous rises, 300 percent. One of the worst States 
in the country is Illinois where right now the median, the 
average neuro premium is $200,000. Now I don't know how they 
continue the payment, but that is why they are leaving. They 
can't stand to stay and pay it.
    This is a problem across the country. It is not just a few 
States. There are only seven States that we can identify that 
are truly stable, and I don't think that it is an accident that 
these are States that have had liability reform for virtually 
30 years, like California, New Mexico, and Louisiana, and 
Indiana, and Wisconsin. You know, what is a paradox is Illinois 
is between Wisconsin and Indiana. They pay $200,000 on an 
average in Illinois. You can go across the State line to 
Indiana, and you can pay $40,000, or you can go up to Wisconsin 
and pay $30,000. They are the same doctors that do the same 
work. Why do they have to pay so much more? Because we have a 
bad system, and it needs to be fixed. And it is a national 
problem, and we think it needs a national solution. Everybody 
in every State, every citizen deserves the same chance of 
access to health care. We are losing it. We are losing it right 
now, and it is getting worse year by year, so delay is not 
going to help. Delay and debate aren't solving the problem.
    We think there is a solution. There are many proposals that 
we are anxious to entertain, and though we do know there are 
solutions and the MICRA reforms that are in California's bill 
from 1975 are proven to hold rates down. The rates across the 
country have increased at three times the amount that the rates 
have in California. You know the provisions of the bill. I 
won't go through them, but I do think that it is important to 
consider this a national dilemma that needs a national 
solution. What I think we need to bring is fairness and balance 
and uniformity to the medical liability system across the 
country. Full economic damages, a limit on non-economic awards, 
which now are 60 percent of the award, and protect every 
person. We want to protect those that are medically injured, 
but we also want to protect every person who needs specialty 
and emergency care and that they can get it near home when they 
need it and where they need it.
    Thank you very much.
    [The prepared statement of James R. Bean, follows:]

   Prepared Statement of James R. Bean on Behalf of the Alliance of 
                           Specialty Medicine

    Chairman Deal, Ranking Member Brown, and Members of the 
Subcommittee, my name is James R. Bean, MD. I am a practicing 
neurosurgeon from Lexington, Kentucky, a member of the Alliance of 
Specialty Medicine's Physician Advisory Council and the current 
Treasurer of the American Association of Neurological Surgeons. On 
behalf of the Alliance, a coalition of 13 medical societies 
representing 200,000 specialty physicians in the United States, I 
appreciate the opportunity to testify before you today regarding the 
effect that our current medical litigation system is having on patient 
access to healthcare.
    Nearly two years ago, this subcommittee held a similar hearing to 
assess the need for federal medical liability reform legislation. At 
that time, subcommittee members were informed of a growing healthcare 
crisis that was seriously affecting patient access to care in at least 
twelve states. As you know, the House of Representatives responded by 
passing the HEALTH act, not once, but twice. The Alliance endorsed this 
legislation then, and we continue to support its passage. 
Unfortunately, the Senate was unable pass this bill and Congress 
adjourned without solving the problem. I am sorry to inform you today, 
that not only has the crisis not subsided, indeed, it has worsened. 
According to the American Medical Association, there are now twenty 
states in ``full-blown'' crisis and twenty-four states and the District 
of Columbia are showing warning signs of a potential crisis Only six 
states--California, Colorado, Indiana, Louisiana, New Mexico, and 
Wisconsin--are considered safe, and the common denominator is that they 
have all implemented effective medical liability reform. I therefore 
have the regrettable task of bringing you up-to-date on the status of 
this ongoing crisis.
    And it is a crisis. The media now report on a daily basis that 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--leaving gaping holes in the healthcare 
safety net.
    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 cardiothoracic 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 for millions, a nearby emergency department that is open to 
avoid unnecessary delays in getting treatment when time is of the 
essence.

  THE MEDICAL LIABILITY CRISIS: PATIENT ACCESS TO MEDICAL CARE IS IN 
                                JEOPARDY

    As the subcommittee considers the current state of this national 
healthcare problem, I'd like to draw your attention to a growing body 
of evidence that does in fact demonstrate just how serious this crisis 
has become.

Doctors are No Longer Performing Complex and High-Risk Medical 
        Procedures
    America's women are at particular risk of losing access to vital 
healthcare services. The August 2003 General Accounting Office report 
entitled, ``Medical Malpractice: Implications of Rising Premiums on 
Access to Health Care,'' confirmed that rising medical liability 
insurance premiums have contributed to reduced access to obstetrical 
services, particularly in rural locations. According to a 2004 
professional liability survey conducted by the American College of 
Obstetricians and Gynecologists, ob-gyns have made a number of practice 
changes as a result of the medical liability crisis:

 One in seven has stopped practicing obstetrics because of the risk of 
        liability claims;
 Because of the risk of liability claims or suit, 22 percent decreased 
        the amount of high-risk obstetric care; 14.8 percent stopped 
        offering or performing VBACs; 9.2 percent decreased the number 
        of deliveries; 12.3 percent decreased gynecologic surgical 
        procedures performed; and 5.6 percent no longer perform major 
        gynecologic surgery;
 Because of liability insurance costs and availability, 25.2 percent 
        decreased the amount of high-risk obstetric care; 12.2 percent 
        decreased the number of deliveries; 14.8 percent decreased 
        gynecologic surgical procedures performed; and 5.4 percent no 
        longer perform major gynecologic surgery
    Patients in need of care from surgical specialties like 
orthopaedics and neurosurgery are likewise affected by the crisis, as 
these physicians are also restricting their practices. According to the 
American Association of Orthopaedic Surgeons, rising liability premiums 
have caused 55 percent of orthopaedic surgeons to avoid at least some 
procedures due to liability concerns; 39 percent now avoid performing 
spine surgery; and 6 percent have eliminated all surgery.
    The American Association of Neurological Surgeons and the Congress 
of Neurological Surgeons report similarly alarming findings. Based on a 
2004 national survey of U.S. neurosurgeons, the AANS and CNS found that 
over one-half of survey respondents have limited services because of 
rising medical liability insurance premiums and/or increased risk of 
suit. Of those limiting services, 70 percent refer complex cases to 
other neurosurgeons; 71 percent no longer perform aneurysm surgery; 23 
percent no longer treat brain tumors, 75 percent no longer operate on 
children; and 34 percent no longer perform complex spine procedures. 
These patients are typically sent to academic medical centers or large 
tertiary care hospitals for treatment, often requiring patients to 
travel great distances to receive neurosurgical care.
    Even specialists who are not usually considered ``high-risk'' cite 
medical liability pressures as the reason why they are restricting 
services. For example, according to the American Urological 
Association, over 41 percent began referring complex cases in the past 
two years and one in four no longer perform such procedures as 
cystectomy (which is complete bladder removal, usually for cancer 
patients).
    The elderly may also be 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 likewise 
feel the effects of the crisis.

Patient Access to Emergency and Trauma Care is at Risk
    While the medical liability crisis affects patients who need many 
types of medical care, access to timely and efficient emergency and 
trauma care services is in particular jeopardy. When patients rush to 
the ER, they assume the hospital will be open and doctors will be there 
to treat them. However, because of the medical liability crisis, this 
is no longer always the case. The liability crisis is 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.
    In addition, to secure affordable medical liability insurance or to 
minimize their risk of lawsuits, many physicians, including 
neurosurgeons, orthopaedic surgeons, cardiothoracic surgeons, 
obstetricians and cardiologists are no longer serving ``on-call'' to 
hospital emergency departments. For example, according to a 2004 
hospital emergency department survey conducted by The Schumacher Group, 
three of four emergency departments diverted ambulances in the last 12 
months in part because no specialists were available. Of these, one 
third diverted patients six or more times a month and an additional 28 
percent diverted patients three to five times a month. More than one-
fourth of hospitals reported losses in specialty coverage related to a 
fear of lawsuits.
    The above referenced August 2003 GAO report confirmed that rising 
medical liability premiums have contributed to reduced access to 
emergency surgery services, particularly in rural locations, because 
certain high risk specialists like neurosurgeons and orthopaedic 
surgeons are no longer serving on-call to hospital emergency 
departments. Over one-third of surveyed neurosurgeons have reported 
that they have altered their emergency and/or trauma call coverage 
because of liability concerns. Neurosurgeons across the country are now 
limiting the types of emergency cases that they treat, they are 
limiting the hours that they serve on-call, or they have stopped 
providing emergency call altogether. Twenty-one percent of orthopaedic 
surgeons have likewise eliminated emergency department call.

Doctors are Moving to States with a More Favorable Medical Liability 
        Climate
    Every 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. Pennsylvania has been especially hard hit, and some 
counties no longer have any practicing orthopaedic surgeons and 12 
maternity wards closed in Philadelphia alone. Moreover, 80 percent of 
Pennsylvania medical students are leaving the state, instead of staying 
to practice in this highly litigious area of the country. 
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. Prior to the recent enactment of medical liability reform, 
Mississippi had lost 35 percent of its neurosurgeons in a two year 
period. Last year, 21 out of 79 neurosurgeons surveyed in Missouri 
stated that they were considering leaving the state, and today, there 
are no longer any neurosurgeons in Southern Illinois.

Doctors, Trauma Centers and Other Medical Providers are Closing their 
        Doors
    An even more troubling aspect of the current crisis is the fact 
that many physicians are simply finding it impossible to stay in 
practice at all, and once gone, they are not easily replaced. In 
extreme cases, emergency departments and trauma centers have been 
forced to shut down completely because the physicians have been unable 
to secure medical liability insurance at any price. The GAO confirmed 
that the medical liability crisis caused trauma centers to close in 
Florida, Mississippi, Nevada, Pennsylvania and West Virginia. The same 
has been true in other states, including Arizona, Maryland, Ohio and 
Texas. These closures are coming during a time when the number of 
visits to the nation's emergency departments climbed over 20 percent 
from 89.8 million in 1992 to 107.5 million in 2001.
    Within the past several years, 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.
    Individual physicians are also retiring. 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. In addition, another 33 percent of neurosurgeons 
report that they are planning to retire early. Five percent of 
orthopaedic surgeons have retired earlier than they otherwise would 
have.
    Current and future shortages of high-risk specialty physicians will 
increase the magnitude of the problem. According to the American 
Hospital Association's March 2003 Liability Insurance Survey, over one-
half of hospitals across the country reported difficulty in recruiting 
physicians because of the medical liability crisis. A recent study of 
third and fourth-year medical students found that nearly one-half said 
the current crisis was a significant factor in their specialty choice, 
with many future doctors no longer choosing high-risk specialties such 
as ob-gyn. In the 2004 National Resident Matching Program, the number 
of ob-gyn training slots filled by U.S. medical school seniors declined 
for the third year in a row to 65.1 percent--a decrease of 20 percent 
over the past decade. The number of U.S. medical students entering 
neurosurgery and emergency medicine residencies declined to 86 percent 
and 77.5 percent, respectively. Finally, applications to medical 
schools have dropped 22 percent since 1997. With an increasingly aging 
population, the country can ill-afford to lose good doctors prematurely 
and to have a healthcare litigation system that deters our best and 
brightest from choosing medicine as a career.

  CAUSE OF THE CRISIS: THE CURRENT MEDICAL LITIGATION SYSTEM IS BROKEN

    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. There is a wide body of evidence to 
substantiate these conclusions.

Medical Liability Awards are On the Rise
    Medical liability awards have been growing steadily, and according 
to closed claims data from the Physicians Insurance Association of 
America (PIAA), the median jury award nearly doubled from 1997 to 2003, 
increasing from $157,000 to $300,000. The average award increased from 
$347,134 in 1997 to $430,727 in 2002. Data collected by Jury Verdict 
Research (JVR), which reports statistics for a smaller number of cases 
that reach the trial stage, reflects these same trends. According to 
JVR, the median medical liability jury award had doubled from $500,000 
in 1995 to over $1 million in 2002 and the average jury award has 
soared to an astonishing $6.2 million, up from $1.8 million in 1996. 
Finally, the number of mega-verdicts is also on the rise. In 1997, only 
two medical liability verdicts topped $20 million. In 2001 and 2002, 
however, seven of the top 20 awards were related to medical liability, 
including a $95.2 million birth injury judgment in New York. The 
combined total of these seven awards was nearly $3 billion.
    Overall medical liability tort costs are rapidly increasing, and 
far outpace the growth in medical costs generally. For example, 
according to the Insurance Information Institute, from 1975 through 
2000, medical liability costs have grown a whopping 1,642 percent as 
compared to a 449 percent increase for general medical costs.

Increased Awards and Settlements Mean Insurers are Paying Out More than 
        they are Collecting, Necessitating Steep Premium Increases
    A June 2003 General Accounting Office (GAO) report, entitled 
``Medical Malpractice Insurance: Multiple Factors Have Contributed to 
Increased Premium Rates,'' confirms what we already know: increased 
losses on claims are the primary contributor to higher medical 
liability insurance premium rates.
    Indeed, according to the Insurance Information Institute, which 
analyzed data from A.M. Best (an independent insurance rating agency 
that analyzes insurance companies' overall financial strength and 
creditworthiness), the cumulative underwriting loss for the medical 
liability insurance sector from 1990 to 2001 was nearly $10 billion. 
This dramatic rise in medical liability awards and settlements has 
meant that professional liability insurers have been paying out more 
than they have been collecting in premiums. In 2002, medical liability 
insurance companies were paying out $1.65 in claims for every medical 
liability premium dollar collected. In 2003, according to the National 
Underwriter Data Services, insurers were paying approximately $1.38 for 
every premium dollar collected. While the ratio of payouts to premium 
dollars collected has become more aligned, insurance companies are 
still finding it necessary to raise physicians' premiums to keep pace 
with anticipated claims. Obviously, this situation 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, obstetricians, cardiothoracic surgeons and 
emergency physicians, have been disproportionately affected by these 
premium increases. For example:

 According to one national survey of neurosurgeons, between 2000 and 
        2004 the national average premium increase was 84 percent, from 
        $44,367 to $81,749. The median rate for neurosurgeons in 
        Illinois is now $200,000 and in some states, neurosurgeons' 
        premiums have reached nearly $400,000 per year.
 Rates for ob-gyns continue to be among the highest. According to the 
        Medical Liability Monitor's 2004 rate survey, in 2004, 
        obstetricians paid $277,241 in Florida, up from $249,169 in 
        2003. Illinois ob-gyns received a 66.9 percent increase in 
        2004, paying $230,428 as compared with $138,031 in 2003. And in 
        Pennsylvania, premiums for ob-gyns increased 34.4 percent in 
        2004 to $172,178 from $128,114 in 2003.
 Utah orthopaedic surgeons saw medical liability rate increases of 60 
        percent from 2002 to 2003 and in Texas they have risen 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 over the past years 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
    Not only are medical liability insurance premiums rising at 
astronomical rates, but many doctors have found 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 others, have either 
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.
    The June 2003 GAO report confirmed that the declining profitability 
of the medical liability insurance market has caused many insurers to 
either stop selling medical liability policies altogether or reduce the 
number of policies they sell, putting even greater pressure on the 
remaining insurance companies to raise their premiums to cover expected 
losses. 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.
 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.
 A recent study found that in recent years, approximately 33 percent 
        of surveyed neurosurgeons have switched insurance companies, 
        and of these, 41 percent did so because their insurance company 
        failed or withdrew from the market. In addition, neurosurgeons 
        in Florida have been unable to obtain medical liability 
        insurance at any cost, forcing them to ``go bare'' or self-
        insure. Across the nation, even those neurosurgeons who only 
        have one claim against them (regardless of the outcome of the 
        case) are finding it difficult to find insurance coverage.
 Three of four insurance carriers with the largest market share in 
        Missouri recently 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.

    SCOPE OF THE CRISIS: A NATIONAL PROBLEM THAT REQUIRES A FEDERAL 
                                SOLUTION

    Those who oppose federal legislation to fix this crisis cite 
various reasons in support of their contention that this is not a 
national problem that merits a federal solution. In particular, they 
note that the regulation of insurance and healthcare is generally left 
to the states and therefore this is a matter that the states should 
attend to. The Alliance respectfully disagrees with these objections. 
Today, healthcare delivery has no borders and it should be equal from 
state to state. We currently have a patchwork of liability reforms, and 
because of this uneven system, access to healthcare varies according to 
the liability climate of each state. Every patient, every citizen, in 
every state deserves equal protection under the law, both in 
compensation for negligent injury, and in timely access to healthcare, 
particularly emergency and specialty care. The undisputed truth is that 
one way or another, this problem now touches nearly every American and 
a federal solution is therefore a national imperative.

Nearly All States are Facing a Medical Liability Crisis
    According to the American Medical Association, there are now twenty 
states in ``full-blown'' crisis: Arkansas, Connecticut, Florida, 
Georgia, Illinois, Kentucky, Massachusetts, Mississippi, Missouri, New 
Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, 
Washington, Nevada, West Virginia, and Wyoming. Twenty-four states and 
the District of Columbia are showing warning signs of a potential 
crisis. For high-risk specialists like neurosurgeons, the situation is 
even more widespread than the AMA reports, as the American Association 
of Neurological Surgeons and Congress of Neurological Surgeons have 
identified at least 22 states that are currently facing a medical 
liability crisis, with another 16 facing a potential crisis.

Every American Pays the Costs of the Current Medical Litigation System
    According to the U.S. Department of Health and Human Services 
(HHS), in its 2003 report entitled, ``Addressing the New Health Care 
Crisis: Reforming the Medical Litigation System to Improve the Quality 
of Health Care,'' the current medical litigation system imposes 
enormous direct (e.g., premiums, legal fees, expenses and payouts) and 
indirect costs (e.g., defensive medicine) on the health care system. In 
2004, for example, 55 percent of surveyed neurosurgeons reported that 
they are practicing defensive medicine and have altered their treatment 
protocols because of liability concerns, including ordering more 
diagnostic or other tests. 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 $70-
120 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
    Each 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. Citing the findings of the Department of Health and Human 
Services and the Congressional Budget Office's (CBO) cost estimate of 
HR 5, the HEALTH Act, the Congressional Joint Economic Committee 
concludes that federal medical liability reform legislation that 
includes a cap on non-economic damages would generate significant 
fiscal savings for the Federal Government. The combined annual budget 
savings attributed to decreased direct and indirect costs would total 
approximately $12.1 billion to $19.5 billion. Over a ten-year period 
(2004-2013), if medical liability reform legislation passed, a total of 
between $67 billion and $106 billion in savings would accrue to the 
federal government.

States Face Significant Barriers to Implementing Medical Liability 
        Reforms
    Many states face barriers--some legal and some political--to 
enacting effective medical liability reform laws. Some states, 
including Florida and Ohio, have enacted medical liability reform laws, 
only to have their state Supreme Courts strike them down as 
unconstitutional. Other states, like Arizona, Kentucky, and 
Pennsylvania have explicit constitutional prohibitions on damage 
limits. Still others, like Montana, have not had their laws tested and 
reviewed by their highest court. In addition, new laws passed by 
Mississippi and West Virginia may also face court challenge, and it 
will be years before it is determined whether these laws pass state 
constitutional muster. As a consequence, despite the increasing medical 
liability crisis in many of these states, they are essentially 
powerless to act to effectively solve the problem.

SOLUTION TO THE CRISIS: MEDICAL LIABILITY REFORM LEGISLATION PATTERNED 
                        AFTER CALIFORNIA'S MICRA

    The cornerstone of any legislation should include the principles 
that injured patients deserve their day in court and that they are 
entitled to receive full, just and fair compensation. Congress should 
therefore adopt medical liability reforms that have a proven track 
record and will help strike the necessary balance between compensating 
injured patients and ensuring access to healthcare for all Americans. 
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 
Alliance believes that any federal reform must contain the key elements 
of MICRA, which 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 (without exceptions 
        or an inflationary adjuster) on non-economic damages, such as 
        pain and suffering;
 Resolving claims quickly by establishing a reasonable statute of 
        limitations for filing a lawsuit;
 Ensuring appropriate payments are there when patient need them by 
        allowing for periodic payments of damages rather than lump sum 
        awards;
 Maximizing the amount of the award that goes to injured patients by 
        placing reasonable limits on attorneys' fees;
 Focusing liability on those at fault, not on ``deep pockets,'' by 
        eliminating joint and several liability; and
 Preventing double recovery of damages through collateral source 
        reform
    Congress may want to consider additional reforms (which were not 
included in last-year's House-passed version of the HEALTH Act) that 
would:

 Ensure that juries are advised by actual experts by establishing 
        expert witness standards; and
 Unclog the courts and reduce the societal costs of lawsuits by 
        limiting frivolous lawsuits
    In addition, Congress should ensure that federal medical liability 
reform does not preempt effective state reforms.
    As the subcommittee moves forward with its deliberations on this 
legislation, the Alliance urges you to keep in mind the following 
points about the effectiveness of MICRA:

MICRA Fully Compensates Injured Patients Quickly
    First 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, in December 2002, a 5 year-old Alameda County 
boy with cerebral palsy and quadriplegia because of delayed treatment 
of jaundice after birth was awarded $84,250,000; a 3 year-old Contra 
Costa County girl with cerebral palsy as a result of birth injury was 
awarded $59,317,500 in October 2002; a 30 year-old homemaker from Los 
Angeles with brain damage because of lack of oxygen during recovery 
from surgery, was awarded $12,558,852 in July 2002; and in November 
2000, a 25 year-old San Bernardino County woman with quadriplegia 
because of failure to diagnose a spinal injury was awarded $27,573,922.
    Medical liability claims are also paid most quickly in California 
versus all other states. According to the National Practitioner Data 
Bank's 2003 Annual Report, in 2003, the mean delay between an incident 
that led to a payment and the payment itself was 4.59 years. In 
California, it was 2.98 years. The slowest state to close claims was 
Massachusetts, which was 6.19 years.

MICRA Significantly Minimizes Premium Increases
    Opponents of reform cite statistics that over the past several 
years, premiums for doctors in California have also been rising; thus 
somehow 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. According to data from the National Association of 
Insurance Commissioners, from 1976 to 2002, liability premiums for 
California physicians rose only 245 percent as compared with 750 
percent of physicians in the rest of the United States. Data from a 
survey of neurosurgeons validates these trends, and both actual 
premiums and the rate of increase for neurosurgeons in California, as 
compared to neurosurgeons who practice in states where there are no 
reforms in place, are significantly lower.

Federal Government and Other Experts Agree that MICRA Works
    U.S. Government experts and others 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 U.S. Department of Health and Human Services, 
Congressional Budget Office and Joint Economic Committee issued reports 
evaluating the HEALTH Act, came to the same conclusion, and the GAO, in 
its August 2003 report, found that ``premium growth was lower in states 
with non-economic damage caps than in states with limited reforms.'' In 
addition to these government experts, others have studied the 
effectiveness of MICRA. A 2004 study by the RAND Corporation, entitled 
``Capping Non-Economic Awards in Medical Malpractice Trials'' concluded 
that MICRA's contingency fee reform and limit on noneconomic damages 
has decreased insurer payouts and redistributed more money from 
personal injury attorneys to injured patients. Finally, according to 
Kenneth Thorpe, in a study published in the January 2004 edition of 
Health Affairs, insurance premiums are 17 percent lower in states with 
caps on noneconomic damages and they are one-quarter lower in states 
with both caps on noneconomic damages and discretionary collateral 
offsets.

States with Damage Caps Have More Doctors Available to Treat Patients
    Opponents of medical liability reform cite various statistics to 
claim that tort reforms, especially caps on damages, have had no affect 
on stemming the tide of this crisis. In addition, in its August 2003 
Report, the GAO asserts that its analysis of medical licensure data 
proves that not only are physicians not moving or retiring as a result 
of increased medical liability premiums, but in the crisis states it 
reviewed there actually was an increase in the number of licensed 
physicians. The Alliance takes issue with these claims for several 
reasons:

 Medical licensure data is in no way indicative of the number of 
        physicians who are actually practicing medicine in a particular 
        state. Rather, it merely means that a certain number of 
        physicians hold a license to practice medicine. Physicians tend 
        to hold multiple state licenses and typically retain their 
        licenses when they relocate or retire from active practice. 
        Thus, taken alone, medical licensure data provides no useful 
        information to prove or disprove the affects of the medical 
        liability crisis on physician supply.
 According to a July 2003 study conducted by the U.S. Department of 
        Health and Human Services' Agency for Healthcare Research and 
        Quality, entitled ``The Impact of State Laws Limiting 
        Malpractice Awards on the Geographic Distribution of 
        Physicians,'' states that have enacted laws capping damage 
        payments in medical liability cases have more physicians per 
        capita than those who have no cap or very high damage caps. The 
        study found that in 1970, before any states had a law capping 
        damage payments, in all states there were virtually identical 
        levels of physicians per 100,000 citizens. Thirty years later 
        in 2000, however, states that had adopted a cap averaged 135 
        physicians per 100,000 citizens, while states without caps 
        averaged 120.
 The May 2003 Joint Economic Committee study concluded that ``the 
        number of doctors at the state level is sensitive to the 
        malpractice insurance costs: higher premiums reduce the number 
        of practicing physicians.''
    The clear and simple truth is that MICRA and other similar laws 
work. 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.

Americans Overwhelmingly Support a MICRA-Style Solution
    Americans are becoming acutely aware of the impact this crisis is 
having on the nation's healthcare system and the care they receive. 
Studies show that they overwhelmingly favor passage of federal 
legislation to reform the current medical liability system and create a 
system that balances the rights of patients to obtain appropriate 
compensation for injuries caused by medical negligence with the rights 
of all citizens to have access to medical care. A March 2004 poll 
conducted by Wirthlin Worldwide for the Health Coalition on Liability 
and Access found that:

 82 percent of the Americans surveyed believe that doctors are being 
        forced to leave their practices because excessive litigation 
        has put the cost of medical liability insurance out of reach.
 By a huge margin, 72 percent of those surveyed said that health care 
        expenses for all people are being driven up by the rising cost 
        of medical liability lawsuits.
 The high number of medical liability lawsuits is unjustified, 
        according to 55 percent of the survey respondents. Only 16 
        percent say that the number of lawsuits against health care 
        providers is lower than justified.
 Three-quarters of Americans want Congress to pass reforms to fix the 
        medical liability crisis. 72 percent favor a law that 
        guarantees full payment for lost wages and medical expenses but 
        limits non-economic damages; 73 percent want to limit the 
        amount of money personal injury trial lawyers can get from the 
        excessive litigation settlements their clients receive.
    A January 2005 poll conducted by Public Opinion Strategies for the 
American College of Emergency Physicians reached similar conclusions, 
confirming that three out of four (75 percent) of Americans recognize 
the current system interferes with physicians' ability to provide 
quality care; 85 percent of Americans believe the current legal 
system--with no consequences for pursuing frivolous lawsuits and 
publicity about large monetary awards--is responsible for rising 
medical insurance costs; and 73 percent favor liability reform that 
includes placing limits on non-economic (pain an suffering) damages.

 WITHOUT REFORM THE STATE OF AMERICA'S HEALTH NOW AND IN THE FUTURE IS 
                                AT RISK

    Clearly the health of our nation's citizens is 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. 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.
 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 
        healthcare systems in the world.
    We have reached a very important juncture in the evolution of the 
U.S. healthcare system. At a time when lifesaving scientific advances 
are being made in nearly every area of healthcare, patients across the 
country are facing a situation in which access to health care is in 
imperiled. 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. The Alliance is hopeful that the Congress's 
continued efforts to highlight and debate this crisis will lead to the 
passage of MICRA-style medical liability reform legislation 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.

             The Many Faces of the Medical Liability Crisis

Arizona
    Ob-gyn: Deborah Wilson made the tough decision to stop delivering 
babies in June 2003. ``It was a really tough decision. I just knew I 
couldn't do it anymore once I realized the risks. You've just got a 
target on your back.'' Dr. Wilson delivered approximately 50 babies a 
month for over 17 years. One of the many patients forced to find a new 
obstetrician was Patty Jasinski, who was seven months pregnant with her 
second set of twins at the time. Dr. Wilson was Jasinski's obstetrician 
for nearly two decades, helping her through five miscarriages, an 
ectopic pregnancy and the birth of her first set of twins. (East Valley 
Tribune, April 2004)
    Neurosurgeon: Timothy Putty, MD writes: ``A 60ish year old man 
presented to St. Joseph's Emergency Dept. with a cerebral hemorrhage. 
The ED physician tried to find a neurosurgeon to care for this patient. 
None of the neurosurgeons that go to that particular hospital was 
available or on call. The ED physician tried to transfer to another 
hospital in Tucson, but none had neurosurgical coverage that evening, 
and the University Hospital was full (on diversion). This patient was 
subsequently flown out of the city, to San Diego, and I believe 
ultimately died'' (American Association of Neurological Surgeons/
Congress of Neurological Surgeons 2004)

Florida
    Neurosurgeon; Mildred McRoy suffered a hemorrhagic stroke in 
February and was rushed to JFK Medical Center in Atlantis, Florida for 
treatment. However, JFK stopped providing around-the-clock 
neurosurgical coverage in July because of the medical liability crisis. 
In fact, there wasn't a single neurosurgeon on call in all of Palm 
Beach County. Ms. McRoy was transported 40-miles away to North Broward 
Medical Center more than eight hours later. She was operated on by 
neurosurgeon Gary Gieseke, but died after being in a coma for several 
days. Almost all of the neurosurgeons at the hospital are ``bare'' and 
are not willing to take on the risk of emergency procedures without 
insurance. The hospital has begun paying for on-call services in an 
effort to provide the necessary 24/7 coverage. (Palm Beach Post, March 
6 and 18, 2004)
    Orthopaedic surgeon; Diana Carr, MD writes: ``In my community only 
two orthopaedists (including myself) of the five will see children. My 
practice is limited to pediatric upper extremity. The other pediatric 
orthopaedic surgeon is on call in rotation with the three others who do 
no pediatrics. The 75-percent of the time he is not on call, children 
have to go to Tampa, Orlando or St. Petersburg where pediatric 
orthopaedists are available. This is a two-hour ride each way for the 
initial appointment and all follow-ups.'' (American Association of 
Orthopaedic Surgeons)
    Ob-gyn; Manatee Obstetrics & Gynecology physicians will end 
obstetrical services at the practice September 2004 due to rising 
medical liability costs, leaving hundreds of expectant mothers to find 
a new baby doctor this fall. State Rep. Bill Galvano, R-Bradenton, is 
an immediate victim of this escalating crisis. His pregnant wife, 
Julie, was scheduled to deliver their third child at Manatee in 
October. (Bradenton Herald, April 15, 2004

Georgia
    Ob-gyn; In 2003 there were three obstetricians in Eastman, Georgia. 
Today there is one. One moved out-of-state and the other 42-year old 
doctor quit obstetrics. (Medical Association of Georgia, 2004); Dr. 
Patricia Ritchie Haynes recently quit her 23-year ob-gyn practice at 
Piedmont Hospital after learning her malpractice premium was going to 
rise by 50 percent in one year. (Atlanta Journal-Constitution, Feb. 8, 
2004); The Athens Women's clinic, which has offered obstetrics services 
for 35 years, announced May 21 that the state's medical liability 
crisis was forcing it to no longer deliver babies. It will continue to 
offer gynecological services. (Athens Banner-Herald, May 21, 2004)
    Emergency Physicians; ``At my hospital in Atlanta, GA, the surgeons 
(including orthopedists) decided that due to . . . skyrocketing 
premiums, they would work less call, leaving us for several months with 
every third day with surgeons and orthopaedics on call. My hospital is 
the designated site for Hartsfield Airport, the busiest airport in the 
nation. Multiple patients have had to be transferred and a colleague 
had a stabbing that had a significant delay in care due to lack of 
coverage.'' (American College of Emergency Physicians, 2005)
    Neurosurgeon; Last year there were four neurosurgeons in Albany, 
Georgia and the local hospital had neurosurgical trauma coverage 24 
hours a day, seven days a week. Today there are two and the hospital 
only has a neurosurgeon on-call 50 percent of the time. If area 
residents suffer a head or spinal injury, stroke or other neurosurgical 
emergency on the ``wrong day'' they must be air-lifted to Macon or 
Columbus, if a neurosurgeon is available there. (Medical Association of 
Georgia, 2004)

Illinois
    Neurosurgeon; In February 2004, 85-year-old retired machinist Fred 
Andricks tripped and hit his head. Because of the medical liability 
crisis there are no neurosurgeons left in Belleville. After a delay, 
Mr. Andricks was transferred to a St. Louis, MO medical center where he 
received treatment. Unfortunately he died the next day from swelling of 
the brain. After learning of her father's fate, Lisa Kasten said ``All 
the talk was that this was going to happen and that someone would not 
get care when they needed it. I just never realize it would be my 
dad.'' (American Association of Neurological Surgeons/Congress of 
Neurological Surgeons 2004)
    Emergency Physician; In August 2004, a cable snapped when Richard 
Rhodes was unloading his stock car into a garage, injuring his hand. He 
was rushed to the Alton Memorial Hospital emergency room with his thumb 
and little finger missing. There were no doctors at the hospital 
available to reattach his fingers. The emergency room physician called 
more than six hospitals in an effort to transfer Mr. Rhodes, but no 
other hospitals or accepting transfers for this type of injury. After 
several hours, Mr. Rhodes was airlifted to a hospital in Springfield 
and his fingers were reattached. Unfortunately because of the delay, 
the reattachment did not take and his thumb had to be amputated two 
weeks later. Mr. Rhodes blames the loss of his thumb on the medical 
liability crisis in Illinois. Mr. Rhodes said, ``The doctor did 
everything he could to find someone to help. I kept saying that I had 
insurance. But what's a sense of having insurance if you can't find 
anyone to work on you?'' (The Telegraph, August 2004)
    Urologist; Roger Rives MD and David Didomenico are the only two 
urologists and Sarah Bush Lincoln Health Center in Mattoon. In an 
effort to reduce their professional liability risks, they have stopped 
performing more risky, highly invasive procedures, including prostate 
and bladder surgery. They have tried to recruit a third urologist for 
more than 18 months, but have been unsuccessful. (The Journal Gazette 
and Times-Courier, August 2004)
    Orthopaedic Surgeon; ``A five-year-old child was struck by an auto 
in Naperville and sustained a fracture of the femur and a small skull 
fracture with minimal underlying brain contusion. Such injuries would 
typical be treated by urgent casting by an orthopaedic surgeon and then 
a neurosurgeon would follow along to make sure the patient's brain 
injury remained stable. In this case, the neurosurgeon on call will not 
see any patient under 18. A pediatric orthopaedic surgeon was in 
attendance, waiting to treat the femur fracture, but without a 
neurosurgeon to follow the patient, transfer to Loyola had to be 
arranged. At Loyola, no pediatric orthopaedic surgeon was available, so 
the adult orthopaedic trauma surgeon had the child's leg placed in 
traction, inserting a pin just above the knee in order to hang the 
weights which pulled on the leg. The plan was to keep the child in 
traction for a few weeks, and then place the child in the cast. The 
family, after 2 days at Loyola, desired transfer of care back to their 
home town. The child was taken out of traction, placed in an ambulance, 
and transferred back to Edward Hospital in Naperville. He was 
eventually casted and sent home. The liability crisis has created a 
situation where this patient had to endure two useless ambulance rides 
with a broken femur, several extra days of hospitalization, and 
insertion and removal of a traction pin. This waste of resources and 
interference with medical care is repeated endlessly across the 
nation.'' (American Association of Orthopaedic Surgeons)
    Ob-gyn; Kim Dahlem, a mother of one, wants to have another baby 
next year, but she has a problem: She must find a doctor who will 
deliver it. The obstetrician-gynecologist who delivered her daughter in 
February 2003 recently decided, after 30 years in practice, to stop 
delivering babies because he could not afford the high cost of medical 
malpractice insurance. Dahlem, 32, does not live in Joliet or southern 
Illinois, areas reported to have lost many obstetricians because of the 
skyrocketing cost of professional liability insurance. She lives in 
northwest suburban Cary, and her gynecologist, Dr. Donald DeDonato, 
practices in Arlington Heights. ``It's heartbreak,'' Dahlem said of 
losing the physician who helped her through a difficult first 
pregnancy. ``He was a blessing . . . I was comfortable with him. It's 
hard having that ripped from you.'' (Chicago Tribune, September 22, 
2004)

Kentucky
    Ob-Gyn; Cynthiana doctor Greg Cooper was forced to give up 
delivering babies after 23 years of practice because of rising medical 
liability costs. Beth Lisak, Dr. Cooper's secretary, was forced to find 
a new ob-gyn when she was seven months pregnant because the doctor 
could no longer deliver her baby. (The Courier-Journal, October 17, 
2004)

Mississippi
    Emergency physician; According to an emergency physician from 
Jefferson City, their practice had never had a physician leave until 
the last 2 years when they lost four. Two went to states with lower 
malpractice insurance rates, one went to work at an urgent care center 
because it has lower malpractice rates and one left clinical medicine 
altogether. (American College of Emergency Physicians, 2005)
    Neurosurgeon; Mississippi surgeon John Lucas, III, MD, related that 
his son was in a car accident and needed immediate neurosurgical 
intervention, but the area's neurosurgeons had already either quit 
doing head trauma cases or had moved away. His son had a correctible 
problem if immediate attention by a neurosurgeon could be given. Dr. 
Lucas did everything he could to expedite the transfer and find a 
neurosurgeon. Unfortunately, the transfer came too late and his son 
John Lucas, IV died. (American Medical Association, 2004)

Missouri
    Orthopaedic Surgeon; Poplar Bluff internist Donald Piland said, 
``Last year a patient of mine fell on the ice during the winter and 
suffered a compound fracture of the lower leg. Subsequently, she lost 
her leg due to a lack of orthopaedic coverage in our community. We had 
recently lost three orthopaedic surgeons in a span of one year, partly 
because they couldn't afford malpractice insurance premiums in the 
state of Missouri.'' (Daily American Republic, March 17, 2004)
    Neurosurgeon; Robert Grubb in St. Louis, Missouri wrote ``I 
recently received a patient in a transfer from a small town in 
northeast Arkansas with a severe cervical spinal injury following a 
motor vehicle accident. The primary care physician said he called 17 
different hospitals closer than St. Louis over a 24-hour period and 
could not find anyone to take the patient because no one had an 
available neurosurgeon. The patient was finally transferred to Barnes 
Jewish Hospital in St. Louis after more than 24-hours, way beyond the 
optimal time for treating such a devastating injury.'' (American 
Association of Neurological Surgeons/Congress of Neurological Surgeons, 
2004)

New Jersey
    Neurosurgeon; Mark McLaughlin writes, ``I recently saw a patient 
from about 50 miles away who had been progressively going quadriplegic 
because no neurosurgeon would take on her highly risky upper cervical 
compression for liability reasons. By the time I saw her she was 
permanently disabled and did not make a good recovery.'' (American 
Association of Neurological Surgeons/Congress of Neurological Surgeons, 
2004)
    Thoracic Surgeon; Dr. John A. Heim, a cardiovascular thoracic 
surgeon from Cherry Hill, was forced to close his practice and move 
when his medical liability coverage increased from $190,000 this year 
and from $80,000 the year before. ``I spent four years in medical 
school, eight years training after that, 10 years in the community 
doing expert surgery, and it really doesn't mean anything because if I 
don't get affordable medical malpractice insurance I [can't 
practice],'' he said. (Asbury Park Press, March 20, 2003)

North Carolina
    Ob-gyn; Dr. Mary-Emma Beres stopped delivering babies after her 
premiums increased from $17,500 to $60,000, leaving only one doctor in 
all of Allegheny County who can perform Caesarean sections. (Raleigh 
News & Observer, March 30, 2003)
    Neurosurgeon; Mark Lyerly, states that ``In the past 10 months, 
numerous patients with intracranial hemorrhage or head injuries have 
been transferred out of our hospital ER because there is only 
neurosurgical ER coverage 14 days a month. Unfortunately, better 
outcomes would have been seen if patients were treated locally instead 
receiving delayed treatments hours later. The ER had 24/7 neurosurgical 
coverage, but we had to cut back because our professional liability 
premiums have almost doubled in the past three years even after cutting 
our coverage from $3/$5 million to $1/$3 million.'' (American 
Association of Neurological Surgeons/Congress of Neurological Surgeons, 
2004)

Ohio
    Ob-gyn; Over the course of her pregnancy, Sharon Minson of 
northeast Ohio had four different ob-gyns because rising professional 
liability insurance rates kept forcing her doctors to stop delivering 
babies. ``When you're pregnant, it should be a happy time,'' she said. 
``I just wanted continuity of care. You can't switch around like 
that.'' In the past two years, 46 of 72 ob-gyns have left Summit County 
in the past two years and more than 190 doctors have left Summit, 
Medina and Portage counties in that time frame. (Akron Beacon-Journal, 
October 21, 2004)
    Gastroenterologist; In July Cleveland gastroenterologist Gary 
Gottlieb of Mayfield Heights announced he was leaving Ohio after 
receiving a professional liability premium bill for $85,000, more than 
five times the amount he paid in 2002. Dr. Gottlieb will move to 
Arizona. In Arizona Dr. Gottlieb will pay between $5,000 and $12,000 
for insurance. Dr. Gottlieb's partners have been unable to replace 
them. All of the gastroenterology fellows at The Cleveland Clinic have 
decided to leave Ohio to pursuit their careers elsewhere because of the 
high malpractice rates in Northeast Ohio (Cleveland Jewish News, July 
2004)
    Neurosurgeon; Thomas Hawk of Columbus has stopped providing trauma 
and emergency call in an effort to reduce his liability premiums. He 
also writes, ``I see lots of patients each week from West Virginia who 
cannot find neurosurgical care and are coming all the way to Columbus, 
Ohio to get care.'' (American Association of Neurological Surgeons/
Congress of Neurological Surgeons)

Pennsylvania
    Orthopaedic surgeon; Shawn Hennigan, MD, recently moved from 
Pennsylvania to Wisconsin solely because of the medical liability 
crisis in Pennsylvania. (American Association of Orthopaedic Surgeons, 
2004); David Yanoff, who has offices in Lehighton, Palmerton and 
Tamaqua, Pennsylvania, is closing up his practice and moving to Idaho 
because of skyrocketing professional liability premiums. Yanoff founded 
Mahoning Valley Orthopedics 16 years ago. (The Morning Call, February 
21, 2004)
    Neurosurgery; In 2004, a 17-year old boy suffering a head injury in 
a car accident in Chester County, Pennsylvania died after no 
neurosurgeon could be found to treat his injury. The boy was originally 
taken to Brandywine Hospital, which lost all of its neurosurgeons 
because of the medical liability crisis. Hours later, he was 
transferred to Crozier-Chester Medical Center in Delaware County, but 
his brain had already begun to swell and nothing could be done. (The 
Morning Call, November 28, 2004)
    Neurosurgeon; Recently, in Pottstown a 20 year old fell down a 
flight of stairs. He sustained significant head trauma. Several years 
ago he would have been taken to Pottstown Memorial Hospital where two 
full time neurosurgeons were on staff. At this time, though, since no 
local neurosurgeons were available, he had to go to Lehigh Valley 
Hospital. Because of inclement weather it was not possible to fly him 
by helicopter. He was, therefore, placed in an ambulance and arrived at 
Lehigh approximately an hour later. Within ten to fifteen minutes of 
arriving at Lehigh Valley he was in the OR but died there of a massive 
bleed. I do not know if it would have made a difference if this patient 
had been treated sooner but I surely know he had no chance with the 
situation as it now exists. (pamedicalcrisis.com, Volume II, Issue No 
5)

Tennessee
    Neurosurgeon Rick Boop of Memphis writes, ``I have seen three 
children die recently of shunt malfunctions in ERs without a 
neurosurgeon who can perform procedures on children. All neurosurgeons 
can provide a simple shunt revision, but many are being forced to drop 
their pediatric privileges in order to obtain or reduce their liability 
premiums. All three of these children died while awaiting helicopter 
transport to a children's hospital.'' (American Association of 
Neurological Surgeons/Congress of Neurological Surgeons, 2004)

Texas
    Ob-gyn; Ken First, MD, and orthopaedic surgeon writes, ``My wife 
was an ob/gyn for 15 years. She had one legal case that was dropped in 
her entire career. She delivered a great many babies. Several years 
ago, my wife gave up obstetrics because the malpractice premiums were 
so high. She then practiced just gynecology surgery and primary care. 
The insurance rates were still high, and she was forced to retire 
leaving a ton of women without their doctor. She gave up her medical 
career to sell Mary Kay cosmetics. She works fewer hours and is already 
making a solid income without the liability.'' (American Association of 
Orthopaedic Surgeons, 2004)
    Emergency physician; An emergency physician who was chairman of the 
hospital's Emergency Department for over 10 years, quit medicine less 
than a year ago because of the exorbitant liability premium rates in 
Texas. Another left the ER because of the medical liability situation, 
noting that ``I feel like I've--wasted a residency and a lot of my 
life.'' (American College of Emergency Physicians, 2005)
    Ob-gyn; Two Dallas doctors, with over 40 years combined experience, 
quit obstetrics in 2004 due to high medical liability insurance 
premiums, leaving only 9 ob-gyns in the area. (Fellow communication to 
the American College of Obstetricians and Gynecologists, 2004).
    Neurosurgeon; Houston neurosurgeon Bruce Ehni writes ``We are the 
recipient of much more serious and risky cases that would have 
otherwise been cared for locally. Here at our hospital in Houston we 
are receiving hemorrhages, traumas and other dire emergencies from as 
far away as El Paso and Brownsville--sometimes up to 600 miles or more! 
Some of these cases include: a patient with head trauma and a blown 
pupil flown in from Harlington (400 miles away); an aneuryrmal 
hemorrhage with intracranial hemorrhage flown in from Laredo (300 miles 
away); and a brain tumor causing abrupt paralysis flown in from San 
Antonio (200 miles away). All of these communities have neurosurgeons. 
The ``bad'' cases end up in Houston despite the presence of 
neurosurgeons locally because everyone is trying to avoid being sued. 
It is bad for patients and bad for us. We are being dumped on 
endlessly.'' (American Association of Neurological Surgeons/Congress of 
Neurological Surgeons, 2004)

Washington
    Emergency physician; Dr. Paul Casey, Chief, Emergency Medicine, 
Chief of Staff, Providence Campus, President-elect, Washington Chapter, 
American College of Emergency Physicians wrote in a letter to Senator 
Patty Murray, ``After significant soul searching, I have decided to 
leave the state I love, my friends and colleagues and the patients I 
enjoy caring for . . . providing quality care for our patients is 
becoming unbearingly difficult, if not impossible in some instances. 
Emergency physicians can no longer afford to bear the financial brunt 
of a failing health care system.'' (Excerpts from a letter to Senator 
Patty Murray, 2004, Washington State Medical Association)
    Neurosurgeon; Patient Wendy Piscopo, a lifelong Democrat, testified 
before the Washington State House of Representatives Judiciary 
Committee on February 26, 2004. She said the following: ``I once again 
require surgery in the same area of my back, but the wonderful 
neurosurgeon I had found after a long search decided suddenly to 
retire, just days before I was to schedule my surgery. Due to the 
skyrocketing cost of malpractice insurance, he decided to retire rather 
than to cave in to the system. It is hard for a Medicare patient to 
find a doctor she trusts, who will not rush her surgery because he has 
to treat as many patients as he can in a day to pay his insurance 
premiums . . . I lost so much when I lost Dr. Souri. I lost a lot of my 
energy. It took me a year to find Dr. Souri--a long time to sit in 
pain. I lost faith in the party I voted for--I thought the Democrats 
were here to fight for the voiceless. And now I must start again 
looking for a surgeon I trust, one who will see me as a person and not 
just another welfare case to rush out of the office. I implore you to 
pass a limit on the non-economic damages in medical malpractice 
lawsuits.''
    Ob-gyn; Dr. Gregary Blackner, Olympia family practitioner, stopped 
delivering babies January 1, 2003 facing a 40 percent increase in 
insurance rates. ``I had patients sitting in my office, sobbing over 
it. I had delivered their first three or four kids, and now I can't 
deliver their new one. They couldn't understand.'' (The Olympian, 5/13/
03)

Wyoming
    Ob-gyn; Dr. Bert Wagner will no longer deliver babies due to the 
increasing liability crisis in Wyoming. Dr. Willard Woods had to give 
up the obstetrical portion of his practice because he could no longer 
get liability coverage . . . the remaining doctors are on call every 
other night. Some pregnant women are faced with driving 70 miles to get 
obstetrical care. He had delivered more than 1,000 babies, including 
the entire starting rosters of 2 local high school basketball teams. 
(Wyoming Medical Society)

    Mr. Deal. Thank you very much, Doctor.
    Mr. Huggins.

                   STATEMENT OF MONTY HUGGINS

    Mr. Huggins. Mr. Chairman and members of the subcommittee, 
I also want to thank you for inviting us here today. This is--I 
will try to get through this. I have only shared this a few 
times. It is very personal with me.
    My name is Monty Huggins, and I am from Knoxville, 
Tennessee. I was born and raised in the Florida Panhandle. 
Myself, my wife, and our families have been active Republicans 
my whole life, and have believed in the platform that we have 
stood for for so many years, and that is up until now.
    I am here today, because I am concerned that Congress is 
trying to take away my rights and the rights of people like me, 
because my wife, Janice, suffered a heart attack and passed 
away in my arms on September 25 this past fall. She had been 
taking Vioxx for a little over a month prior to the death, and 
she was in perfect health with--39 years old. She was in great 
shape, no history of heart problems in her family, and she 
didn't smoke, drink, and wasn't overweight in the slightest. 
And I want to show a picture here, a picture of her. And she 
was prescribed Vioxx by her doctors that she had--because she 
had early onset of arthritis and had been taking the drug for 
about a month, right up until her death.
    Janet was involved with her work. She worked for our 
government. She was a project scheduler on large projects, like 
the Cleveland Brown Stadium and currently working on a project, 
a $350 million project with the Department of Energy. She 
enjoyed her work a lot, took a lot of pride in it, and was 
great with her coworkers.
    Personally, on a personal basis, Janet loved hiking, 
cooking, and doing other family activities and a graduate of 
the Indiana University. Anything she could do to spend more 
time with me or her son was definitely her top priority. Janet 
also had, and both of us had, a close relationship with God and 
was involved in various ministries and projects for the inner 
city. We originally met through a church ministry and just 
celebrated our 1-year anniversary in Gatlinburg, Tennessee the 
week before she died.
    My wife was an amazing human being. She was a wonderful 
mother to her 9-year-old son, and we miss her very much. Her 
death, as you can imagine, has impacted our lives, especially 
for me after waiting 39 years to find the love of my life and 
to be taken away senselessly. Elijah, her son, will grow up 
without the love and tenderness of his mom and the advice of 
her. And he will not get to enjoy the pleasures and benefits of 
having her be there for his graduation, marriage, and 
grandkids. The morning I was getting ready for her funeral is 
the morning that they actually pulled Vioxx off the market. I 
was putting my jacket on when my sister came into the room and 
said that she had just heard on the news. At that point, we 
really had not put the two and two together, but we were 
fishing for answers. And of course, the autopsy later on 
revealed that she did die of a blood clot in her left artery.
    This medicine that our doctor gave her basically was given 
to her to make her feel better, and the medicine was supposed 
to ease the pain. And if they had pulled this drug off the 
market just 6 to 8 weeks earlier I really believe, with all of 
my heart, my wife would still be here.
    The proposed medical malpractice bill supported by the 
President will protect, I believe, the makers and the drug 
companies. Why do we want to protect companies that have 
knowingly killed, you know, people, and especially at a time 
that we know that our own government, the FDA, is doing a lousy 
job of protecting us from these drugs?
    When I heard about the guy from the FDA talking to the 
Senate, it really made me angry. The way I understand it, he is 
one of the top safety officials who approve drugs for the 
government. He is one of the top safety guys telling the Senate 
that he and everyone else at the FDA can't do one thing to 
protect the American people from medicines that can kill you.
    Our own government is to--is here to protect us, and now 
that we want to give companies like Merck a free ride and 
protect them from accountability. And that is so important to 
me is holding them accountable for what is going on. People 
need to know about this. Because my wife is not the only one 
who has died from Vioxx, I could have potentially killed 
thousands--it could have potentially killed thousands of 
others, too.
    If I may have a few more minutes.
    Mr. Deal. I am sorry that time is up. Could you summarize 
very quickly for us?
    Mr. Huggins. Yes, sir.
    The pharmaceutical companies--they should be held 
accountable, especially for my wife's death and others to come. 
This proposed bill would prohibit anyone from punishing drug 
companies for their bad conduct. There has to be a deterrent. 
And as far as I am concerned, Merck took my wife away from me.
    And that is all I have got to say.
    [The prepared statement of Monty Huggins follows:]

                  Prepared Statement of Monty Huggins

     Mr. Chairman and Members of the Subcommittee: Thank you for 
inviting me to testify before you today. My name is Monty Huggins and 
I'm from Knoxville, Tennessee. I was born and raised in the Florida 
Panhandle. I'm a life-long, active Republican, having believed in the 
platform we have stood for, for many years, that is, until now. I'm 
here today because I'm concerned that Congress is trying to take away 
the rights of people like me. You see my wife Janet suffered a sudden 
heart attack and passed away on September 25, 2004. She had been taking 
Vioxx for about one month prior to her death and she was only 39 years 
old.
    She was in great shape and had no history of heart problems. She 
didn't smoke and she wasn't overweight in the slightest. She was 
proscribed Vioxx by her doctors because she had an early onset of 
rheumatoid arthritis and had been taking the drug for one month, right 
up until her death.
    Janet was very involved in her work. She was project scheduler on 
large contracting projects like the Cleveland Brown Stadium and a $350 
million project with the Department of Energy. She enjoyed her job very 
much and took pride in the projects that she worked on.
    Personally, Janet loved hiking, cooking and doing other family 
activities. Anything she could do to spend more time with me and our 
son was always her top priority. Janet also had a very close 
relationship with God and was involved in a variety of church 
activities and projects for the needy. We originally met through a 
church ministry and had just celebrated our one-year anniversary in 
Gatlinburg the weekend before she died.
    My wife was an amazing human being and a wonderful mother to her 9-
year-old son. We both miss her very much. Her death has impacted our 
lives in so many ways. Elijah, her son, will grow up without the love, 
tenderness, and advice of his mom. He will not get to enjoy the 
pleasures and benefits of having her there for his graduations, 
marriage and grandkids. The morning I was getting ready for her funeral 
is the morning they pulled Vioxx from the market. This was medicine 
that our doctor gave her to make her feel better. Medicine that was 
supposed to heal her. If they had pulled this deadly drug from the 
market even six to eight weeks earlier, my wife would still be alive 
today.
    The proposed medical malpractice bill supported by the President 
will protect the makers of drugs like Vioxx. Why do we want to protect 
companies that may have knowingly killed people? Especially at a time 
when we know that our own government is doing a lousy job of protecting 
us from dangerous drugs.
    When I heard about that guy from the Food and Drug Administration 
talking to the Senate it made me extremely angry. The way I understand 
it he's one of the top safety officials who approves drugs for the 
government. Here's one of the top safety guys telling the Senate that 
he and everyone else at the FDA can't do one thing to protect the 
American people from medicines that can kill you.
    Our own government can't protect us and now they want to give 
companies like Merck a free ride and protect them from accountability? 
People need to know about this. Because my wife is not the only one who 
has died from Vioxx--it could have potentially killed thousands of 
others too.
    I am not here before you just for me. I am here representing the 
tens of thousands that have been affected by this drug and more 
importantly to help make sure that we don't have another Vioxx. A 
defective drug does not discriminate. This affects everyone in this 
room. We all take prescription drugs for various ailments and over the 
last several years we have seen the failure of the FDA to protect us. 
There must be deterrents to make sure that pharmaceutical companies do 
not knowingly put defective drugs on the market all in the name of 
profits.
    This just isn't right. We depend on our government to protect us 
from things like this. And now that they can't do anything to get 
dangerous medicines off the market, it's just plain wrong to give the 
big drug companies this kind of legal protection.
    These pharmaceutical companies should be held accountable if their 
drug caused my wife's death and the deaths of others and not be allowed 
to escape responsibility. This proposed bill would prohibit anyone from 
punishing drug companies for bad conduct.
    As far as I'm concerned Merck took my wife away from me. They 
should be punished--not let off the hook.
    Thank you for allowing me to be here today.

    Mr. Deal. We thank you, Mr. Huggins, and we certainly 
extend our sympathy to you for your loss.
    Ms. Campbell, you are recognized for 5 minutes.

                  STATEMENT OF SHERRIE CAMPBELL

    Ms. Campbell. Thank you, Chairman Deal, Ranking Member 
Brown, members of the committee, for the opportunity to share 
my story.
    I almost didn't make it here today, because, while I was 
arriving at the Atlanta airport yesterday, my father was in 
Crawford Long Hospital having emergency open-heart surgery. 
When I asked my tearful mother if I should stay, she literally 
said, ``No, go up there and take care of the doctors so they 
can take care of us.''
    My name is Sherrie Campbell, and I live in Watkinsville, 
near Athens, Georgia. I am honored to be here today to speak 
with you about an issue that directly affected me and my 
family, the loss of my ob-gyn. Women and gynecologists have a 
special relationship. She is the person in whom a woman trusts 
so many of her health care needs, and in some cases, even her 
chances for survival. It is often a unique and long-term 
relationship, one that can last through many stages of a 
woman's life, including the most joyous occasions.
    On January 15, 2004, I was sitting in an examination room 
waiting on my gynecologist, who has been my doctor for the last 
10 years. I wanted to schedule a tubal ligation, because I had 
turned 40 a couple of weeks earlier. I was in for a shock when 
my gynecologist, Dr. Cindy Mercer, breezed in and said, ``Good 
news; your pregnancy test is positive.'' I was advised to have 
extra tests to ensure everything was normal, because of my 
advanced maternal age. And I was pleased to have a wonderful 
team taking care of me, including Dr. Mercer, as well as the ob 
nurses and techs.
    I trusted these women with my health and my baby's life. I 
had read about the difficulty obs were having in paying for 
liability insurance, in some cases paying six-figure insurance 
premiums. And I remember talking to Dr. Mercer about it later 
on. She said she did not know how long they would be able to 
continue delivering babies. Well, that worried me, so I called 
back the next week just to verify that they would, indeed, be 
able to deliver my baby due in September. I was stunned when 
I--when they told me no. I could not believe that Dr. Mercer 
and her partners would not be able to help me through my 
pregnancy.
    In the middle of my pregnancy, I was going to have to 
switch to a doctor I didn't know. The race was on. It takes at 
least a month to get in with an ob-gyn in Athens, because there 
are so few doctors. And I had to find a new doctor before all 
of those other pregnant women, 160 of them, found out the same 
news. I was lucky enough to find another obstetrician to 
deliver my baby, but I had influential friends who offered to 
help me get an appointment.
    Do we need to network to get a doctor's appointment now? 
When I returned to Dr. Mercer's office to pick up my records, I 
learned that the wonderful staff, Lee Ann and Katie and Amy, 
who had helped me through my first pregnancy, would be losing 
their jobs. I realized that these women's lives were going to 
be more rocked than mine.
    My new doctor recommended that I schedule a cesarean 
section for my delivery. I don't know if I needed one or if the 
doctor just wanted to be sure he wouldn't get sued. I don't 
begrudge him that. It certainly doesn't help me, and the rest 
of the women in Athens, if he gets sued and is forced to leave, 
too. Right now, one out of every two deliveries in Athens are 
C-sections. The national average is 26 percent, according to a 
Wall Street Journal article I read recently. In fact, no 
patient in Athens can have a V-back now.
    Finally, a week before my scheduled surgery, during 
Hurricane Francis, I had my beautiful, healthy baby girl, 
Claire Amelia. When Dr. Mercer and her group were forced to 
drop obstetrics, the women in Athens lost one-third of the 
obstetricians in town. The remaining obstetricians are working 
very hard and still can not meet the needs of our community. I 
don't even know if any of them will take high-risk patients 
these days. I know, too, that the doctors must test beyond the 
norm just to be safe.
    But what does that do to our health care costs, my health 
care costs? If there are no doctors, who will deliver our 
babies? Who will deliver my children's babies 20 years from 
now. We have the finest health care system in the world, but we 
need your help to give doctors the freedom to take care of us. 
Women in my community are wondering where they are going to go 
for health care.
    Members of the committee, I ask for your help. I appreciate 
your attention and your hard work to solve this complex 
problem.
    Thank you.
    [The prepared statement of Sherrie Campbell follows:]

                 Prepared Statement of Sherrie Campbell

    Thank you Chairman Deal, Ranking Member Brown and Members of the 
Committee for the opportunity to share my story.
    My name is Sherrie Campbell, and I live in Watkinsville, Georgia, 
outside of Athens, Georgia. I am honored to be here today to speak with 
you about an issue that has directly affected me and my family, the 
loss of my ob-gyn. Women and ob-gyns have special relationships. He or 
she is the person in whom a woman entrusts so many of her healthcare 
needs, and, in some cases, even her chances for survival. It is a 
unique and often long-term relationship, one that can last through many 
stages of a woman's life, including the most joyous occasions.
    On January 15, 2004, I was sitting in an examination room waiting 
on my ob-gyn, who has been my doctor for the last ten years. I was 
actually searching for a good time to schedule a tubal ligation because 
I had turned forty a couple of weeks earlier. However, I was in for a 
shock, as my ob-gyn, Dr. Cindy Mercer, breezed in, saying, ``Good news, 
your pregnancy test is positive.'' Those seven words, especially the 
last one, gave me the biggest surprise of my life.
    After the initial shock, my husband and I settled in to the fact 
that we were going to have our second child. As a result of my advanced 
maternal age, I was advised to begin the process of having extra tests 
conducted to ensure everything was proceeding normally. During my first 
ultrasound, Dr. Mercer joined Amy, the ultrasound tech, and me, to be 
sure everything looked okay. I was glad to see Lee Ann and Angela, the 
OB nurses in the office again after they had taken such good care of me 
during my first pregnancy. I trusted these women with my health and my 
baby's life. I initially resisted taking the blood test to check for 
Downs Syndrome, knowing that we wanted whatever baby we were given, but 
the spina bifida test is done at the same time, and I wanted to give 
the baby a chance if there were any problems. Given my age, I was also 
sent to the prenatal specialist in Athens. The blood test showed I had 
a 1 in 35 chance of having a handicapped child, and the worry was never 
far from the surface.
    In the meantime, my husband's and my own stress level was high. He 
had just changed jobs and we were in the midst of changing insurers, 
and I had a sluggish first trimester. Despite this, I was so looking 
forward to my next monthly OB visit because it was with Dr. Mercer. I 
had read about the difficulty obstetric doctors were having trying to 
find insurance, and in some cases paying six-figure insurance premiums, 
and I remember talking to her about it. I asked her if they were 
feeling the same kind of pressure. Dr. Mercer said that she did not 
know how long they would be able to keep delivering babies as recently, 
one of the seven doctors that delivers babies at the Athens Women's 
Clinic, where Dr. Mercer works, had been sued. As a result of that one 
suit, the Clinic had already been forced to stop its indigent care 
services because their insurance premiums had risen so drastically they 
could no longer afford to provide free care.
    I was very worried about Dr. Mercer and the other doctors, and so I 
called back early the next week to verify that she would be able to 
deliver my baby, due in September. Sadly, I was told no. I was just 
stunned. I was halfway through a pregnancy with my choice of doctors 
whom I trusted, revered even, and suddenly I was lost. I could not 
believe that Dr. Mercer, with whom I had entrusted my healthcare with 
for 10 years, would not be able to help me through my pregnancy. As I 
mentioned, being advanced in age for this delivery made it even more 
important to me that I have access to a physician that knew and 
understood my fears and concerns. Without Dr. Mercer I was unsure who 
would help me if the pregnancy turned difficult.
    Now, the race was on. It takes at least one month to get in with a 
new OB/GYN in the Athens area because there are so few doctors, and I 
knew I didn't have a prayer of getting in to see another doctor 
quickly. And, I had to find a new doctor before all those other 
pregnant women found out the same news. A friend of mine had told me 
about her good experience with the Women's Center of Athens, and I 
immediately called for an appointment. Apparently, I was one of the 
first to call because they took me. My friend who had recommended the 
Women's Center is a woman of influence at the University of Georgia. 
She told me she'd make a phone call to get me in if they wouldn't see 
me. I spoke with another friend, the wife of an influential health care 
provider in Athens, who also told me that she'd make a phone call to 
get me in to see someone else.
    Is this good medicine? Does it now take networking to get in to see 
a doctor? And what about the women who don't have the same friends I 
do? What about the women who are new to the area? Unfortunately, I 
wasn't thinking about them at the time. I did what it took to find the 
best care for my family. And that is what we all want.
    When I returned to Athens Women's Clinic to pick up my records to 
take to the Women's Center of Athens, I spoke to Katie, the 
receptionist, who was about to lose her job. And Amy, the ultrasound 
tech, who sat with me during the first tests, told me that she was 
scared and worried about her family's finances because she too was 
about to be laid off. The Clinic's OB nurse Lee Ann was laid off too, 
and she is now working in a hospital. I began to realize that no matter 
how much I felt I'd been abandoned, these women's lives were rocked 
even harder than mine.
    I wanted to help my friends but I also had to worry about my 
pregnancy. When I finally met with my new doctor--it was recommended 
that I schedule a Caesarian-section for my delivery. I couldn't decide 
if I needed one, or if the doctor needed to be sure he wouldn't get 
sued. I don't begrudge him that. It certainly doesn't help me and the 
rest of the women in Athens if he gets sued and is forced to leave 
too.Thankfully, I was fortunate to find Dr. Halbach, a wonderful ob-gyn 
who could help me deliver.
    Just after midnight on September 7, a week before my scheduled 
surgery, and during the hurricane, I left the bed to lie on our sofa 
and time what I thought were Braxton-Hicks contractions. I found I was 
mistaken when my water broke around 2:30. I was relieved beyond measure 
that Dr. Halbach was on call that night, and delivered our beautiful, 
healthy, baby girl, Claire Amelia.
    As I spent my three days in the hospital recovering from surgery, I 
asked the nurses and doctors plenty of questions. I was surprised at 
how many C-sections were being performed; I later found out that one 
out of every two deliveries in Athens are C-sections. The national 
average is 26%, according to a Wall Street Journal article I read 
recently.
    My story doesn't end here. I had my follow-up appointment with Dr. 
Halbach and wished everyone there farewell because I wanted to continue 
to see the gynecologist of my choice. A week later, I developed a 
breast infection, which is an unpleasant experience for a nursing 
mother. Who was I supposed to call? I chose the obstetrician at the 
Women's Center of Athens, the group that had helped me deliver Claire 
Amelia in my time of need and they were gracious as always. About a 
month ago, however, Claire stopped nursing abruptly and I experienced 
the familiar pain of another infection. The hormones that go along with 
nursing are strong and I tearfully called the obstetrician's office 
again. I was told the nurse would be on the phone for a while and they 
didn't have any appointments open. And then the receptionist asked, 
``Are you still our patient?'' For some reason, perhaps hormones, I was 
devastated by that question. No one wanted to take care of me. I made 
an appointment for the next day, knowing that would be too late as my 
milk supply was dropping rapidly. Eventually, I was able to get an 
appointment with a gynecologist back at the Athens Women's Clinic, my 
original doctor's office. Although they could not deliver my baby, at 
least I still had the opportunity to see them for my other health 
needs. Some women aren't so lucky. Many ob-gyns have actually retired, 
or left one state for another. I am thankful Dr. Mercer has decided not 
to leave Athens.
    When Dr. Mercer and her group were forced to drop obstetrics, women 
in Athens lost one-third of the ob-gyns in town. The remaining 
obstetricians in Athens are working extremely hard and very long hours 
to take care of us. There aren't that many ob-gyns left. I don't know 
how many will even take high-risk patients these days. I'm glad that my 
advanced maternal age did not prevent me from getting the care I 
needed. I know too that doctors are testing us beyond the norm, just to 
be safe. Is that good medicine? Is every doctor doing it? How does that 
affect our health insurance costs?
    These doctors aren't faceless, deep-pocketed, cosmic healers. In 
Athens, we have a community. Our oncologists cry with us, our 
obstetricians cuddle our babies, our pediatricians' children go to 
Mother's Morning Out with our children, they go to dinner with us, they 
are our clients, they worship with us, they are our friends. I know 
that sometimes things can go wrong during delivery, and sometimes 
mistakes are made. But we must weigh the effects of the current system 
on all women. If there are no doctors, who will deliver our babies? 
What will happen when Claire and my son, Thomas are ready to start 
their families? If they choose to stay in the Athens area, who will 
deliver their babies twenty years from now? Will we depend solely on 
emergency room doctors? We have a country where a woman can choose to 
have a baby underwater if she wants. Why can't I choose the doctor I 
want? Who is so intent on making it impossible for them to practice?
    We have the finest health care in the world, and our doctors cannot 
practice out of fear. Members of the Committee, I came here to ask your 
help. We need some help to give our doctors freedom to take care of us. 
Women in my community wonder where they are going to go for health 
care.
    I don't know the answers, but I'm here begging for your help 
because you have the resources to see the big picture. I appreciate 
your attention and your hard work to solve this difficult problem.

    Mr. Deal. Thank you, Ms. Campbell.
    Mr. Malone, you are recognized for 5 minutes.

                    STATEMENT OF DYLAN MALONE

    Mr. Malone. Mr. Chairman, members of the subcommittee, 
thank you for having me here to speak on behalf of my son, Ian, 
who died before he ever said a word. He was the victim of 
medical negligence during a botched delivery. He died last May. 
He didn't live to see his fifth birthday.
    He is not alone. Medical malpractice is the leading cause 
of death in America. According to the National Academy of 
Sciences Institute of Medicine study, about 98,000--the figure 
was mentioned earlier, about 98,000 Americans die every year 
due to preventable medical errors. That is more people than die 
from highway accidents, breast cancer, drunk driving, and AIDS. 
It is a serious problem. I agree with Dr. Bean, and I agree 
with Ms. Campbell: the health care system is in trouble. But it 
is more than a fiscal crisis. There is a patient safety crisis 
here, too.
    Ian was a lot more than a statistic to my wife and I. He 
was our son. And you never saw a more excited expectant father 
than I was that summer of 1999 when they gave my wife a drug 
called Cytotec to induce labor. We didn't know that the 
manufacturer of Cytotec had forbidden doctors to use it to 
induce labor. The physician knew, but we didn't.
    In fact, Cytotec causes such violent contractions and such 
unnatural contractions, it is used as an abortion pill in some 
South American countries and in Third World countries. Every 
bottle of this drug has a pregnant woman on it with a ``no'' 
sign drawn through her. So to hide that from us, the 
obstetrician dispensed the pills in a simple brown envelope.
    The Cytotec caused such unnaturally powerful contractions 
that literally smothered Ian in the womb. His heartbeat began 
to falter. It stopped completely about 20 minutes before he was 
born, he was stillborn. He was more of a gray color than blue, 
and they had to resuscitate him. Worse yet, then they falsified 
the chart to show a good heartbeat throughout the entire 
delivery and to say that he was breathing and that he had a 
heartbeat at delivery. They didn't make any mention of Cytotec, 
so the intensive care unit staff had no idea what a severe 
injury they had just had transferred to their facility. And 
that altered his course of treatment and made his outcome much, 
much worse.
    His severe brain damage left him unable to swallow. He 
couldn't hold his head up. He could never speak. He had to be 
fed through a tube in his intestines 20 out of every 24 hours 
of the day. He was on dozens of medications. He had dozens of 
seizures a day. Eventually, because he couldn't swallow or 
manage his airway, aspiration pneumonia caught up with him, and 
he got a terrible fever and died.
    The insurance company, by the way, didn't want to pay for 
this care during this time. They coldly suggested that if were 
to surrender our custodial rights and put him up for adoption, 
the State could provide for the nursing care he needed, which 
gets to the core of the reason why I am here. You know, if you 
cap the amount of money available to an injured person after a 
medical error, you are not doing anything about the number of 
stories like this one. You are only shifting the burden to the 
taxpayer. And I say, if you want to lower the cost of medical 
malpractice, you need to lower the incidents of malpractice.
    I didn't know it then, but I now know that the obstetrician 
that was responsible for my son's death had lost eight 
malpractice suits before I had ever laid eyes on the man. Even 
though the State agreed with this, by the way, we filed a 
complaint against his license, and they felt that he was guilty 
of gross negligence and misconduct and that he had falsified 
his chart. And so they took action. They gave him a $1,000 
fine. He still practices today. And other children have died 
under his care in the meantime.
    It is a handful of repeat offending physicians. I am sure 
Dr. Bean is an excellent physician. Most doctors are. They are 
highly skilled, caring people. But it is a handful of 
irresponsible physicians that are doing the lion's share of the 
damage, and that is the way--you know, there are 100 ways you 
could tackle this problem. And I beg you not to fixate on the 
one solution that punishes the victim and makes the burden 
harder on my family.
    You know, he was an infant. He didn't have a job. His 
economic loss was zero. So you are capping the funds available 
to help him.
    I also suggest that you reform the insurance industry so 
that they will stop price gouging hardworking physicians, like 
Dr. Bean. No--if they are going to hold massive price hikes, 
they should hold hearings to explain why they need them, like 
they do in California. You can also reduce transactional costs 
in the courts by putting reasonable limits on the number of 
expert witnesses. There are all kinds of patient safety 
measures you could take that could fill stacks of volumes. 
There are so many good ideas on the table.
    So I urge you to think of the problem this way. I see my 
time is about up. If 100,000 Americans die every year from 
preventable medical errors, why don't you cap that number 
instead of eroding my son's right to seek compensation so that 
we can take good care of him and he could have a good quality 
of life during the 4\1/2\ years he did live?
    [The prepared statement of Dylan Malone follows:]

                   Prepared Statement of Dylan Malone

    Mr. Chairman and Members of the Subcommittee: Good afternoon and 
thank you for this opportunity to speak on behalf my son Ian, who died 
last May, never having spoken a word. The victim of medical negligence 
during a botched delivery, he did not live to see his fifth birthday.
    Ian is not alone. Medical errors are one of the leading causes of 
death and injury in our nation. As many as 98,000 Americans die every 
year as a result of preventable medical errors according to a National 
Academies of Sciences Institute of Medicine study.
    More people die from medical negligence and mistakes each year than 
from highway accidents, drunk driving, breast cancer and AIDS.
    According to a 1997 University of Chicago study the number of 
injuries caused by medical accidents in inpatient hospital settings 
could be as high as three million and cost as much as $200 billion.
    But Ian was more than a statistic to my wife and I, he was our son. 
You never saw a more excited father-to-be than I was in the summer of 
1999 when Christine was prescribed the drug Cytotec to induce labor, we 
didn't know that the drug's manufacturer warned against the possibility 
of serious brain damage if used by pregnant women, but our doctor did.
    In fact, the drug is used in third world countries to induce 
abortions because it causes violent contractions. Every bottle of 
Cytotec shows a pregnant woman with a no sign drawn through her. To 
hide this from us the doctor gave us the pills in a simple brown 
envelope.
    The Cytotec caused such unnaturally powerful contractions that Ian 
was literally smothered in the womb; they lost his heartbeat about 20 
minutes before he was delivered. A stillborn, his little body color was 
more grey than blue, and he had to be resuscitated.
    Because Ian's health care providers falsified his chart to show a 
steady heartbeat throughout labor, made no mention of Cytotec, and 
listed him as breathing with a heartbeat at delivery, the intensive 
care unit had no idea of the severity of his injuries. This cover-up 
attempt probably made Ian's outcome even worse.
    The resulting severe brain damage left Ian unable to swallow, so 
the secretions had to be suctioned from his mouth by machine. He was 
fed by way of a tube into his abdomen, and suffered from seizures and 
aspiration pneumonias. The insurance companies didn't want to pay for 
his care--they coldly suggested we put him up for adoption.
    Eventually we set out to tell Ian's story to a jury. There was a 
settlement and we were able to provide the hundreds of thousands of 
dollars of care Ian needed every year.
    I am committed to honoring his memory by fighting to improve the 
system for those who will come after him. I strongly believe that there 
are many things we can do to prevent many instances of negligence and 
medical errors.
    I want people to know that medical negligence is a serious problem 
in this nation, and that instead of fixing it, President Bush wants to 
pass a law that would target all victims of medical negligence no 
matter how severe the injury or how horrible the care.
    This is a very important point. The backers of this radical 
proposal to change medical malpractice in our country would hurt ALL 
victims--not just those who have so-called frivolous cases. It really 
offends me when I hear that word. I want the President to fix the 
health care mess and to stop blaming victims like my son Ian. My son's 
life was not frivolous.
    Let's start with medical negligence and medical errors. The 
President wants to cap medical malpractice awards at $250,000--I say if 
we're going to have a cap--let us cap the number of people who suffer 
from medical negligence every year. It's a national scandal that as 
many as 100,000 people die from medical errors annually.
    We didn't know it then, but the doctor who killed Ian had lost 
eight suits before we ever saw him, and he is still practicing medicine 
today. In fact, other children have been terribly injured or have died 
under his care since Ian's birth, largely because the medical board 
refuses to act on his license, for Ian's injury he paid only a $1,000 
fine. Of course, most doctors are highly skilled and care deeply about 
helping their patients. However, a small minority of doctors are 
causing the majority of the damage, and we have to deal with this life 
and death issue.
    We also need to make sure that insurance companies don't gouge 
doctors for their medical malpractice insurance premiums. Doctors 
should only have to pay rates that are based on what the insurance 
companies have actually paid out in claims.
    The bottom line is that I think it should be up to juries to decide 
whether a lawsuit shouldn't be in court. I trust juries, not the 
insurance companies and HMOs. We all should. It's one of our most 
valued rights as Americans.
    People need to know that this debate is really about protecting our 
constitutional right to a trial by jury. And when they do, I don't 
think the American people will stand for this assault on one of our 
most fundamental freedoms.
    Nearly 100,000 Americans die every year from preventable medical 
errors, that's the number we need to cap.
    Thank you for allowing me to be here today.

    Mr. Deal. Thank you, Mr. Malone. We certainly all are sorry 
for the loss of your son.
    Ms. Rasar, you are recognized for 5 minutes.

                     STATEMENT OF MARY RASAR

    Ms. Rasar. Thank you.
    Chairman Deal, Ranking Member Brown, distinguished members 
of the House Energy and Commerce Subcommittee on Health, it is 
an honor for me to be here. Though given the experience of my 
family--given the experience that my family and I had, if I 
could take it back, I would rather not be here.
    July 4, 2002, my dad was returning a rental car. His name 
is James. Friends called him ``Fisty.'' He was struck by a 
young man driving a big truck, and he was sideswiped. They 
wanted to take him to--they needed to take him to a level one 
trauma center in Las Vegas, which they had a level one trauma 
center in Las Vegas until the day before my dad's accident. It 
was closed because the orthopedic surgeons who worked at the 
center lost their medical liability insurance coverage. A very 
large insurance company that insured over 40,000 physicians 
across the United States, had stopped writing medical liability 
policies only for 1 month before.
    Rather than sending my dad to the hospital that he needed 
to get help, they had to--the paramedics had to take him to the 
nearest hospital to try to stabilize him so they could 
transport him hours away to Salt Lake City's level one trauma 
center. They couldn't stabilize him. He died. My dad died 
alone. My sister and I didn't have an opportunity to say 
goodbye to him. He was my only living parent. My mom had died 
just a few years earlier to cancer. And I hear all of these 
victims, and they are all sad. I mean, we all have to 
experience loss, but my dad didn't get treated just because he 
couldn't--the doctors couldn't get insurance. And they couldn't 
get insurance, because the insurance company wouldn't cover the 
doctors anymore.
    That doesn't seem right. He wasn't rich. He was a 
hardworking man. He worked his whole life. He was in the 
military. He served in the Air Force. He worked at the Golden 
Nugget. He had insurance. It is not like he didn't have 
insurance, but he just couldn't get treated. So he just died. 
They just let him die. They did everything they could. One of 
the things that bothers me most is the things that my dad has 
missed. He had a full life. We had--we experienced trauma in 
our family growing up, too. But some of the things he has 
missed, he has missed his oldest son's graduation from high 
school. He has missed his oldest grandson's graduation from the 
Air Force basic training. He missed his grandson, Jeremy, my 
nephew's marriage. He missed the birth of his first great-
granddaughter. I miss him a lot, you know.
    Mr. Chairman, the increase in medical malpractice insurance 
premiums caused by frivolous lawsuits and out-of-control jury 
awards has a consequence in the lives of real people. No one is 
denying the victims of malpractice their day in court, or even 
looking to deny them unlimited economic damages for mistakes 
made by doctors, but because of frivolous lawsuits and out-of-
control jury awards, my father, my children's grandfather, did 
not stand a chance. He was taken from us, and our family will 
be forever affected because of this crisis.
    In the months that have passed, I have taken the 
opportunity to learn about this growing crisis. Doctors are 
being forced from their practices due to rising and outrageous 
medical liability insurance. I have learned that the problem is 
not unique to Nevada. It is growing, and it is finding victims 
like our family all across America. It is real for the 
expectant mothers in Maryland, West Virginia, Mississippi, and 
Pennsylvania who can't find an ob-gyn. It is real for parents 
of children in Florida who can't find a pediatric neurosurgeon. 
And it is very real for the elderly in Arizona who depend on 
their orthopedic surgeons and who are told that their trusted 
doctors are moving to States where practicing medicine is 
affordable and less risky.
    The fact is, Mr. Chairman, my father did not have to die. 
After speaking with numerous specialists, I am convinced that 
he would be living today had the trauma center been open. So in 
our family, as we consider this terrible tragedy of losing 
someone we love so dearly, it is clearly understood that he did 
not die because of a car accident but because of the crisis 
within our Nation's health care delivery system.
    And as true as this is, there is an equal truth, Mr. 
Chairman: you and your colleagues can fix this problem. You can 
do something about it. To make sensible reforms denies no one 
of his or her rights, but sensible reforms will save lives. 
Please, Mr. Chairman, pass necessary medical liability reform. 
It really matters in life and death.
    Thank you.
    [The prepared statement of Mary Rasar follows:]

                    Prepared Statement of Mary Rasar

    Chairman Deal, Ranking Member Brown, distinguished members of the 
House Energy and Commerce Subcommittee on Health:
    It's an honor for me to be here, though given the experience my 
family and I have had to endure I would certainly give up this honor--
particularly if giving it up could bring back my father . . . my 
children's grandfather . . . Jim Lawson, a man known to his friends as 
Fisty.
    However, if by sharing my Dad's story, I can save even one family 
from the tragedy we have had to needlessly endure, then I am not only 
honored to be here, Mr. Chairman, but I am grateful for this 
opportunity.
    On July 4, 2002, my father was returning a rental car to McCarran 
International Airport in Las Vegas, Nevada, when he was his hit by a 
young man driving a large truck. His injuries, though serious, were not 
immediately life-threatening, but he had to be stabilized with the kind 
of equipment that is only found in a Level One trauma center.
    Fortunately, a Level One center with the exact equipment that was 
needed to save his life was only five minutes away. Unfortunately, it 
was closed. Only days before, the orthopedic surgeons who worked at 
that center had lost their medical liability insurance coverage. A very 
large insurance company, that had covered over 40,000 physicians across 
the United States, had stopped writing medical liability policies only 
the month before.
    Rather than sending my father to the hospital with the best 
possible trauma care, the paramedics did the best they could and rushed 
him to a community hospital, where they attempted to stabilize him for 
air transport to the next closest Level One center hours away in Salt 
Lake City, Utah. Unfortunately, the transfer was too late, and without 
the proper equipment, my father died in the process.
    Mr. Chairman, the continued increase in medical malpractice 
insurance premiums, caused by frivolous lawsuits and out-of-control 
jury awards has a consequence in the lives of real people. No one is 
denying the victims of malpractice their day in court--or even looking 
to deny them unlimited economic damages for mistakes made by doctors. 
But because of frivolous lawsuits and out-of-control jury awards my 
father--my children's grandfather--did not stand a chance. He was taken 
from us. And our family will be forever affected because of this 
crisis.
    In the months that have passed, I have taken the opportunity to 
learn more about this growing crisis--doctors are being forced from 
their practices due to rising and outrageous medical liability 
insurance. I have learned that the problem is not unique to Nevada. It 
is growing and is finding victims like our family, all across America. 
It is real for the expectant mothers in Maryland, West Virginia, 
Mississippi, and Pennsylvania who can't find an ob/gyn. It is real for 
parents of children in Florida who can't find pediatric neurosurgeons. 
And, it is very real for the elderly in Arizona who depend on their 
orthopedic surgeons and are told that those trusted doctors are moving 
to states where practicing medicine is affordable and less risky.
    The fact is, Mr. Chairman, my father did not have to die. After 
speaking with numerous specialists I am convinced that he would be 
living today had the trauma center been open. So in our family, as we 
consider the terrible tragedy of losing someone we loved so dearly, it 
is clearly understood that he died not because of a car accident, but 
because of the crisis within our nation's health care delivery system.
    And as true as this is, there is an equal truth, Mr. Chairman: you 
and your colleagues can fix this problem. You can do something about 
it. To make sensible reforms denies no one of his or her rights. But 
sensible reforms will save lives. Please, Mr. Chairman, please pass 
necessary medical liability reform. It really is a matter of life and 
death. Thank you.

    Mr. Deal. Thank you, Ms. Rasar. We likewise extend our 
sympathy to you and your family for the loss of your father.
    I am going to recognize myself now for the questioning 
period of 5 minutes. I would remind all of us that we have a 
second panel of many members, and some of them have airplanes 
to catch this afternoon, too, so I will not use my entire 5 
minutes. I would encourage everybody to be as brief as possible 
in their questioning.
    Dr. Bean, let me start with you.
    We are in a quandary, obviously, as to what the 
relationship is between capping non-economic losses and access 
to health care. Ms. Rosenbaum, I believe who is going to 
testify in our second panel, in her written testimony, 
indicates that she doesn't think there is necessarily that 
relationship between those caps and access that, in fact, those 
caps might encourage bad medical practices. Would you comment 
on that, please?
    Mr. Bean. I would like to answer the last question first. I 
can think of no doctor that practices bad medicine simply 
because there is or isn't a cap. That doesn't happen. And as 
far as it being a deterrent to bad practice, I don't think that 
happens either. It is not a quality issue. Neurosurgeons are 
sued about once every 2 years. If being sued is a sign of 
quality or not, then we are all incompetent. We shouldn't be 
practicing. It is not a sign of quality. It just happens 
because of the high risk.
    As far as the non-economic damage, we believe there are 
economic consequences. People need to be treated. They have to 
have replacement of their income. They have to have living 
accommodations, and it may be for years. All of that should be 
provided. It is the non-economic damage that is unquantifiable 
that can go through the roof. That 60 percent or more, as I 
said, of what the award is constituted of in these big cases, 
that is what we see as driving the jury awards higher and 
higher. And like I said before, it is a simple equation. What 
is paid out has to be paid in. And it is the high-risk people 
like ob and what I do that this burden falls on.
    It is a matter of balance. Yes, I want to compensate 
everybody who is medically injured. And yes, I know medical 
injuries would happen--will happen, and I know I want to 
prevent them. They will always happen, to some degree. But if 
we don't strike a balance and decide that so much can be paid 
an no more, then we can never stop this crisis from building 
and driving necessary doctors out of practice. Congress has had 
to decide before what is the value of suffering. It is hard to 
place a price on suffering, but you have had to do it. You had 
a victims fund. You had to come up with a price on the ultimate 
suffering. It was $250,000. At some point, our resources run 
out, and we destroy the system that everybody depends on, and 
that is why we think that a cap on non-economic damages is the 
balance that keeps the system operational.
    Mr. Deal. Thank you, Doctor.
    I am going to forego the rest of my time.
    Mr. Brown, you are recognized.
    Mr. Brown. Thank you, Mr. Chairman.
    All of us on this panel, Republicans and Democrats, want to 
solve this problem for doctors and for patients. We--but Dr. 
Bean, my question is for you. We--first of all, we know several 
things. We know the drug industry gave tens of millions of 
dollars to re-elect the President. We know that HMOs gave 
millions of dollars to Republican leadership. We know this 
legislation, which is billed as a malpractice--medical 
physician malpractice reform includes provisions to protect the 
drug industry to--from lawsuits, to absolve the drug industry, 
HMOs, and the medical device industry from punitive damages. We 
know that the President and Republican legislative leaders are 
campaigning all over the country talking only about the 
physicians and access to care but rarely mentioning the 
protections for the drug industry, the insurance industry, and 
medical device industry.
    And we also know this bill won't pass when it looks like 
this, in large part because it does absolve the drug industry, 
the insurance industry, the medical device industry from 
responsibility for their actions. We also know this bill could 
pass if we took those industries out and focused on malpractice 
reform and focused on really helping this accessibility for 
patients to medical care.
    So my question is, would you recommend to this panel, Dr. 
Bean, that we remove the provisions protecting the drug 
industry, HMOs, and medical device industry so we could focus 
on your profession and access to care for everyone in this 
country?
    Mr. Bean. Mr. Brown, that is a difficult question, because 
I can't write the legislation or make the accommodations that 
have to be made between the Republicans and the Democrats. I am 
focused on physician liability. I know there are other--some 
other issues, particularly in--that relate to physicians, say, 
in using drugs. And when we take new devices and use them with 
the best evidence that they are safe, and when we give drugs, 
we use them with the best evidence that they are safe, we do 
want to be protected until we find new evidence that it isn't. 
Now----
    Mr. Brown. But if I----
    Mr. Deal. [continuing] as far as the bill goes in that 
regard, I think it should be part of the legislation. I can not 
tell----
    Ms. DeGette. Will the gentleman yield?
    Mr. Brown. Well, go ahead. Yes, I will yield to my--I am 
sorry to interrupt. We only have 5 minutes, and I----
    Ms. DeGette. Dr. Bean, the question is, though, and I hope 
Mr. Brown was going to ask this, I understand why you folks 
would want to be immunized, but why should Congress also 
immunize the pharmaceutical companies and the manufacturers of 
the medical devices? That is not what you are talking about.
    Mr. Bean. No, I am truly talking about the dilemma of 
losing physicians. And that was my focus in the----
    Mr. Brown. Okay. I think that that tells us--you know, I 
say to you again that--and I have had this conversation with 
dozens of doctors in my District and all over this--the 
Nation's capitol and all over Ohio that this proposal won't--
that frankly, for purposes of fund raising, for purposes of 
political gain, the physicians are being used by my friends on 
the other side of the aisle in order to protect the drug 
industry, the insurance industry, and the medical device 
industry to raise money both--and political support both from 
you and your organizations and millions of dollars from the 
drug industry, and we are never going to solve this problem.
    We are going to see a panel like this 2 years from now with 
the human tragedies that Ms. Rasar and Mr. Malone and Mr. 
Huggins have had, human tragedies that none of us can 
understand unless it has happened to us. We are going to have 
those again in 2 years, because this Congress is dysfunctional 
because of its addiction to drug industry, insurance industry, 
and medical device industry money. And until the doctors 
understand that you--that we care about what happens to you but 
we don't want to protect Merck when they don't come forward and 
tell the truth about Vioxx, or we don't want to protect these 
other drug industries--other drug companies and other insurance 
HMOs and other medical device industries when this--that is 
what will happen if we continue down this road.
    I would--I have 40 seconds left. Mr. Huggins, you wanted to 
say a couple more things before your 5--when your 5 minutes 
were up. Would you like to take a minute, my last minute or----
    Mr. Huggins. Yes, the one thing----
    Mr. Brown. If that would help you. Okay.
    Mr. Huggins. Okay. Sorry. One thing I wanted to mention is 
I--Dr. Bean here, I feel for him. And I feel for Ms. Campbell 
here. My personal--my best friend and workout partner is one of 
the top pulmonologists in the State of Tennessee, and he was 
there at my side at the hospital. He got there when my wife 
came in. And we have talked on this issue. I know how high his 
premiums are. I know what he has to pay. We have talked about 
it a lot. And my heart goes out to him, because he has to pay a 
lot.
    Now he feels as I do, that it needs to start with the 
insurance industry and regulation of bad doctors practicing 
medicine, because it is only a handful. And if we start it 
there, the one thing that really troubles me, being a lifelong 
Republican, is the fact that the platform that I have believed 
in for so many years is--has to do with limiting government in 
our lives and giving rights to the State. And what you guys are 
proposing is the absolute 180 degrees. It is getting 
government--telling myself, as an individual, what I can 
recover from loss and what my loss is and tell me what it is.
    Mr. Deal. Mr. Huggins, I am going to have to cut you off.
    Mr. Huggins. Thank you.
    Mr. Deal. You have been about a minute past Mr. Brown's 
time, and I sensed a hardening of his heart, and I just didn't 
want it to go any further.
    Mr. Huggins. Yes, sir.
    Mr. Deal. I am going to recognize Dr. Burgess next.
    Mr. Burgess. Thank you, Mr. Chairman.
    I will just have to say I find some of the remarks coming 
from the other side unfortunate. I thought this was a panel 
convened to access information from this--from the witnesses 
and not to hold forth on political agendas.
    Dr. Bean, I agree with you, and I agree with you 
wholeheartedly that the question does become about what will 
the system--what can the system bear and how do you compensate 
people for their loss. And to that end, I would like to ask Mr. 
Malone, and again, just everyone else up here on the panel, I 
feel for you, for your loss of your son Ian, can you tell us, 
sir, did you pursue litigation against your physician?
    Mr. Malone. Yes, we did. We--the suit is still pending 
against the obstetrician. Although Ian was born in the summer 
of 1999, we did settle with the new birth center that he was 
delivered at for the amount they had insurance for, which is a 
$2 million settlement. Of course Ian's medical bills were 
several hundred thousand dollars a year, and he lived for 4\1/
2\ years, so after you pay court costs and expert witnesses and 
you do that math, you can see that that money was needed, which 
is why we are still pursuing the obstetrician.
    I should also mention that when I was last in Washington, 
DC, my son was still alive, and I was lobbying for patient 
safety changes. And during the interim, Ian has died. And since 
the last time I have pled with the Congress for new patient 
safety changes to go after repeat offending doctors, that 
obstetrician mutilated a child in a very bizarre forceps 
delivery and killed him, killed a little boy last Christmas.
    So I--this is not--I apologize for the melodrama, but this 
is not tax code. People are dying, and I urge you to act.
    Mr. Burgess. A couple of other questions, then, along that 
line just for my clarification. Do you mind me asking what 
State you come from?
    Mr. Malone. Washington State.
    Mr. Burgess. Okay. And your son was born at a birthing 
center?
    Mr. Malone. Right, a new one, a new facility built just 
about one mile from the major facility where--that we 
traditionally use. With my wife's--Ian was not our first child. 
With my wife's prior delivery, she had refused anesthetic, so--
to try it natural. She was in the hospital setting, but she--so 
she thought she would take it to the next step. If she wasn't 
going to avail herself for the anesthesiologist, why not be in 
the nice, clean, beautiful birth center that is right next to 
the hospital.
    Mr. Burgess. Just for my own satisfaction, do they do 
cesarean sections at the birthing center?
    Mr. Malone. No, they--that is why they are so close. They 
transfer, if they need a C-section, to the hospital. They have 
an arrangement set up for that. We asked a lot of questions 
along those lines before we chose them.
    Mr. Burgess. You know, Cytotec--of course, I was a 
practicing obstetrician before I came to Congress, and off 
label use of Cytotec is not that uncommon. I will just tell the 
other members of the panel that.
    Mr. Malone. Right.
    Mr. Burgess. I would say what is uncommon would be to use a 
potent medication like that in a birthing center. That is 
clearly a--in Texas, at least, a departure for the standard of 
care. Back in the 1980's, when there was some trouble with 
credentialling, this Congress, and I obviously wasn't here 
then, passed laws that required physicians to register, and I 
have registered with the National Practitioner Data bank. And 
unfortunately, that information is not generally available to 
the general public. In Texas where we passed some significant 
liability reforms, which included caps, and I eluded to some of 
the benefits from that, and I hope we get to hear from my good 
friend, Mr. Montemayor, here in a little bit, about the--what 
has happened down in Texas, and I hope you will stay around for 
that. But one of the other things that we did was all of the 
information collected on a physician from the Texas State Board 
of Medical Examiners is now instantly available on the 
Internet. Every month, it goes up. And I know this because I 
was a little bit late in paying my licensure fee because I am 
up here in Congress and I don't have a secretary to do it for 
me anymore, and sure enough, my name was up there as delinquent 
for non-payment of fees, and they didn't give me much of a 
grace period. But it just underscores the point that this 
information does need to be available to consumers. And as a 
doctor, I have no problem with that. I think what we have done 
in Texas, perhaps, could be a model for other areas. Of course, 
bearing in mind what Dr. Bean has said, we are all sued. You 
can be the best doctor in the world, and you are still going to 
accumulate lawsuits. In fact, if you are a good doctor, people 
are going to seek you out when they have more than just the 
average amount of difficulty, and as a consequence, bad results 
can follow, and as a consequence, lawsuits can follow.
    I would just also, with my last 5 seconds, I do hope this 
panel will refrain from the use of the word ``frivolous'' when 
it talks about lawsuits. I support the President in this 
endeavor, but I don't like the use of that language. As we have 
seen here today, there is always a human tragedy at the base of 
every story, and that is a word we should avoid.
    Mr. Deal. I thank the gentleman.
    Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman.
    And I would like to add my thanks to all of the witnesses, 
particularly those of you who have lost family members. It 
can't be easy coming here. And you all give us a good 
dimension.
    Dr. Bean, I wanted to talk with you, because I want you, 
and your members, to understand, also, the members on both 
sides of the aisle understand there is an issue with 
malpractice, with doctors having increasing malpractice 
insurance rates. We want to get to the bottom of that and try 
to deal with it. But I did want to ask you a few questions.
    You are here representing the Alliance of Specialty 
Medicine, is that correct, Doctor?
    Mr. Bean. That is correct.
    Ms. DeGette. And I believe you said in your opening and 
then, again, in response to the chairman's question that the 
obvious problem here is the payouts are quite a bit more than 
the insurance premiums, which is why premiums have to go up. Is 
that correct?
    Mr. Bean. That is the understanding.
    Ms. DeGette. Yes.
    Mr. Bean. The information we have is $1.65 going out in 
2002 for $1 coming in.
    Ms. DeGette. Uh-huh. Well, if staff could put up this 
chart, please. It should be up on the screen. There we go.
    [Chart.]
    This is according to an independent agency, which shows 
that actual payouts by malpractice insurance companies are 
$55.43 per every $100 of premiums written. Do you see that?
    Mr. Bean. That is right.
    Ms. DeGette. And so what this incurred is the $80.48, that 
is what the malpractice insurance companies said that they 
would have to pay out, but in fact, they only paid out $55.43. 
Is that--do you see that there, too?
    Mr. Bean. I see that.
    Ms. DeGette. And Doctor, this is the kind of chart that 
people like me look at and we say, ``Well, maybe part of the 
problem is the way malpractice insurance companies are writing 
their insurance policies.'' Would you have any disagreement 
with that?
    Mr. Bean. Not on the face of it, no.
    Ms. DeGette. Okay. If you could move the microphone a 
little closer.
    Mr. Bean. Certainly.
    Ms. DeGette. Thanks.
    Mr. Bean. No, not on the face of it, but I--if there is 
more comment, but what I can say is this. Surely it is an 
arcane, actuarial system in figuring out the rates in 
insurance, and I certainly don't understand. I have to look at 
simple figures like you do. But what I do understand is this. 
Insurers have dropped out of virtually every State. If it was 
such a lucrative business, they would stay and make money, but 
they are leaving. We have trouble finding----
    Ms. DeGette. Well, let me ask you this, Doctor, because as 
a representative of your group, I assume you wouldn't have any 
objection, as part of legislation, to doing some kind of a 
study about how malpractice insurance companies write their 
insurance policies, would you?
    Mr. Bean. Certainly not.
    Ms. DeGette. Absolutely----
    Mr. Bean. I would have no----
    Ms. DeGette. [continuing] because your real problem, I 
think as you testified more than once, is that doctors are 
having to leave the practice of medicine, emergency trauma 
centers are having to close down because they--doctors just 
can't afford to pay these premiums, isn't that right?
    Mr. Bean. That is true.
    Ms. DeGette. Would you be surprised to know that when we 
considered this legislation in the Energy and Commerce 
Committee last year, the sponsor of the bill told me that the 
groups said that they would not allow such a study to be 
conducted as part of the legislation?
    Mr. Bean. I am--can't say I would be surprised. I wasn't 
aware of that.
    Ms. DeGette. But your group wouldn't object to that?
    Mr. Bean. No, as a matter of fact, we would like to look at 
other additional elements as well, like expert witness 
standards.
    Ms. DeGette. Absolutely. And----
    Mr. Bean. There is more to this.
    Ms. DeGette. Right.
    Mr. Bean. When you talk about the MICRA elements, most of 
those are to stop the hemorrhage or loss at the end of the 
line. We would like to stop it at the beginning. There is more 
to it.
    Ms. DeGette. Now when you refer to ``MICRA,'' Doctor, what 
you are talking about is the tort reform legislation that was 
passed in California, correct?
    Mr. Bean. Correct.
    Ms. DeGette. But the bill that was passed by the House last 
year is different in a number of respects from MICRA, isn't 
that correct?
    Mr. Bean. There are other elements. That is correct.
    Ms. DeGette. And the other thing we learned in our hearings 
last year, in the 108th Congress, was, in fact, after Congress 
passed this tort reform bill, it had caps on non-economic 
damages and everything else. Malpractice premiums still didn't 
go down for the doctors in California until after a voter 
initiative capping malpractice insurance premiums was passed. 
Isn't that correct?
    Mr. Bean. I don't think that is--I have heard that, and I 
have--and what happened is MICRA was passed in 1975.
    Ms. DeGette. These have to pass through court challenge, 
which takes a while before the insurance premiums actually come 
down. That initiative, Prop 103, was passed in 1988. By 1985, I 
think the effect of the cap in California was visible. Around 
the country, between 1985 and 1987, there was a big spike. That 
was the second crisis after 1975 to 1986.
    Ms. DeGette. Well, in fact----
    Mr. Bean. I don't think that----
    Mr. Deal. I am going to have to call time.
    Mr. Shimkus. Mr. Chair, a parliamentary inquiry.
    Mr. Deal. Who is----
    Mr. Shimkus. Mr. Chairman.
    Mr. Deal. Yes.
    Mr. Shimkus. Is it not proper that if we are using a graph 
and a chart from some consumer that we know who they are and 
that we have a copy of that?
    Ms. DeGette. You bet you. Mr. Chairman----
    Mr. Shimkus. Would you provide that to us?
    Ms. DeGette. [continuing] this is from the Best State Line 
Report. It is an independent group. I would be happy----
    Mr. Shimkus. I would like----
    Ms. DeGette. Mr. Chairman, would--excuse me, Mr. Shimkus, I 
would be--I would ask unanimous consent to place it in the 
record of the hearing.
    Mr. Shimkus. And if we would have copies of it----
    Mr. Deal. Without objection----
    Mr. Shimkus. [continuing] for the presentation, that would 
be appreciative.
    Mr. Deal. Would you distribute it to members, also?
    Ms. DeGette. Yes. Counsel has it, Mr. Chairman.
    Mr. Deal. All right. Let me ask the members, if they would, 
if at all possible, let us try to keep the questioning to an 
absolute minimum. We have several witnesses on the next panel 
that are going to have to leave, and we are not going to be 
able to hear from them at all if we don't get to them rather 
quickly.
    Let us see. Who is next? Dr. Norwood is next.
    Mr. Norwood. Mr. Chairman, I will pass on questioning to 
get to the next panel, if you please.
    Mr. Deal. Thank you.
    Ms. Capps.
    Ms. Capps. Dr. Bean, I wanted to follow up on an answer 
that you gave to Chairman Deal's question. You pay--you pointed 
out that Congress set an amount for 9/11 victims.
    Mr. Bean. Yes, ma'am.
    Ms. Capps. And some payments were as high as $6.3 million. 
The average payment was for a death in that tragic event was 
about $2 million, I believe. And I wondered if you would be 
willing, speaking for your organization, to consider raising 
the caps to that level for victims of medical malpractice. A 
yes or no answer.
    Mr. Bean. Yes, the answer is no, and the reason is that we 
have evidence across the States that the effect on premiums is 
in direct relation to the cap on non-economic damages. Anything 
that high would have virtually have no effect----
    Ms. Capps. Who--so do you----
    Mr. Bean. [continuing] in----
    Ms. Capps. Excuse me. But do you believe, then, that what 
Congress did was wrong?
    Mr. Bean. No, I don't believe what Congress did in that 
situation was wrong. In terms--and the illustration was that 
there is a need, at times, to decide on the value of suffering. 
And in this case, we are trying to strike a balance between 
what money is in the medical system and what can be paid out 
for injuries.
    Ms. Capps. Okay. I want to ask you one more question, but 
with a yes or no, because I have--I want to be able to elicit 
more information from a couple of our witnesses.
    Tell me if your organization would support efforts to 
aggressively regulate insurance providers along side of 
implementing caps to make sure doctors absolutely reap the 
savings the caps theoretically create.
    Mr. Bean. I have no expertise. The answer is yes if--just 
as in State regulation, if there is a regulation to be done 
that would improve the consistency of premiums, certainly.
    Ms. Capps. Thank you.
    Both Mr. Huggins and Mr. Malone, your stories are 
compelling, and thank you, Ms. Campbell, for being a witness 
here today as well.
    Mr. Huggins, it is clear that Vioxx, and to generalize on 
that drug company, is a great concern to you. And the fact that 
we are now exempting them or--in this legislation, I wonder if 
you would comment for a minute or so on that a bit more.
    Mr. Huggins. Well, primarily--excuse me. Primarily, I 
don't--personally, I don't understand why pharmaceutical 
companies have been included into this bill.
    Ms. Capps. It concerns some of us, too.
    Mr. Huggins. I am looking at Merck and many other companies 
that are all traded on the market. And what you are proposing 
is the fact that I do not have a right to sue a pharmaceutical 
company for what I feel I should be compensated for, for 
whatever reason, from a fault of a drug company when they are 
traded on the market every day.
    Ms. Capps. Um-hum.
    Mr. Huggins. And to me, that--it--to me, it raised the line 
of my constitutionality, my constitutional right to be able to 
say what I feel my loss is when I am--you know, I am holding 
accountable a drug company. And you know, it is traded on the 
market every day. I don't--I personally don't understand what 
this has to do with this bill.
    Ms. Capps. I certainly appreciate your statement.
    Mr. Malone, I am a nurse, and you are concerned about 
patient safety and really focusing on that just makes my heart 
glad. And I wonder if you, in the short time that I have 
remaining, would say another word about how you feel, you have 
been through the mill on this, ways that we, in Congress, could 
focus in that--in ways that we should in this topic.
    Mr. Malone. Well, indeed, some of it is a State issue, and 
some of it can be done here at the Federal level. Obviously, 
cooperation between States, you hear horror stories about 
physicians who go from State to State. Dr. Anderson, our 
physician, even went from country to country to avoid detection 
as a--such as scoundrel went across the Canadian border several 
times. But some things that can be done are changing the makeup 
of medical review boards, more transparency in settlements. 
Secrecy agreements are very hard on patient safety. You know, 
there are a variety of things, and I am out of time.
    Ms. Capps. I would----
    Mr. Deal. Thank you.
    Ms. Capps. I hope we can continue to use your expertise. 
Thank you.
    Mr. Deal. Ms. Bono.
    Ms. Bono. Mr. Chairman, I think I am going to yield at this 
point and wait for the second panel.
    Mr. Deal. Thank you.
    Ms. Myrick.
    Ms. Myrick. No, Mr. Chairman. I will yield at this time, 
also.
    Mr. Deal. I believe that covers everybody then.
    Thank you all for doing so. Thanks to all of you on the 
panel for being here. We appreciate your testimony and you 
being present for this hearing. If we can now go to the second 
panel, ladies and gentlemen, if you will take your seats.
    Thank you, ladies and gentlemen. We are pleased to have 
such a distinguished panel, and we will try to move as quickly 
as possible, because I do understand the travel plans are here.
    And first is Mr. Montemayor, is that correct, who is the 
insurance commissioner from the Texas Department of Insurance. 
And I believe I will just introduce each of you as we go along.
    Mr. Montemayor.

   STATEMENTS OF JOSE MONTEMAYOR, CPA INSURANCE COMMISSIONER, 
 TEXAS DEPARTMENT OF INSURANCE; J. ROBERT HUNTER, DIRECTOR OF 
   INSURANCE, CONSUMER FEDERATION OF AMERICA; JAMES HURLEY, 
AMERICAN ACADEMY OF ACTUARIES; SARA ROSENBAUM, HIRSH PROFESSOR 
 AND CHAIR, DEPARTMENT OF HEALTH POLICY, THE GEORGE WASHINGTON 
 UNIVERSITY MEDICAL CENTER, SCHOOL OF PUBLIC HEALTH AND HEALTH 
    SERVICES; SHERMAN ``TIGER'' JOYCE, AMERICAN TORT REFORM 
 ASSOCIATION; GURKIRPAL SINGH, ADJUNCT PROFESSOR OF MEDICINE, 
   DEPARTMENT OF GASTROENTEROLOGY, STANFORD BUSINESS SQUARE; 
JOSEPH P. GLENMULLEN, PSYCHIATRIST, HARVARD LAW SCHOOL, MENTAL 
    HEALTH LAW SCHOOL HEALTH SERVICES; RICHARD F. KINGHAM, 
COVINGTON & BURLING; SIDNEY M. WOLFE, DIRECTOR, HEALTH RESEARCH 
 GROUP, PUBLIC CITIZEN; AND VICTOR E. SCHWARTZ, SHOOK, HARDY & 
                         BACON, L.L.P.

    Mr. Montemayor. Thank you, Mr. Chairman. It is a pleasure 
to be here. And members, it is a real honor to be here and give 
you our perspective on this particular line of insurance from a 
regulatory standpoint and also from how we see the market in 
some of the issues that are underpinning the medical 
malpractice issues.
    As many of you may not know, the insurance commissioners 
are on a State by State basis. In Texas, the insurance 
commissioner is elected by the Governor and with the advice and 
consent of the Senate and basically is in charge of regulating 
the insurance markets within the State.
    Part of the regulatory duties are, obviously, then to 
license insurance companies, monitor their solvency levels, 
approve their rates or monitor their rates, in the Texas cases 
monitor their rates, and also approve the insurance contracts 
themselves, the forms.
    There is also the National Association of Insurance 
Commissioners. And the role of the National Association is an 
organization of insurance regulators from all 50 States, the 
District of Columbia, and the U.S. territories, and it dates 
back to the 1800's. It provides a forum for the development of 
uniform policy on insurance matters where appropriate. And 
obviously, they are very, very focused on solvency and 
financial aspects of this.
    In terms of my own activities at the NAIC, I Chair the 
National Property and Casualty Insurance Committee and the 
Subcommittee for Market Conditions Working Group, which was 
established in 2003 to look at, particularly, distressed lines 
within property and casualty. The very first one that came up 
for study, and the one with most urgency, was this one, medical 
malpractice. And we heard a lot of testimony on the causes and 
solutions for what came to be known as the medical liability 
insurance crisis.
    We assigned some researchers and eventually produced a 
pretty good-sized report, which I will forward to your 
committee clerk so you can have use of it. But we basically 
looked at a number of the States, all 50 States' premiums and 
what was happening in the--within the market. The overarching 
conclusion was that underwriting losses, as Dr. Bean, I think, 
on the previous panel pointed out, it is what comes in and what 
goes out, were the major single contributing factor influencing 
the rate increases being experienced by physicians and other 
health providers over the past several years.
    The report provided data, research sources, and a list of 
the market interventions available for consideration to State 
regulators as well as to policymakers, such as the U.S. 
Congress or the State legislators.
    The Texas experience, basically, manifested itself in its 
fullness on this last set of crises, probably around 1999 to 
2000. Nursing home licensed insurers participating totally in 
our market dropped from eight to just one. Licensed insurers 
for physicians medical malpractice, I used to have about 17 in 
the market. We dropped to four. Many of them actually went 
completely insolvent, broke, and had to be put into 
receivership, because losses greatly exceeded their premiums. 
In fact, there were about 6,500 doctors displaced where they 
lost their insurance coverage completely either because the 
insurance company went out of business or stopped writing the 
line because their own regulator basically said, ``No more. 
That is all there is you can handle.''
    Over 11 medical malpractice insurance with more than 6,500 
physicians withdrew effectively from the market. There were 
several rate increases from 1999 to 2002. Those increases range 
from 23 percent to about 117 percent. The Joint Underwriting 
Insurance Association, which is one of the tools effectively 
used in some of the markets, grew to something like 3,000 
physicians, and we physically got involved in trying to place 
many of these dislocated physicians. The largest medical 
malpractice writer, the Texas Medical Liability Trust, not an 
insurance company, but a creature of the legislature, that acts 
effectively as an insurance company, increased its rates over 
140 percent over that 4-year period and had to, in addition to 
that, assess an extra $5,000 per physician just to maintain an 
ability to continue to write. And we had had a cap effectively 
on non-economic damages since, let us see, 1977, and it was due 
to inflation. Because of a series of interventions in court, it 
basically was applicable only in cases of wrongful death, and 
that had climbed to about $1.7 million.
    The way that Texas legislature responded, they adopted a 
law to effectively place limits on non-economic damage, made 
provisions for periodic payments for future damages as they 
became accrued. It is stipulated that pre-judgment interest was 
not awardable on future damages. And in terms of the class 
actions, it required that Texas courts keep plaintiff attorney 
fees in proportion to the actual work done. They took the 
unusual step to also put in front of the voters a 
constitutional amendment to immediately get at the benefits to 
be had from these tort reforms. And so the law went into 
effect, basically, with those reforms on the 1st of September. 
The voters were voting to ratify a constitutional amendment 
specifically empowering the State legislature to adopt those 
limitations 10 or 12 days later, and they became effective.
    Our experience since----
    [The prepared statement of Jose Montemayor follows:]

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    Mr. Deal. I am sorry. I am going to have to cut you off. 
You have run past our time limit, but we will try to get back 
and let you expound on some of that.
    I would remind everybody that we do have your written 
testimony that is available and in the record for the members 
here.
    Let me move to Mr. Hunter, Mr. Robert Hunter, Director of 
Insurance for Consumer Federation of America. We are pleased to 
have you.

                  STATEMENT OF J. ROBERT HUNTER

    Mr. Hunter. Thank you, Mr. Chairman.
    I am going to be referring to some exhibits--oh, by the 
way, Mr. Chairman, congratulations on your first hearing.
    I handed up some charts, because they are in the--my 
written statement, but maybe they are easier to follow. There 
are four I am going to touch on.
    [Chart.]
    The first chart is the insurance economic cycle. It tells 
you when and why various hard and soft markets happen. The 
first was in the mid-1970's. I was the Federal Insurance 
Administrator under President Ford when the first medical 
malpractice hard market hit. The White House Domestic Policy 
staff asked me to look into what was going on and whether or 
not there was an explosion in medical malpractice claims and 
verdicts. I dutifully sought the data, wanting to keep my job, 
and the first thing I discovered was that the medical 
malpractice statistics were not broken out in the insurance 
annual reports sent to the insurance department, so we asked 
the commissioners to do so, which they have done. And that is 
why we have data today.
    We undertook a closed claim study with the States and in 
due course, I reported back to the White House that there was 
no explosion in claims, and the cause of the spike was the 
economics of the insurance industry. Thus, we now know the hard 
market and the rate shocks that physicians have experienced in 
the last few years, more than 10 percent between 2000 and 2003, 
relate to these same economic conditions. The recent rate spike 
was the very bad news that brings us here today.
    The good news is that the cycle has now turned soft. Recent 
data shows that medical malpractice insurance premium increases 
have essentially ended. In 2004, A.M. Best reports, malpractice 
insurance premiums rose by just 4 percent nationwide. The rates 
are expected to be level for the next few years, as has 
occurred in each previous soft market phase.
    Look at the chart of Federal funds rates. That is the 
second chart.
    [Chart.]
    Medical malpractice insurance companies have a huge float 
on the premiums, since it takes several years for claims to be 
paid on average from the time they get the premium. Medical 
malpractice insurers invest heavily in bonds so when interest 
rates fall, rates must rise. And we have been at historic low 
rates, which is part of the cause of the rate increases we have 
witnesses.
    Using the data from the medical malpractice insurance 
company reports, I did the next chart, which is on page six of 
my written statement.
    [Chart.]
    The top line of the chart shows premiums collected by 
insurance companies for medical malpractice on a nationwide, 
per doctor average, adjusted for medical inflation. Premiums, 
you will see, go up and down with the cycle, but losses--the 
bottom, losses paid per doctor are flat. They are not going up. 
It is--there is no explosion in losses. It is--they are flat. 
This is the same thing we reported to the White House in 1976 
the same thing we reported to the White House in 1986, the same 
thing that is going on today. Inflation-adjusted payouts 
producted dropped from 2001 to 2003. The average payment per 
closed claim over the last decade was under $30,000 from which 
attorneys were compensated. Few of them, one in four persons, 
who file a medical malpractice claim, collect any money at all.
    The low cost of the medical malpractice system is further 
evidenced by the final chart at the bottom of page six of my 
testimony.
    [Chart.]
    Here, we see the ratio of medical malpractice insurance 
premiums to the total health care costs. Medical malpractice 
insurance costs as a proportion of national health care 
spending is minuscule, 60 cents per $100 spent. If you cap non-
economic damages, you will not impact the cost of health care 
in any meaningful way. Even if you eliminated the entire 
malpractice system, you would hardly impact the cost of health 
care.
    The good news is this: the worst of the malpractice rate 
hikes are over. Congress has time to conduct a thorough 
examination of the problem and proposed thoughtful solutions. 
You should not rush into changes in the medical liability 
system harming victims and fail to address insurance failures, 
which are at the root of these problems.
    You should consider and act on insurance reform measures to 
control the harmful excesses of a business cycle that causes 
sudden and unjustifiable price spikes and coverage cutbacks 
every decade or so. I recommend you look at the Proposition 103 
system of California or look at Texas. They did pass tort 
reform, but it wasn't until Jose went after them and 
disapproved some rate filings that they actually got rates to 
go down.
    You should also assess and enact methods to reduce 
negligence and medical errors by physicians and medical 
facilities. And you should evaluate why so few people who are 
hurt by medical negligence receive any form of compensation. I 
think you should review a no-fault system, or other methods 
that maybe could work here. But you shouldn't just do something 
to victims without looking at other mechanisms. You have plenty 
of time, now that this cycle has turned, to make sure the 
action you take does no harm.
    Given the return to the soft insurance market, I strongly 
urge you to use this gift of time to make sure that your action 
is best for all Americans, and particularly that victims of 
malpractice would not be harmed by your actions.
    [The prepared statement of J. Robert Hunter follows:]

Prepared Statement of J. Robert Hunter, Director of Insurance, Consumer 
                         Federation of America

    Good morning. I am J. Robert Hunter, insurance director for the 
Consumer Federation of America. I am also an actuary, a former federal 
Insurance Administrator under Presidents Ford and Carter, and a former 
Texas Insurance Commissioner. CFA is a non-profit association of 300 
organizations founded in 1968 to advance the consumer interest through 
research, advocacy and education.
    I would like to thank Chairman Nathan Deal, Ranking Member Sherrod 
Brown and the other members of the Subcommittee for the opportunity to 
offer our comments on this extremely important issue. For the third 
time in less than thirty years, Congress and state legislators across 
the country have been grappling with the problem of fast-rising medical 
malpractice rates. Insurers insist that a sharp increase in large, 
unwarranted jury verdicts is to blame for the crisis. As a result, 
lawmakers on this Subcommittee and in a variety of states are 
considering legislation to place further limits on the legal rights of 
Americans who have been harmed or killed by medical malpractice.
    However, my research over many years shows that insurers are 
pointing fingers when they should be looking in the mirror. I first 
studied this issue at the behest of President Ford when, in the mid-
1970s, a hard market hit medical malpractice in much the same fashion 
as we are witnessing today. After doing research similar to what I will 
present to you today, the Ford White House decided not to push for tort 
reform since, as today, the sudden surge in prices for doctors was not 
due to a jump in claims, but was related to insurance industry 
economics.
    It is the ``hard'' insurance market and the insurance industry's 
own business practices that are largely to blame for the rate shock 
that physicians have experienced in the last few years. Recent data 
also shows that sharp rate increases have ended (in 2004, medical 
malpractice premiums rose by just four percent) and are expected to 
level out for the next few years. CFA has also found that:

 The rate problem was caused by the classic turn in the economic cycle 
        of the industry, sped up--but not caused by--terrorist attacks.
 Further limiting patients' rights to sue for medical injuries would 
        have virtually no impact on lowering overall health care costs. 
        Medical malpractice insurance costs as a proportion of national 
        health care spending are miniscule, amounting to 60 cents per 
        $100 spent.
 Insurer losses for medical malpractice have risen slowly in the last 
        decade, by less than the rate of inflation.
 Malpractice claims have not ``exploded'' in the last decade. In fact, 
        rather than exploding, inflation-adjusted payouts per doctor 
        dropped from 2001 to 2003. The average payment per closed claim 
        over the last decade was $27,524, from which both the plaintiff 
        and defense attorneys were compensated.

      THE GOOD NEWS--STEEP MEDICAL MALPRACTICE RATE HIKES ARE OVER

    The insurance industry is a very cyclical business. Insurers make 
most of their profits from investment income. During years of high 
interest rates and/or excellent insurer profits, insurance companies 
engage in fierce competition for premium dollars to invest for maximum 
return. Insurers severely under price their policies and insure very 
poor risks just to get premium dollars to invest. This is known as the 
``soft'' insurance market.
    But when investment income decreases--because interest rates drop 
or the stock market plummets or the cumulative price cuts make profits 
become unbearably low--the industry responds by sharply increasing 
premiums and reducing coverage, creating a ``hard'' insurance market 
that usually degenerates into a ``liability insurance crisis.''
    A hard insurance market happened in the mid-1970s, precipitating 
rate hikes and coverage cutbacks, particularly with medical malpractice 
insurance and product liability insurance. A more severe crisis took 
place in the mid-1980s, when most lines of liability insurance were 
affected. Again, beginning in late 2000, the country started 
experiencing a ``hard market,'' this time affecting property as well as 
liability coverage, with some lines of insurance seeing rate increases 
of 100 percent or more.
    The following exhibit shows the national cycle at work, with 
premiums stabilizing for 15 years following the mid-1980s crisis. (The 
1992 data point was not a classic cycle bottom, but reflected the 
impact of Hurricane Andrew and other catastrophes in that year.)

[GRAPHIC] [TIFF OMITTED] T0143.029

    Prior to late 2000, the industry had been in a soft market since 
the mid-1980s. The strong financial markets of the 1990s had expanded 
the usual six- to ten-year economic cycle. No matter how much they cut 
their rates, insurers wound up with a great profit year when investing 
the ``float'' on premiums in an amazing stock and bond market. (The 
``float'' occurs during the time between when insurers receive premium 
payments and pay out insurance losses. There is about a 15-month lag in 
auto insurance and a five to ten year lag in medical malpractice.) 
Further, interest rates were relatively high through the 1990s as the 
Federal Reserve Board focused on recovery from the recession rather 
than inflation.
    But in 2000, the market started to turn with a vengeance as the 
Federal Reserve cut interest rates again and again. For medical 
malpractice insurers, mainly investing in bonds, this sharply reduced 
future expectations for investment returns and was reflected in their 
ratemaking by raising rates.

[GRAPHIC] [TIFF OMITTED] T0143.030

    This cut in interest rates began to take place before September 
11th, as the chart above shows. The terrorist attacks sped up the price 
increases that were coming, collapsing two years of anticipated 
increases into a few months. The increases we witnessed were mostly due 
to the cycle turn, not the terrorist attack or any other single factor. 
This was a classic economic cycle bottom.
    Fortunately, the hard market is over. Medical malpractice written 
premiums rose by only 4 percent in 2004 1, following three 
years of double digit increases. We anticipate at least eight years of 
small medical malpractice price increases until the next economic cycle 
turns hard.
---------------------------------------------------------------------------
    \1\ Review and Preview, A.M. Best and Co., January 2005, Page 19.
---------------------------------------------------------------------------
          MEDICAL MALPRACTICE WRITTEN PREMIUMS AND PAID LOSSES

    I have tested two hypotheses advanced by the insurance industry to 
justify sharp premium increases in recent years. First, if large jury 
verdicts in medical malpractice cases or any other tort system costs 
are having a significant impact on the overall costs for insurers and 
are therefore the reason behind skyrocketing insurance rates, then 
losses per doctor should be rising faster than medical inflation over 
time. Second, if lawsuits or other tort costs are the cause of rate 
increases for doctors--rather than decreasing interest rates and other 
economic factors--those losses should be reflected in rate increases in 
line with such losses, not in ups and downs that instead reflect the 
state of the economy, the well-documented insurance economic cycle, 
interest rates, the stock market or the profitability of insurers' 
investment income.
    The data show that both hypotheses are completely false, as 
demonstrated in the charts below. First, these charts show that since 
1975, medical malpractice paid claims per doctor have tracked medical 
inflation very closely (slightly higher than inflation from 1975 to 
1985, and flat since). In other words, payouts have risen almost 
precisely in sync with medical inflation. Moreover, contrary to what 
the insurance and medical lobbies have alleged, the years from 2001 
through 2003 saw no ``explosion'' in medical malpractice insurer 
payouts or costs to justify sudden rate hikes. In fact, rather than 
exploding, inflation-adjusted payouts per doctor dropped from 2001 to 
2003. These data confirm that neither jury verdicts nor any other 
factor affecting total claims paid by insurance companies that write 
medical malpractice insurance have had much impact on the system's 
overall costs over time.
    While payouts closely track medical inflation, medical malpractice 
premiums diverge significantly. They do not track costs or payouts in 
any direct way. Since 1975, the data show that in constant dollars, per 
doctor written premiums--the amount of premiums that doctors have paid 
to insurers--have fluctuated almost precisely with the insurers' 
economic cycle, which is driven by such factors as investment income, 
poor insurer business decisions and changing interest rates, not by 
lawsuits, jury awards, the tort system or other causes. Moreover, 
medical malpractice insurance premiums rose much faster in 2002 and 
2003 than was justified by insurance payouts. This hike is similar to 
the rate hikes of the past, which occurred in the mid-1980s and mid-
1970s and were not connected to actual payouts.
    In sum, the results of my analysis are startling; premiums rise and 
fall with the insurance industry's economic cycle, but paid losses do 
not 2:
---------------------------------------------------------------------------
    \2\ Sources: A.M. Best and Co. special data compilation for AIR, 
reporting data for as many years as separately available (premiums and 
losses); American Medical Assoc. (number of non-federal doctors, 1975, 
1980, 1985, 1986, 1990, 1992-2002; other years estimated); Bureau of 
Labor Statistics (CPI).4 See Exhibit 3 for underlying data.

[GRAPHIC] [TIFF OMITTED] T0143.031

    ``Direct Premiums Written'' is the amount of money that insurers 
collected in premiums from doctors during that year. ``Direct Losses 
Paid'' is what insurers actually paid out that year to people who were 
injured--all claims, jury awards and settlements--plus what insurance 
companies pay their own lawyers to fight claims.
    We calculate the paid losses on a per doctor basis to remove from 
the trend we are studying the effect of the ever increasing number of 
doctors in America. We acknowledge that the number of doctors includes 
a certain number of doctors that are retired or otherwise not in the 
medical malpractice system, but since we are interested in overall loss 
trends over time, and since the percentage of doctors in that category 
should not vary much year to year, this fact should not significantly 
impact our results. ``Paid losses'' are a far more accurate reflection 
of actual insurer payouts than what insurance companies call ``incurred 
losses.'' Incurred losses are not actual payouts. They include payouts 
but also reserves for possible future claims--e.g., insurers' estimates 
of claims that they do not even know about yet. While incurred losses 
do exhibit more of a cyclical pattern, observers know that this is 
because in hard markets, as we are currently experiencing, insurers 
will increase reserves as a way to justify price increases. In fact, 
the current insurance ``crisis'' rests significantly on a jump in loss 
reserves in 2001. Historically, reserves have been later ``released'' 
to profits during the ``softer'' market years. For example, according 
to a June 24, 2002, Wall Street Journal front page investigative 
article, St. Paul, which until 2001 had 20 percent of the national med 
mal market, pulled out of the market after mismanaging its reserves. 
The company set aside too much money in reserves to cover malpractice 
claims in the1980s, so it ``released'' $1.1 billion in reserves, which 
flowed through its income statements and appeared as profits. Seeing 
these profits, many new, smaller carriers came into the market. 
Everyone started slashing prices to attract customers. From 1995 to 
2000, rates fell so low that they became inadequate to cover 
malpractice claims. Many companies collapsed as a result. St. Paul 
eventually pulled out, creating huge supply and demand problems for 
doctors in many states. Christopher Oster and Rachel Zimmerman, 
``Insurers'' Missteps Helped Provoke Malpractice ``Crisis,'' Wall 
Street Journal, June 24, 2002.
    The calculations underlying this chart are attached as Appendix A.

       MEDICAL MALPRACTICE HAS LIMITED IMPACT ON HEALTH CARE COST

    In last decade, paid malpractice claims totaled $37.8 billion; 1.3 
million claims were closed. Thus the average payment per closed claim 
was $27,524, from which both the plaintiff and defense attorneys were 
compensated.
    Of the 1.3 million claims, only 352,000 received any payment. This 
means that only 23 percent of claimants got any money. If you were one 
of the ``lucky'' ones whose injury was severe enough and the negligence 
clear enough to qualify you for a payment, your payment averaged 
$107,000, from which your lawyers were paid. On average, about 35,000 
claims per year are paid out in any way.
    The relatively low overall cost of this system is shown in the 
following chart:

[GRAPHIC] [TIFF OMITTED] T0143.032

    Currently, the total premiums paid by doctors and hospitals total 
$10.1 billion 3, compared to the Health Expenditures of 
$1,674 billion, 4 which means that medical malpractice 
premiums represent six-tenths of one percent of Health Expenditures in 
the nation. Note that the line of best fit shows that this tiny 
percentage is declining over time.
---------------------------------------------------------------------------
    \3\ A.M. Best and Co., special report, run for the Americans for 
Insurance Reform.
    \4\ Statistical Abstract of the United States, 2005 Edition, U.S. 
Census Bureau, 2003 is the Bureau's projection.
---------------------------------------------------------------------------
    So, even if Congress took a step we would never advise and 
completely immunized doctors and hospitals from legal liability in the 
event of medical negligence, total health care costs in this country 
would hardly be affected.

                        WHAT SHOULD CONGRESS DO?

    First, Congress should do no harm. The national problem of serious 
rate hikes is over for the time being, except perhaps in a couple of 
states. This gives Congress time to carefully study the situation and 
not rush to take action that would harm victims of medical negligence.
    Unfortunately, medical malpractice legislation passed in 2003 by 
the House of Representatives, H.R. 5, would do harm to consumers of 
healthcare and to victims of medical malpractice. The cumulative effect 
of capping non-economic and punitive damages, shielding liability for 
some drug manufacturers, and changing joint and several liability and 
collateral source rules would be to remove key deterrents to dangerous 
medical practices. Moreover, H.R. 5 does absolutely nothing to deter 
physician negligence.
    Part of a Congressional evaluation of medical malpractice should 
look at the question of why so few people hurt by medical negligence 
are recovering compensation for that negligence. Perhaps a review of 
no-fault and other mechanisms for compensating victims of medical 
negligence might be considered. How much would alternative systems 
cost? How can the system be made more efficient while fully protecting 
the many victims of malpractice in the nation?
    Another aspect of this study should be insurance reform, which is a 
way for the regulators to control the harmful excesses of a business 
cycle that causes sudden and unjustifiable price spikes and coverage 
cutbacks every decade or so. We recommend looking at the system passed 
in California, the Proposition 103 system, which has worked wonders to 
hold down rates in that state.5 For example, this system has 
allowed consumer representatives to successfully intervene in 
opposition to recently proposed rate hikes by some malpractice 
insurers, which has led to much lower rates for doctors. Congress 
should consider creating a national reinsurance facility, which would 
serve to stabilize the wild swings in rates that characterize the 
current insurance cycle. A national reinsurance facility would also 
make insurance more readily available by spreading the cost of large 
medical injuries to a national base, which does not presently occur.
---------------------------------------------------------------------------
    \5\ See ``Why Not the Best,'' a report on how Proposition 103 works 
at www.consumerfed.org.
---------------------------------------------------------------------------
    Congress should also evaluate methods for reducing negligence and 
medical errors by physicians and medical facilities. It is well known 
that a very small proportion of doctors cause a very high percentage of 
the claims for medical malpractice. Yet many states have weak 
procedures for disciplining dangerous doctors and stopping them from 
continuing to practice, putting American consumers of health care at 
risk.
    The 1999 report regarding medical errors by the Institute on 
Medicine (IOM) demonstrates that far too many Americans face the 
serious possibility of an injury, or even death, due to medical 
mistakes in the hospital. Using the IOM's low estimate of 44,000 deaths 
per year, medical errors are the eighth leading cause of death in this 
country, ahead of breast cancer and AIDS. The IOM's high-range estimate 
of 98,000 deaths a year would make medical errors the fifth leading 
cause of death, more than all accidental deaths.6 Of course, 
some medical errors are directly attributable to physician negligence 
and some are not, but the IOM report clearly demonstrates the serious 
implications of rolling back the legal rights of Americans who have 
been harmed or killed by malpractice. If Congress gets it wrong, the 
pain and suffering incurred by many families across the country will 
only increase.
---------------------------------------------------------------------------
    \6\ To Err is Human, Building a Safer Health System, Institute of 
Medicine, National Academy of Sciences; November, 1999.
---------------------------------------------------------------------------
    Before this Committee rushes through tort reform legislation, I 
urge you to get the facts. As the evidence I've presented you with 
today shows: (a) insurers have themselves to blame for the predicament 
they--and physicians and patients throughout the country--face, and (b) 
you have plenty of time to make sure that any action you take does no 
harm, given the return of the soft insurance market and very small 
price increases for doctors.

                                                                       APPENDIX A
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    Direct      Direct
                                                                                    Number of   Medical     Direct      Direct     Premiums     Losses
                                                   Written    Paid Losses    Loss    Doctors      Care     Premiums     Losses      Written    Paid per
                      Year                         Premiums   (thousands)   Ratio     (Non-    Inflation    Written    Paid per   per Doctor-   Doctor-
                                                 (thousands)                         federal)    (CPI-U)  per Doctor    Doctor       2003        2003
                                                                                                                                    Dollars     Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
1975...........................................     $865,208     $190,867    0.221    366,425       47.5   $2,361.21     $520.89  $14,793.63   $3,263.51
1976...........................................   $1,187,978     $188,545    0.159    381,000       52     $3,118.05     $494.87  $17,844.85   $2,832.17
1977...........................................   $1,423,091     $248,969    0.175    395,575       57     $3,597.53     $629.39  $18,782.87   $3,286.05
1978...........................................   $1,412,555     $294,456    0.208    410,151       61.8   $3,443.99     $717.92  $16,584.64   $3,457.17
1979...........................................   $1,405,991     $391,800    0.279    424,726       67.5   $3,310.35     $922.48  $14,594.96   $4,067.10
1980...........................................   $1,493,543     $521,849    0.349    439,301       74.9   $3,399.82   $1,187.91  $13,508.49   $4,719.91
1981...........................................   $1,616,470     $665,570    0.412    455,904       82.9   $3,545.64   $1,459.89  $12,728.37   $5,240.81
1982...........................................   $1,815,056     $847,543    0.467    472,507       92.5   $3,841.33   $1,793.72  $12,358.71   $5,770.92
1983...........................................   $2,033,911   $1,079,862    0.531    489,109      100.6   $4,158.40   $2,207.81  $12,301.59   $6,531.27
1984...........................................   $2,282,590   $1,197,979    0.525    505,712      106.8   $4,513.62   $2,368.90  $12,577.27   $6,600.97
1985...........................................   $3,407,177   $1,556,300    0.457    522,315      113.5   $6,523.22   $2,979.62  $17,104.06   $7,812.64
1986...........................................   $4,335,863   $1,709,883    0.394    547,222      122     $7,923.41   $3,124.66  $19,327.92   $7,622.12
1987...........................................   $4,781,084   $1,905,491    0.399    556,647      130.1   $8,589.08   $3,423.16  $19,647.27   $7,830.38
1988...........................................   $5,166,811   $2,128,281    0.412    566,072      138.6   $9,127.48   $3,759.74  $19,598.40   $8,072.85
1989...........................................   $5,500,540   $2,273,628    0.413    575,496      149.3   $9,557.91   $3,950.73  $19,051.81   $7,874.99
1990...........................................   $5,273,360   $2,415,117    0.458    584,921      162.8   $9,015.51   $4,128.96  $16,480.44   $7,547.78
1991...........................................   $5,043,773   $2,423,418    0.480    609,384      177     $8,276.84   $3,976.83  $13,916.31   $6,686.47
1992...........................................   $5,228,362   $2,808,838    0.537    633,846      190.1   $8,248.63   $4,431.42  $12,913.17   $6,937.35
1993...........................................   $5,469,575   $3,028,086    0.554    648,662      201.4   $8,432.09   $4,668.20  $12,459.73   $6,898.00
1994...........................................   $5,948,361   $3,174,987    0.534    661,960      211     $8,985.98   $4,796.34  $12,674.07   $6,764.89
1995...........................................   $6,107,568   $3,326,846    0.545    689,121      220.5   $8,862.84   $4,827.67  $11,961.82   $6,515.71
1996...........................................   $6,002,233   $3,556,151    0.592    717,335      228.2   $8,367.41   $4,957.45  $10,912.09   $6,465.10
1997...........................................   $5,864,218   $3,587,566    0.612    737,263      234.6   $7,954.04   $4,866.06  $10,090.03   $6,172.80
1998...........................................   $6,040,051   $3,957,619    0.655    757,865      242.1   $7,969.82   $5,222.06   $9,796.86   $6,419.19
1999...........................................   $6,053,323   $4,446,975    0.735    778,491      250.6   $7,775.71   $5,712.30   $9,234.05   $6,783.64
2000...........................................   $6,303,206   $4,988,474    0.791    793,211      260.8   $7,946.44   $6,288.96   $9,067.72   $7,176.36
2001...........................................   $7,288,933   $5,424,197    0.744    814,776      272.8   $8,945.93   $6,657.29   $9,759.20   $7,262.49
2002...........................................   $8,928,252   $5,806,463    0.650    831,645      285.6  $10,735.65   $6,981.90  $11,186.73   $7,275.26
2003...........................................  $10,142,575   $5,622,377    0.554    848,514      297.1  $11,953.34   $6,626.15  $11,973.46   $6,637.30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: A.M. Best and Co. special data compilation for AIR, reporting data for as many years as separately available (premiums and losses); American
  Medical Assoc. (number of non-federal doctors, 1975, 1980, 1985, 1986, 1990, 1992-2002; other years estimated); Bureau of Labor Statistics (CPI).


    Mr. Deal. Thank you, sir.
    Our next witness is Mr. James Hurley representing the 
American Academy of Actuaries. And Mr. Hurley, being from 
Atlanta, I especially welcome you here today. You are 
recognized for 5 minutes.

                    STATEMENT OF JAMES HURLEY

    Mr. Hurley. Thank you, sir.
    Good afternoon, Chairman Deal, Ranking Member Brown, and 
members of the subcommittee. Thank you for inviting me to 
testify today on behalf of the American Academy of Actuaries.
    The Academy is the public policy and professionalism 
organization for actuaries practicing in all specialties within 
the United States. It is nonpartisan and it assists the public 
policy process through the presentation of clear and objective 
actuary analysis. It also develops and upholds actual standards 
of conduct, qualification, and practice.
    I will start by discussing a recent experience in the 
medical malpractice line of business.
    During the 1990's, the medical malpractice line experienced 
favorable operating results contributed to by favorable reserve 
development on prior coverage years and healthy investment 
returns. Insurers competed aggressively, health care providers 
shared in the benefit of improved loss experienced and higher 
levels of investment income through stable or decreasing 
charged premiums.
    Recently, however, the cost of medical malpractice 
insurance has been rising. Rate increases have been 
precipitated in part by the growing size of claims, more 
frequent claims in some areas, and higher defense costs. The 
decline in bond yields has exacerbated the need for rate 
increases. From a financial standpoint, medical malpractice 
results deteriorated for several years through 2001 and have 
improved only slightly since then. 2004 data is not yet 
available but is projected to reflect similar results.
    Two indicators of financial results are the combined ratio 
and the operating ratio. We can obtain these indicators for 
reporting companies from A.M. Best, a company that offers 
comprehensive data to insurance professionals and tracks these 
results. The combined ratio is an indication of how the company 
is doing in its insurance underwriting. For all companies 
reporting to A.M. Best, the combined ratio deteriorated to 155 
percent for 2001, improving only to 138 percent through 2003. 
For underwriting, this represents a loss of 55 cents on each 
dollar of premium written in 2001. Preliminary projections for 
2004 are for a combined ratio of 133 percent.
    A measure of the overall profitability of a line of 
business is the operating ratio. The A.M. Best operating ratio 
adjusts the combined ratio for other expense and income items, 
primarily investment income. The operating ratio deteriorated 
to 134 percent in 2001, indicating a loss of 34 cents on every 
dollar of premium, and stands at 121 percent in 2003. Given 
lower interest income levels, the 2004 operating ratio will 
probably not improve as much as the projected improvement in 
the combined ratio. At these levels, 2001 through 2003 results 
are the worst they have been in 15 years or more, exceeding 
levels of the 1980's.
    As is clear from this data, the loss in operating 
environment has deteriorated. Benefits of favorable reserve 
development appear to be gone, and the available investment 
income offset has declined. In fact, some observe that reserve 
liabilities may require increases to cover current ultimate 
loss obligations. As a result, rates for both insurers and re-
insurers have increased to properly align with current loss and 
investment income levels. Companies failing to do this 
jeopardize their surplus base and financial health.
    My written statement summarizes the two key drivers of 
financial results and their effects on operating results and 
surplus for some 30 companies that specialize in this coverage. 
These companies represent one-third of the experience, 
approximately one-third of the experience, reported to A.M. 
Best. The results for these companies are more favorable than 
the industry in general, but reflect similar deterioration.
    In chart B, page seven of my testimony, the total after-tax 
operating income for these companies is shown. The favorable 
operating income of the earlier years, 1995--the mid-1990's, is 
in the 20 percent neighborhood. It declines to a slight profit 
in 2000, but to a loss of 8 percent in 2001, further to 11-
percent loss in 2002, before improving to a 2-percent loss in 
2003. Companies who continue to write medical malpractice must 
interpret the current experience and determine what rates to 
charge for perspective coverage in light of this experience.
    It should be mentioned that self-insured programs, that is 
trusts and captives, have also been effected by deteriorating 
loss and investment circumstances. These entities, insuring 
their own liability exposure, have experienced increased 
funding levels and lower yields on assets held to cover these 
liabilities. The impact extends beyond an insurance company 
problem.
    Tort reform, as discussed, is one means to address the 
current challenges. The Academy, which takes no position for or 
against tort reform, has previously reviewed and commented on 
this subject. The observations include, one, that a package of 
tort reforms is more likely than individual reforms to impact 
on losses in premium. The key among reforms is a per medical 
injury, non-economic cap at a relatively low level and 
collateral source rule, including introduction as evidence at 
trial.
    You should keep in mind that poorly crafted reforms can 
increase losses, and therefore rates, rather than decrease 
them. But we should also have reasonable expectations about 
what will happen. One is reforms may not yield immediate rate 
reductions, particularly given the rate increases being 
implemented, since the actual affect, including judicial 
confirmation, will not be immediately known. A non-economic cap 
will not affect the economic component of claim costs, and thus 
the severity will still likely call for increases in rates but 
perhaps at some lower level.
    Last, such reforms should make the loss environment more 
predictable, encourage market participation, and reduce 
concerns about large, subjective, non-economic damage 
components to claims.
    Mr. Deal. Mr. Hurley, I am going to have to ask you--if you 
have a sentence or two to summarize, that would be good.
    Mr. Hurley. Just to say that the Academy appreciates the 
opportunity to be here, and we would be happy to provide any 
input we can, subsequent to the testimony here.
    [The prepared statement of James Hurley follows:]

 Prepared Statement of James Hurley, Medical Malpractice Subcommittee, 
                     American Academy of Actuaries

                              INTRODUCTION

    The American Academy of Actuaries appreciates the opportunity to 
provide comments on issues related to medical malpractice. The Academy 
hopes these comments will be helpful as Congress considers related 
proposals.
    This testimony discusses what has happened to medical malpractice 
financial results and its likely effect on rates, tort reform, and some 
discussion of frequent misconceptions.

                MEDICAL MALPRACTICE--WHAT HAS HAPPENED?

    The medical malpractice insurance marketplace continues to be in 
serious turmoil. After an extended period of reported high 
profitability and competitiveness during the 1990s, this turmoil began 
with serious deterioration in financial results, continued with some 
consequences of these results and, still at this point, gives rise to 
an uncertain future. Industry-wide financial results reflect a 2003 
combined ratio (the measure of how much of a premium dollar is 
dedicated to paying insurance costs of the company in a calendar year) 
of 138 percent, an improvement relative to the 2001 and 2002 results, 
but still well above profitable levels. The 2003 operating ratio 
(reducing the combined ratio for investment income) of about 116 
percent extends the several year pattern of losing money after the 
inclusion of investment income. Projections for 2004 are for a slightly 
lower combined ratio (approximately 133 percent) and probable lesser 
improvement in the operating ratio. This follows 2001 and 2002 
operating ratios exceeding 120 percent.
    The consequences of these poor financial results are several. 
Insurers have voluntarily withdrawn from medical malpractice insurance 
(e.g., St. Paul, writer of approximately nine percent of total medical 
malpractice insurance premium in 2000) or have selectively withdrawn 
from certain marketplaces or segments of medical malpractice insurance. 
In addition, several insurers have entirely withdrawn due to poor 
financial results (e.g., Phico, MIIX, Frontier, Reciprocal of America, 
some of which are under regulatory supervision). Overall, premium 
capacity has been reduced by more than 15 percent. These withdrawals 
fall unevenly across the states and generally affect those identified 
as jurisdictions with more severe problems than others.
    Capacity to write business would have decreased even more if not 
for the fact that much medical malpractice coverage is written by 
companies specializing in this coverage, some that were formed for this 
specific purpose.
    These figures focus on the published insurance industry statistics. 
Parallel to industry experience is the growing volume of self-insured 
programs (e.g., deductible programs, trusts and captives), which have 
significantly increased their share of the medical liability exposure 
``pie'' over time; some would estimate this segment has responsibility 
for half or more of the exposure today. These self-insured entities, 
such as hospitals, see the dollars needed to cover their retentions 
increasing and are having increased difficulty securing excess or 
reinsurance coverage to manage their exposure.
    The future outlook is not positive, at least in the short term. 
Claim costs are increasing more rapidly now than they were 
historically. Further, full adjustment to the lower interest rate and 
tightened capacity environment would drive higher premium rates, even 
if losses were not increasing. The combined effect is that there are 
likely to be more poor financial results and additional rate increases.

Background-Market Conditions in the 1990s
    The current premium increases are hard to understand without 
considering the experiences of the last decade. Rates during this time 
period often stayed the same or decreased relative to the beginning of 
the period due to several of the following factors:

 Favorable Reserve Development--Ultimate losses for coverage years in 
        the late 1980s and early 1990s have developed more favorably 
        than originally projected. Evidence of this emerged gradually 
        over a period of years as claims settled. When loss reserves 
        for prior years were reduced, income was contributed to the 
        current calendar years, improving financial results (i.e., the 
        combined and operating ratios). That was the pattern during the 
        middle to late 1990s for 29 provider-owned/operated medical 
        malpractice insurers whose results are shown in Chart A. What 
        is evident from that chart is that favorable reserve 
        development (shown as a percentage of premium) was no longer 
        occurring after 2001, as developments in 2002 and 2003 were 
        unfavorable. This unfavorable development contributes to bottom 
        line losses for these companies.
 Low Level of Loss Trend--The annual change in the cost of claims 
        (frequency and severity) through most of the 1990s was lower 
        than expected by insurers, varying from state to state and by 
        provider type. This coincided with historically low medical 
        inflation and may have benefited from the effect of tort 
        reforms of the 1980s. Rates were established using the earlier 
        anticipated higher loss trends and were able to cover these 
        actual lower loss trends for a time. As a result, rate 
        increases were uncommon and there were reductions in several 
        states. This was justified in part because the rates 
        established at the beginning of the last decade proved too 
        high, inasmuch as carriers had assumed higher loss trends.
      Insurers responded to the emerging favorable loss trend in 
        different ways. Some held rates stable and paid policyholder 
        dividends or gave premium discounts. Some reduced filed rates. 
        Others increased rates modestly and tried to refine pricing 
        models to improve overall program equity. In general, however, 
        premium adequacy declined in this period. Collected rates came 
        into line with insurers' costs, but competitive actions pushed 
        rates even lower, particularly in some jurisdictions.
 High Investment Yields--During the 1990s, investment returns produced 
        a real spread between fixed income rates of return and economic 
        inflation. Medical malpractice investment results are based on 
        a portfolio that is dominated by bonds with stock investments 
        representing a minority of the portfolio. Although medical 
        malpractice insurers had only a modest holding of stocks, 
        capital gains on stocks also helped improve overall financial 
        results. These gains improved both the investment income ratio 
        and the operating ratio.
 Reinsurers Helped--Many medical malpractice insurers are not large 
        enough to take on the risks inherent in this line of insurance 
        on their own. The additional capacity provided by reinsurers 
        allows for greater availability of medical malpractice. Similar 
        to what was happening in the primary market, reinsurers reduced 
        rates and covered more exposure, making the net results even 
        better.
 Insurers Expanded Into New Markets--Given the financial results of 
        the early-to-mid-1990s, some insurers expanded into new markets 
        (often with limited information to develop rates). They also 
        became more competitive in existing markets, offering more 
        generous premium discounts. Both actions tended to push rates 
        down.

What Has Changed?
    Although these factors contributed to the profitability of medical 
malpractice insurance in the 1990s, they also paved the way for the 
changes that began at the end of the decade.

 Loss Trend Began to Worsen--Loss cost trends, particularly claim 
        severity, started to increase toward the latter part of the 
        1990s. The number of large claims increased, but even losses 
        adjusted to eliminate the distortions of very large claims 
        began to deteriorate. This contributed to indicated rate 
        increases in many states.
 Loss Reserves are Strengthened--As the losses began to deteriorate, 
        many insurers responded by strengthening their reserves. 
        However, as of year-end 2003, the adequacy of the aggregate 
        loss reserve levels for the industry is still being questioned 
        despite the reserve strengthening recorded during the 2000-2003 
        period. The statistics for the earlier mentioned 29 companies 
        have been better than the total industry, to date. Some 
        observers suggest that aggregate reserves will require further 
        increases, particularly if severity trends continue or 
        intensify.
 Investment Results Have Declined--Bond yields have declined from 
        1990's highs. The lower bond yields reduce the amount of 
        expected investment earnings on a future policy that can be 
        used to reduce prospective rates. A one percent drop in 
        interest rates can be translated to a premium rate increase of 
        two to four percent (assuming no changes in other rate 
        components) due to the several year delay in paying losses on 
        average. A 2.5 percent drop in interest rates, which has 
        occurred since 2000, can translate into rate increases of 
        between 5 percent and 10 percent. Note low investment yields 
        may cause an insurer to reduce its market presence and also may 
        discourage new entrants. The recent increases in yields may 
        alleviate some of the pressure from this source.
 The Reinsurance Market Has Hardened--Reinsurers' experience 
        deteriorated as their results were affected by increased claim 
        severity and pricing changes earlier in the decade. Because 
        reinsurers generally cover the higher layers of losses, their 
        results are disproportionately influenced by increases in claim 
        severity. This, coupled with the broadly tightened reinsurance 
        market after Sept.--11 2001, has caused reinsurers to raise 
        rates substantially and tighten reinsurance terms for medical 
        malpractice.
    The bottom line is that these changes have required insurers to 
increase rates if they are to preserve their financial health and honor 
future claim payments.

The Results
    To obtain a better understanding of the effect of these changing 
conditions, we focus on the results of 29 specialty insurers that are 
primarily physician owned or operated and that write primarily medical 
malpractice business. Their results reflect the dynamics of the medical 
malpractice line. This sample represents about one-third of the insured 
exposures reported by the insurance industry in the United States.
    These insurers, achieving more favorable financial results than 
that of the total industry, showed a slight operating profit (six 
percent of premiums) in 2000. This deteriorated to operating losses for 
years 2001 through 2003 (see Chart B), with 2002 reflecting an 11 
percent loss, improving to a 2 percent loss in 2003.
    There are two key drivers of these financial results:

 Insurance Underwriting--For these companies, a simplified combined 
        ratio was calculated by dividing calendar year loss and loss 
        adjustment and underwriting expenses by premium. On this basis, 
        the combined ratios peaked at 134 percent in 2001, improving to 
        129 and 122 percent for 2002 and 2003, respectively. That means 
        in 2003, these insurers incurred $1.22 in losses and expenses 
        for each $1.00 of premium. The five years preceding 2000 were 
        fairly stable, from 110 percent to 115 percent. Deterioration 
        of the loss and loss adjustment expense ratio drove these 
        results; the underwriting expense ratio remained relatively 
        constant (see Chart C).
 Investment Income--Pre-tax investment income (including realized 
        capital gains and losses) emanates from policyholder-supplied 
        funds invested until losses are paid as well as from the 
        company capital (``surplus''). The investment income offset to 
        the underwriting loss is measured as a percentage of earned 
        premiums. This statistic declined during the measurement period 
        from the mid-40 percent level of the mid-1990s to the 20 
        percent level in 2002 and 2003 (see Chart D).
      This offset will continue to decline because (i) most insurer-
        invested assets are bonds, some of which were purchased before 
        recent lower yields, and interest earnings do not yet fully 
        reflect these lower yields; and (ii) the premium base is 
        growing due to increased rates and growth in exposure. Invested 
        assets are not increasing as rapidly as premium and, therefore, 
        investment income as a percentage of premium will decline.
    The effect of these results on surplus is reflected in Chart E, 
which shows the percent change in surplus from one year to the next. 
Surplus defines an insurer's capacity to write business prospectively 
and to absorb potential adverse loss development on business written in 
prior years (see Chart E). After three years of declines, the increase 
in 2003 is in part from external sources (e.g., surplus notes, capital 
contributions and trust preferreds).

Tort Reform
    Some states enacted tort reform legislation after previous crises 
and in response to the current circumstances as a compromise between 
affordable health care and an individual's right to seek recompense. 
The best known is the Medical Injury Compensation Reform Act or MICRA, 
California's tort reform package. Since MICRA's implementation in 1975, 
California has experienced a more stable marketplace and lower premium 
increases than have most other states.
    Tort reform has been proposed as a solution to higher loss costs 
and surging rates. Many are suggesting reforms modeled after 
California's MICRA, although some have cautioned against modifying the 
MICRA package. The Academy, which takes no position for or against tort 
reforms, has previously reviewed and commented on this subject. Based 
on research underlying the issue, we observe the following:

 A coordinated package of tort reforms is more likely than individual 
        reforms to achieve savings in malpractice losses and insurance 
        premiums.
 Key among the reforms in the package is a cap on non-economic awards 
        (on a per-event basis and at some level low enough to have an 
        effect, such as MICRA's $250,000) and a mandatory collateral 
        source offset rule.
 Such reforms may not assure immediate rate reductions, particularly 
        given the size of some increases currently being implemented. 
        The actual effect, including whether or not the reforms are 
        confirmed by the courts, will not be immediately known.
 These reforms are unlikely to eliminate claim severity (or frequency) 
        changes but they may mitigate them. The economic portion of 
        claims is not affected if a non-economic cap is enacted. Thus 
        rate increases still will be needed.
 These reforms should reduce insurer concerns regarding dollar awards 
        containing large, subjective non-economic damage components and 
        make the loss environment more predictable.
 Poorly crafted tort reforms could actually increase losses and, 
        therefore, rates.

                        FREQUENT MISCONCEPTIONS

    In closing, it might be helpful to address some frequent 
misconceptions about the insurance industry and medical malpractice 
insurance coverage.
    Misconception 1: ``Insurers are increasing rates because of 
investment losses, particularly their losses in the stock market.''
    As we have pointed out, investment income plays an important role 
in the overall financial results of insurers, particularly for insurers 
of medical professional liability, because of the long delay between 
payment of premium and payment of losses. The vast majority of invested 
assets are fixed-income instruments. Generally, these are purchased in 
maturities that are reasonably consistent with the anticipated future 
payment of claims. Losses from this portion of the invested asset base 
have been minimal, although the rate of return available has declined.
    Stocks are a much smaller portion of the portfolio for this group, 
representing about 15 percent of invested assets. After favorable 
performance up through the latter 1990s, there has been a decline in 
the last few years, contributing to less favorable investment results 
and overall operating results. Investment returns are still positive, 
but the rates of return have been adversely affected by stock declines 
and more so by lower fixed income investment yields.
    In establishing rates, insurers do not recoup investment losses. 
Rather, the general practice is to choose an expected prospective 
investment yield and calculate a discount factor based on historical 
payout patterns. In many cases, the insurer expects to have an 
underwriting loss that will be offset by investment income. Since 
interest yields drive this process, when interest yields decrease, 
rates must increase.
    Misconception 2: ``Companies operated irresponsibly and caused the 
current problems.''
    Financial results for medical liability insurers have deteriorated. 
Some portion of these adverse results might be attributed to inadequate 
knowledge about rates in newly entered markets and to being very 
competitive in offering premium discounts on existing business. 
However, decisions related to these actions were based on expectations 
that recent loss and investment markets would follow the same 
relatively stable patterns reflected in the mid-1990s. As noted 
earlier, these results also benefited from favorable reserve 
development from prior coverage years. Unfortunately, the environment 
changed on several fronts ( loss cost levels increased, in several 
states significantly; the favorable reserve development ceased; 
investment yields declined; and reinsurance costs jumped.
    While one can debate whether companies were prudent in their 
actions, today's rate increases reflect a reconciliation of rates and 
current loss levels, given available interest yields. There is no added 
cost for past mispricing. Thus, although there was some delay in 
reconciling rates and loss levels, the current problem reflects current 
data.
    Misconception 3: ``Companies are reporting financial losses to 
justify increasing rates.''
    This is a false observation. Companies are reporting financial 
losses primarily because claim experience is worse than anticipated 
when prices were set. Several companies have suffered serious adverse 
consequences given these financial results, including liquidation or 
near liquidation. Phico, MIIX, Frontier, and most recently, the 
Reciprocal of America, are all companies forced out of the business and 
in run-off due to underwriting losses. Further, the St. Paul Cos., 
formerly the largest writer of medical malpractice insurance, has 
withdrawn from this market. One reason for this decision is an 
expressed belief that the losses are too unpredictable to continue to 
write the business.
    The Academy appreciates the opportunity to provide an actuarial 
perspective on these important issues and would be glad to provide the 
subcommittee with any additional information that might be helpful.

[GRAPHIC] [TIFF OMITTED] T0143.033

[GRAPHIC] [TIFF OMITTED] T0143.034

    Mr. Deal. Thank you very much.
    Mr. Brown has asked us to take a break so that we can have 
Dr. Singh, who is one of the witnesses that is going to be on 
the video conference, hooked up. So I think that is a 
reasonable request. We will do that. We will try to do it as 
quickly as possible.
    Mr. Brown. Thank you. Thank you. And then he will testify 
after all of you, but he would--he has been at this 
conferencing center at Stanford for 2 hours. He also has a sick 
child he is trying to kind of work with, too, but he is--and 
then he will speak when everyone else is--he would like to 
listen to the testimony at least from Ms. Rosenbaum on, if 
possible. Thanks.
    Mr. Deal. Dr. Singh, can you hear me?
    Mr. Singh. Yes, I can hear you.
    Mr. Deal. This is Nathan Deal. I am chairman of the 
Subcommittee on Health. We are pleased to have you join us by 
way of this teleconference. We have not arrived at the point of 
your testimony, but I understood you wanted to hear the other 
witnesses that have testified. We have two that have already 
testified on this panel, actually three, and we will proceed in 
order, and you will be the fourth witness from this point 
forward. And we will let you know at that point. But if you can 
hear, you should be able to hear the other witnesses. You can 
still hear us----
    Mr. Singh. Yes, I can hear you.
    Mr. Deal. All right. Good.
    Mr. Singh. I can hear you, but I can't see anything.
    Mr. Deal. That is the way we like it. We thank you for 
being with us. If you will just listen and be patient, we will 
get to you in just a few minutes.
    Mr. Singh. Okay.
    Mr. Deal. Our next witness is Sara Rosenbaum from the 
Department of Health Policy at George Washington University 
Medical Center, and we are pleased to have you, Ms. Rosenbaum.

                   STATEMENT OF SARA ROSENBAUM

    Ms. Rosenbaum. Thank you, Mr. Chairman.
    I wanted to focus my observations on H.R. 5 from the last 
Congress, because I assume that this might be a starting point 
for the committee's deliberations from here on in. And I want 
to quickly make just a few points.
    The first is that--to the extent that caps on non-economic 
awards to yield savings, in the intervening 2 years since the 
bill passed the House, NCSL reports many more States have 
enacted caps on damages of varying amounts. And so the one 
cautionary note is simply that the impact of the caps provision 
probably can be expected to have declined.
    A second point is that, as has been mentioned already a 
couple of times, H.R. 5 lacks any safety or quality provisions, 
which I think in the intervening 2 years, have become much more 
important and a much bigger part of the national dialog on 
health quality. And more importantly, in my view, given the 
purpose of this bill, the legislation really does nothing to 
address what I think is the most profound problem for medicine 
today, which is to have to be on a fault system at all. I think 
that a fault system, invariably, no matter how you try and deal 
with the fault system, produces very poor results for everybody 
involved, including both the physicians and the injured 
patients.
    The third point goes to the corporation shields that are in 
this bill. There is a very important shield, which the bill 
contains, having to do with liability for punitive damages in 
cases of drugs that have received pre-market approval. First of 
all, I will just echo the point that has already been made, I 
am not sure why this corporate shield is in a bill designed to 
help physicians deal with the high cost of malpractice 
premiums. More importantly, this kind of shield has been 
expressly disavowed as reliable evidence by the Supreme Court, 
in the case of another agency approval standard. And even more 
importantly, the shield is so large that, as I sat and thought 
about the magnitude of the shield for today's testimony, it 
occurred to me that a distributor who is involved in the 
deliberate tampering with drugs, would, in fact, be shielded, 
because the drug had FDA approval. That is obviously a complete 
non-secluder, and yet that is the result of H.R. 5, as it is 
worded.
    A fourth point is that you have elected, in H.R. 5, to use 
a very narrow statute of limitations for medical negligence 
actions. Generally speaking, negligence actions do have short 
statutes of limitations, except in the case of medical 
negligence under State law, because it often takes a long time 
for a medical injury to reveal itself, and many States, in 
fact, use much longer periods than you are allowing. So that is 
an issue to consider.
    Finally, and this is something that I observed 2 years ago 
when I testified as you were preparing to report H.R. 5, the 
legislation contains no rule of construction that reconciles 
its provisions with other Federal laws, and as a result, the 
bill has the affect of turning every civil action that happens 
to involve a health care corporation into a health care action. 
I actually don't think that is what you intend, but the result 
is that many, many laws that grant civil rights that protect 
against fraud that give private litigants rights against 
corporations of various kinds would be converted into health 
care actions under the terms of this legislation. And so I 
would recommend, once again, the consideration of a limiting 
amendment.
    Thank you.
    [The prepared statement of Sara Rosenbaum follows:]

Prepared Statement of Sara Rosenbaum, Harold and Jane Hirsh Professor, 
 Health Law and Policy, Chair, Department of Health Policy, The George 
   Washington University School of Public Health and Health Services

    Good afternoon Mr. Chairman and Members of this Subcommittee. Thank 
you for the opportunity to testify before the Subcommittee this 
afternoon on the important topic of medical liability reform.
    I am a professor of health law and policy at the George Washington 
University School of Public Health and Health Services. I have taught, 
studied, and written about health law for 20 years following the 
earlier portion of my career spent in the representation of low income 
individuals and families. I am the co-author of one of the nation's 
leading health law textbooks. Over a near-30 year time period, I have 
testified before Congress on a broad array of topics in health law and 
policy.
    I would like to focus my remarks on the key elements of H.R. 5, The 
Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 
2003. It is my assumption that this legislation offers a starting point 
for the development of legislative policy in the 109th Congress.
    The stated purpose of H.R. 5 is to ``improve patient access to 
health care services'' and ``[reduce] the excessive burden'' placed on 
health care by the current liability system. According to CBO estimates 
for HR 5, the impact on medical malpractice premiums would range from 
0% liability premium savings in one-fifth of all states (because of 
state caps already in place) to significantly higher than the 25%-30% 
savings norm in about a third of the states. It is important to note in 
the 2 years since HR 5 passed in the House, more states have moved to 
place limits on non-economic damages. Data available through the 
National Conference of State Legislatures (NCSL) indicate that as of 
2004, only about a dozen states did not impose any limits. Legislative 
action by the end of the year may have reduced this number further. It 
is unclear in my view whether more than a handful of states would be 
affected by the recovery caps in HR 5, were it to be re-introduced at 
this point.
    It is also important to note that HR 5 contains no provisions to 
either incentivize or require efforts to reduce and report on medical 
errors, despite the fact that the Institute of Medicine has ranked 
death from preventable medical errors one of the nation's leading 
causes of death.
    In my opinion, the question thus becomes whether provisions such as 
those found in HR 5 can be justified in view of the bill's negligible-
to-none impact on the cost of malpractice premiums, the absence of any 
impact on the cost of health insurance premiums, and the absence of any 
provisions aimed at making recoveries swifter and fairer for 
individuals killed or injured by preventable errors. Comparing the 
bill's negligible to no impact on cost and quality against heightened 
burdens that it places on injured persons and their families, I 
conclude that the answer is no.

Key Elements of H.R. 5
    H.R. 5 would establish strict federal standards, including caps on 
non-economic damages, statutes of limitations, limits on attorney's 
fees, damages payouts, collateral source rules, and the procedures and 
standard of proof necessary to support claims of punitive damages 
related to malicious intent or willful and wanton disregard of patient 
wellbeing. Taken together, these standards can be expected to not 
simply curb limits on non-economic damages, but reduce access to 
lawyers and the courts because of the procedural constraints and severe 
limits on recoveries.

The FDA ``Shield''
    Of particular concern in my view is the shield against recovery of 
punitive damages (which themselves are severely limited) accorded under 
the legislation. The Act would prohibit any punitive damages for 
products that either have received pre-market FDA approval or that are 
``generally recognized among qualified experts as safe and effective 
pursuant to conditions established by'' the FDA. In other words, the 
FDA is not required to have weighed in at all for the shield to be 
triggered; ``general recognition'' among ``qualified experts'' 
(undefined) would suffice to prevent the recovery of even modest 
punitive damages. Furthermore, the shield would protect not only the 
manufacturer but also its distributor ( 7(c)), as well as the supplier 
of raw input materials in manufacturing the product. Protection would 
be total no matter how wanton, willful, and intentional the misconduct. 
It appears that the Act would shield even negligible punitive damages, 
even were the claim to involve intentional product tampering by a 
distributor of an FDA approved drug.
    The rationale underlying the provisions such as the FDA shield in 
( 7(c))--which is irrebuttable and unprecedented in its breadth--has 
been explicitly rejected by the United States Supreme Court. In Bragdon 
v Abbott 524 U.S. 624 (1998), the Court refused to recognize CDC 
universal safety precaution guidelines as irrebuttable proof of the 
existence of a safety standard for professionals treating patients with 
HIV. The majority noted in their opinion that treating federal agency 
action as irrebuttable evidence of what is reasonable is unwarranted, 
since standards may either be incomplete or rest on an incomplete 
record and therefore must be independently validated by a court, 
through the use of objective evidence. Here, the FDA standard in 
question is the very pre-marketing standard that has been the subject 
of enormous controversy in recent months, as Vioxx and other drug 
approval scandals have come to light. The conflicts of interest that 
have emerged in these scandals undermine any notion in my view that an 
FDA pre-market review standard would constitute conclusive--or 
potentially even persuasive--evidence of reasonableness.

Statutes of Limitations
    The Act imposes a three-year statute of limitations in all but the 
narrowest of circumstances. Many states currently use longer statutes 
of limitations precisely because it can take far longer for the true 
consequences of medical negligence to manifest themselves. As a result, 
many states provide for statutes of limitations substantially longer 
than the typical three year time period granted for ordinary 
negligence.

The Eclipsing of Federal Civil Rights and Other Rights
    The Act contains no rule of construction reconciling its provisions 
with other federal laws. In essence, any claim, regardless of its 
underlying theory, arising out of any civil action involving health 
care and involving a health care provider would be subject to the 
limitations of the Act.
    The term ``health care lawsuit'' is defined as
          any health care liability claim concerning the provision of 
        health care goods or services or any medical product affecting 
        interstate commerce, or
          any health care liability action concerning the provision of 
        health care goods or services or any medical product affecting 
        interstate commerce, brought in a State or Federal court or 
        pursuant to an alternative dispute resolution system, against a 
        health care provider, a health care organization, or the 
        manufacturer, distributor, supplier, or market, promoter or 
        seller of a medical product, regardless of the theory of 
        liability on which the claim is based or the number of 
        claimants, plaintiffs, defendants, or other parties, or the 
        number of claims or causes of action, in which the claimant 
        alleges a health care liability claim. Such a term does not 
        include a claim or action which is based on criminal liability; 
        which seeks civil fines or penalties paid to Federal State or 
        local government; or which is grounded in antitrust. * * *  
        9(7)
    A ``health care liability action'' means
          A civil action brought in a State or Federal Court or 
        pursuant to an alternative dispute resolution system, against a 
        health care provider, a health care organization, or the 
        manufacturer, distributor supplier, marketer, promoter, or 
        seller of a medical product, regardless of the theory of 
        liability on which the claim is based, or the number of 
        plaintiffs, defendants or other parties, or the number of 
        causes of action, in which the claimant alleges a health care 
        liability claim.  9(8)
    A ``health care liability claim'' means
        A demand by any person, whether or not pursuant to ADR against 
        a health care provider, health care organization, or the 
        manufacturer, distributor, supplier, marketer or promoter or 
        seller of a medical product * * * which are based on the 
        provision of, use of, payment for (or the failure to provide, 
        use or pay for) health care services or medical products, 
        regardless of the theory of liability on which the claim is 
        based * * *  9(9)
            the term ``health care goods or services'' means
          Any goods or services provided by a health care organization, 
        provider or by any individual working under the supervision of 
        a health care provider that relates to the diagnosis, 
        prevention or treatment of any human disease or impairment or 
        the assessment of the health of human beings.  9(12)
    The popular understanding of this legislation, as reflected in 
press coverage, is that it is intended to shield individual clinical 
practitioners against punishing liability judgments. However, the 
bill's actual reach is breathtaking because the Act contains no 
limiting language.
    The sweep of the above-cited definitions effectively means that any 
claim against any health care corporation becomes a health care 
liability claim, thereby permitting a defendant to invoke the bill's 
numerous protections. The law's protections would appear to be 
triggered even in cases that do not involve medical injuries in the 
medical negligence context, simply because the defendant is a health 
care corporation: claims involving alleged civil rights violations; 
claims involving alleged acts of fraud and corruption on the part of 
health care companies, brought by ERISA plans or health care suppliers; 
and any claim that can be characterized as a ``demand'' against a 
``provider.''

    Mr. Deal. Thank you. You did good on time.
    Our next witness is Mr. Sherman Joyce from the American 
Tort Reform Association. Mr. Joyce, we will recognize you for 5 
minutes.

              STATEMENT OF SHERMAN ``TIGER'' JOYCE

    Mr. Joyce. Thank you, Mr. Chairman, Ranking Member Brown, 
and members of the subcommittee.
    The American Tort Reform Association believes very 
strongly, as many of you have echoed, that the case for 
comprehensive medical liability reform to cover not just an 
individual State's, which has been referenced, but to be 
national in scope is very, very strong. The American Medical 
Association has stated that currently 20 States in the United 
States are in a crisis as a result of our current medical 
liability system. And further, 25 more are certainly moving in 
that direction and very much in jeopardy of reaching that 
status as well.
    The reason why this is happening has already been 
discussed, and I will just add a couple of pieces of data.
    The Physician Insurers Association of America, which is the 
association of physician and dentist-owned mutual liability 
insurers that provide coverage for health care providers, has 
found that between 1997 and 2003, the median jury award in a 
medical liability case nearly doubled from $157,000 to 
$300,000. Over roughly the same timeframe, settlements also 
roughly doubled from $100,000 to $200,000. Further, in a large 
number of cases as the PIA has noted, actually resulted in no 
verdict, yet the average defense costs in these cases, because 
they are very complex, is nearly $88,000, which is a very high 
price to pay in terms of costs.
    As you have discussed and has been widely reported, access 
to health care is threatened, and President Bush made a point 
of highlighting this when he visited southern Illinois last 
week. He was in Madison County. Madison County, a county that 
my organization has identified as what we call judicial 
hellholes. It is the worst litigation jurisdiction in the 
country. Its neighboring count, in St. Claire, together, in the 
last 2 years of seeing over 160 physicians leave their 
practice, and it is particularly pronounced, as you heard, very 
much along the lines of what the earlier panel talked about 
with high-risk specialties.
    The American Hospital Association concluded recently that 
45 percent of hospitals have reported losses of physicians, 
with a particular emphasis on emergency room coverage and 
emergency medicine coverage. You heard of the very tragic case 
of the young woman on the previous panel. I think that was 
probably the most tragic example of that particular kind of 
problem.
    But the problems go beyond these quantifiable costs and 
situations. The problem of defensive medicine is a very, very 
real problem for us as consumers, and also particularly for the 
Federal Government, which expends large numbers of our tax 
dollars to pay for our health care system. And we see estimates 
of upwards of $28 billion or more could be saved in defensive 
medicine costs by some estimates, if we pass good medical 
liability legislation.
    The solution, as you have heard, we believe, is on hand. It 
has been the law in California for nearly 30 years. And the 
experience there has been very, very positive. According to the 
National Association of Insurance Commissioners, between 1976 
and 2002, insurance premiums rose for physicians outside of 
California three times as fast during that timeframe as they 
did in California. Cases settle faster, which is good for 
people who have claims. And the costs are lower. We think it is 
good for all involved.
    The Medical Liability Monitor provide even more compelling 
data, highlighting current liability costs--liability insurance 
costs for physicians in Los Angeles, Chicago, and Miami. For an 
ob-gyn, the insurance averages to about $66,000. In Chicago, it 
is $147,000. And in Miami, it is $277,000. I think you can--we 
can all agree that that is a very serious matter. Commissioner 
Montemayor talked about what is happening in Texas. They passed 
legislation, as have the good people in Mississippi, in 
response to a very real crisis there. More needs to be done at 
the State level.
    Let me conclude by making two final points.
    The first is that State reform is essential, and we 
certainly support, but the opportunities are somewhat limited, 
and a number of States have actually overturned--State courts 
have overturned tort reform and medical liability reform 
proposals on the basis of State constitutions. That alone, it 
seems to me, is an invitation for the Congress to address this 
issue.
    The final matter that I would point out is that litigation 
generally does not involve a single plaintiff and a single 
defendant. It generally involves multiple parties, sometimes on 
both sides. We believe that the rules should apply equally to 
all parties. We don't think that there should be one set of 
rules with respect to coverage and compensation for one party 
and a different set for others. A fair and balanced set of 
rules based on what works, we think, is good public policy and 
encourage you to take those steps to enact that.
    Thank you.
    [The prepared statement of Sherman ``Tiger'' Joyce 
follows:]

 Prepared Statement of Sherman Joyce, President, American Tort Reform 
                              Association

    Mr. Chairman, Representative Brown, and Members of the 
Subcommittee, thank you for inviting me to speak today on behalf of the 
American Tort Reform Association (ATRA).
    ATRA is a Washington, DC-based membership association of more than 
300 large and small businesses, physician groups, nonprofits, and trade 
and professional associations having as its mission the establishment 
of a predictable, fair, and efficient civil justice system through the 
enactment of legislation and through public education.

                              INTRODUCTION

    There is no doubt that the American healthcare system is the finest 
in the world. We have the best doctors, hospitals, and medical schools. 
American pharmaceutical companies are the engine of innovation in 
creating life-saving medicines. America has conquered polio, developed 
cures for serious diseases that were once death sentences, and created 
technologies and therapies that have not only improved the American 
people's health, but also the world's.
    Unfortunately, we also know that our healthcare system costs are a 
major issue for consumers and elected officials, with annual costs 
increasing at double digit rates. This increase threatens the very 
greatness of our healthcare system, and ultimately the American 
people's access to world class medical care. While elected officials at 
the federal and state level discuss possible solutions to this problem, 
be they medical savings accounts or a single-payer healthcare system, 
one of the contributing factors to the healthcare cost problem is the 
crisis in our medical liability system. ATRA believes that Congress 
should consider reforms to our medical liability system as one of the 
critical elements to reform our healthcare system.

    THE PROBLEM: THE CURRENT MEDICAL LIABILITY SYSTEM IS INADEQUATE

    An effective medical liability system should provide predictability 
and fairness, guided by the over-arching principle of fairly 
compensating those who are truly injured by medical negligence.
    Unfortunately, our medical liability system comes up short.
    In our system, costs are escalating astronomically. According to 
the Physicians Insurers Association of America, a trade association 
composed of 50 insurance companies owned by doctors and dentists, the 
median medical liability jury award nearly doubled from $157,000 in 
1997 to $300,000 in 2003.1 The average award also increased 
from $347,134 in 1997 to $430,727 in 2002.2 The growth in 
settlements followed this trend, with the median settlement increasing 
from $100,000 in 1997 to $200,000 in 2002.3 Average 
settlements increased from $212,861 in 1997 to $322,544 in 
2002.4
---------------------------------------------------------------------------
    \1\ Physicians Insurers Association of America, PIAA Claim Trend 
Analysis: 2003 ed. (2004) [hereinafter ``PIAA Trend Analysis'' (2004)].
    \2\ Id.
    \3\ Id.
    \4\ Id.
---------------------------------------------------------------------------
    In addition to sharp escalation in costs, however, the medical 
liability system is highly inefficient.5 Prompt and full 
compensation to injured plaintiffs are the exception and not the rule. 
A full 70 percent of medical liability claims result in no payment to 
the plaintiffs.6 Of the 5.8 percent of claims that do go to 
a jury verdict, defendants won 86.2 percent of the time, with an 
average cost to defend such lawsuits of $87,720 per claim.7
---------------------------------------------------------------------------
    \5\ Fifty-eight cents from every dollar recovered goes to 
administrative and defense costs, as well as attorneys' fees. See 
Council of Economic Advisers, Who Pays for Tort Liability Claims? An 
Economic Analysis of the U.S. Tort Liability System 9 (April 2002).
    \6\ See PIAA Trend Analysis (2004), supra note 1.
    \7\ Id.
---------------------------------------------------------------------------
    In addition to being expensive and inefficient, the system does a 
poor job of promoting patient safety. Only 1.53 percent of patients 
injured by medical error file claims and most claims that are filed do 
not involve medical malpractice.8 Such a system plainly 
fails to serve the interests of all parties to litigation.
---------------------------------------------------------------------------
    \8\ See Office of the Assistant Secretary for Planning and 
Evaluation, U.S. Department of Health and Human Services, Confronting 
the New Health Care Crisis: Improving Health Care Quality and Lowering 
Medical Costs by Fixing Our Medical Liability System 11 (Jul. 24, 2002) 
[hereinafter ``HHS Report (2002)''] .
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             NEGATIVE POLICY IMPLICATIONS OF THE STATUS QUO

    Doctors routinely order unnecessary tests and procedures to guard 
against the possibility of litigation in the aftermath of a bad 
outcome. According to a study published in the Quarterly Journal of 
Economics, the excess cost of defensive medicine contributes $50 
billion annually to the cost of our healthcare system.9 
Through programs such as Medicare and Medicaid, the federal government 
pays tens of billions of dollars to pay the costs associated with 
defensive medicine. According to a recent HHS report, between $28.6 and 
$47.5 billion per year in taxpayer funds is spent indirectly 
subsidizing this system.10 These increased costs in a 
financially overburdened healthcare system reduce both the access to 
and quality of healthcare. The root of this problem is an unpredictable 
litigation system in which the volatile nature of jury verdicts 
provides no clear signals and predictability to healthcare providers 
and insurers.
---------------------------------------------------------------------------
    \9\ David Kessler and Mark McClellan, Do Doctors Practice Defensive 
Medicine? Quarterly Journal of Economics, May 1996, at 387-388.
    \10\ See HHS Report (2002), supra note 8, at 7.
---------------------------------------------------------------------------
                          IMPACT ON PHYSICIANS

    The current costs of the litigation system impose burdens on 
taxpayers and individual physicians. This compromises innovation in 
delivering improvements to patient safety. The result is a medical 
liability system that is too costly, offers little deterrent value, 
and, at best, does little to promote improvements in patient safety. 
For example, the American Hospital Association has reported that 45 
percent of hospitals have lost physicians and/or reduced coverage in 
emergency departments due to the medical liability crisis.11 
Stories about individual physicians are equally compelling. For 
example, after serving 30 years as medical director for Forsyth County 
Emergency Medical Services of North Carolina, Dr. Lew Stringer resigned 
his position in 2003 due to the lack of availability of affordable 
malpractice insurance.12 And in Missouri, family physician 
Dr. Donald Maples closed his practice after serving the community of 
Kirksville for 14 years because of the high cost of his medical 
liability insurance. Commenting on his experience, Dr. Maples said, ``I 
expected to be here until I was in my mid-60s, but the reality is that 
I can no longer really truly afford to do this.'' 13
---------------------------------------------------------------------------
    \11\ American Hospital Association, Professional Liability 
Insurance Survey (2003).
    \12\ Winston-Salem Journal, June 3, 2003.
    \13\ KTVO, April 30, 2004.
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PATIENT ACCESS TO HEALTHCARE IS COMPROMISED BY CURRENT LIABILITY SYSTEM

    A survey of physicians showed that over 76 percent believed 
malpractice litigation affected their ability to provide quality 
healthcare.14 According to the American Medical Association 
(AMA), 20 states are in the midst of a healthcare liability crisis, 
while another 25 states show problem signs that indicate a crisis is 
imminent. ATRA believes that this litigation environment has resulted 
in many physicians stopping the practice of medicine, abandoning high-
risk parts of their practices, or moving their practices to other 
states. The public has taken notice, as well. According to a nationwide 
survey commissioned by the Health Coalition on Liability and Access, 82 
percent of Americans believe doctors are leaving their practices due to 
unaffordable malpractice premiums caused by excessive 
litigation.15
---------------------------------------------------------------------------
    \14\ See HHS Report (2002), supra note 8, at 4.
    \15\ See Health Coalition on Liability and Access, available at 
http://www.hcla.org/factsheets/2004-HCLA-Poll-(Fact%20Sheet).pdf.
---------------------------------------------------------------------------
    For example, on January 10, 2005, Mercy Hospital of Wilkes-Barre, 
Pennsylvania, stopped delivering babies because of the retirement of 
several OB/GYNs due to the high cost of medical liability 
insurance.16 Pennsylvania has been hit hard by the medical 
liability crisis, with a 2004 poll suggesting that one in four patients 
have changed doctors in the Keystone state due to the medical liability 
crisis.17
---------------------------------------------------------------------------
    \16\ Wilkes-Barre Citizens Voice, January 8, 2005.
    \17\ See Pennsylvania Economy League, available at http://
www.issuespa.net/polls/point/10295/10281/.
---------------------------------------------------------------------------
    In early January, President Bush visited Southern Illinois to 
discuss the medical liability crisis. The President pointed out that 
Madison and St. Clair Counties 18 had lost about 160 doctors 
over the last two years due to the medical liability 
crisis.19 High-risk specialists have been particularly hard 
hit; in 2004, the last two brain neurosurgeons in Southern Illinois 
resigned their posts at Neurological Associates of Southern Illinois 
because their malpractice insurance premiums were approaching 
$300,000.20
---------------------------------------------------------------------------
    \18\ The American Tort Reform Foundation published an analysis of 
the worst trial court jurisdictions in the country, known as ``Judicial 
Hellholes ''' where the law is applied in a systematically 
unfair and unbalanced manner, generally against defendants. Madison 
County is ranked as the number one Judicial Hellhole in the United 
States, with Saint Clair County being ranked as number two. The 2004 
Judicial Hellholes report is available at http://www.atra.org/reports/
hellholes/report.pdf.
    \19\ President Discusses Medical Liability Reform, available at 
http://www.whitehouse.gov/news/releases/2005/01/print/20050105-4.html.
    \20\ UPI, February 25, 2004.
---------------------------------------------------------------------------
                                SOLUTION

    Fortunately, there are proven policy changes that Congress can 
enact to abate this liability crisis. These laws can ensure Americans 
will continue to enjoy high quality medical care. At the same time, 
these reforms will protect the rights of patients in cases of true 
medical negligence. As Congress contemplates a legislative remedy, ATRA 
believes that any such legislation should apply to all defendants in 
healthcare actions. Doing so will ensure that all parties in a claim 
are treated equitably in the civil justice system.
    The solution to the medical liability problem was devised over 25 
years ago in California with reforms called the Medical Injury 
Compensation Reform Act, better known as MICRA. Like much of the United 
States today, California experienced a medical liability crisis in the 
early 1970s. By 1972, a sharp increase in litigiousness ensured that 
California medical malpractice insurance carriers were paying claims 
well in excess of dollars that they collected in premiums. The crisis 
continued to worsen. By 1975, two major malpractice carriers in 
Southern California notified physicians that their coverage would not 
be renewed. At the same time, another insurer announced that premiums 
for Northern California physicians would increase by 380 
percent.21 In response to the crisis, then-Governor Jerry 
Brown called the California Legislature into special session to develop 
solutions. The result was MICRA.
---------------------------------------------------------------------------
    \21\ See Californians Allied for Patient Protection, MICRA 
Information, July 1, 1995, at 10.
---------------------------------------------------------------------------
    Signed by Governor Brown in 1975, MICRA's centerpiece is a single 
cap of $250,000 on noneconomic damages.22 Other provisions 
of MICRA include: (1) allowing collateral source benefits to be 
introduced into evidence; (2) permitting the periodic payment of 
judgments in excess of $50,000; (3) allowing patients and physicians to 
contract for binding arbitration; and (4) limiting attorney contingency 
fees according to a sliding scale.
---------------------------------------------------------------------------
    \22\ Noneconomic damages are monetary awards intended to compensate 
the plaintiff for subjective losses such as physical pain and 
suffering, mental anguish, loss of body function, disfigurement, or 
emotional distress. This differ from economic damages which are 
monetary awards intended to compensate the plaintiff for objective 
quantifiable losses such as property loss, medical expenses, lost 
wages, or lost or impaired future earnings capacity.
---------------------------------------------------------------------------
                        CALIFORNIA--A COMPARISON

    Evidence indicates that MICRA's success has stabilized insurance 
rates in California by limiting overall damages and by substantially 
diminishing the unpredictability--the volatility--of judgments. For 
example:

 From 1976 through 2002, malpractice premiums in California rose 245 
        percent. In the rest of the country, premiums increased 750 
        percent; 23
---------------------------------------------------------------------------
    \23\ See American Medical Association, Medical Liability Reform-
Now!, December 3, 2004, at 40.
---------------------------------------------------------------------------
 Medical liability lawsuits in California settle on average in 1.8 
        years, while the same lawsuits in states without limits on 
        noneconomic damages settle on average in 2.4 years--33 percent 
        longer; 24 and
---------------------------------------------------------------------------
    \24\ See The Doctors' Company, What is MICRA?, available at http://
www.thedoctors.com.
---------------------------------------------------------------------------
 Medical liability lawsuits in California settle for an average of 
        $15,387; the same lawsuits in states without limits on 
        noneconomic damages settle for an average of $32,714--53 
        percent more.25
---------------------------------------------------------------------------
    \25\ See Californians Allied for Patient Protection, MICRA: A 
Successful Model for Affordable and Accessible Health Care, available 
at http://www.micra.org.
---------------------------------------------------------------------------
    While these figures make the case that MICRA has worked, an even 
more compelling argument for its success can be made by comparing 
malpractice rates for California physicians with their counterparts in 
other major metropolitan areas of states without MICRA-style 
reforms.26 For example: 27
---------------------------------------------------------------------------
    \26\ The Florida Legislature passed medical liability reform, CS SB 
2-D, during special session in August 2003. The bill contained a high 
cap on noneconomic damages. CS SB 2-D became effective on September 15, 
2003.
    \27\ Rates are for 2004, $1/$3 million coverage as reported by 
Medical Liability Monitor. Los Angeles rates reported from SCPIE 
Indemnity Co., Chicago rates reported from Illinois State Medical Ins. 
Services, Inc., and Miami rates reported from First Professional 
Insurance Company.

 A Los Angeles area internist pays $13,808; an internist in Chicago 
        pays $38,424, and in Miami pays $69,310;
 A Los Angeles area general surgeon pays $40,436; a general surgeon in 
        Chicago pays $102,700, and in Miami pays $277,241; and
 A Los Angeles OB/GYN pays $66,100; an OB/GYN in Chicago pays 
        $147,540, and in Miami pays $277,241.
    MICRA has ensured that those injured by medical negligence receive 
fair compensation, but it also has ensured that the market for medical 
liability insurance has remained stable and affordable. As a result, 
California has been largely immune from the liability crisis endemic to 
other states.

           RECENT EXAMPLES OF REFORMS: MISSISSIPPI AND TEXAS

    Over the last two years, Mississippi and Texas passed significant 
medical liability reform legislation to rein in skyrocketing 
malpractice premiums. In July 2004, Mississippi Governor Haley Barbour 
signed House Bill 13, comprehensive civil justice reform legislation, 
which contained significant medical liability reform provisions. One of 
the key provisions was a $500,000 limit on noneconomic damages in 
medical liability cases. Positive results are already being seen as the 
Medical Assurance Co. of Mississippi, which insures approximately 60 
percent of doctors in Mississippi, did not raise base premium rates for 
2005.28 The story is much the same in Texas. In the summer 
of 2003, Governor Rick Perry signed House Bill 4, comprehensive civil 
justice reform legislation containing meaningful medical liability 
reform, including a $750,000 limit on noneconomic damages ($250,000 per 
healthcare provider). As a result, the largest medical malpractice 
provider in the state, the Texas Medical Liability Trust, lowered rates 
by 12 percent for 2004 and an additional 5 percent for 
2005.29 According to Lieutenant Governor David Dewhurst, 13 
new companies have started writing policies in Texas.30 The 
recent experiences of both Misssissippi and Texas confirm that MICRA-
style reforms have a positive impact in reining in medical malpractice 
rates.
---------------------------------------------------------------------------
    \28\ See Hattiesburg American, October 10, 2004, at 8.
    \29\ See Houston Chronicle, September 21, 2004, at 5.
    \30\ Id.
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                   OPPONENT ARGUMENTS ARE INCOMPLETE

    Opponents of medical liability reform claim that the ``access to 
healthcare'' problem is a myth and that MICRA-style reforms are not the 
solution to rising malpractice premiums. One of the most common 
arguments they advance is that malpractice rates are increasing because 
insurance companies are making up for investment losses suffered in the 
stock market bubble in the late 1990s. They further argue that 
insurance carriers are gouging doctors with rate increases to boost 
profits.
    A brief examination of the evidence, however, suggests otherwise. A 
report by the investment and asset management firm Brown Brothers 
Harriman examined the investment mix of medical liability insurance 
carriers and the effect those investments had on premiums. The Brown 
Brothers report found no relationship between losses suffered by 
carriers in the stock market and rising premiums, ``As medical 
malpractice companies did not have an unusual amount invested in 
equities and since they invested these monies in a reasonable market-
like fashion, we conclude that the decline in equity valuations is not 
the cause of rising medical malpractice premiums.'' 31
---------------------------------------------------------------------------
    \31\ Raghu Ramachandran, Brown Brothers Harriman & Co., Did 
Investment Affect Medical Malpractice Premiums? (January 2003).
---------------------------------------------------------------------------
    In addition, more than 60 percent of physicians obtain insurance 
through physician owned and operated companies.32 These 
companies began to form in the 1970s when commercial carriers were 
exiting the medical liability insurance market due to unexpected 
losses, leaving healthcare providers no other options but to form their 
own insurance companies. These companies compete with commercial 
carriers and return excess revenue to policy holders, the owners of the 
companies. The contention that malpractice premiums are increasing in 
an effort to boost profits is, in essence, asking us to believe that a 
majority of doctors are ``gouging'' themselves and picking their own 
pockets. A reasonable examination can reach only one conclusion: 
medical liability insurance premiums are increasing because of higher 
costs and instability of our current litigation system, which does not 
allow carriers to accurately predict future losses and provide 
reasonable pricing of liability policies. Insurers price their product 
on cost and risk. It is logical to infer that a medical liability 
system that is more expensive and more volatile will necessarily be 
more expensive to insure.
---------------------------------------------------------------------------
    \32\ See Patient Access: The Role of Medical Litigation Before a 
Joint Hearing of the United States Senate Judiciary Committee and 
Health, Education, Labor and Pensions Committee (Feb. 11, 2003) 
(statement of Lawrence E. Smarr, President, Physician Insurers 
Association of America).
---------------------------------------------------------------------------
    A 2003 Government Accounting Office (GAO) study examined the impact 
of the medical liability system on access to healthcare. The report 
acknowledged that states that limit noneconomic damages have enjoyed a 
lower rate of increase in medical liability insurance rates than states 
with more limited reforms.33 As our opponents are quick to 
point out, however, the report also alleged that there is little 
evidence to suggest that states with no limits on damages have a 
healthcare access problem. 34
---------------------------------------------------------------------------
    \33\ See Government Accounting Office, Medical Malpractice: 
Implications of Rising Premiums on Access to Health Care 5 (August 
2003) [hereinafter ``GAO Report'' (2003)].
    \34\ See GAO Report (2003), supra note 33, at 5.
---------------------------------------------------------------------------
    The report is incomplete. GAO examined only a limited number of 
states, 5, and not the entire 18 then in crisis, as identified by the 
AMA at the time that the GAO conducted its examination. It has never 
been ATRA's position that the effects of the medical liability crisis 
are uniform. Many variables drive the crisis, including the type of 
medical specialty, the physician's location (urban, rural, or 
suburban), and the overall litigation environment of a particular 
region. In some areas and among some specialties, the effects of the 
current crisis are minimal; in other areas, and many other specialties, 
the effects of the crisis are profound.

                               CONCLUSION

    Members of Congress should examine the medical liability system and 
assess the effects that current cost escalation and litigation will 
have on the future. ATRA believes such an examination inevitably leads 
to the conclusion that the costs associated with the current system are 
unsustainable and that MICRA-style reforms must be enacted. Such 
reforms are in the best interests of patients, taxpayers, physicians, 
and plaintiffs. And these reforms should apply to all defendants in 
litigation. As Californians can attest, strong medical liability 
reforms create a system that strikes the correct balance between fairly 
compensating victims of medical negligence with a liability market that 
stabilizes premiums for physicians. This reform will go a long way 
toward enhancing and protecting access to healthcare. Lawmakers should 
not wait to act until a full-blown crisis is verified by a government 
report. It is the responsibility of elected officials to take remedial 
and, if necessary, preventive action to ensure that such a crisis never 
occurs.
    Thank you for your attention, and I would be happy to answer any 
questions.

    Mr. Deal. Thank you.
    Our next witness is Dr. Joseph Glenmullen from the Harvard 
Law School. Dr. Glenmullen, we are pleased to have you, and you 
are recognized for 5 minutes.

                STATEMENT OF JOSEPH P. GLENMULLEN

    Mr. Glenmullen. Thank you, Mr. Chairman.
    I am here particularly to talk about the pharmaceutical 
company shield that is under discussion. I am a psychiatrist 
who practices at the Harvard Law School Health Services and 
also in private practice. I am on the faculty at Harvard 
Medical School and the author of two books on antidepressant 
side effects: ``Prozac Backlash'' and ``The Antidepressant 
Solution.'' I am very much a moderate in the debate about 
antidepressants, because I prescribe the drugs to many patients 
who have reported their benefits, but I have been a critic of 
patients not being adequately warned about their side effects.
    I am sure you are aware of the historic 2005 FDA warning. 
It is a black box warning that antidepressants can make 
children and adolescents suicidal, especially whenever the dose 
changes, and that this is suicidality over and above any that 
results from the underlying illness. Numerous families 
testified at the FDA hearings last year about losing children 
or having children survive this terrible side effect, and I am 
here because I have witnessed this side effect firsthand in 
patients who I was treating and know full well how important it 
is for doctors to be well educated about how to differentiate 
antidepressant-induced suicidality from the suicidality that 
can occur in depression.
    Unfortunately, both the FDA and the pharmaceutical industry 
knew over a decade ago about this side effect. Shortly after 
Prozac, the first of today's antidepressants, was introduced in 
the early 1990's, there were multiple reports in prominent 
medical journals and media attention greater than there is 
today. The FDA held a hearing in September 1991 at which, 
unfortunately, the issue was swept under the carpet. Numerous 
conflicts of interest among the committee members the FDA 
appointed. But despite that, one-third of them voted in 1991 
for a warning and repeatedly called for additional research.
    I have given you some documents in the slide preparation of 
internal Eli Lilly documents that came out of lawsuits against 
the company, showing that Eli Lilly agreed in the early 1990's 
to do the gold standard research, developed a full protocol for 
the study, involved as many as 100 scientists, and as part of 
the effort, developed a more sensitive scale for assessing 
antidepressant-induced suicidality. Unfortunately, once the 
media attention died down, Eli Lilly never did the study, 
saying in a later lawsuit that it was mooted by the FDA 
hearing, but anyone who reads the transcript of that hearing 
would know how untrue that is.
    The FDA not only failed to get the study done, but it 
failed to have other companies that had new antidepressants in 
the pipeline adopt the more sensitive scale for assessing 
antidepressant-induced suicidality.
    These are just a few of countless internal company memos 
that have literally changed health care, literally changed the 
way doctors and I can diagnose antidepressants' side effects 
and treat them and, therefore, save lives and also contributed 
to the momentum that resulted in the 2005 warnings. Without 
these lawsuits, we would be without a vital avenue for 
protecting the public.
    The FDA has still not done enough to protect American 
children. It hasn't adequately filled out the warning in terms 
of the relationship between antidepressant-induced suicides and 
antidepressant withdrawal reactions. It hasn't done enough to 
limit off-label prescribing of the drugs. Only Prozac is 
approved for depression in children, and yet a million American 
children are taking all kinds of other antidepressants for 
everything from shyness to headaches to school anxiety to 
attention deficit disorder. I don't understand how the FDA can 
let this happen after acknowledging that these drugs can make 
children suicidal.
    The FDA has also failed to adequately educate the public 
and doctors about the meaning of this side effect and how to 
differentiate it from underlying suicidality of depression. In 
fact, the most dangerous scenario is when neither doctors nor 
patients are well informed about this side effect. Patients get 
it, deteriorate, and think, ``Oh, my God, the miracle cure that 
has worked for millions of people is not working for me,'' and 
are at serious risk to kill themselves.
    This side effect can happen to anyone on an antidepressant, 
even people doing well on a stable dose. The research shows 
that most patients will forget to take their antidepressant for 
2 or 3 days, and with many of these drugs, that is all it takes 
to be in severe antidepressant withdrawal, which can make 
people suicidal.
    I really think that the issue of the pharmaceutical company 
shield--I hope you will think of it as a very personal 
question. What if one of your children or one of your 
grandchildren was under consideration for an antidepressant? 
Would you want the doctors treating them to have all of the 
information that the pharmaceutical companies have about these 
drugs, or would you prefer that the pharmaceutical companies 
control access to that information and withhold much of it, as 
we have learned in the last decade? If you would want doctors 
treating your family members to have access to this 
information, please do not vote along partisan party lines. 
Instead, vote to protect this vital source of protection for 
the American public.
    Thank you very much.
    [The prepared statement of Joseph P. Glenmullen, follows:]

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    Mr. Deal. Thank you.
    Have we got Dr. Singh's microphone turned on on the other 
side? Dr. Singh, you can still hear me?
    Mr. Singh. Yes, I can hear you.
    Mr. Deal. All right. Well, we are to your point in the 
testimony. And Dr. Singh is an adjunct professor of medicine at 
Stanford University, and we are pleased to have you, and we 
thank you for your patience in waiting on us to get to you.
    Now you have the feeling that most politicians have when 
they are being interviewed. That is, you can't see us, but we 
can see you.
    We are pleased to having you recognized for 5 minutes.

                  STATEMENT OF GURKIRPAL SINGH

    Mr. Singh. Thank you very much, chairman, ladies, and 
gentlemen.
    I am a rheumatologist by clinical training with research 
interests and expertise in drug safety and epidemiology. My 
complete background, as well as my complete testimony, are made 
available to you, and you should have photocopies of those. I 
am not going to read all of it in--because I only have 5 
minutes, and I would only highlight some important significant 
features of my testimony. But I would be happy to answer 
questions on any of the points that I have raised in my written 
testimony.
    I have been specifically asked to comment on the notion 
that the FDA represents an effective, concerned, and 
independent regulatory entity that can be relied upon to 
require and accurately analyze, in a timely manner, all 
information necessary to assess a drug or a device's safety and 
efficacy profile and that it promptly informs the prescribing 
and patient community through complete and accurate and 
understandable labeling.
    I will use the case example of Vioxx to illustrate some of 
the points made in this particular statement.
    First of all, let me start by stating for the record my 
admiration for the FDA scientists and medical reviewers. They 
are clearly some of the smartest individuals in the medical 
field and have dedicated their lives to public service. They 
work long hours in jobs that are mostly invisible to the public 
they try to protect for salaries that are a fraction of what 
they could make outside the FDA. But they work within a system 
that is far from perfect, witness the Vioxx and antidepressant 
episodes.
    The first problem is that clinical trials designed before 
the approval of a drug are not designed to study drug safety. 
They are designed, in the current system, only to look at drug 
efficacy. This means that there are a small number of patients 
who are followed for short periods of time in selected 
populations and therefore you would be very likely to miss 
early safety signals.
    To assess safety, we need to do studies after the drug's 
approval, the so-called post-marketing studies, but these are 
rarely completed. You saw an example from the previous speaker 
as well. In the current system, a drug is considered safe until 
proven otherwise. While this system does bring rapid drug 
approval, it raises the possibility of sometimes causing 
serious harm.
    No. 2, and this is the problem, the system is designed for 
rapid drug approval, not a careful review of drug safety. For 
example, in the case of Vioxx, you will see medical testimony 
that I will quote these reviewers from the Food and Drug 
Administration who pointed out that there were already 
significant problems with heart attacks, a threefold increase 
in the risk of heart attacks, seen in the data that Merck 
submitted to the FDA for the approval of the drug. And the 
reviewer went on to say that this available data, the studies 
are still very small, and it is impossible to answer, with 
complete certainty, whether the risk of cardiovascular and 
thromboembolic events is increased in patients on Rofecoxib. 
And she says a larger data base will be needed to answer this 
and other safety comparison questions.
    So what happens next? Does the FDA require Merck to conduct 
larger and more definitive studies? No. Remember, the system is 
designed for rapid drug approvals. So the drug is approved 
quickly by the FDA and applied to review within 6 months with 
no discussion of the heart attack tradeoff. The system works at 
a cost that we will all know many years later.
    No. 3, there is no mechanism for conditional or time-
limited approval. Once a drug is approved, the FDA has little 
power to force a drug company to do safety studies. Again, I 
will give you repeated examples in my written testimony when 
this happened with Rofecoxib. The FDA repeatedly noted that 
adequately powered and prospectively designed studies are 
necessary to address the cardiovascular safety issues with 
Vioxx. But Merck would not do that and, in fact, canceled the 
only study that could have provided an answer in 2002, and the 
reason is because they said it would send the wrong marketing 
and public relation signal. Why ask the question if you do not 
want to know the answer? Instead, they proposed a pooled 
analysis of ongoing clinical trials, which is not a very 
effective way to look for these signals. And the FDA recognized 
that, but really did not have any way of forcing the drug 
company to do safety studies.
    So life goes on, millions of people keep on taking the 
drug, the drug company makes billions of dollars of profits, 
nobody knows what is happening, and the band plays on.
    No. 4, there is no good mechanism of informing the 
prescribing physician or the public of FDA's concerns. Again, 
to look at the Vioxx example, the drug company had unlimited 
resources, millions and millions of dollars to launch a direct 
to consumer campaign, held physician meetings, you know, do 
scientific presentations to point out their view of the safety 
of the drug. The Food and Drug Administration differed in their 
views, but there was no way for the public to know about that. 
I mention in my written testimony many instances when written 
published material from the drug company were in direct 
conflict with what the FDA had found, but everybody only heard 
one side of the picture. We did not know what the FDA was 
thinking. Why does the FDA not publish its own findings in 
medical journals? Why do the FDA reviewers not go to scientific 
meetings and present their data, their interpretation of the 
data, so that we understand better both sides of the picture?
    [The prepared statement of Gurkirpal Singh follows:]

 Prepared Statement of Gurkirpal Singh, Adjunct Clinical Professor of 
  Medicine, Department of Medicine, Division of Gastroenterology and 
           Hepatology, Stanford University School of Medicine

    Chairman Barton, Congressman Dingell, and Ladies and Gentlemen:
    Thank you for inviting me to testify before the Subcommittee on 
Health of the Committee on Energy and Commerce.
    I am a rheumatologist by clinical training with research interests 
and expertise in drug safety and epidemiology. My group and I at 
Stanford University were instrumental in pointing out the risks of 
painkillers such as ibuprofen (Motrin) and Aleve (a class of drugs 
called NSAIDs). Our NIH sponsored research over the years has allowed 
us to identify patients who have a high risk of serious stomach 
bleeding from such drugs and potential ways to avoid such risks. I have 
been working in this research area of drug safety and outcomes research 
for almost 15 years, and have published extensively in the medical 
literature. I am currently working with large public datasets such as 
Medicare and Medicaid to study early safety signals of medications. I 
lecture medical students, residents and other physicians, both at 
Stanford, and in conferences worldwide, on many of these issues.
    I have been asked to comment on the notion that FDA represents an 
effective, concerned and independent regulatory entity that can be 
relied upon to require and accurately analyze in a timely manner all 
information necessary to assess a drug or device's safety and efficacy 
profile and that it promptly informs the prescribing and the patient 
community through complete and accurate and understandable labeling. I 
will use the example of the approval and withdrawal of rofecoxib 
(Vioxx) as a case-study. It is not my intention to catalogue all the 
errors made, but rather to highlight the lessons that we have learnt 
and the knowledge that we can derive from this episode so that early 
signals are not missed again with another drug.
    First of all, let me start by stating for the record my admiration 
for the FDA scientists and medical reviewers. They are some of the 
smartest individuals in the medical field, and have dedicated their 
lives to public service. They work long hours, in jobs that are mostly 
invisible to the public they try to protect, for salaries that are a 
fraction of what they could make outside the FDA. But they work within 
a system that is far from perfect--witness the Vioxx and anti-
depressant episodes.

  1. pre-approval clinical trials are not designed for studying drug 
                                 safety

    In a clinical trial, patients are assigned randomly to receive the 
study drug or the comparison treatment, and they are followed for the 
health outcomes of interest. The clinical trial is the optimal method 
of assessing the efficacy of medications, but often not its safety. For 
example, clinical trials to study the efficacy of an arthritis pain 
medicine can be conducted in a few hundred patients who are followed 
for 6 weeks. But such a study is too small to evaluate the effects of a 
medication on health outcomes such as heart attack or stroke. Studies 
of thousands of patients followed for several years are often needed to 
provide confidence in the evaluation of these outcomes. And therein 
lays a problem. The current system of drug approval at the FDA relies 
on clinical trials designed for efficacy--while these trials provide 
information to evaluate if the drug works, there are very often not 
sufficient to assess its safety.
    Another problem is the fact that many clinical trials are performed 
in an ``optimal'' population, and exclude people who may be at risk for 
suffering the maximum harm from a drug--such as those with a weak heart 
or the elderly or pregnant women. So, there is little safety data 
collected in these high-risk populations.
    In the current system of drug approval, trials designed to assess 
the safety of a drug are often performed after its approval--the so-
called post-marketing studies. But these are rarely completed. A drug 
is considered ``safe'' unless proven otherwise. While this system 
brings rapid drug approvals, it does raise the rare possibility of 
sometimes causing serious harm from side-effects not discovered in 
clinical trials.

2. the system is designed for rapid drug approval, not a careful review 
                   of drug safety--the vioxx example.

    The first principle of medicine is primum, non nocere--first do no 
harm. It is extremely important that clinical trial data be carefully 
studied and if there is any indication--even a small one--that there is 
a possible risk of serious harm, the approval of the drug should be 
deferred till appropriate large-scale data is collected. How well 
equipped are we to do that today? Let me illustrate with the Vioxx 
example.
    When Merck filed for the approval of Vioxx in the US, it submitted 
data on 58 studies (that included 3629 patients treated with Vioxx) to 
the FDA. However, only 371 and 381 patients had received doses of 12.5 
mg or 25 mg for more than 1 year, and only 272 had received doses of 50 
mg for at least 6 months. These studies were adequate to study the 
efficacy of Vioxx on pain relief, but did not have enough power to look 
at serious adverse vents such as heart attacks and strokes. 
Nevertheless, there were early signs of serious problems. In a careful 
FDA review of Merck's new drug application for Vioxx, Dr. Villalba 
(exhibit 10) noticed (and I quote) that ``thomboembolic events [such as 
heart attack and stroke] are more frequent in patients receiving VIOXX 
than placebo . . .'' [page 105]. Among 412 patients taking placebo, 1 
had a cardiovascular event (0.24%). In contrast, among the 1631 
patients receiving 12.5 mg or more of VIOXX daily, 12 had a 
cardiovascular event (0.74%) (6)--a three-fold increase in risk. Many 
scientists would consider this three-fold difference as an early 
warning sign. But at that time, there were no adequate data to make a 
firm conclusion one way or another. In fact, the FDA reviewer went on 
to point out that: ``With the available data, it is impossible to 
answer with complete certainty whether the risk of cardiovascular and 
thromboembolic events is increased in patients on rofecoxib. A larger 
database will be needed to answer this and other safety comparison 
questions'' [page 105].
    What happens next? Does the FDA require Merck to conduct larger and 
more definitive studies? After all, the drug was no more effective than 
any other available pain-killer in the US--and there were nearly 30 
such drugs available in the US. Further, another drug--the cox-2 
inhibitor celebrex--which had no such signal for heart attacks had been 
already available in the US market 6 months prior. A combination of two 
older drugs--a pain-relieving drug such as motrin with a drug that 
protects the stomach such as prilosec--is as effective and almost as 
safe on the stomach as Vioxx, with no heart attack risk. There was 
certainly no emergent need to approve Vioxx without further studies if 
there were lingering safety concerns. The trade-off of heart attacks 
for the rare instances of stomach bleeds is not a reasonable one. 
Remember, primum non nocere--first, do no harm. Instead, the drug was 
approved by the FDA in a priority review within 6 months--with no 
discussion on the heart attack trade-off. The system that is designed 
to approve drugs rapidly works--at a cost that we all know now.

   3. there is no mechanism for conditional or time-limited approval.

    Once a drug is approved, the FDA has little power to force a drug 
company to do safety studies. Let us look at Vioxx. From the time the 
NDA was filed to the ultimate withdrawal of the drug, FDA medical 
reviewers repeated noted the increase in heart problems with the drug, 
in multiple studies. The signals were not definitive because there were 
no large safety studies. FDA reviewers repeatedly noted the need for 
such studies. On March 12, 2002, Dr. Villalba wrote to Dr. Goldkind 
(Deputy Division Director): ``Adequately powered and prospectively 
designed studies are necessary to definitively address cardiovascular 
safety issues with Vioxx''. Merck would not do any, and in fact, 
cancelled the one study that could have provided the answer in 2002. 
The New York Times recently reported that Merck decided a 
cardiovascular outcome study would send the ``wrong'' marketing and 
public relations signal. Why ask a question if you do not want to know 
the answer? Instead Merck proposed a pooled analysis of ongoing 
clinical trials for new indications. On December 19, 2002, the FDA sent 
a letter to Merck stating that this approach ``. . . might not be 
sufficient to address the ongoing cardiovascular safety concerns 
surrounding Vioxx.''
    Four years before the withdrawal of Vioxx, the FDA had ``ongoing 
cardiovascular safety concerns surrounding Vioxx''. Concerns that had 
started before the drug was approved. Yet, the sponsor would not do 
definitive studies to address these safety concerns. So what happens--
life goes on, millions of people take the drug, blissfully unaware of 
``ongoing cardiovascular safety concerns' of their regulatory agency. 
And the band plays on . . .
    It is my recommendation that a system of conditional or time-
limited approvals should be instituted. This way, if there are any 
emerging safety problems with a drug after its approval, the FDA can 
require companies to do large safety studies within a certain time 
period.

 4. there is no good mechanism of informing the prescribing physicians 
                      or public of fda's concerns.

    In my opinion, this is the single most important problem of 
communication with the system. While the drug companies spent hundreds 
of millions of dollars in touting the benefits of their drugs in 
direct-to-consumer advertisements and sales calls to physicians, the 
FDA has no way to inform the public of its concerns, except through a 
process of label change.
    Again, let us look at the Vioxx example. Multiple studies published 
by Merck in medical journals underplayed the risk of serious 
cardiovascular complications. The VIGOR trial was published in the New 
England Journal of Medicine, once of the most reputed medical journals 
in the world. However, the publication under-reported the true number 
of heart attacks in patients on Vioxx. (Four years later, Merck would 
say that those were preliminary numbers--but did the publication say 
that at that time?). While it prominently discussed the 50% reduction 
of stomach bleeds in patients taking Vioxx, it did not mention that in 
spite of this, patients on Vioxx had more serious adverse events, more 
hospitalizations and more deaths than patients on Naproxen. In 
addition, the true rates for cardiovascular thrombotic adverse events 
(a prespecified study endpoint in the protocol), hypertension and 
congestive heart failure, factors that may contribute to heart attacks 
and which were all higher in the Vioxx group--were not shown in the 
paper at all. The FDA knew the truth--but these concerns were never 
communicated to the prescribing physicians or public. In February 2001, 
the FDA put the correct numbers on its website--but how many physicians 
know how to navigate the FDA website? Why could the FDA not publish its 
own findings in the New England Journal?
    In March 2000, Merck sent a letter to all its investigators to 
encourage the use of aspirin in patients on Vioxx who may be at risk 
for cardiovascular complications. For the next 4 years, Merck sales 
force would tell prescribing physicians that the use of aspirin would 
eliminate the increased heart attack risk seen with Vioxx. But studies 
that the FDA reviewed suggested that this was simply not true. For 
example, in a document released to public last week, Dr. Villalba's 
review of the ADVANTAGE study on November 28, 2001 states: ``the use of 
low dose ASA for cardiovascular prophylaxis may not eliminate the 
excess of cardiovascular events on rofecoxib 25 mg compared to naproxen 
. . .'' The FDA knew, but the prescribing physicians and the American 
public remained blissfully unaware--and the band played on . . .
    Merck has repeatedly insisted that prior to the APPROVe study, 
there was no evidence of Vioxx's toxicity. In multiple scientific 
meetings and other communications with physicians, Merck presented data 
from Alzheimer's disease studies to claim that there was no heart 
attack risk from Vioxx. However, FDA memos released last week show that 
the FDA ``never accepted the results from the Alzheimer's studies as a 
replacement for prospectively designed, placebo-controlled studies. 
Furthermore, the FDA repeatedly requested that these data be updated.'' 
Yet, it took more than a year from FDA's first request on December 9, 
2002 to when it finally received the updated data on December 17, 2003. 
As early as 2001, the FDA already knew that in two Alzheimer's Disease 
studies, patients on Vioxx were almost twice as likely to die as those 
on placebo; updated safety data confirmed these findings. Yet, the FDA 
never released their analysis in any scientific meeting or any other 
communication to the public. Once again, the drug company continues to 
claim safety of its drug, the FDA knows otherwise, but the prescribing 
physicians and patients remain blissfully unaware. And the band plays 
on . . .

 5. the label process is one of negotiations--let us make a deal . . .

    There needs to be an open public discussion of the role of FDA in 
approving drugs and labels. The label is the practically the only way 
through which the FDA communicates with physicians. Last week, the FDA 
released a document titled ``Sequence of Events with Vioxx, since 
opening of IND''. I would encourage all of you to read it--and see for 
yourself how this process can be manipulated. Some quotes from this 
document:
          ``The sponsor rejected FDA proposed labeling.''
          ``The division requested that the sponsors reconsider their 
        proposal . . .''
          ``Merck cancelled the January 09, 2002 meeting.''
    And many more.
    The current process of labeling is one of negotiations--if the 
``sponsor'' does not agree with what the FDA wants, it can continue to 
stall or worse. In the meantime, it can continue to sell its drug and 
promote its cardiovascular safety in the scientific and lay media. And 
the band plays on.
    Finally, one side gives in--the label is approved. A label that 
mostly supports Merck's position.
    This process needs to be corrected, if need be, by new legislation. 
The FDA should be given the authority that is accorded to our judicial 
system--to make unilateral decisions on issues of public health safety, 
after appropriate public hearings, without having to negotiate and 
reach agreement with drug companies. The FDA should regulate the drug 
companies, not collaborate or negotiate with them if there is any 
question of public safety.

              6. absence of publicly-available information

    The FDA approval process needs to be more open and subject to 
public scrutiny. Once a drug is approved, all the data supporting such 
approval should be put in the public domain. If this had been done with 
Vioxx, perhaps independent scientists would have been able to spot 
early signals. Similarly, all clinical study data submitted to the FDA 
should be available to the public after the drug is approved. Claims of 
``trade secrets'' should not take precedence over public health and 
safety. Pharmaceutical companies should not be allowed to selectively 
disseminate only positive data.
    The FDA should encourage its scientists to publish their findings--
even if these findings challenge currently-held opinions. In fact, it 
is more important to hear views of dissent--only through an open 
discussion of all issues does science advance. Scientists like Dr. 
Graham and Dr. Mossholder should be encouraged to discuss their 
findings in public, and publish in the scientific literature.

                       7. emphasis on drug safety

    It is important for life-saving medications to be approved in a 
rapid fashion. However, there needs to be a renewed focus on drug 
safety as well. Current standards regard every drug as safe--even one 
that has multiple safety signals in clinical trials--unless it can be 
proven with 95% certainty that it is not. Such certainty requires large 
trials, which are not done--and the band plays on--If there is 
conditional approval, this will change.
    An independent office of drug safety which does not report to the 
FDA new drug approval section should be established. Safety data on all 
new drug approvals must be vetted through this office. Such independent 
office should have the authority to conduct safety studies on approved 
drugs, or require that such studies be conducted if there are safety 
signals. Only then will be able to adhere to the principle of ``Primum, 
Non Nocere''--First, Do No Harm.
    Thank you.

                               References

    1. Singh G. Recent considerations in nonsteroidal anti-inflammatory 
drug gastropathy. Am J Med 1998; 105(1B):31-38.
    2. Singh G and Triadafilopoulos G. Epidemiology of NSAID-induced GI 
complications. J Rheumatol 1999; 26 Suppl 26:18-24.
    3. Singh G, Mithal A, Triadafilopoulos G. Decreasing 
hospitalizations due to complicated gastric and duodenal ulcers in the 
United States: 1998-2001. Gastroenterology 2004; 126 (4 Suppl. 2): A97-
98.
    4. Ray WA, Stein CM, Hall K, Daugherty JR, Griffin MR. Non-
steroidal anti-inflammatory drugs and risk of serious coronary heart 
disease: an observational cohort study. Lancet 2002;359:118-123.
    5. Muliner T. Anticipated consequences of NSAID antiplatelet 
effects on cardiovascular events and effects of excluding low-dose 
aspirin use in the Cox-2 GI Outcomes Megatrial. Letter of November 21, 
1996 to B Friedman, A Nies, and R Spector.
    6. Villalba ML. FDA Medical Officer Review of VIOXX (rofecoxib), 
NDA 21-042 (capsules) and NDA 21-052 (oral solution). Http://
www.fda.gov/ cder/drug/infopage/vioxx/default.htm.
    7. Targum SL. Consultation on NDA 21-042, S-007; Review of 
cardiovascular safety database [on Vioxx or rofecoxib). FDA Memorandum, 
Feb 1, 2001. Http://www.fda.gov/ohrms/dockets/ac/01/briefing/3677b2--
06--cardio.doc; last accessed on June 5, 2001.

    Mr. Deal. Dr. Singh, I am going to have to stop you at this 
point since we have exceeded the 5 minutes, but we will, I am 
sure, expound on this as we get to the question stage. Thank 
you very much.
    Mr. Singh. Thank you.
    Mr. Deal. And our next witness is Mr. Richard Kingham from 
here in Washington, DC of Covington & Burling. We are pleased 
to have you, Mr. Kingham.

                 STATEMENT OF RICHARD F. KINGHAM

    Mr. Kingham. Thank you, Mr. Chairman.
    I was asked to address the specific provision relating to 
punitive damages for products that are approved by FDA, 
particularly drugs, and that is what I will do.
    I have looked at the language that was in H.R. 5, though I 
recognize, of course, that there is no specific language before 
us today in this hearing.
    I note the following things. First, it is a very limited 
defense. It applies only to punitive damages. It does not, in 
its terms, limit the ability of a plaintiff to recover for 
economic damages, including pain and suffering. Now there are 
other issues in the bill, but this provision does not affect 
that. So it affects only punitive damages.
    What is more, it applies only if the product went through 
an FDA approval system and if the FDA actually looked at the 
aspect of the product that is the subject of the litigation and 
made it affirmative decision with respect to it. And it does 
not apply if the manufacturer withheld anything from the FDA 
during the approval process or afterwards, nor does it apply if 
anything improper was done in the way of payments to FDA 
officials.
    So it is a narrow and limited provision. It is not 
unprecedented. Not only have eight States passed legislation 
like this over the last 20 years, but Congress passed a 
provision very similar to this in 1986, which I was involved in 
negotiating, the National Childhood Vaccine Injury Act of 1986, 
which includes a provision that significantly limits the right 
to get punitive damages for products that are approved by FDA 
and are within the scope of that legislation. So we have ample 
precedent for this having been done.
    Now what is its rationale? The rationale ultimately is that 
if you have given all of the information to FDA that it needs 
to make benefit risk judgments about a product and if the FDA 
has made that judgment, then you can not be held liable for 
having engaged in the kind of egregious misconduct that 
warrants punitive damages. This does not mean that courts and 
juries can not second-guess, in the context of compensatory 
damages, whether the right decisions were made by 
manufacturers. They can, indeed.
    Now the fact is, all drugs, that I am familiar with, entail 
risks, and the approval of every drug is a benefit risk 
judgment. FDA officials, in my experience, and it is 31 years 
of experience, make a good faith effort to perform that 
function. Yes, they make decisions that well-intentioned people 
disagree with. They may even sometimes make mistakes. I do not 
believe there is any evidence that FDA officials engage in the 
kind of egregious misconduct that would warrant the imposition 
of punitive damages for the decisions they make and which 
manufacturers comply with.
    Let me switch now and just respond to a couple of things 
that have been said.
    Professor Rosenbaum suggests in her written testimony, and 
she suggested in her oral testimony, that there may be some 
constitutional problem with this proposed legislation. Well, 
let me say, first, there has never been a serious 
constitutional issue about a very similar provision included in 
the childhood vaccine legislation in 1986. That problem has 
never occurred.
    Second, a much stronger limitation on liability with 
respect to drug products, vaccines, was enacted by Congress 10 
years before that in the swine flu episode and that actually 
was tested in the courts and was determined not to violate the 
constitution. I don't think there is a serious constitutional 
argument here.
    I also don't think this legislation protects against a 
situation in which someone deliberately introduces poison, or 
otherwise tampers, with a product. In fact, it has provisions 
that expressly require compliance with tamper-evident packaging 
regulations as a condition of protection against punitive 
damages.
    Dr. Singh has made a number of points, and I won't deal 
with all of them, but I would say two things to respond to him.
    First of all, the FDA does have the power to require 
manufacturers to engage in post-marketing inquiries. There were 
regulations passed in the 1970's that give the agency that 
authority, if it wishes to use it. The agency does communicate 
with doctors. It does publish, in medical journals and other 
places, information concerning its findings from post-marketing 
safety evaluation and other activities that the agency engages 
in. The agency does communicate with the profession in other 
ways than through the drug approval process.
    There are, clearly, things that can be improved about FDA, 
about the pharmaceutical industry. There are always areas of 
improvement that can be identified. I simply do not see, in 
what has been presented here today, evidence of the kind of 
misbehavior on the FDA's part that would justify the imposition 
of punitive damages on people who comply with its requirements 
and fully disclose the information they have that is relevant 
to the imposition of those requirements.
    Thank you.
    [The prepared statement of Richard F. Kingham follows:]

 Prepared Statement of Richard F. Kingham, Partner, Covington & Burling

    Mr. Chairman, thank you for inviting me to testify before this 
Subcommittee. My name is Richard F. Kingham. I am a partner in the law 
firm of Covington & Burling, where I have practiced in the area of food 
and drug law for more than 31 years. During this time, I have 
represented pharmaceutical companies and industry associations in 
numerous proceedings before the Food and Drug Administration and other 
federal agencies. I have also advised clients with respect to product 
liability actions and the relationship between tort liability and the 
FDA drug approval process. I have served on committees of the National 
Institutes of Health and the Institute of Medicine of the National 
Academy of Sciences and have taught food and drug law and related 
subjects at the University of Virginia School of Law, the Georgetown 
University Law Center, and the University of Wales in the UK. I am 
testifying in my personal capacity at the request of the Committee, and 
am not representing any client.
    My statement addresses the proposal to provide a defense to 
punitive damages for manufacturers and distributors of drugs, 
biological products, and medical devices that have been subject to 
premarket approval, licensure, or clearance by FDA. Language to enact 
this type of protection included in section 7(c) of H.R.5 as passed by 
the House in the 108th Congress. I support the passage of legislation 
creating a carefully worded, narrow defense that is based on the 
language in that bill.
    A defense like that proposed in H.R.5 will protect against the 
imposition of punitive damage judgments against manufacturers, but only 
under very limited circumstances. The defense will not prevent any 
person from bringing a claim against a drug or device manufacturer. 
Injured patients will continue to be able to have their day in state 
court. Furthermore, the defense is narrowly crafted so that it will not 
prevent an injured patient from being awarded full compensation in any 
case. The full range of compensatory damages, including substantial 
awards for pain and suffering, will still be available to plaintiffs. 
The bill will provide only a narrow defense to the award of punitive 
damages.
    Moreover, only defendants that have complied in all relevant 
respects with FDA requirements are eligible to use this defense. FDA 
not only conducts a demanding and comprehensive safety assessment 
before each product reaches the market, but also continues to review 
the product's safety over its life on the market. Although the need for 
certain changes and reforms in FDA's review process recently has been 
the subject of debate, the agency's current structure and processes do 
support the goal of providing a comprehensive review. To facilitate 
this review, FDA imposes extensive reporting requirements on the 
manufacturers of drugs, biological products, and medical devices. Any 
manufacturer that knowingly misrepresents or withholds required 
information from FDA, and thus potentially distorts or subverts the FDA 
review process, will be unable to use this statutory defense against 
punitive damages.
    A review of even a few steps of the FDA review process for 
prescription pharmaceutical products reveals both the scope of the 
information that manufacturers must submit to FDA and to the breadth 
and depth of FDA's product review. I choose to focus on prescription 
drugs today because these products have been the topic of much 
discussion in recent months. The requirements for medical devices and 
biological products, including vaccines, are similar in breadth.
    In applying for FDA approval of a new prescription drug, the 
manufacturer is required to submit to FDA all known safety information 
about the drug, including information obtained in clinical trials in 
the U.S. and in foreign countries. As part of this application, the 
manufacturer must submit the results of affirmative large-scale studies 
of the drug's safety and effectiveness. These studies often involve 
several thousand patients at multiple locations. New Drug Applications 
(NDAs) literally can reach hundreds of thousands of pages in length.
    As part of a drug's approval, FDA may require the manufacturer to 
conduct additional studies and submit reports. These postmarketing 
studies provide additional data and may allow the manufacturer and the 
agency to identify rarely-occurring adverse events that could not have 
been identified in clinical trials of even thousands of patients.
    Whether or not postmarketing studies are required, the drug 
manufacturer must report to the agency a wide range of information 
about each marketed drug on an ongoing basis. For instance, the 
manufacturer must report to FDA adverse events that occur anywhere in 
the world, whether or not the company thinks that the event is caused 
by the drug. Any issues arising in the manufacturing process must be 
reported, as well. For instance, if even one batch of a distributed 
drug fails to meet a single manufacturing specification, FDA must be 
notified within 3 days. In annual reports to FDA, the manufacturer must 
submit the reports of any clinical trial conducted inside or outside of 
the U.S. The manufacturer also must notify FDA of any significant 
regulatory decision that affects the drug by any regulatory agency in 
the world.
    FDA's structure and processes allow the agency to review this 
information thoroughly and to update potential safety concerns 
continuously. In its reviewing Divisions, FDA employs hundreds of 
doctors, each qualified in the relevant scientific discipline. These 
doctors review individual data points for each drug, as well as the 
universe of data for similar products, to determine whether the 
product's benefit-risk ratio has changed and if additional product 
warnings or limitations are required. To assist in this assessment, FDA 
employs epidemiologists, statisticians, and microbiologists and has 
developed technology tailored to the reviewers' needs such as adverse 
event databases. Moreover, the agency's advisory committees, of which 
there is one for each category of drug, are composed of prominent 
specialists that are not employed by FDA and are required to comply 
with FDA requirements regarding conflicts of interest. FDA regularly 
refers technical issues to these committees for additional input.
    The combination of mandatory reporting by manufacturers and careful 
agency review allows FDA to identify immediate and unusual safety 
issues such as manufacturing errors, as well as long-term issues such 
as rarely-occurring but serious adverse events. The manufacturers 
clearly play an essential and irreplaceable role in the process.
    Manufacturers that act lawfully and in good faith with FDA's 
requirements--that submit all required information to FDA and that 
comply with any limitations that FDA imposes on the product's 
marketing--still may be exposed to tort claims of negligence and strict 
liability under the proposed statutory language. They still may be 
required to pay compensatory damages. This bill properly would 
recognize, however, that these manufacturers cannot be deemed to have 
engaged in the sort of egregious misconduct that would justify punitive 
damages. Their good faith compliance with the regulatory requirements 
cannot be viewed as the kind of behavior that would ``shock the 
conscience'' of the community and thus deserve to be subject to 
punitive damages.
    Indeed, commentators have urged for years that regulatory 
compliance be deemed a defense to claims for punitive damages. In 1991, 
a very distinguished panel writing the Reporter's Study on Enterprise 
Responsibility for Personal Injury for the American Law Institute 
asserted that, ``If a defendant has fully complied with regulatory 
requirements and fully disclosed all material information relating to 
risk and its control, it is hard to justify the jury's freedom to award 
punitive damages.'' The panel argued specifically that 
``Pharmaceuticals present a special combination of circumstances 
justifying such a [limited] defense.''
    Congress itself took that view in passing the 1986 National 
Childhood Vaccine Injury Act. That Act creates a limited defense to 
punitive damages for manufacturers of certain vaccines. That 
provision's limitations are similar to those in the proposed language, 
in that vaccine manufacturers may invoke the defense only if they can 
demonstrate their compliance in all material respects with the relevant 
requirements of the Federal Food, Drug, and Cosmetic Act (FDCA). That 
legislation has successfully achieved the goals that led to its 
enactment. Companies developing or testing vaccines for many new uses 
are not covered by that Act, however.
    A large number of states also have taken the view that 
manufacturers should be able to defend themselves from punitive damages 
on the basis of their compliance with FDA requirements. Since New 
Jersey first enacted such a defense nearly 20 years ago, at least seven 
additional states have created a statutory defense either for FDA-
approved products or for all products that comply with mandatory state 
or Federal government standards. In addition, six other states either 
prohibit claims for punitive damages more generally or make no 
provision for the award of punitive damages. Michigan goes even 
further, providing a complete defense to tort liability for products 
that are FDA-approved and compliant.
    Thus, at least 15 states provide defenses that are at least as 
generous as the language of the proposed bill. There has been no 
suggestion that these state laws have precluded injured patients from 
successfully litigating cases of negligence and strict liability 
against companies manufacturing and distributing drugs, biologics, and 
medical devices. In fact, the legal scholars that endorse a limited 
regulatory compliance defense acknowledge that the defense will affect 
a relatively limited number of cases.
    The language of H.R.5 also appropriately makes the defense 
unavailable where a person illegally paid or bribed an FDA official to 
obtain or maintain the approval, clearance, or licensure for the 
product at issue. Although no innovative pharmaceutical manufacturer 
has been accused of bribery, and although the concerns regarding 
generic manufacturers appear to have been resolved, this language 
remains a necessary and wise precaution.
    In summary, this House should enact a carefully crafted, limited 
defense to punitive damages for products that are subject to and 
compliant with FDA premarket approval requirements. Under such a 
provision, no injured person will go uncompensated. No person will 
receive less than complete compensation. At the same time, the defense 
will encourage reporting by FDA-regulated companies and will further 
strengthen the already comprehensive FDA review process for drugs, 
biological products, and medical devices.

    Mr. Deal. Thank you, sir.
    Our next witness is Dr. Sidney Wolfe, Director of the 
Health Research Group at Public Citizen.
    Dr. Wolfe.

                  STATEMENT OF SIDNEY M. WOLFE

    Mr. Wolfe. Thank you.
    In keeping in this whole idea of a medical defense and if 
something is approved by the FDA it must be okay is the idea 
that the FDA is doing a good job. We surveyed physicians in the 
FDA in 1998 because a number of drugs that shouldn't have come 
on the market were coming on, and then they were being taken 
off. And they told us that there were 27 drugs, which they had 
thought were too dangerous, which were approved over their 
head. Seventeen of them told us that the standards for safety 
and efficacy had--were lower than they had been prior to 1995, 
and several said they had been silenced against talking about 
drug dangers at Advisory Committee hearings.
    The FDA itself followed up our study several years later, 
and they found that a third of the medical officers didn't feel 
comfortable expressing different scientific opinions, and a 
number of reviewers said decisions should be based more on 
science and less on corporate wishes.
    And then finally, just a year and a half ago, the Inspector 
General of HHS did another study on the same topic and found 
that 18 percent of the physicians in the FDA felt pressure to 
recommend that drugs be approved for sale, despite their 
reservations. The conclusion of the inspector general is 
overall, these findings represent a significant safety warning.
    I am now going to quickly go through seven examples of 
drugs: two have been taken off of the market much too late, 
five are still on the market. The five that are still on, we 
have filed petitions with the FDA with all of them to be 
banned.
    Rezulin, a diabetes drug, approved in March 1997, and 
within a few months, it was taken off the market in the United 
Kingdom because of liver damage largely in the United States. 
Six deaths from liver damage. We petitioned the FDA to ban this 
drug. A few months later, by then, 26 liver deaths. The FDA 
held an Advisory Committee meeting. Another couple of years 
later, 43 liver deaths. And finally, after FDA physicians 
complained not for attribution that the drug should be taken 
off the market, it was taken off the market several years later 
than it had been in the United Kingdom. By then, 63 liver 
deaths, 7 transplants.
    Trovan, an antibiotic, was taken off the market everywhere 
in the world because of liver damage. Liver damage had shown up 
before it was approved in the United States in 10 percent of 
men who were tested with this Pfizer drug. When the FDA finally 
decided what to do, instead of banning the drug, as the rest of 
the world had done, they banned it except for people in nursing 
homes and in hospitals. When we filed the petition in 1999 to 
ban the drug, there were eight cases of liver failure, 
including five deaths and three transplants. This morning, we 
looked at the most recent data: 56 cases of liver failure, 
including 29 deaths and 9 transplants. This drug is still in 
the market, only in the United States because of the FDA's 
incompetence, I think.
    Baycol, a cholesterol-lowering drug, was taken off the 
market a year after the FDA had enough information to be aware 
that it was much more dangerous than the other cholesterol-
lowering drugs. By the time it was taken off the market, there 
were 1,899 cases of this life-threatening muscle destruction, 
called rhabdomyolysis. Many of these had occurred in the year 
between when the FDA knew and when the FDA acted.
    A somewhat chemically related cousin to Baycol is a drug we 
tried to stop from getting on the market in the United States 
called Crestor, another cholesterol-lowering drug. Before 
approval, it looked like it had more cases of this same 
rhabdomyolysis than any drug ever, even Baycol, which came off 
the market, hadn't shown any of these cases prior to its 
approval. An FDA medical officer looking at some kidney damage 
said, ``This may represent an unacceptable risk since the other 
cholesterol-lowering drugs don't have these effects.'' We tried 
to stop it, but since it came into the market, there have been 
100 cases of this life-threatening rhabdomyolysis muscle 
destruction and more than 40 cases of renal failure, a rate 75 
times higher per million prescriptions than the other statins 
combined.
    Vioxx has been mentioned before. Four years before it came 
off the market, a published study showed a four to fivefold 
increased risk in heart attacks. We asked the FDA to put a 
black box warning on it. Had that been done, hundreds of 
thousands of people--millions of people who took the drug 
wouldn't have taken it, and according to FDA's own estimates, 
tens of thousands of heart attacks would have been prevented, 
including Mr. Huggins' wife we heard about before.
    Bextra, another drug in this family, still on the market. 
We had to sue the FDA, because Pfizer and the FDA didn't want 
us to see the internal reviews on this drug, which showed an 
FDA physician concerned about the blood clotting properties of 
this drug and the similarity between it and Vioxx.
    And finally, Meridia, sibutramine, a weight-reduction drug. 
The FDA physician and the Advisory Committee thought it was too 
dangerous. It shouldn't have been approved. It came on the 
market. At this point, 56 cardiovascular deaths in people using 
the drug, many under the age of 50.
    Not counting Vioxx or Baycol, we are talking about 
hundreds, if not thousands, of people who have died 
unnecessarily because of drugs the FDA should have taken off 
the market. We have a book called ``Worst Pills, Best Pills,'' 
which lists 170 other drugs that we say do not use, also on our 
website, worstpills.org. The FDA clearly is not doing a good 
job, and it is adding insult to injury to try and immunize drug 
companies because they pass the so-called FDA gold standard.
    [The prepared statement of Sidney M. Wolfe follows:]

   Prepared Statement of Sidney M. Wolfe, Director, Public Citizen's 
                         Health Research Group

    Chairman Deal and Members of the Subcommittee, thank you for the 
opportunity to testify today. Under the most perfect circumstances, if 
the FDA were actually doing as good a job as possible at preventing the 
approval of drugs and other medical products whose benefits are known 
to be outweighed by their risks and, as expeditiously as possible, 
removing such products when such risks are discovered after approval, 
this legislation would still unfairly punish patients and their 
families.
    I will focus on substantial evidence, based on our more than 33 
years of oversight over the agency, demonstrating that the FDA is far 
from doing an adequate job protecting the public from such products, 
making the impact of this legislation even more disastrous to potential 
victims.

      HRG MEDICAL OFFICER SURVEY/FDA STUDY/INSPECTOR GENERAL STUDY

    In late 1998, prompted by many drugs with clear evidence of dangers 
not being adequately regulated, we surveyed FDA medical officers who 
were the primary reviewers in the Center for Drug Evaluation and 
Research (CDER) for new drug applications. The responses, from 53 FDA 
physicians, included 27 instances cited in which the FDA medical 
officer thought a drug too dangerous to be approved but approval 
occurred over their objection. Seventeen medical officers described the 
current standards of FDA review for safety and efficacy as ``lower'' or 
``much lower'' compared to those in existence prior to 1995. And 
several medical officers said they had been instructed by their 
superiors to censor their reports or presentations.
    A study in 2001 by the FDA itself, precipitated by high turnover 
rates among scientists and physicians in the agency, showed that about 
one-third of medical officers did not feel comfortable expressing 
differing scientific opinions, and a similar number felt that decisions 
adverse to a drug were stigmatized within the agency. A number of 
reviewers said that decisions should be based more on science and less 
on corporate wishes.
    A subsequent study by the HHS Inspector General in 2003 confirmed 
that decisions concerning drug safety and effectiveness were being 
overturned. Eighteen percent of surveyed FDA physicians and scientists 
felt pressure to recommend that drugs be approved for sale despite 
their reservations about the drug's safety, efficacy or quality. The 
report concluded: ``Overall, these findings present a significant 
warning signal.''

          SPECIFIC EXAMPLES OF DANGEROUSLY POOR FDA REGULATION

Rezulin (troglitazone-diabetes drug)
 March, 1997: U.S. Rezulin marketing begins
 Dec, 1997: drug withdrawn in UK after 130 cases of liver damage 
        including six deaths, mainly in the US
 July, 1998: Health Research Group petitions FDA to ban Rezulin after 
        560 cases of liver damage, including 26 liver deaths
 March, 1999: FDA advisory committee meeting: now 43 liver deaths
 early, 2000: Some FDA physicians state drug should be banned
 March, 2000: Rezulin is withdrawn in the US; by then, 63 liver 
        deaths, seven liver transplants
    Trovan (trovafloxacin-antibiotic) Like two other drugs also 
approved in 1997, the painkiller Duract (bromfenac) and the diabetes 
drug Rezulin (troglitazone), (now both off the market) there was also 
clear evidence of liver damage caused by Trovan (in animals and in 
humans) before the drug was approved in December 1997. In one study 
prior to approval in which the drug was used to treat prostatitis, 
almost 10% of the men (14 out of 140) given the drug developed evidence 
of liver toxicity. With eight other drugs in the fluoroquinolone 
antibiotic family available in the U.S, as well as dozens of other 
safer and equally or more effective drugs for infections, the removal 
of Trovan from the market would not have deprived doctors or patients 
of a drug that could possibly be considered indispensable. Instead of 
banning Trovan as was done everywhere else in the world, the FDA chose 
to ``limit'' its use in the United States to patients who were either 
hospitalized or in nursing homes. At the time of our petition in 1999 
to ban the drug, there were eight cases of liver failure, including 
five deaths and three liver transplants. There are now a total of 56 
cases of liver failure, including 29 deaths and nine people requiring 
liver transplants.
    Baycol (cerivastatin-cholesterol lowering) Approximately one year 
before Baycol was removed from the market in August 2001, its 
manufacturer Bayer, using FDA data on other statins found that Baycol 
had 20 times more reports of rhabdomyolysis (an often-fatal destruction 
of muscle) per million prescriptions than Lipitor. An FDA official, 
feebly excusing FDA's belated ban, stated that ``We weren't aware at 
that point of the difference between Baycol, and the other similar 
[drugs]. Our expectation is when a company becomes aware of a specific 
problem with their drug, they come to us.'' By the time Baycol was 
banned, there were 1,899 cases of rhabdomyolysis, a significant number 
having occurred between the time there was unequivocal evidence that 
FDA should have banned the drug and when it was actually banned a year 
later.
    Crestor (rosuvastatin-cholesterol lowering) Despite the Baycol 
disaster, and some chemical similarity between Baycol and Crestor, the 
FDA approved Crestor in August 2003, knowing that prior to approval 
there had already been 7 cases of rhabdomyolysis in clinical trials, 
compared to none in clinical trials prior to Baycol's approval (or that 
of any other statin). In addition to this risk, which AstraZeneca 
(Crestor's manufacturer) and the FDA wrote off as limited to the 
highest (80 mg) dose that was subsequently not approved, the drug also 
causes unique kidney toxicity, even in people who did not have 
rhabdomyolysis that can lead to secondary kidney damage. An FDA medical 
officer reviewing dozens of cases of blood and protein in the urine and 
several cases of renal insufficiency/renal failure in people using 
Crestor before approval said ``if they [these findings] are the signals 
for the potential progression to renal failure in a small number of 
patients, this may represent an unacceptable risk since currently 
approved statins do not have similar renal effects.'' Since Crestor 
came on the market, there have been more than 100 cases of 
rhabdomyolysis reported to the FDA, a rate per million prescriptions 
that is higher than any of the other statins still on the market. In 
addition, there have been approximately 40 cases of renal failure in 
people without rhabdomyolysis, a rate approximately 75 times higher per 
million prescriptions than that of the other statins combined.
    Vioxx (rofecoxib-NSAID) A study published more than four years ago 
showed a four to five-fold increase in heart attacks in people using 
Vioxx compared to those using naproxen. As a result, we asked FDA for a 
black box warning four years ago. Although such a warning would have 
greatly reduced the toll of tens of thousands of heart attacks 
occurring between then and Vioxx's withdrawal, the agency, to the 
pleasure of Merck, rejected a black box and chose not to adequately 
warn the public. Many lives were thus lost.
    Bextra (valdecoxib-NSAID) When we learned almost two years ago that 
FDA had rejected Pfizer's application for a new pain indication for 
Bextra, the agency, in collaboration with Pfizer, denied our freedom of 
information request for the FDA review as to why the application had 
been rejected. We thus had to sue the FDA to obtain these data. The 
medical officer who reviewed the study stated that ``The excess of 
serious cardiovascular thromboembolic [blood clots] in the valdecoxib 
arm of the CABG [Coronary Artery Bypass Graft] trial is of note as the 
entire study population received prophylactic low dose aspirin as part 
of the standard of care in this setting to minimize just such events. 
Given the emerging concern over a possible pro-thrombotic action of 
certain agents in the COX2 class, these data are of concern.''
    Meridia (sibutramine-weight reduction) Both the FDA medical officer 
who reviewed the new drug application for the amphetamine-like weight 
reduction drug Meridia and the FDA advisory committee were opposed to 
the drug's approval because of safety concerns such as increased blood 
pressure. Since approval, there have been reports of a total of 56 
cardiovascular deaths in people using Meridia, a large proportion of 
whom were under the age of 50.
    If this legislation is enacted, it will represent the third prong 
of a three-pronged attack on patients' safety involving the FDA and the 
drug and device industries:
    The two prongs involving the FDA are, as discussed in the above 
examples, inadequate regulation over the introduction and market 
removal of unsafe drugs and a sharp (85%) decrease from 1998 through 
2004 in FDA enforcement actions concerning illegal prescription drug 
ads--distorting the power of information into misleading doctors and 
patients about risks and benefits of drugs. The third prong, reducing 
the ``regulation'' of drug and device companies by lessening their 
liability for injuries and deaths to patients, is all the more onerous 
in the face of such lax FDA activities. Unless all three forms of 
``regulation'' are allowed to operate in a maximal way, patients will 
not be adequately protected.
    In addition to the four drugs discussed above that are still on the 
market in this country, all of which we have petitioned the FDA to ban, 
the newly published edition of our book, Worst Pills, Best Pills and 
our web site, WorstPills.org both list 176 other prescription drugs 
that we and our consultants urge that people DO NOT USE and discuss 
safer alternatives to each of these.

Comments Regarding Draconian Limits the House Proposes to Placed on 
        Patients' Medical Malpractice and Products Liability Lawsuits
    Ensuring safe drugs for Americas' consumers is not just predicated 
on a strong regulatory system at the FDA. The role of the civil justice 
system is equally important. Without strong state laws that enable 
patients and consumers to hold medical providers accountable for 
negligence or errors, the medical industry--including the drug 
companies--will have much more incentive to cut corners in pursuit of 
profits and will have much less incentive to be vigilant about patient 
safety.
    For this reason, Public Citizen strongly objected to the two 
identical omnibus medical malpractice bills voted approved by the House 
last Congress (H.R. 5 and H.R. 4280). As it is likely that the same 
legislation will soon be before this committee and the entire House, I 
would like to provide our perspective on how inadvisable it is.
    This legislation is remarkable in that its provisions not only 
apply to medical malpractice lawsuits against doctors, hospitals and 
HMOs, but also to pharmaceutical companies and medical device companies 
when their products injure or kill. In this way, the legislation is 
also a product liability bill.
    The cumulative effect of the provisions would be to limit the 
ability of patients to recover for serious injuries and also to limit 
the ability of patients to find lawyers willing to take their cases. As 
a result, drug and device companies would have less incentive to ensure 
that their products are as safe as possible and that adverse effects 
are known before the products are marketed--a consequence that will 
threaten the health and well-being of us all.
    The two bills introduced in the last Congress proposed to cap non-
economic damages at $250,000. Non-economic damages compensate people 
for pain and suffering--sometimes a lifetime's worth--resulting from 
permanent and significant injury such as brain damage, paralysis, 
disfigurement, or lost childbearing ability. For example, this cap 
would affect patients with significant kidney damage from a drug such 
as Rezulin, permanent incapacitating back injury caused by a broken 
spinal screw, or children who lost their young father from a heart 
attack induced by a CoX-2 pain reliever. Cases seeking compensation for 
such injuries are not ``frivolous'' cases--the usual justification 
offered by President Bush and others for imposing a damages cap. And a 
$250,000 cap will have it s biggest impact on the cases that are the 
most deserving of large compensation--something the legislation's 
proponents claim they do not intend. Moreover, because the bill would 
not allow the damages to account for inflation, its arbitrary limits 
would become more unjust with each day.
    In addition, the two bills introduced in the last Congress would 
have virtually eliminated the ability of injured patients to recover 
punitive damages. Punitive damages are awarded to punish and deter 
serious and wanton wrongdoing. Although they are awarded in only a 
small fraction of civil cases, the threat of punitive damages is 
important to deter reckless disregard for patient safety. Last year's 
legislation would have eliminated punitive damages entirely in cases 
against drug and medical device companies or restricted them to 
instances in which the plaintiff could show that the company had 
marketed the product without FDA approval or that it had committed 
fraud to get FDA approval. Because prescription drugs and medical 
devices cannot be sold legally without FDA approval, this latter 
proposal effectively bans punitives.
    Litigation against Merck is still in its early stages, but it may 
unearth very incriminating documents showing that the company knew 
Vioxx posed a serious danger to a significant number of patients, that 
the company knew that Vioxx had limited, if any, improved efficacy over 
ibuprofen, but that, to protect the company's investment, the company 
engaged in a cover-up of information that would have saved lives. If 
what I have posited about Merck is true, would the American public 
support sparing a company that engages in such unethical conduct from 
punitive damages? I can't imagine it.
    The proposal to apply a one-year statute of limitations, running 
from discovery of the injury, will provide another hurdle to the 
ability of injured consumers to bring suit. The law in most states 
starts the limitation period running from the discovery of the 
malpractice, not discovery of the injury. This distinction is important 
because an injury will frequently manifest itself well before its cause 
is known. For example, the association between the anti-depressant 
Serzone and liver toxicity was not widely known until 2002, years after 
the drug came on the market in 1995. The injured party should not have 
to twice bear the cost of this defective product.
    The two medical malpractice bills also would have changed state 
rules of joint and several liability, leaving patients with no recovery 
for the share of damages assigned to an uninsured, underinsured, or 
bankrupt defendant. 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 defendant if the other is unable to pay its share. In 
essence, the legal system recognizes that the wrongdoing could not have 
occurred without the participation of all parties and, therefore, that 
all parties should be accountable for making the victim whole.
    Next, by instituting a ``periodic payment rule'' for future damages 
over $100,000, the legislation would allow defendants and insurance 
companies to string out payments for future damages over the life 
expectancy of the victim, rather than having to pay up front. Thus, 
even after the civil justice system has determined that the money 
rightfully belongs to the plaintiff, defendants and insurers would be 
able to invest and earn interest on a large piece of the plaintiff's 
damages award. Victims would be left to cope with new and unexpected 
expenses attributable to their injury, such as changing medical costs 
or increased transportation costs. The bill would provide no protection 
to the victim if his or her needs change or if the defendant drug 
manufacturer's insurance company becomes insolvent.
    Finally, the cap on plaintiffs' attorney fees payable under 
contingent fee arrangements will drastically cut back on the ability of 
patients with limited means to get qualified legal counsel. As a 
result, patients' ability to bring product liability cases against drug 
and device companies, which have massive resources to defend 
themselves, will be reduced significantly.
    Medical malpractice and product liability cases are very risky for 
plaintiffs' attorneys for three reasons: the costs are especially high, 
the likelihood of prevailing is quite low compared with other types of 
tort actions, and the lawyers do not get paid unless they win. But 
limiting plaintiffs' attorney fees will create an enormous imbalance in 
favor of the defendant. While we may disagree on the need for damage 
caps, we should all be able to agree that our legal system should 
remain a fair and balanced forum accessible to all Americans.

    Mr. Deal. Thank you.
    Our last witness is Victor Schwartz of Shook, Hardy & Bacon 
here in Washington, DC.
    Mr. Schwartz, we are pleased to have you.

                 STATEMENT OF VICTOR E. SCHWARTZ

    Mr. Schwartz. Okay. Thank you.
    I think I am the last of 15 witnesses here that as a 
prominent politician who had married a woman who was her sixth 
husband, and I once heard him say he knew what the challenge 
was, he just had to find a way to make an interest----
    Mr. Deal. I haven't started the clock yet, sir.
    Mr. Schwartz. I know. They always let me--you have one line 
that is not on the clock.
    Mr. Chairman, thank you for inviting me and Ms. DeGette, is 
that how you pronounce it, actually, I was in--down in Illinois 
in that hellhole of Madison County, and they had a woman 
doctor, an ob-gyn, who was moving to Colorado because her 
insurance would be reduced by 80 percent. And it is just 
something to think about. I think that doctors should actually 
practice where they are needed and not be hopscotching around 
the country to find better tort laws.
    But I am going to briefly talk about punitive damages and 
this somewhat controversial provision in your bill.
    Punitive damages, plain and simple, are there to punish 
people who have done something wrong. And anybody, and I have 
won punitive damage cases, the first one in Ohio, actually. And 
I had the State in back of me to enforce that judgment. And 
there is really very little difference between a punitive 
damage award, which is strictly punishment, and the State going 
after somebody and punishing them for something wrong that they 
have done.
    And in Texas, when I was down there, the Texas trial 
lawyers had signs up all over the place. And I like those 
signs. They said, ``Punitive damages are needed to punish 
corporate criminals.'' Well, if somebody has followed the law, 
they are not a criminal. This body, a few years ago, passed 
legislation that raised the speed limit. My friend Ralph Nato 
was aghast. He thought it was a very bad thing. If a person 
today drives at 65 miles an hour, a clear day, they are driving 
carefully, and they have an accident, and an expert comes in, 
and this can happen, and that expert testifies, ``Well, if he 
had driven 55, there wouldn't have been an accident.'' Should 
that person be punished?
    FDA, we hear it today, and we are going to hear it again 
and again, is in controversy. And whether their rules are right 
or their rules are wrong, that is something for this body to 
decide. But if somebody is following the law, the exact letter 
of the law, it is very difficult to see, under our system of 
justice, why that person should be punished.
    Now that is the FDA defense, properly construed. And there 
is something else that hasn't been mentioned by any other 
witness. First, in Ohio, when this bill was--the same provision 
was put into law in 1988, I was there. And I was told by 
opponents that Ohio would become the dumping ground for bad 
drugs, that this would create very bad incentives, it would be 
Sodom and Gomorra. And in 2005, the legislation was considered. 
What happened? None of that. In fact, it worked very well. 
There has been no dumping ground. There have been no problems 
whatsoever. And we have actual experience with this provision 
and these horrible tales that are told have not come true.
    And Mr. Brown, good to see you. I didn't get a chance to 
say hello.
    My role as counsel to pharmaceutical companies, and the law 
is not just made of carrots and sticks. It has both aspects to 
it. And just hitting somebody over the head all of the time 
doesn't always bring about a good result. Mr. Stewart of NYU, 
the ALI Enterprise study showed the same thing that is my 
experience. If you have a provision in the law that says if you 
report, you do not have to be punished, that creates an 
incentive on that marginal piece to have the drug company 
report. And that is one of the benefits of this type of 
defense. It has incentives as well as punishments. And they 
also know that if they don't, a jury is told about the defense, 
and the jury is told that if you don't comply with all of the 
regulations, there is no shield. And that jury hears in its 
head that if there is noncompliance, punishment is appropriate.
    So I don't see the controversy, really, on policy over this 
type of defense. There is a controversy about whether the FDA 
rules should be changed. But if one follows the law, it is very 
difficult, under our system of justice, to justify punishment.
    Thank you very much.
    [The prepared statement of Victor E. Schwartz follows:]

  Prepared Statement of Victor E. Schwartz, General Counsel, American 
                        Tort Reform Association

    Chairman Deal, Ranking Member Brown, and Members of this 
Distinguished Subcommittee, I thank you for your kind invitation to 
testify today about whether it is appropriate to preclude punitive 
damages from being awarded against manufacturers of medical products, 
when the products were subject to pre-market approval by the Food and 
Drug Administration (hereinafter ``FDA'').

                               BACKGROUND

    By way of background, the subject of tort law has been of interest 
to me throughout my career. I was a law professor and acting dean of 
the University of Cincinnati College of Law, and have taught at the 
University of Virginia, Georgetown, and American University Law 
Schools. I continue my affiliation with Cincinnati as an Adjunct 
Professor and a Member of the Board of Visitors.
    I am co-author of Prosser, Wade & Schwartz's Torts (10th ed., 
2000), the most widely used torts casebook in the United States. For 
the first fourteen years of my practice, I represented only injured 
persons and assisted in obtaining the first punitive damages verdict in 
the State of Ohio against a product manufacturer.
    I have served under both President Ford and President Carter as 
Chair of the Federal Inter-Agency Task Force on Product Liability. That 
Task Force explored the product liability crisis that arose in the late 
1970s and 1980s. It also developed the Model Uniform Product Law Act, 
which has been used as a basis for state legislation and the 
development of law by courts. I have had the privilege of working with 
Members of Congress from both parties on numerous federal liability 
issues, including the successful enactment of the Biomaterials 
Assurance Access Act of 1998, the General Aviation Revitalization Act 
of 1994, and the Paul D. Coverdell Teacher Protection Act of 2001.
    For the past two decades, I have worked at law firms whose 
principal practice has been on the defense side. Currently, I chair 
Shook, Hardy & Bacon's Public Policy Group. Approximately two hundred 
articles that I have authored or co-authored have been published in 
learned journals. I have been fortunate to have many of them cited by 
courts as a basis for rulings of law. I serve, and I am speaking today, 
as General Counsel to the American Tort Reform Association (hereinafter 
``ATRA''), but the views are solely my own, based on my practice and 
experience. No one, other than my Public Policy Group colleagues at 
Shook, Hardy & Bacon, has changed or modified my testimony.

               HISTORY OF PUNITIVE DAMAGES IN A NUTSHELL

    Punitive damages evolved in England in the development of common 
law. They served, and continue to serve, an important function. They 
were an auxiliary to the criminal law to help assure that persons who 
committed wrongful criminal acts paid a price for their conduct, even 
if the government did not prosecute these acts. The purposes of 
punitive damages are to punish the defendant, deter him from committing 
future wrongful acts and to deter others who might be similarly 
inclined, so that such acts are less likely to occur in the future.
    It should be absolutely clear to this Subcommittee that punitive 
damages are not compensatory. Compensatory damages include paying 
people for their out-of-pocket losses in the past and in the future, 
and also damages for pain and suffering, emotional loss, and other 
harms that do not readily translate to a precise monetary value.
    Punitive damages are, in effect, punishment by the state. State 
means are used to enforce punitive damages, the same way state means 
are used to enforce the criminal law or government action and civil 
fines. As a practical matter, there is no difference. The state will 
use its official mechanisms to enforce such awards, and the sting is 
the same. Sometimes it is more so, because punitive damages--especially 
when they are large--generate quite a bit of publicity. Most 
constitutional rights that protect criminal defendants, however, do not 
apply to defendants who are subject to punitive damages. This is one 
basic reason why this body should work to assure that the punitive 
damages system is fair.

                     THE CHANGE IN PUNITIVE DAMAGES

    During oral argument of a major punitive damage case, Pacific Mut. 
Life Ins. Co. v. Haslip, 499 U.S. 1 (1991), Justice Scalia asked a 
lawyer for a petitioner who was seeking to overturn a punitive damages 
award, ``Who whispers in my ear what was constitutional in 1789 is not 
constitutional today?'' I attended that argument and Justice Scalia, at 
least in my view, did not receive a clear answer to his question. Here 
is the answer.
    In 1789, punitive damages were confined solely to purposeful, 
wrongful acts, such as battery, assault, and wrongful imprisonment. 
They also were never larger than compensatory awards, and usually less. 
They dealt with a wrongful act and were imposed once on a defendant. In 
the past three decades, punitive damages have undergone substantial 
change in all three of these areas. Punitive damages are not at all the 
same as they were in 1789.
    First, the standard for awarding punitive damages has been 
attenuated in a number of states, and mere gross negligence as 
contrasted with purposeful conduct, could be a trigger for making an 
award. Second, the types of acts for which punitive damages may be 
imposed have become less clear and harder to define or predict. 
Finally, punitive damages awards might be awarded multiple times, 
especially against manufacturers where each plaintiff against the 
company may seek an award and a jury has absolutely no idea that awards 
were previously made.
    This is by way of background to evaluate whether it is appropriate 
to allow the state to punish a defendant--who has marketed a drug or 
medical device, and has fully complied with FDA pre-market approval and 
post-market rules and regulations. Of course, every Member of this 
Subcommittee knows, and most Americans know, that the FDA and its 
procedures have been under question in recent times. Not long ago, I 
remember when the FDA was challenged because it was not moving quickly 
enough in providing the American public with drugs that were needed to 
fight serious diseases. Now, among many, there is a contrary feeling--
that the FDA may be moving too quickly and not carefully enough in the 
drug approval process. That debate is an important one to have in 
Congress, but it is not relevant for a core public policy decision 
about whether someone should be punished who has complied with the law.
    Let me give you an example. A number of years ago, Congress decided 
to allow states to raise the speed limit on automobile driving. My 
friend, Ralph Nader, and others, strongly decried the charge, stating 
that it would lead to more accidents and more fatalities. Nevertheless, 
it was the view of Congress that the states should be permitted to 
allow drivers to go drive much faster than 55 mph--65, 75 or even 85 
mph. Consider a motorist going 65 mph on a clear day that tries to 
drive carefully but nevertheless has a collision. The facts indicate 
that if he had been driving more slowly, he may have avoided an 
accident. In our legal system, that drive may be subject to civil 
liability. Rational thought clearly suggests, however, that a driver 
going at or below the legal speed limit should not be punished by the 
state. If the law needs to change, this body or state legislature 
should do it. Punishment is not appropriate for totally lawful acts 
that have been specifically considered by Congress.
    Even prominent members of the personal injury bar agree with this 
concept. For example, in a trip to Texas not long ago, I noticed 
advertisements on the highway, placed by the Texas Trial Lawyers 
Association, which is composed of some of the toughest, most effective 
personal injury lawyers in America. The advertisement stated, 
``Punitive damages are needed to punish corporate criminals.'' This may 
be true because law enforcement mechanisms are sometimes overwhelmed 
with more serious cases and do not have time to punish wrongful, 
criminal corporate acts. If a corporation has complied with the law, 
and a company that manufactures pharmaceuticals or medical devices has 
met the standards of pre-market approval for the FDA, it is difficult, 
as a matter of public policy, to see why they should be punished. If 
the FDA standard needs to be changed (just like the situation with the 
speed limit, which may need to be changed), it is the responsibility of 
this body to make the change. No matter how emotional the arguments 
might be, it is not sound public policy to punish a company that has 
complied with the legal rules.

        EXPERIENCE WITH FDA COMPLIANCE PUNITIVE DAMAGES DEFENSE

    Compliance with FDA standards defenses have been enacted in a 
number of states, including Arizona, Michigan, New Jersey, Oregon, Utah 
and Ohio (copies of laws attached hereto). The Michigan law goes 
further than the bill you are considering--it provides that a product 
is not defective or unreasonably dangerous, and the manufacturer or 
seller is therefore not liable in a product liability action, if the 
product at issue was approved by the FDA for safety and efficacy.
    I was personally involved in the development of the law in Ohio, 
which was enacted in 1987. Those who opposed it predicted that the drug 
companies might treat Ohio as part of Sodom and Gomorra and dump 
dangerous drugs in the state. They said drug warnings might disappear, 
and defective drugs would be heaped upon the good citizens of Ohio. As 
a member of the Ohio Bar, former dean and currently an Adjunct 
Professor at Cincinnati, I certainly did not wish to be part of such 
mayhem, but I believed, for the policy reasons I have outlined today, 
that punishment should not be imposed against people who follow the 
law. The FDA compliance punitive damages defense would be sound policy 
and do no harm. Well, that provision has now been law for more than 15 
years. Recently, the issue was reviewed again by the Ohio legislature, 
and the legislation kept that law in place there has been not a 
scintilla of evidence that any wrongful conduct was caused by this 
defense. In fact, in December 2004, the Ohio legislature amended the 
law to extend the FDA compliance punitive damages defense to over-the-
counter drugs and medical devices, in addition to prescription drugs.
    Pharmaceutical companies in Ohio and a number of other states have 
been treated with fairness in not being subject to punishment when they 
follow the law. They still may be subject to liability for compensatory 
damages. In pharmaceutical cases, these damages are substantial, but 
they should not be punished.
    The experience in Ohio can be revealing, because sometimes there 
may be factual questions as to whether a particular defendant withheld 
material information or made misrepresentations to the FDA regulators; 
in other words, a question of fact. When such an issue goes to a jury, 
it is told that punitive damages are not to be awarded if a company met 
the standards of pre-market approval and did not withhold material 
information or misrepresent the facts. What a jury sometimes hears is 
that it should award punitive damages if a defendant did not comply 
with FDA regulations. For that reason, in this type of defense there is 
a certain danger to companies who are reckless or negligent and fail to 
meet FDA requirements. It exerts a powerful pressure to follow the law.

            MOTIVATION IS NOT SIMPLY BY STICKS, BUT CARROTS

    Incentives to follow the law can be positive. Motivation is not 
brought about by sticks; carrots help too. In the past twenty years of 
practice, I have worked with pharmaceutical companies in a counseling 
role. I would share with you that a good, well-drafted FDA punitive 
damage defense can help bring about good conduct.
    FDA rules sometimes are precise, but do leave room for judgment at 
times. When client conduct can be assured, going to the ultimate to 
meet every requirement and turn over all pertinent information to the 
FDA (such as adverse risk reports) will prevent punishment; it can be a 
factor in motivating conduct that is positive and goes far beyond the 
requirements of the black letter of the law. Life experience teaches us 
that carrots as well as sticks can motivate good results. A properly 
constructed FDA defense can do just that, a point that is overlooked or 
perhaps not appreciated by those who opppose such provisions because 
those opponents of a sound public policy idea are not and have not been 
in a position of providing counsel.

                               CONCLUSION

    If one places the words ``Food and Drug Administration'' into 
Google( on the Internet, hundreds of thousands of hits come up now 
because it is very controversial. This body can and will regulate FDA 
procedures and rules. What is important to appreciate today is that 
state punishment--and that is punitive damages--should be reserved for 
unlawful conduct. If a company in good faith comports with the rules 
and regulations, and meets the requirements of the organization 
established by federal law to govern its behavior, monitor it and 
review it on a national basis, punishment is totally and entirely 
inappropriate.
    I thank you very much for your kind attention, and would be pleased 
to answer any questions.

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    Mr. Deal. Thank you.
    We will now go to the question phase, and I will start it 
off.
    You have all presented very interesting testimony, although 
some of it is somewhat contradictory with the other, but we 
expect that because this whole issue is controversial.
    Let me start out, Mr. Hurley, if I might, Ms. DeGette had 
the slide that was up earlier showing the in and out on 
premiums from insurance malpractice premiums versus the 
payouts. From what little I understand about the insurance 
industry, and I must admit you are really the expert there, on 
cases of this type in malpractice, especially where you have 
injuries that may not present themselves for many years, where 
you have statutes that give a statute of repose before the 
bringing of actions from an actuarial standpoint, we are not 
talking about just an in and out proposition, are we? We are 
talking about having to maintain reserves for unknown claims. 
We are talking about just the general insurance industry 
requirements of reserves, are we not?
    Mr. Hurley. Certainly, Chairman Deal, they--the need is 
that insurance companies carry reserves for the liabilities 
that they have as of a point in time. It is not simply just in 
and out as of a point in time. For example, if an insurance 
company, particularly a malpractice insurance company, provides 
coverage in a given year or in a given number of years and then 
stops collecting premiums, stops providing coverage 
prospectively, it will be years before that company is finished 
making the payments for which it is obligated as of the point 
in time it stopped collecting premium. The reserves that 
company carries are the amounts of money set aside in order to 
allow it to make that payment, that subsequent payment 
activity. So when the company stops collecting premium, it 
doesn't stop making payments. It must have reserves in order to 
make good on the promises related to the policies that it 
already issued.
    So yes, it must carry reserves. It is not simply just 
comparing today's payments with today's premiums. That is a 
mismatch.
    Mr. Deal. One of the statements, Mr. Hunter, that I 
gathered from you was with regard to returns that the insurance 
companies have recognized. Obviously, an insurance company 
receiving premiums, like any other business receiving revenue, 
must invest that revenue in order to stay in business and, 
hopefully, make a profit. Would you acknowledge that during the 
good years where those investments were being very profitable 
for the insurance companies that, in fact, the malpractice 
premiums were given a break in terms of the premiums that were 
being charged simply because the investments were profitable?
    Mr. Hunter. Yes, I believe that is correct. The investment 
income does impact the rates. If the investment income goes up, 
the rates go down. If the investment income goes down, the 
rates go up. But it is true that paid losses over the last 30 
years, if you add them up, are about half--less than half of 
the premiums that were collected. And that includes 30 years, 
so you have caught up with the lags. So that--I think her chart 
was----
    Mr. Deal. Did you----
    Mr. Hunter. Even over the long poll.
    Mr. Deal. Did your calculations on that include litigation 
expenses?
    Mr. Hunter. No, I am talking now about payouts----
    Mr. Deal. Oh, payouts.
    Mr. Hunter. [continuing] to victims. Yes.
    Mr. Deal. Just to victims.
    Mr. Hunter. But that includes the litigation, the expenses 
of the victims but not of the defense.
    Mr. Deal. So if, in fact, most of the cases that are 
litigated are, in fact, won, there may not be a payout to the 
victim, but there is significant defense costs that are not 
calculated in your figures?
    Mr. Hunter. Yes, I think of the claims brought against 
insurance companies, only 23 percent actually result in a 
payout. Some are closed with almost no expense, but others are 
closed with a significant expense, if they go all of the way to 
a trial, and that would--that is not in the paid losses, but it 
is in the total data.
    Mr. Deal. But it is a real outgo in terms of making an 
insurance business work?
    Mr. Hunter. Oh, sure.
    Mr. Deal. All right.
    Mr. Hurley, did you wish to comment about this further?
    Mr. Hurley. Well, it is hard for me to comment on the 
comments that Mr. Hunter has made. But one thing that I--it is 
not clear to me is whether, when he says they are comparing 
premiums and--premiums to the payouts over time, whether, in 
fact, he is including the fact that those companies had--are 
going to stop collecting premium are still going to be 
responsible for future payments if they never collect another 
nickel in premium.
    Mr. Deal. Right.
    Mr. Hurley. You just can't compare premium payments and 
loss payments. You just can't compare the two. You do 
reserves----
    Mr. Hunter. You can over the long pull. You can't in the 
short--over 1 year. I agree.
    Mr. Deal. Dr. Singh, I don't want to keep you there sitting 
in the dark again. I am going to ask you a really quick 
question, and I have got 5 seconds.
    You have testified on one aspect of this legislation that 
is proposed, but on the side of recognizing the need for 
medical malpractice reform, do you agree we need to do 
something?
    Mr. Singh. Yes, I agree with that. As a practicing 
physician, I think I agree. You need to do something with 
medical malpractice reform.
    Mr. Deal. Thank you.
    Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman. Thank you for your 
patience. Thank you all for being here so long and waiting 
through all of this.
    I am going to request to enter into the record a letter 
from the Insurance Commissioner of California, John Garamendi, 
and also that any members on either side could submit written 
questions since so many people had to leave today.
    Mr. Deal. Without objection.
    Mr. Brown. Thank you.
    And I have just a couple of real quick things.
    Mr. Garamendi said that there are three reasons that 
California rates have stabilized. MICRA is one of them. 
Proposition 103 insurance reforms one of them. And what has 
happened with State, local, and private programs to eliminate 
bad practitioners and adequate care. In the like he said, ``It 
is incorrect to attribute California's lower medical 
malpractice rates to any single factor. It is incorrect to use 
California's MICRA law as an argument to support the broad 
range of actions contemplated in the bill.'' He said, ``The 
bill overreaches and gives wrongdoers protection that is not 
appropriate.'' So if I could enter that into the record.
    [The letter follows:]

                             Insurance Commissioner
                                        State of California
                                                   February 9, 2005
The Honorable John D. Dingell
Member, United States Congress
2328 Rayburn House Office Building
Washington, D.C. 20515
    Dear Congressman Dingell: You asked why California's medical 
malpractice rates are lower than the average rates in America. I 
believe three things account for this:

1. MICRA: The Medical Injury Compensation Reform Act (MICRA) of 1975, 
        reformed the medical malpractice insurance system in California 
        through implementation of a $250,000 cap on non-economic 
        damages, a limit on attorney fees, and full disclosure of 
        collateral sources of compensation and periodic payments for 
        awards over $50,000.
2. Proposition 103 and the resultant rate regulation that has been in 
        effect since 1992.
3. State, local and private programs that eliminate bad practitioners, 
        inadequate care, and underperforming hospitals and providers. 
        Included in this category are licensing boards for medical 
        professionals, hospital accreditation, peer review, and group 
        practice peer review.
    It is incorrect to attribute California's lower medical malpractice 
rates to any single factor. It is incorrect to use California's MICRA 
law and the relative advantageous rates in California as an argument to 
support the broad range of actions contemplated in the bill before you. 
MICRA is limited to those issues discussed in Item 1 above.
    I believe that the bill before you overreaches and gives wrongdoers 
protection that is not appropriate and may well result in the 
proliferation of products, services and procedures that are truly 
harmful to the public. For example, creating a safe harbor from product 
liability for pharmaceutical manufacturers who receive FDA approval 
makes no sense in the face of recent mistakes by the FDA and subsequent 
recalls of commonly prescribed drugs. If evidence can be produced in a 
court of law that establishes that a pharmaceutical is unsafe, and 
penalties levied against the manufacturer, this will help to protect 
patients who suffer when the FDA makes the wrong call. Recent 
revelations of conflicts of interest and hiding relevant data should 
warn you away from this ill-conceived proposal.
    As for the nation and this state, the best way to bring medical 
malpractice rates under control is to eliminate the possibilities for 
malpractice. This must be our focus.
            Sincerely,
                                                     John Garamendi

    Mr. Brown. Thank you, Mr. Chairman.
    Dr. Singh, since both the chairman and I feel bad that you 
have had to sit there by yourself, my questions are going to 
you and for more than 5 seconds, I hope.
    You and Dr. Graham with the FDA, my understanding is, have 
conducted a large study of heart attacks and COX-2 drugs. Tell 
us, briefly, what your conclusions from that study were.
    Mr. Singh. We have conducted a large study in the 
California Medicaid population of heart attacks and the COX-2 
drugs. It is, by far, the largest study ever done and is--and 
studies more heart attacks than all of the studies that have 
been done up so far. The results of the study were submitted to 
the FDA about 3 weeks ago, and it was our expectation that 
these results would be presented in a scientific forum during 
the FDA Advisory Committee meetings next week. But I have been 
informed that Dr. David Graham has been told that he can not 
present the results of these studies of this particular study 
during that meeting. And that is very unfortunate, I think.
    Mr. Brown. But why is that? Why are you and Dr. Graham not 
allowed to?
    Mr. Singh. I do not know. I do not know the answer. No 
reasons were given. The FDA has had, now, 3 weeks to look at 
the results. It followed a protocol that was very similar to 
the Kaiser Permanente FDA protocol that was done, a very 
carefully done study. It has meaningful data that answers very 
important questions that are going to be discussed next week. 
But Dr. Graham has been told he can not present the data.
    Mr. Brown. And you have, Dr. Singh, significant concern 
about Celebrex, as others have had about Vioxx, correct?
    Mr. Singh. That is hard to say. You know. There is a lot of 
data in the study, and I would probably not go on record and 
tell about the results of our study on any one given drug. But 
our data on Celebrex, as well as on other drugs, puts it into 
perspective of what is going on in the whole field with, also, 
the non-COX-2. And this is important information that the 
public, as well as the FDA's Advisory Committee, needs to hear. 
And I would rather discuss it in a scientific forum. And we 
have given the FDA the opportunity, shown them all of the 
results. Dr. Graham is a core investigator on this study. He 
knows exactly what was done, how it was done, what the results 
are, and he is not being allowed to present it at the FDA.
    Mr. Brown. Yes, I am just incredulous what has happened to 
what I thought was perhaps our government's best agency, the 
Food and Drug Administration. And with this government so awash 
in drug company money, the FDA appears more and more to be a 
wholly owned subsidiary of the drug industry. And I just am 
amazed at the behavior of something like this, not allowing two 
scientists, two scientists who have very good reputations, one 
of whom works for the FDA, not to who have made national news 
with their work, not being allowed to testify. And I--it is 
just one more example of the FDA failing to represent the 
public, in my mind.
    Mr. Chairman, I will yield back the balance of my time.
    Thank you, Dr. Singh, for being with us, and thank you all 
on the panel.
    Mr. Deal. Thank you, Mr. Brown.
    Dr. Norwood.
    Mr. Norwood. Thank you very much, Mr. Chairman.
    I am glad to see so many people that we have seen in here 
before at other hearings. We are glad that you are back. And I 
think, Mr. Chairman, that if you wish to do an FDA hearing, you 
have got a lot of witnesses here that want to testify or, in 
fact, if you want to go over H.R. 5, you probably have got a 
lot of witnesses here who wish to testify. But I want to remind 
us all, that is not what this hearing is about. And I am so 
happy to hear your remarks on FDA, but that is not why we are 
here.
    Now I don't believe there are many people in Congress, in 
fact, I am certain a majority, who don't believe that we have 
to do something about medical liability. I--the majority 
believe that. Now there is, and always will be, contention on 
how we best get to that.
    I am going to vote for H.R. 5, if I ever see it again, but 
it is not because I love it. It is not because I agree with 
everything in it. It is not because I don't believe it can be 
made better. It is because it may be the only vehicle where we 
have a possibility to ever try to bring these premiums in line 
and correct a serious problem for which my--one of my 
constituents today was right here talking about and the fact 
that access to care is getting out of hand. We have just lost, 
in Augusta, Georgia, one of the finest neurosurgeons in the 
Southeast, because he can't practice anymore because of 
frivolous lawsuits, because of what is going on with liability 
and lack of reform in controlling the premiums.
    I don't know whether $250,000 is right. I will debate that 
and have a discussion with anybody about that. But that is not 
the point. The point is, there has to be a known number, a 
known amount of liability, for people to be able to function in 
the real world and practice medicine. And that doesn't even, 
Dr. Burgess, take into consideration for the very costly 
business of practicing medicine or practicing law, as 
physicians do, rather than medicine for fear of being sued. Now 
it is clear to me, those of you who want to have some type of 
reform, have given us numbers that suit that. Your studies all 
show we should. Those of you that don't want to have any type 
of reform have given us another study that refutes everything 
that, basically, we are saying needs to be done.
    I don't know why I am surprised. Lawyers don't agree on 
things. And they tend to--one lawyer says it says this and 
another lawyer says it says that, and that is sort of what has 
come out of this hearing. What we need out of this hearing is 
some good ideas from smart people like you how to get this 
problem under control. And I am sorry, I don't believe we got 
that data today.
    I am just curious, and I will conclude, Mr. Chairman. Would 
each of you tell me, do you really--do you believe that 
Congress should deal with this problem of medical liability 
that is out of hand? I know Mr. Hunter says it is not. Somebody 
else says it is. All I know is my doctors I live with at home 
tell me it is out of hand. And I see it being out of hand in my 
District. Now does anybody here think Congress ought not to try 
to come to a solution? And if you do, speak up.
    Mr. Hunter. I think Congress should take their time and not 
just do a knee-jerk bill. I think you should--you have time 
because the premiums last year just rose by 4 percent. We are 
not in a crisis mode at this point.
    Mr. Norwood. That is a matter of opinion.
    Mr. Hunter. It is not a matter of opinion. That is reported 
by A.M. Best and Company.
    Mr. Norwood. That is not a matter of opinion.
    Mr. Hunter. It is not.
    Mr. Norwood. There are plenty of people who think----
    Mr. Hunter. That is a fact.
    Mr. Norwood. [continuing] we are in a crisis.
    Mr. Hunter. That is a fact.
    Mr. Norwood. That is a fact because you believe----
    Mr. Hunter. Oh, no, no, no. There were serious rate 
increases at--the 3 previous years, but last year, 4 percent, 
and the rates are pretty much flat right now.
    Mr. Norwood. Is 4 percent correct?
    Mr. Hunter. Yes, 4 percent is correct.
    Mr. Norwood. I want to hear somebody else tell me that----
    Mr. Hunter. Okay.
    Mr. Norwood. [continuing] or tell me it is not.
    Yes, sir.
    Mr. Hurley. Well, I don't have the report that Mr. Hunter 
is referring to, but I think it would be worth investigating. I 
think it would be worth checking. Four percent sounds low in 
light of the--I see this report.
    Mr. Norwood. Right. We see reports from everybody, and----
    Mr. Hunter. I didn't make it up. This is A.M. Best.
    Mr. Hurley. A.M. Best is quoting on the total aggregate 
premium. The problem with total aggregate premium is it doesn't 
count self-insured programs that are diminishing the amount of 
money that is being reported to A.M. Best----
    Mr. Norwood. Which is my point. If you are not for this, 
you can sure as hell come up with a report that allows you to 
say you are not for this. I just want to know if there is 
anybody here that thinks that the Congress should not deal with 
this critical problem in the United States today. I am not 
asking you whether you believe there ought to be a shield in it 
or not. I am not asking you whether you believe it ought to be 
$250,000 or $1 million. I am asking you do you believe--anybody 
not believe that the Congress must deal with this and it must 
deal with it now? And maybe we do have a lot of time, but we 
have spent my entire career in Congress trying to get here. Now 
I think we have spent enough time. I don't like H.R. 5 either, 
but I am going to vote for it, because we need to establish in 
law there is a limitation to what these juries can give out or 
otherwise you are not going to have people to deliver your 
babies and take care of your child when they hit their head.
    And with that, Mr. Chairman, unless somebody says they 
think we ought not to do it, well----
    Mr. Deal. Let us give Dr. Wolfe a real quick response and--
--
    Mr. Wolfe. About 20 seconds. I worked this op-ed in the New 
York Times a couple of years ago on the fact that 5 percent of 
the doctors account for over half of the malpractice payouts. I 
think that there is a crisis of doctor discipline, and I think 
that one of the things that Congress here could do is conduct 
enough research to figure out why so many medical boards are 
doing such a bad job preventing medical malpractice. I think if 
we prevented a significant chunk of it, that, in and of itself, 
would bring down the payouts and premiums.
    Mr. Norwood. Well, you--I don't totally----
    Mr. Deal. I am going to have to call time.
    Ms. DeGette is anxious to get her testimony--her questions 
in.
    Ms. DeGette. Thank you.
    Like all of the other members, Mr. Chairman, I have got a 
plane to catch, and like the witnesses. So I will be quick.
    I want to ask you a question, Mr. Kingham, because I have 
been sitting here all day, and I have been sitting here for 8 
years listening about the malpractice insurance crisis that we 
have that is forcing doctors to leave the practice of medicine, 
particularly in lots of different subspecialties, 
neurosurgeons, ob-gyns, and others. And the problem we are 
grappling with in Congress and in this committee is what, if 
anything, should Congress do to deal with these rising medical 
malpractice insurance rates? I appreciated your testimony today 
because, frankly, it is the first testimony I can remember 
hearing about the caps for the pharmaceutical industry. And I 
guess I want to ask you a question, because I have been 
puzzling for a long time, why are we putting these--if the 
problem is medical malpractice insurance rates, why have we 
included the pharmaceutical industry in this bill? What is the 
looming problem for the--are the--is the pharmaceutical 
industry going to get out of the business of making drugs if we 
don't put these caps on?
    Mr. Kingham. Well, no, obviously, people are going to stay 
in the pharmaceutical business. What has been suggested in a 
number of reports by the Institute of Medicine and other 
organizations over the years, is that the standardless award of 
punitive damages and the possibility that they will be awarded 
and the risk environment that that creates discourages research 
in certain key areas, for----
    Ms. DeGette. And does that----
    Mr. Kingham. [continuing] example----
    Ms. DeGette. Does that affect what happens to physicians 
then?
    Mr. Kingham. Yes, it does.
    Ms. DeGette. Okay. If you could explain that.
    Mr. Kingham. If it doesn't--if you don't have a drug to 
administer to somebody when they are pregnant because nobody is 
willing to develop a drug for use in pregnant women, because of 
liability risks, yes. If you don't have the latest research in 
oral contraceptives because people are afraid to go in the oral 
contraceptive business and develop new products, yes.
    Ms. DeGette. Okay.
    Mr. Kingham. If you don't have a vaccine to prevent a 
disease in a person because people are afraid to be in the 
vaccine business, yes, it does affect the practice of medicine.
    Ms. DeGette. Okay. So my question is, then, is there a risk 
right now, under current law, with punitive damages that the 
pharmaceutical companies are going to stop making all of those 
drugs? And if so, could you supplement your testimony to give 
us that evidence?
    Mr. Kingham. I would be happy to, but there are----
    Ms. DeGette. Thank you.
    Mr. Kingham. There have been studies over the years, which 
suggest that it does have a perverse influence on willingness 
to do research and development in key areas.
    Ms. DeGette. Now----
    Mr. Kingham. There is no question about that.
    Ms. DeGette. [continuing] let us see. Is this Dr. Wolfe 
here? You are shaking your head. Can you respond?
    Mr. Wolfe. Yes. The idea that the pharmaceutical industry, 
with its, roughly, 18-percent profit margin, can't afford to do 
research for whatever reason, I mean, that is the--it is the we 
won't do research if you control drug prices, something that 
the Administration seems to have lied about in the Medicare 
bill. So every time there is any kind of ``cap'' to the 
industry, they say, ``If you don't behave, we are not going to 
do any research.'' I think it is just a preposterous kind of 
statement to make. There is no basis whatsoever for it, as far 
as I have been able to see, and I have been watching this for 
even slightly longer than you have.
    Ms. DeGette. Thank you.
    I want to ask a quick question to Mr. Hunter and Mr. 
Hurley.
    And this is sort of what we were talking about on the last 
panel, too. The issue of insurance company rates is a very 
complex issue. I think you would both agree with that. And it 
is something the committee is struggling with. Is that right?
    Mr. Hunter. Yes, it is complex. Sure.
    Ms. DeGette. Would either one of you--and if you can both 
answer for the record, would either one of you have any 
objection to, in this bill, including, as part of any bill 
Congress passed, a study of insurance--malpractice insurance 
rates pricing in risk pools?
    Mr. Hunter. I wouldn't, absolutely not.
    Ms. DeGette. Mr. Hurley?
    Mr. Hurley. I, professionally, don't have any view about 
that. I mean, I am here for the American Academy, and I am----
    Ms. DeGette. The Academy doesn't have a position on that, 
but they wouldn't object to it, would they?
    Mr. Hurley. I don't know. I would have to check.
    Ms. DeGette. Okay. Would anybody here object to that kind 
of study being included? Okay. I guess that--I take that as a 
no, just like Mr. Norwood asked for his response.
    Again, I want to thank all of you. I would like to note, 
Mr. Schwartz, I noticed in your written testimony you helped 
write the tax book I studied tort law from at NYU Law School, 
so you have----
    Mr. Schwartz. And you are still awake, so that means that 
there was something----
    Ms. DeGette. Well, it was quite a few years ago.
    Mr. Schwartz. Yes. Don't remind me. I am in the 11th 
edition.
    Ms. DeGette. Thank you. Thank you, Mr. Chairman. I yield 
back.
    Mr. Deal. Thank you, Ms. DeGette.
    Dr. Burgess.
    Mr. Burgess. Thank you, Mr. Chairman. And I appreciate 
everyone's indulgence through what has been a long afternoon.
    I have got a number of questions, and I will go through 
them as quickly as I can with the time that is available.
    First off, Mr. Hunter, on the table that you have provided 
us, and I will just have to tell you what--I started to look 
through this. I was afraid you were going to show us fetal 
heart rate tracings, but actually they were insurance cycles, 
so I was relieved about that.
    If I just look at this appendix A, and again, I will 
confess to you that I am not very bright about this sort of 
stuff. But if I just do the simple math of the last two 
columns, direct premiums per doctor 2003 dollars and the paid 
doctor 2003 dollars and you go from 1975, which was my second 
year in medical school, up until the present day, it looks like 
we went from a ratio of about $4.73 being paid in for every 
dollar that was paid out in losses in 1975. Fast forward to the 
present and in present-day dollars of $2 in premiums for every 
dollar paid out. Is that--am I reading that correctly? Am I 
doing the math----
    Mr. Hunter. That would be right.
    Mr. Burgess. [continuing] right on that? But then these are 
direct costs----
    Mr. Hunter. Yes.
    Mr. Burgess. [continuing] so the costs that Medical 
Protective or Texas Medical Liability Trust spent defending me 
through these processes in each of the--any time you are sued, 
as the young man testified, it takes a long time to get through 
the process. So we are typically talking about several years 
for one of these cases, if it, in fact, comes to trial. So 
there are significant costs on the defensive side, which we 
don't even know about in this form, is that correct?
    Mr. Hunter. That is correct.
    Mr. Burgess. So I guess my take-away from that is the 
insurance companies probably aren't overcharging? They may have 
been overcharging in 1975 when you were the--Gerald Ford's 
Insurance Commissioner, but they are not overcharging at the 
present date. Am I drawing the correct conclusion from your 
data?
    Mr. Hunter. I don't conclude anything about overcharging. 
I--that is not the point of this. The point of this is that the 
premiums go up and down with the cycle and the losses have 
stayed flat over the years.
    Mr. Burgess. Well, yes. I would just--in a simple-minded 
way, doing the calculations and not being smart enough to 
calculate cycles, it looks like the insurance companies are 
doing a whole lot worse in 2003, in 2003 dollars, than they 
were the first or second year I was in medical school.
    Let me go----
    Mr. Hunter. Well, except that you--it is the data that 
underlies the chart on the top of my page 6, which shows that 
the losses are flat.
    Mr. Burgess. And then again, we have heard other testimony, 
and in response to Dr. Norwood's question, that that--there 
perhaps is another school of thought on that.
    Mr. Schwartz, I did appreciate your remarks. I thank you 
for being so thorough. I would just ask a question. You made 
the point that punitive damages are designed to punish, and 
obviously, we want to punish behavior that we don't want to see 
again. And these are--this is a civil proceeding, but these, in 
fact, are quasi-criminal--it is a punishment. It deals in a 
quasi-criminal sense. But for criminals, for drug dealers, we 
have got sentencing guidelines. With punitive damages, and I 
have never understood this, we don't. The sky is the limit. You 
get whatever you guys or the people on the other side, 
actually, can prove, you get--is what you get to take home that 
day. Do I understand that correctly?
    Mr. Schwartz. You do. The----
    Mr. Burgess. And why are there not sentencing guidelines 
for punitive damages? What is the problem with structuring a 
settlement so that if someone is, in fact, harmed and you don't 
want to see that behavior again, why can the judge not make a 
recommendation to a jury?
    Mr. Schwartz. There are problems for a judge to do that 
under the common law. This is a legislative matter, and it is 
something that this body or State legislature should do. You 
have put your finger on a key point. You have a criminal 
justice system where there are certain protections for a 
substantial fine being levied against you. In a civil system 
where the fines could be a billion dollars or a million 
dollars, there is no structure whatsoever. And I have had 
discussions with people who, on the criminal side, want to be 
more fair to criminal defendants. But oops, when you are on the 
civil side, they just want to--just imagine, in a criminal 
case, you said to a jury, ``Okay. You can sentence, and look 
how you feel, what your emotions are,'' and the person's 
sentence would be whatever the jury wanted to render. I think 
that is why this legislation should include some guidelines 
like you are suggesting for what punishment is appropriate.
    Mr. Burgess. Thank you. My time is about expired. Dr. 
Wolfe, you mentioned doctor discipline is a problem, and Ms. 
Rosenbaum, you indicated that--did I understand you right? You 
said you would favor a no-fault system?
    Ms. Rosenbaum. Yes.
    Mr. Burgess. And I truly believe, too, that that is the 
only way to really get the issue of patient safety. But, ma'am, 
we are having a dickens of a time with the $250,000 cap because 
of the contingency fees that are present from the plaintiff's 
bar in this country. Do you think we could ever get a no-fault 
system where you just took the plaintiff's bar completely out 
of the equation? A yes or no answer will be fine. I have always 
wanted to do that to a lawyer.
    Ms. Rosenbaum. Yes, I actually think, going back to the 
question that Dr. Norwood raised, that it is that issue that 
actually really is worth Congress's time and patience.
    Mr. Burgess. Correct, but the--and Mr. Brown is no longer 
here, but he impugned the President's activity of this field 
because he said the President is getting campaign 
contributions. I don't know if anyone cares to do a study on 
campaign contributions on that side for the American Trial 
Lawyers Association, but I suspect they were pretty evident in 
the last election as well. You are talking about a system, a 
no-fault system, which I, in fact, would embrace, but a no-
fault system is going to remove the contingency fee award to 
plaintiffs' lawyers across the country. I think they will be 
pretty upset to read about that.
    I will yield back.
    Mr. Deal. Thank you, Dr. Burgess.
    Mr. Norwood. Mr. Chairman.
    Mr. Deal. Yes, Dr. Norwood.
    Mr. Norwood. I would like to ask unanimous consent for just 
1 minute to sort of finish my statement, if that is agreeable.
    Mr. Deal. Without objection.
    Mr. Norwood. I thank you, sir.
    Mr. Wolfe, I don't know--Dr. Wolfe. Pardon me. I don't know 
if your figures are right that 4 percent of the doctors cause 
all of the malpractice awards, but assuming you are, it makes 
me very happy that 90 percent--96 percent of that profession is 
doing everything it can to help people. They are also doing 
everything they can to keep from being sued, which is why we 
see so much--I don't require a comment, so much--why we see so 
much defensive medicine being practiced.
    I don't know whether the people in my District, who had a 
frivolous lawsuit brought against an ob-gyn clinic of five 
doctors and then they had to shut their place down because 
nobody would sell them any malpractice insurance. I don't know 
if they fit in the 4 percent or the 96 percent. I don't know if 
the doctors in Athens, Georgia, who closed the emergency room 
clinic there because they couldn't get any malpractice 
insurance because of a frivolous lawsuit, I don't know whether 
they fit in the 4 percent or 96 percent. What I do know is that 
we absolutely have to deal with this problem, and even if we 
don't get it right, we have got to limit liability to some 
number.
    Mr. Chairman, I appreciate your opportunity to finish that 
up.
    Mr. Burgess. Mr. Chairman.
    Mr. Deal. Yes.
    Mr. Burgess. May I ask for unanimous consent that we ask 
Dr. Singh to send us the data that he has provided to the FDA 
and has not been allowed to speak on?
    Mr. Deal. Yes, without objection.
    And anyone else that has any further information that you 
wish to submit would be appropriate as well.
    This is, indeed, a very distinguished panel, and we do 
appreciate your----
    Mr. Burgess. Mr. Chairman.
    Mr. Deal. Yes.
    Mr. Burgess. May I ask, the same as Dr. Norwood, for the 
indulgence of an additional minute. We have assembled these----
    Mr. Deal. Without objection. Yes.
    Mr. Burgess. Dr. Singh, just briefly, how many doses of 
Vioxx were taken during the time that drug was on the market?
    Mr. Singh. I am sorry. I don't have the number here with 
me. We have done a study on that.
    Mr. Burgess. Okay. How----
    Mr. Singh. It has been hundreds of millions. Hundreds of 
millions.
    Mr. Burgess. And how many--let us just leave it with fatal 
heart attacks. How many fatal heart attacks do you estimate 
were caused by Vioxx?
    Mr. Singh. That is a very difficult number to reach, and 
Dr. David Graham has done calculations based on his study----
    Mr. Burgess. And you are going to share that data----
    Mr. Singh. [continuing] and he estimates is at about 
130,000.
    Mr. Burgess. 130,000. And you are going to share that data 
with us.
    Mr. Singh. But that is Dr. David Graham's data. That data 
is out in the public domain.
    Mr. Burgess. Okay. And your--but you are going to share 
your data with us as well.
    Mr. Singh. Yes, our data we didn't look at the total number 
of heart attacks----
    Mr. Burgess. Okay.
    Mr. Singh. [continuing] caused. We just looked at what the 
different drugs do in comparison to each other.
    Mr. Burgess. Very well.
    Mr. Kingham, finally, you talked about the vaccine injury 
compensation fund, and I think that was a wonderful thing that 
was done and did allow vaccines to be available without the 
costs being exploded, but we saw what happened with that in 
the--when you can't sue the vaccine manufacturer, sue the guy 
that puts the preservatives in the bottle. And that was kind of 
an unfortunate result of that. I think your testimony that you 
have to--the protections have to extend across the spectrum or 
there are no protections at all, I think that you really 
underscored that point, and I thank you for bringing it to us. 
I think I understood a little better today than I have ever 
understood it before.
    The psychiatrist, Dr. Glenmullen left. I would just make 
the point about psychiatry and antidepressants and suicide. 
When I was in medical school in the 1970's, we didn't have 
selective seratonin reuptake inhibitors like he was talking 
about today. We had a class of compounds called the tricyclic 
antidepressants. Even back then, way back in the dark ages of 
psychiatry, we were told that if you start a patient on a 
tricyclic antidepressant, watch out, because within the first 
couple of weeks, they are likely to become more suicidal as 
they start to feel better. Initially, they are so depressed 
they can't think about suicide. As they start to feel a little 
better, it starts to cross their mind again, and maybe they 
feel good enough to act upon it.
    So that has been in the psychiatric jargon for--and domain 
for a long, long period of time. I don't dispute what he is 
saying about the SSRIs in children, and I think, certainly, the 
managed care has done nothing for the practice of psychiatry in 
this country. It simply underscores that a child on a selective 
seratonin reuptake inhibitor needs to be under the care of a 
board-certified psychiatrist, and preferably a child 
psychiatrist. These are potent medications. But when used as--
in the proper way, they may provide a great deal of benefit.
    Thank you, Mr. Chairman, for your indulgence.
    Mr. Deal. Well, thank you all.
    Thanks especially to our panel members, and thank you for 
your indulgence in the time delays that we have had today. We 
thank you very much and look forward, perhaps, to seeing some 
of you again.
    [Whereupon, at 5:13 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
                              American Academy of Actuaries
                                                  February 22, 2005
The Honorable Nathan Deal
Chairman, Subcommittee on Health
Committee on Energy and Commerce
U.S. House of Representatives
Washington, D.C. 20515
    Dear Chairman Deal: As a representative of the American Academy of 
Actuaries 1, I am writing this letter as a clarification to 
information provided to your subcommittee during the February 10 
hearing on medical liability issues. In discussions of medical 
malpractice premium, Mr. Robert Hunter quoted a four percent (4%) 
medical malpractice premium growth from AM Best's Review and Preview. 
Because this statistic was inconsistent with my experience and 
expectations, I contacted AM Best and asked for an explanation of the 
relatively small change considering all the premium rate increases 
implemented by many of the reporting companies. According to AM Best, 
the calculation was not adjusted for the fact that some companies 
stopped reporting information in 2004. Ordinarily this would not have 
been a significant problem except that one of the largest writers of 
medical malpractice in the United States stopped reporting data in 2004 
causing the premium increase of 2004 over 2003 to be distorted. Mr. 
Hunter's observation that ``. . . the cycle has turned and the crisis 
is over,'' at least based on this statistic, seems unsupported.
---------------------------------------------------------------------------
    \1\ The American Academy of Actuaries is the public policy 
organization for actuaries practicing in all specialties within the 
United States. A major purpose of the Academy is to act as the public 
information organization for the profession. The Academy is non-
partisan and assists the public policy process through the presentation 
of clear and objective actuarial analysis. The Academy regularly 
prepares testimony for Congress, provides information to federal 
elected officials, comments on proposed federal regulations, and works 
closely with state officials on issues related to insurance. The 
Academy also develops and upholds actuarial standards of conduct, 
qualification, and practice, and the Code of Professional Conduct for 
all actuaries practicing in the United States.
---------------------------------------------------------------------------
    Although aggregated Best premium data is sometimes used as an 
indicator of increases in rates, it can only be an approximation. 
Increases in self-insured retentions, deductibles and captive 
formations erode the year-to-year growth in premium and make this 
statistic less effective as an indicator of increasing rates. In the 
case of 2004, the change in reporting companies has also distorted the 
comparison. In my experience, the rate increases implemented in 2004, 
at least for most jurisdictions, were substantially more than four 
percent.
    It was a pleasure to have met you and if the Academy can provide 
additional information, please let us know.
            Sincerely,
                                 James D. Hurley ACAS, MAAA
                           Member, Medical Malpractice Subcommittee
                                 ______
                                 
                           American Bar Association
                                Governmental Affairs Office
                                                  February 16, 2005
The Honorable Nathan Deal
Chairman
Subcommittee on Health
Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC 20515
    Dear Mr. Chairman: I am writing to you on behalf of the American 
Bar Association regarding the February 10, 2005 Subcommittee's hearings 
on medical liability to present ABA views on federal proposals to pre-
empt state medical liability laws.
    The ABA, which has over 400,000 members throughout the country has 
long opposed legislation that would pre-empt the state tort laws and 
impose federal medical professional laws on the states.
    It has been suggested by some that enactment of such legislation 
would help the uninsured. This is simply not the case. Limiting 
compensation to those who have been inured by medical malpractice will 
not help the uninsured gain access to health insurance. While limiting 
medical malpractice awards would have a major impact on those patients 
most severely injured by malpractice, it would have only a minor impact 
on national health care costs. According to the Congressional Budget 
Office, malpractice costs make up less than 2 percent of overall health 
care spending. The CBO also reports that even if malpractice costs were 
reduced by 25 to 30 percent, it would only lower health care costs by 
0.4 to 0.5 percent would likely have a comparably small effect on 
insurance premiums.
    The ABA is especially concerned about proposals that would place a 
cap on pain and suffering awards in states that have no such cap for 
patients that have proved in their state courts that they were harmed 
by malpractice or a defective medical product. Those affected by caps 
on damages are the patients who have been most severely injured by 
negligence of others. No one has stated that their pain and suffering 
injuries are not real or severe. These patients should not be told 
that, due to an arbitrary limit, they will be deprived of the 
compensation they need to carry on. Yet legislation to cap pain and 
suffering awards, if enacted, would result in the most seriously 
injured persons who are most in need of recompense receiving less than 
adequate compensation.
    The reallying cry of proponents of this type of legislation has 
been that doctors have experienced significant increases in their 
insurance premiums. Insurance premiums in a number of areas are up 
significantly. Pre-empting the state tort laws and limiting the rights 
of patients to be compensated for malpractice and harm caused by 
defective medical products will not solve this problem. Caps on non-
economic damages have failed to prevent sharp increases in medical 
malpractice insurance premiums, according to a white paper comparing 
states with caps to states without caps that was released June 2, 2003, 
by Weiss Ratings, Inc., an independent provider of ratings and analyses 
of financial services companies, mutual funds and stocks.
    For over 200 years, the authority to promulgate medical liability 
laws has rested with the states. The system, which allows each state 
autonomy to regulate the resolution of medical liability actions within 
its borders, is a hallmark of our American justice system. Because of 
the role they have played, the states are the repositories of 
experience and expertise in these matters. Thus the ABA urges your 
subcommittee not to approve Legislation that would pre-empt the states' 
medical liability laws.
    In addition to the policy reasons why this long- and effectively-
functioning liability system should not be altered by the U.S. 
Congress, it should be noted that the constitutionality of the 
amendment will surely be challenged based on constitutional separation-
of-powers grounds. The Supreme Court, in the decisions of Pegram et al. 
v. Hendrich, 120 S.Ct. 2143 (2002), and Rush Prudential HMO, Inc. v. 
Moran, 122 S.Ct. 2151 (2002), continued to recognize that it is 
appropriate for the states to handle health accountability matters 
because health care is an area traditionally left to the states to 
regulate. In addition, a number of states have constitutions that 
prohibit caps on damage awards in personal injury cases.
    Currently, states have the opportunity to enact and amend their 
tort laws, and the system functions well. Congress should not 
substitute its judgement for the systems which have thoughtfully 
evolved in each state over time. To do so would limit the ability of a 
patient who has been injured by medical malpractice or by defective 
medical products to receive the compensation he or she deserves.
    The ABA is concerned about those in America who are without health 
insurance. Since 1772, the ABA has been on record supporting access to 
quality health care for every American regardless of the person's 
income. In February, 1994, the ABA's House of Delegates reaffirmed its 
support of legislation calling for universal coverage for all through a 
common public or public/private mechanism through which all contribute. 
But federal legislation to pre-empt state liability laws would not help 
the situation.
    We request that you include this letter in the record of your 
February 10 hearings. Thank you.
            Sincerely,
                                                    Robert D. Evans
Cc: Members of the Subcommittee on Health
                                 ______
                                 
    Prepared Statement of the Joint Commission on Accreditation of 
                        Healthcare Organizations
    The Joint Commission on the Accreditation of Healthcare 
Organizations is pleased to submit testimony for the record to the 
House Energy and Commerce Health Subcommittee's hearing on medical 
malpractice reform, held on February 10th. The Joint Commission is the 
nation's oldest and largest standard setting and accrediting body in 
health care. Approximately 15,000 health care organizations are 
currently accredited by the Joint Commission, including the 
preponderance of U.S. hospitals. Our mission is to continuously improve 
the safety and quality of care provided to the public. Under its Public 
Policy Initiatives--which focus on broad issues that have the potential 
to seriously undermine the provision of safe, high-quality health care 
and, indeed the health of the American people--the Joint Commission's 
convened an expert roundtable to address strategies for improving the 
medical liability system and preventing patient injury.
    On February 10, 2005, the Joint Commission released the results of 
the roundtable discussions in a white paper entitled ``Health Care at 
the Crossroads: Strategies for Improving the Medical Liability System 
and Preventing Patient Injury.'' Its recommendations center around one 
very basic fact: there is a fundamental dissonance between the medical 
liability system and the patient safety movement. While patient safety 
depends on transparency of information as the basis for improvement the 
current system drives too much of that information underground. As a 
result, neither patients nor providers benefit.
    The paper is a call to action for those who influence, develop or 
carry out policies that will lead the way to resolution of the issue. 
For the Committee's consideration, we have attached the conclusions and 
recommendation presented in the white paper. The complete document can 
be found at http://www.jcaho.org/about+us/public+policy+initiatives/
tort--resolution.htm.
 recommendations from ``health care at the crossroads: strategies for 
 improving the medical liability system and preventing patient injury''
Recommendation I: Pursue Patient Safety Initiatives that Prevent 
        Medical Injury
    When the Institute of Medicine (IOM) released its landmark report, 
To Err Is Human,1 the frequent occurrence of medical error 
went public. Now, five years after the IOM report, error remains 
ubiquitous in health care delivery. To be sure, activities and 
initiatives aimed at improving patient safety have been and continue to 
be pursued. However, there are obstacles within health care 
organizations that stymie improvement--most notably, lack of will, 
resources and knowledge.
    The axiom, ``you learn from your mistakes'' is too little honored 
in health care. Near-miss and error reporting is an essential component 
of safety programs across safety-conscious industries. Within health 
care, though, many physicians are often reluctant to engage in patient 
safety activities and be open about errors because they believe they 
are being asked to do so without adequate assurances of legal 
protection.2 The stifling specter of litigation results in 
the under-reporting of adverse events by physicians and avoidance of 
open communications with patients about error.3
    The IOM report suggests that 90 percent of medical errors are the 
result of failed systems and procedures that are poorly designed to 
accommodate the complexity of health care delivery. If properly 
designed, these systems and procedures could better prevent inevitable 
human errors from reaching patients. But understanding the root causes 
of errors requires their divulgence in the first place. In sharp 
contrast to the systems-based orientation of the patient safety 
movement, tort law targets individual physicians.4
I.a Strengthen oversight and accountability mechanisms to better ensure 
        the competencies of physicians and nurses
    As the IOM reports make clear, multiple broken systems can be 
identified in the majority of cases in which a serious adverse event 
has occurred. However, there remains today too little effort to unveil 
the specific contributory factors to such occurrences. That said, a 
systems-based approach to quality improvement does not preclude 
individual accountability. Accountability mechanisms--licensure, 
certification, and peer review--also need to be strengthened to ensure 
an optimally qualified health care workforce. The tort system should 
not be the net to snare incompetent physicians, and it cannot be 
effective, when it is cast so wide.
    The American Board of Medical Specialties (ABMS) is now in the 
process of implementing encompassing new requirements for the 
maintenance of board certification for the 24 medical specialties it 
represents. These requirements would eventually apply to over 90 
percent of practicing physicians. Following suit, the Federation of 
State Medical Boards is also pursuing an agenda for the maintenance of 
physician licensure.
    While the legal system is often maligned by physicians, some 
physicians do not hesitate to use it to stave off loss of hospital 
privileges and licensure. Going forward, to avoid the quagmire in which 
hospitals often find themselves when they attempt to curtail or remove 
privileges, these institutions need to be thorough and deliberate in 
their initial granting of privileges, to consider granting new 
privileges for shorter periods of time, and to apply objective measures 
of performance before renewing privileges. This approach would be 
synchronous with the movement of certification boards to grant time-
limited board certification, and to undertake rigorous competency 
assessment on a continuing basis.
    Administrative and clinical leadership must also take greater 
initiative to ensure the competency of their nurses. Nurse staffing 
shortages have made the hiring of new nurses a priority, but newly 
graduated nurses typically receive far too little training before 
assuming clinical responsibilities, and the monitoring of clinical 
performance is uneven at best. The growing use of external staffing 
agencies to fill staffing gaps only makes this problem worse.
I.b Allow health care researcher access to open liability claims to 
        permit early identification of problematic trends in clinical 
        care
    One of health care's principal patient safety success stories is 
anesthesiology. The American Society of Anesthesiologists uses case 
analysis to identify liability risk areas, monitor trends in patient 
injury, and design strategies for prevention. Today, the ASA Closed 
Claims Project--created in 1985--contains 6,448 closed insurance 
claims. Analyses of these claims have, for example, revealed patterns 
in patient injury in the use of regional anesthesia, in the placement 
of central venous catheters, and in chronic pain management. Results of 
these analyses are published in the professional literature to aid 
practitioner learning and promote changes in practices that improve 
safety and reduce liability exposure.
    Closed claims data analysis is the one way in which the current 
medical liability system helps to inform improvements in care delivery. 
However, reliance on closed claims for information related to error and 
injury is cumbersome at best. It may take years for an insurance or 
medical liability claim to close. These are years in which potentially 
vital information on substandard practices remains unknown. Providing 
patient safety researchers with access to open claims, now protected 
from external examination, could vastly improve efforts aimed at 
identifying worrisome patterns in care and designing appropriate safety 
interventions.
I.c Encourage appropriate adherence to clinical guidelines to improve 
        quality and reduce liability risk
    Adherence to clinical guidelines has long been touted as an 
effective way in which to improve quality, reduce variation in care, 
and improve financial performance.5 In court, clinical 
guidelines are increasingly invoked to prove or disprove deviations 
from the standard of care. But there is a more significant relationship 
between medical liability and clinical guidelines. A new study has 
shown that adherence to clinical guidelines can have a significant role 
in reducing legal risk.6 The study, which focused on 
obstetrical patients, found a six-fold increase in risk of litigation 
for cases in which there was a deviation from relevant clinical 
guidelines.7 Further, one-third of all obstetric claims 
analyzed in the study were linked to non-compliant care.8
I.d Support teamwork development through team training, ``Crew Resource 
        Management,'' and high-performing microsystem modeling
    Teamwork--indeed, team training--has been identified by patient 
safety experts as an essential factor in reducing the risk of medical 
error. In aviation, ``Crew Resource Management'' (CRM) is the 
methodology used to guide team development among pilots, flight 
attendants and other crew. In this context, predefined roles and 
responsibilities for various scenarios help to assure the safety of 
every flight. Consistently applying such an approach to health care 
delivery could increase the timeliness and accuracy of communications--
breakdowns of which are commonly implicated sources of serious adverse 
events. This could also help to enlist clinicians and support staff in 
committing to a common goal--safe and effective care--in the often 
high-pressure and chaotic environments of health care. Unfortunately, 
health care professionals are not educated and trained to work as teams 
or even team members. Recreating the culture of health care delivery to 
value team-based care must begin at the earliest point of 
intervention--health care professional education--and be continuously 
reinforced in practice.
    Clinical units that successfully foster strong team-based 
approaches to health care delivery do exist. In their research, Nelson, 
Batalden et al identified high-performing, front-line clinical units 
called microsystems.9 A microsystem is further defined as a 
small group of people who regularly work together to provide care to 
discrete sub-populations of patients, and share business and clinical 
aims, linked processes, and a common information 
environment.10 Microsystems are often embedded in larger 
organizations--the ``macrosystem.''
    High-performing microsystems produce superior outcomes and cost-
effective care, and at the same time, provide positive and attractive 
working environments.11 These units are also characterized 
by the high value placed on patient safety, as well as compliance with 
policies and other requirements.
I.e Continue to leverage patient safety initiatives through regulatory 
        and other quality oversight bodies
    A study recently published in Health Affairs by Devers et al 
concludes that the major driver for hospital patient safety initiatives 
is Joint Commission requirements.12 The majority of 
hospitals surveyed as part of the study explicitly noted that they were 
working to meet Joint Commission requirements--developing better 
processes for reporting, analyzing, and preventing sentinel events; 
meeting patient safety standards, including acknowledgement of 
leadership's accountability for patient safety and the creation of a 
non-punitive culture; and meeting the specific national patient safety 
goals.13
    In the Devers et al study, the description of hospital patient 
safety initiatives also highlights the influence of other third parties 
in driving patient safety improvements. The Leapfrog Group was 
frequently mentioned by study participants, particularly with regard to 
its influence in driving the adoption of Computerized Physician Order 
Entry (CPOE) systems.
I.f Encourage the adoption of information and simulation technology by 
        building the evidence-base of their impacts on patient safety, 
        and pursue proposals to offset implementation costs
    In its Crossing the Quality Chasm report, the IOM underscores the 
importance of information technology as a key factor in meeting several 
of its quality aims. Since then, the momentum toward widespread 
adoption of information technology has accelerated. Leading proponents 
include the National Alliance on Healthcare Information Technology, the 
Markle Foundation's Connecting for Health initiative, and now the 
Department of Health and Human Services (HHS) itself, with the 
appointment of a national coordinator for IT initiatives last year.
I.g Leverage the creation of cultures of patient safety in health care 
        organizations
    The pressures on health care leaders today are great. Increasing 
costs, increasing demand for services, and unfavorable reimbursement 
policies mean that patient ``throughput''--the time in which patients 
move into, through, and out of the health care setting--must be 
accelerated to maintain revenues. This acceleration of the care process 
heightens the risk of medical error, and compromises effective patient-
practitioner communications.14 Yet, in this environment, a 
culture of patient safety must be created and emulated from the top 
down. This responsibility lies both with individual health care 
organizations and practitioners, and with those who set health care 
policy in this country.
I.h Establish a federal leadership locus for advocacy of patient safety 
        and health care quality
    Until this country both elevates the importance of quality and 
safety problems and engages in a coordinated approach to solutions, it 
will be difficult to make significant strides in addressing the 
foundational patient safety problems that persist today. Creation of an 
Office of Health Care Quality in HHS could provide a powerful platform 
for setting priorities and direction for improving patient safety and 
health care quality. Such an office could also coordinate and enhance 
the efforts of established private and public sector bodies already 
engaged in patient safety and quality improvement activities.
I.i Pursue ``pay-for-performance'' strategies that provide incentives 
        to focus on improvements in patient safety and health care 
        quality
    New public and private sector payer initiatives designed to ``pay 
for performance'' may provide a new opportunity to align incentives for 
increasing safety and improving quality and patient outcomes. In 2003, 
CMS launched a demonstration project in partnership with Premier Inc. 
to test the effectiveness of paying hospitals more for better 
performance according to selected measures. In 2005, a new 
demonstration project was initiated for large medical group practices. 
Small but symbolically significant bonuses are to be based on results 
in the management of specific clinical conditions and procedures. The 
pay-for-performance concept essentially envisions rewards for desired 
behaviors and outcomes.
Recommendation II: Promote Open Communication Between Patients and 
        Practitioners
    Lack of disclosure and communication is the most prominent 
complaint of patients, and their families, who together have become 
victims of medical error or negligence. Years of expensive and wounding 
litigation often ensue when families are sometimes only seeking 
answers.
II.a Involve health care consumers as active members of the health care 
        team
    Health care consumers are playing an important role in the patient 
safety movement--as educated advocates for change based on their own 
experiences. When individuals' stories reach the right audience, 
listeners pay heed. Health care consumers can specifically help to 
prevent adverse events by being active, informed, and involved members 
of the health care team. For patients and family members, the physical 
and emotional devastation of medical error cannot be easily overcome. 
What they want most out of their ordeal is honest and open dialogue 
about what went wrong, and a ``legacy''--having their experience serve 
as a lesson for prevention in the future.15 Seldom are such 
communications and assurances forthcoming.
II.b Encourage open communication between practitioners and patients 
        when an adverse event occurs
    An unintended consequence of the tort system is that it inspires 
suppression of the very information necessary to build safer systems of 
health care delivery. When it comes to acknowledging and reporting 
medical error, there is too often silence between practitioners and 
patients; practitioners and their peers; practitioners and the 
organizations in which they practice; and health care organizations and 
oversight agencies.
    One of the basic principles of patient safety is to talk to and 
listen to patients.16 Several elements are fundamental to 
any disclosure effort. These include a prompt explanation of what is 
understood about what happened and its probable effects; assurance that 
an analysis will take place to understand what went wrong; follow-up 
based on the analysis to make it unlikely that such an event will 
happen again; and an apology.17
    The Joint Commission's accreditation standards require the 
disclosure of sentinel events and other unanticipated outcomes of care 
to patients, and to their family members when appropriate. A recent 
study confirms that many hospitals--half of those surveyed--are 
reluctant to comply with this standard for fear of medical liability 
suits.18 If disclosure is taken a step further to the offer 
of an apology, hospitals and physicians are even more likely to 
gravitate to traditional ``defend and deny'' behaviors. But there is 
increasing awareness that openness has the potential to heal, rather 
than harm, the physician-patient relationship. A growing number of 
hospitals, doctors and insurers are coming around to the idea that 
apologies may save money by reducing error-related payouts and the 
frequency of litigation.19
II.c Pursue legislation that protects disclosure and apology from being 
        used as evidence against practitioners in litigation
    Today, some prominent medical centers have adopted policies that 
urge doctors to disclose their mistakes and to apologize.20 
Insurers, too, are increasingly urging apologies.21 And, a 
growing number of states are passing laws that protect an apology from 
being used against a doctor in court.22 More such 
protections will be needed in order for most caregivers and 
organizations to feel comfortable with apologies, despite the ethical 
imperatives underlying such disclosure.
II.d Encourage non-punitive reporting of errors to third parties that 
        promotes sharing of information and data analysis as the basis 
        for developing safety improvement strategies
    Few caregivers and health care organizations voluntarily break 
through the wall of silence to report life-threatening medical errors 
beyond the walls of their institutions. The Joint Commission has had a 
voluntary reporting system since 1996, but its Sentinel Event Database 
receives only about 400 new reports of events each year--well below the 
44,000 to 98,000 deaths related to medical error estimated by the IOM 
to occur each year.
    A number of states now have mandatory error reporting systems of 
various types.23 One of the most active, the New York State 
Patient Occurrence Report and Tracking Systems (NYPORTS), logged 
approximately 30,000 reports in 2003.24 A new reporting 
system in Pennsylvania captures reports of near-misses as well as 
actual errors. Reporting systems can capture enormous volumes of data, 
but without the requisite resources to analyze and translate data into 
useful information, their potential is far from being fully realized. 
Other types of external reporting systems include voluntary reporting 
systems tailored to specific health care segments and medical 
specialty-based reporting systems.25
    There remains a substantial lack of clarity as to whether error 
analyses reported to a third-party, such as a state agency or the Joint 
Commission, are afforded legal privilege protections. This lack of 
certainty of protection continues to hamper reporting efforts that 
could otherwise yield essential information for making breakthrough 
improvements in health care safety.
II.e Enact federal patient safety legislation that provides legal 
        protection for information reported to designated patient 
        safety organizations
    Patient safety legislation--under consideration by the Congress for 
several years and currently pending reintroduction in the current 
Congress--proposes legal protection for information reported to any 
Patient Safety Organization, as defined in the legislation. Passage of 
patient safety legislation of this nature would provide the cornerstone 
for effective reporting systems that assure confidentiality and 
encourage the sharing of lessons learned from the analyses of adverse 
events.
Recommendation III: Create an Injury Compensation System that is 
        Patient-Centered and Serves the Common Good
    Only a small percentage (2 to 3 percent) of patients who are 
injured through medical negligence ever pursue litigation, and even 
fewer ever receive compensation for their injuries.26 Those 
who are awarded compensation wait an average of five years to receive 
it.27 Clearly, the current tort system falls short in 
compensating injured patients. As for exacting justice, there is often 
little correlation between court findings of negligence and actual 
negligence.28 And rather than deterring negligence, there is 
a common refrain among physicians that the current tort system ``keeps 
us from doing things that we, as good professionals, would naturally 
do.'' 29
    A central question is how the medical liability system can be 
restructured to actively encourage physicians and other health care 
professionals to participate in patient safety improvement 
activities.30 The goal of any such restructuring should be 
to reduce litigation by decreasing patient injury, by encouraging open 
communication and disclosure among patients and providers, and by 
assuring prompt and fair compensation when safety systems fail.
III.a Conduct demonstration projects of alternatives to the medical 
        liability system that promote patient safety and transparency 
        and provide swift compensation to injured patients
    Numerous proposals have been suggested for improving the medical 
liability system. These proposals center on three broad approaches: (1) 
creation of alternative mechanisms for compensating injured patients, 
such as through early settlement offers; (2) resolving disputes through 
a so-called ``no-fault'' administrative system or through health 
courts; and (3) shifting liability from individuals to 
organizations.31 Though these approaches are distinct, they 
are not in conflict. One could imagine an injury resolution system that 
incorporates the characteristics of all three.
    Inherent in any alternative to the current tort system must be a 
high priority for disclosure--an acknowledgement of the error or 
injury, an apology, and assurances that steps will be taken to avoid 
such an error in the future.
    A 2003 IOM report calls for demonstration projects to test the 
feasibility and effectiveness of alternative injury compensation 
systems that are patient-centered and focused on safety.32 
Such demonstration projects are needed to begin the process of 
mitigating the periodic medical liability crises that, aside from 
economic factors, result from the delivery of unsafe care, unreliable 
adjudication of claims, and unfair compensation for injured patients.
III.b Encourage continued development of mediation and early-offer 
        initiatives
    Some states and liability insurance companies are already pursuing 
reforms to reduce reliance on litigation as a means to resolve injury 
claims. In 2002, Pennsylvania became the first state to require 
hospitals to disclose, in writing, adverse events to patients or their 
families.33 Nevada and Florida have since followed 
Pennsylvania's lead.34 Pennsylvania is also the site of a 
Pew-sponsored demonstration project that encourages mediated dispute 
resolution.35 As part of this model, physicians are 
encouraged to disclose adverse events to their patients and to 
apologize.36 Patients or their families are provided with an 
early and fair offer of compensation, and the opportunity for mediation 
to resolve disputes.37 It is too soon to know the full 
ramifications of the Pew-sponsored project, but early indications are 
that it has been successful in mitigating litigation.38
    COPIC Insurance Company, a physician-owned liability insurer in 
Colorado, initiated its ``3Rs'' (respect, respond and resolve) program 
in 2000. Under this program, each insured physician is encouraged to 
communicate openly with the patient if an adverse event occurs, and to 
offer an apology when warranted.39 COPIC pays for patient 
expenses, and also reimburses for lost wages.40 Importantly, 
patients are not asked to waive their rights to 
litigation.41 Since its inception, none of the cases 
addressed through the 3Rs program has gone to litigation.42
    Comprehensive medical liability reform is the long-term solution 
for resolving the issues inherent in today's system, but there are 
actions that can be taken in the intermediate term that would bring 
greater integrity and transparency to the process.
III.c Prohibit confidential settlements--so-called ``gag clauses''--
        that prevent learning from events that lead to litigation
    Medical liability claims are often settled before they reach trial, 
or before the trial ends in judgment. Terms of these settlements 
typically include a ``gag clause'' that requires the confidential 
sequestering of all information related to the case. Such confidential 
settlement offers may encourage quick resolution, but this is achieved 
at the cost of forever barring access to potentially important 
information that could be used to improve the quality and safety of 
care.
III.d Redesign or replace the National Practitioner Data Bank
    Physicians named in medical liability judgments and settlements, as 
well as disciplinary actions, are reported to the National Practitioner 
Data Bank (NPDB). The primary reason for the existence of the NPDB is 
to permit hospitals and licensing boards to track incompetent 
physicians. Since its inception, questions have continued to be raised 
about the validity and reliability of the NPDB.43 A 2000 
General Accounting Office (GAO) report cited a multitude of NPDB 
problems, including underreporting of disciplinary actions, which, the 
report states, is a far better expression of physician competence than 
medical liability claims.44 In fact, medical liability 
claims data constitute 80 percent of the information contained in the 
NPDB.45 The information the data bank contains is also 
characterized in the GAO report as substantially incomplete--lacking,, 
for example, any information as to whether the standard of care was 
considered when a claim was settled or adjudicated.46
    There is a need for a centralized information or sources that 
reliably capture important inputs about the performance of physicians 
and other practitioners, but other options than the NPDB exist. For 
instance, the Federation of State Medical Boards (FSMB) regularly makes 
information on disciplinary actions taken against physicians publicly 
available. It has now been five years since the release of the GAO 
report critical of the NPDB, and no substantial progress has been made 
to implement its recommendations. Given the relative ineffectiveness of 
the NPDB, it either needs to be substantially redesigned or its 
responsibilities need to be reassigned to other more reliable 
information repositories.
III.e Advocate for court-appointed, independent expert witnesses to 
        mitigate bias in expert witness testimony
    Accountability for health care professional competency lies with 
the individual and his or her licensing and certification boards, and 
employers. This accountability should increasingly extend to the 
conduct of physicians who act as expert witnesses in medical liability 
cases. As many who have participated in a medical liability case can 
attest, expert opinion is subject to substantial potential bias when 
that opinion is paid for by either the defendant or the plaintiff in a 
case.47 According to the Federation of State Medical Boards, 
expert witnesses who give false or misleading testimony are subject to 
disciplinary action.48 In the long term, court-appointed 
experts that are independent of either plaintiffs or defendants are 
more likely to provide objective support to the litigation process.
    It is clearly time to actively explore and test alternatives to the 
medical liability system. The goal of such alternatives is not to 
legally prescribe ``blame-free'' cultures. Rather, the goal is to 
stimulate the creation of ``just cultures,'' that is, health care 
environments that foster learning--including learning from mistakes--
but that also emphasize individual accountability for misconduct. 
Inherent in any viable alternative for addressing medical liability 
claims should be the potential for fairly compensating greater numbers 
of injured patients, while allowing health care practitioners and 
providers the opportunity to reveal error, learn from such errors, and 
ensure that they are not repeated.
    Redesigning the medical liability system will necessarily be a 
long-term endeavor. Meanwhile, more and continued efforts aimed at 
fostering transparency among provider organizations, practitioners, and 
patients; seeking alternatives to litigation; leveraging the 
development of patient safety cultures; treating health care providers 
fairly; and honoring patients are both noble goals and practical 
necessities that must be actively pursued.

                               References

    1 Institute of Medicine, To Err is Human: Building a 
Safer Health System, National Academies Press: 2000
    2 Studdert et al
    3 Ibid
    4 Ibid
    5 Ransom, Scott R., Studdert, David M., et al, ``Reduced 
medicolegal risk by compliance with obstetric clinical pathways: A 
case-control study,'' OB/GYN, 101:4, April 2003
    6 Ibid
    7 Ibid
    8 Ibid
    9 Nelson, Eugene C., Batalden, Paul B., et al, 
``Microsystems in health care: Part 1. Learning from high-performing 
front-line clinical units,'' The Joint Commission Journal on Quality 
Improvement, September 2002:472-493
    10 Ibid
    11 Ibid
    12 Devers, Kelly J., Pham, Hoangmai H., Liu, Gigi, 
``What is driving hospitals' patient-safety efforts?'' Health Affairs, 
23:2, March/April 2004
    13 Ibid
    14 Sage
    15 Gibson, Singh
    16 Mohr, Julie J., Barach, Paul, et al, ``Microsystems 
in health care: Part 6. Designing patient safety into the 
microsystem,'' Joint Commission Journal on Quality and Safety, 29:8, 
August 2003
    17 Ibid
    18 Devers et al
    19 Zimmerman, Rachel, ``Doctors' new tool to fight 
lawsuits: Saying I'm sorry,'' Wall Street Journal, May 18, 2004
    20 Ibid
    21 Ibid
    22 Ibid
    23 Wachter, Robert M, Shojania, Kaveh, Internal 
Bleeding: The Truth Behind America's Terrifying Epidemic of Medical 
Mistakes, Rugged Land, February 2004
    24 ibid
    25 Suresh, Gautham, Horbar, Jeffrey D., Plesk, Paul et 
al, ``Voluntary anonymous reporting of medical errors for neonatal 
intensive care,'' Pediatrics, June 2004
    26 Studdert, et al
    27 Ibid
    28 Ibid
    29 Comment at roundtable meeting
    30 Sage
    31 Studdert, et al
    32 Ibid
    33 Liebman, Carol B., Hyman, Chris Stern, ``A mediation 
skills model to manage disclosure of errors and adverse events to 
patients,'' Health Affairs, July/August 2004
    34 Ibid
    35 Ibid
    36 Ibid
    37 Ibid
    38 Ibid
    39 COPIC's 3Rs Program, Volume 1, Issue 1, March 2004, 
viewed on the website, copic. com
    40 Ibid
    41 Ibid
    42 Ibid
    43 General Accounting Office, National Practitioner Data 
Bank: Major improvements are needed to enhance Data Bank's reliability, 
GAO-01-130, November 2000
    44 Ibid
    45 Ibid
    46 Ibid
    47 Posner, Karen L., Caplan, Robert A., Cheney, 
Frederick W., ``Variation in expert opinion in medical malpractice 
review,'' Anesthesiology, 1996; 85: 109-54
    48 James Thompson, speaking at the Joint Commission 
Roundtable meeting, July 28, 2004
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