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November 2, 2006 Mcare Commission Public Hearing 1
Pennsylvania Insurance Department
Overview of the
Medical Care Availability and Reduction of Error Fund
November 2, 2006 Mcare Commission Public Hearing 2
What is Mcare?
The Medical Care Availability and Reduction of Error Fund (“Mcare”) was created by Act 13 of 2002 and is a deputate of the Pennsylvania Insurance DepartmentMcare is the successor to the Medical Professional Liability Catastrophe Loss Fund, better known as the “CAT Fund”
November 2, 2006 Mcare Commission Public Hearing 3
What is Mcare’s Mission?
Mcare main purpose is to ensure reasonable compensation for persons injured due to medical negligence
November 2, 2006 Mcare Commission Public Hearing 4
How does Mcare Implement its Mission?
By administering various sources of funds to pay for judgments, awards or settlements in medical malpractice claims against participating health care providers and eligible entities, which exceed the primary limits of coverage
November 2, 2006 Mcare Commission Public Hearing 5
Who is required to participate in Mcare?
Participation is mandatory for physiciansosteopathic physicianspodiatristsnurse midwiveshospitalsnursing homes birth centersprimary health centers
Professional corporations**Most professional corporations, associations or partnerships owned entirely by health care providers may choose to insure their basic (primary) layer of liability
– If they so choose, then their participation in Mcare is mandatory
November 2, 2006 Mcare Commission Public Hearing 6
Who is NOT Subject to Mandatory Mcare Coverage Participation?
1. providers who practice less than 50% in PA2. providers who practice exclusively as federal government
employees3. providers who practice exclusively as Commonwealth or
City of Philadelphia employees4. providers who are exclusively forensic pathologists5. providers who are retired, but who provide care for his or
herself and immediate family members6. providers who practice exclusively as members of the PA or
U.S. military forces7. providers who practice exclusively under a volunteer license8. providers who practice exclusively with coverage under the
Federal Tort Claims Act
November 2, 2006 Mcare Commission Public Hearing 7
National Coverage Limits
8 states require some level of mandatory coverage
Only New Jersey and Wisconsin require the same level of mandatory coverage as Pennsylvania
November 2, 2006 Mcare Commission Public Hearing 8
PA’s Mandatory Coverage Limits
Since the Fund’s creation in 1976, the required coverage limits for health care providers has varied to meet changes in the law
The primary rates increase or decrease in part to reflect the risk associated with the changes to the primary layer
November 2, 2006 Mcare Commission Public Hearing 9
What are the Coverage Requirements?
Providers must insurer their professional medical services within the Commonwealth by purchasing medical professional liability insurance as follows:
Primary Layer from an insurance carrier licensed or approved by the PA
Insurance Department or with an approved self-insurance plan
and an
Excess Layer from Mcare
November 2, 2006 Mcare Commission Public Hearing 10
Market Rates
Premium rates for primary malpractice insurance are increasing annually at lower percentages
Since 2003, the Pennsylvania Insurance Department has licensed or approved 4 new insurance companies and 29 risk retention groups
November 2, 2006 Mcare Commission Public Hearing 11
What is the history of coverage limits?
From 1976 to 1982 coverage remained consistent
History of Coverage Limits
Coverage Limits (per Occurrence/per Annum)
Mcare Layer Basic (Primary) Layer
Year
Policy Effective Date All HCPs Non-Hospital Hospital
1976
01/13/76 - 12/31/82
$1,000,000 / $3,000,000 $100,000 / $300,000 $100,000 / $1,000,000
1977
1978
1979
1980
1981
1982
November 2, 2006 Mcare Commission Public Hearing 12
Coverage in 1983
Increase in primary layer
History of Coverage Limits
Coverage Limits (per Occurrence/per Annum)
Mcare Layer Basic (Primary) Layer
YearPolicy Effective
Date All HCPs Non-Hospital Hospital
1983
01/01/83 - 12/31/83 $1,000,000 / $3,000,000 $150,000 / $450,000 $150,000 / $1,000,000
November 2, 2006 Mcare Commission Public Hearing 13
Coverage from 1984 to 1996
Increase in primary layer History of Coverage
LimitsCoverage Limits (per Occurrence/per Annum)
Mcare Layer Basic (Primary) Layer
Year
Policy Effective Date All HCPs Non-Hospital Hospital
1984
01/01/84 - 12/31/96 $1,000,000 / $3,000,000$200,000 /
$600,000$200,000 / $1,000,000
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
November 2, 2006 Mcare Commission Public Hearing 14
Coverage from 1997 to present
Fund layer decreasesPrimary layer increases
History of Coverage Limits
Coverage Limits (per Occurrence/per Annum)
Mcare Layer Basic (Primary) Layer
Year
Policy Effective Date All HCPs Non-Hospital Hospital
199701/01/97 - 12/31/98
$900,000 / $2,700,000
$300,000 / $900,000$300,000 / $1,500,0001998
199901/01/99 - 12/31/00
$800,000 / $2,400,000
$400,000 / $1,200,000
$400,000 / $2,000,0002000
200101/01/01 - 12/31/02
$700,000 / $2,100,000
$500,000 / $1,500,000
$500,000 / $2,500,0002002
2003
01/01/2003 to present
$500,000 / $1,500,000
$500,000 / $1,500,000
$500,000 / $2,500,000
2004
2005
2006
November 2, 2006 Mcare Commission Public Hearing 15
Primary Market Rates
The following slide illustrates recent rates for a select group of carriers
November 2, 2006 Mcare Commission Public Hearing 16
Annual Percentage Changes in Select Medical
Malpractice Carriers’ Base Premium Rates (Year Increases Are Effective)
2000 2001 2002 2003 2004 2005 2006 2007
JUA 3.2% 16.4% 20.0% 48.0% 4.2% 0.6% -1.9% 7.5%
PMSLIC 15.0% 10.0% 40.0% 54.0% 15.1% 10.8% 0.0% 0.0%
Medical Protective Not Available 15.0% 45.0% 15.7% 25.0% 15.0% 0.0% Not Available
November 2, 2006 Mcare Commission Public Hearing 17
Mcare Layer Rates
The Mcare rates increase or decrease to reflect the changes in coverage, claims payout and operational expensesMcare rates were simply a percentage of providers’ primary premiums until 1996Since 1997, Mcare rates were a percentage of the JUA base rates
November 2, 2006 Mcare Commission Public Hearing 18
What is the History of Mcare rates?
The following slide illustrates assessment rates from 2000 to 2007
The rate went from 61% in 2000
to 23% in 2007
November 2, 2006 Mcare Commission Public Hearing 19
Assessment Rate History
Mcare Annual Assessment Rates
61% 61%
50%43% 46%
39%
29%23%
0%
10%
20%
30%
40%
50%
60%
70%
2000 2001 2002 2003 2004 2005 2006 2007
November 2, 2006 Mcare Commission Public Hearing 20
Medical Malpractice Crises…
Periodic medical malpractice crises date back to the mid-1970’sIn 2000, several national medical malpractice insurers withdrew from the market and thereby reduced the total medical malpractice insurance capacity in PA and the nationThe 9/11 attack exacerbated the malpractice insurance crisis by increasing reinsurance costsIncreased malpractice expenses created financial stress on providers
November 2, 2006 Mcare Commission Public Hearing 21
How did the Administration and the Legislature React?
Act 13 of 2002 was enacted in order to address the concerns of the health care provider community and private marketplace
November 2, 2006 Mcare Commission Public Hearing 22
Legislative Reforms and Rule Changes by the PA Supreme Court
Prohibited venue shopping
Curtailed the number of cases filed in Philadelphia
Established guidelines for Motion of Remittitur
Gives judges more power to limit runaway jury awards for non-economic damages
Certificate of MeritCertified medical expert must confirm that malpractice has occurred
Encourage the use of Alternative Dispute Resolution Methods
November 2, 2006 Mcare Commission Public Hearing 23
Some Other Key Provisions of Act 13 of 2003
Reduced mandatory malpractice coverage limits from $1.2 million in 2002 to $1 million in 2006
Reduced Mcare’s coverage layer from $1,200,000 by $200,000 in 2002 to $500,000 to $1,000,000 in 2003
Continue to provide fair and reasonable compensation to injured claimants
Provided for a gradual phase-out of Mcare
November 2, 2006 Mcare Commission Public Hearing 24
Access to quality health care was an immediate concern
Something was needed that would allow time for the Act 13 reforms to take effect
November 2, 2006 Mcare Commission Public Hearing 25
An interim measure was needed…
The General Assembly passed Act 44 of 2003 and Governor Rendell signed it into law thus establishing the Health Care Provider Retention Program
Commonly referred to as the Mcare “Abatement Program”
November 2, 2006 Mcare Commission Public Hearing 26
How is the Abatement Program Funded?
Act 44 provides funding for the Abatement Program from a 25 cents per pack tax on cigarettes, providing $180 million annually
$42 million annually has been dedicated from the Auto CAT Fund
Funding for Mcare from the Auto CAT Fund is scheduled to sunset in 2013
November 2, 2006 Mcare Commission Public Hearing 27
What are the Goals of the Abatement Program?
Mcare’s Abatement Program isdesigned so Pennsylvanians willhave continued availability of andaccess to quality health care
November 2, 2006 Mcare Commission Public Hearing 28
How is this goal achieved?Pennsylvania’s innovative Abatement Program defrays providers’ malpractice insurance expenses until legislative and judicial reforms have time to take effect
Through 2006, more than $830 million of public funds have been committed to help defray providers’ malpractice insurance expenses
Encourages physicians to continue practicing in Pennsylvania
The number of physicians paying Mcare assessments remained fairly constant over the past few years at more than 35,000
November 2, 2006 Mcare Commission Public Hearing 29
Abatement Program*Note: Through October 25, 2006, 33,660 unique providers submitted 2006 abatement applications, which is many thousands more than the number of abatement applications in October in prior years. More than 36,500 unique providers are expected to apply for 2006 abatements because nursing homes became eligible for 2006 abatements, and it appears that more than 700 nursing homes will apply for abatements. Likewise, Podiatrists became eligible for abatements in 2005, which accounts for most of the 2005 increase.
Unique Providers Who Applied for Mcare Abatement2006 is Projected
32,497
34,265
35,815 36,500*
30,000
35,000
40,000
2003 2004 2005 2006
Provider is defined as either a physician (MD/DO), podiatrist, certified nurse midwife, nursing home, birth center, medical corporation or hospital
November 2, 2006 Mcare Commission Public Hearing 30
Providers Eligible for Abatement of their Mcare Assessments
Approximately 14% of all physicians participating in the Mcare program are eligible for 100% abatements of their Mcare assessments, as are midwives
Physicians who are not eligible for 100% abatements are eligible for 50% abatements, as are Podiatrists (as of 2005) and Nursing Homes (as of 2006)
November 2, 2006 Mcare Commission Public Hearing 31
100% Abated Providers
The following slide illustrates The total amount of Mcare savings realized to date (2003 – 2006) for those providers abated at 100%
The top line demonstrates the value to those providers in the JUA’s highest rated territory (Philadelphia)
The bottom line demonstrates those providers in the JUA’s lowest rate territory (Dauphin)
November 2, 2006 Mcare Commission Public Hearing 32
100% Abated Providers
2003 to 2006 Aggregate Mcare Assessments Abated per Provider Typein the Highest and Lowest Rated JUA Territories
$68,174 $82,011
$154,608 $154,784$177,966
$194,168
$36,979 $44,537
$82,278 $82,801 $95,486 $104,148$29,119
$15,699
Highest Rated TerritoryLowest Rated Territory
November 2, 2006 Mcare Commission Public Hearing 33
50% Abated Providers
Program began for 2003 and included only MDs and DOs not abated at 100%
Podiatrists added effective 2005
Nursing Homes added effective 2006
November 2, 2006 Mcare Commission Public Hearing 34
50% Abated
2003 to 2006 Aggregate Mcare Assessments Abated per Provider Typein the Highest and Lowest Rated JUA Territories
$-$10,000$20,000$30,000$40,000$50,000
Highest Rated TerritoryLow est Rated Territory
November 2, 2006 Mcare Commission Public Hearing 35
Abatement Program Improvements
e-Signature implemented mid-’06
1. Relieves providers of requirement to print, sign and return abatement applications
2. Increases efficiency of the eligibility process
3. Allows providers to confirm their eligibility status within 24 hours
November 2, 2006 Mcare Commission Public Hearing 36
What is occurring in the Mcare Claims environment?
Mcare’s claim expenses decreased each
year since 2003, and Mcare’s assessment
rates decreased each year since 2001
November 2, 2006 Mcare Commission Public Hearing 37
Claims & Assessments
Mcare’s claim payments have declined each year since 2003
Mcare’s assessment rate has declined each year since 2001
Total Mcare assessments paid by providers (net of abatements) have declined each year since 2001
November 2, 2006 Mcare Commission Public Hearing 38
History of Mcare Claim Payments
Mcare Annual Claims Payments
$341$322
$348$379
$320
$233$210
$100
$150
$200
$250
$300
$350
$400
2000 2001 2002 2003 2004 2005 2006
Mil
lio
ns
November 2, 2006 Mcare Commission Public Hearing 39
Count of Paid Cases and Claims
Mcare Claim and Case Counts by Year"Claims" are against individuals providers that result in Mcare payments
A "case" encompass all claims paid to one plaintiff
544 547 534 543476
373322
699 692 674 701620
471424
100200300400500600700800
2000 2001 2002 2003 2004 2005 2006
Cases Claims
November 2, 2006 Mcare Commission Public Hearing 40
Alternative Dispute Resolution Procedures
Mediation was used in 114 cases between September 1, 2005, and August 31, 2006, a 46% increase when compared to 78 for the previous yearArbitration used in an additional 21 cases in 2006 Trials with pre-determined award ranges (high/low) were used in 4 cases ADR techniques were used in a total of 139 cases in the 2006 Mcare claim year
November 2, 2006 Mcare Commission Public Hearing 41
Mcare claims appear to be in line with the recent Supreme Court study
November 2, 2006 Mcare Commission Public Hearing 42
Trends in Case Filings for All Pennsylvania Medical Malpractice
2,632 2,6592,903
1,712 1,816 1,698
0
500
1000
1500
2000
2500
3000
2000 2001 2002 2003 2004 2005
Trend in Medical Liability Case FilingsNote: Act 13, The Mcare Act, and Act 127 (Venue Reform) became effective in mid-2002.
Source: Administrative Office of PA Courts, Medical Malpractice Statistics
http://www.courts.state.pa.us/Index/MedicalMalpractice/2005StatewideFilings.pdf
41.5% decline in case filings since 2002
November 2, 2006 Mcare Commission Public Hearing 43
Communication Efforts
Governor Rendell’s desire for more communication between Mcare and the malpractice insurance community has resulted in more than 10 carriers meetings since 2002 On average,125 insurance industry representatives were present at each meetingMore than 30 individualized carrier meetings/educational seminars since 2002
November 2, 2006 Mcare Commission Public Hearing 44
So where are we today?
Since April 2006, the Mcare Commission has met 6 times to study the future scope and obligations of the Fund as mandated by Act 88 of 2005
PricewaterhouseCoopers has made several in-depth presentations in an effort to educate the Commission and the public
Various proposals have been presented to the Commission for consideration
November 2, 2006 Mcare Commission Public Hearing 45
Where are we today? cont’d
To consider….
Whether or not or when to phase-out Mcare
Whether or not or when to change the total mandatory coverage limits
Whether or not taxpayer monies should continue to be used to fund assessment abatements
How best to deal with the unfunded liability
November 2, 2006 Mcare Commission Public Hearing 46
Unfunded LiabilityMcare’s unfunded liability is the amount of money Mcare is projected to pay for claims reported to date as well as claims that occurred but are unreported
PricewaterhouseCoopers calculates the unfunded liability to be $2.33 billion as of December 31, 2005
Mcare's Unfunded Liabilities
$2.28 $2.24 $2.33 $2.40 $2.39 $2.33
0. 00
1. 50
3. 00
2000 2001 2002 2003 2004 2005
Billi
ons
November 2, 2006 Mcare Commission Public Hearing 47
Abatement Program Continues………
Governor Ed Rendell signed Senate Bill 972 (Act 128 of 2006) on October 27, 2006 that extends the Abatement Program for 2007
November 2, 2006 Mcare Commission Public Hearing 48
Commission Report
The Commission is required to submit a report to the Governor and General Assembly by November 15, 2006
November 2, 2006 Mcare Commission Public Hearing 49
Thank you for attending the Commission’s Public Hearing today.