Pennsylvania

IV. State Case Studies

Pennsylvania

Citizens of Pennsylvania would likely take issue with the Wisconsin state senator’s assertion that PCFs do not represent taxpayer money, as their experience illustrates that such collections can indeed become a source of PCF funding: Pennsylvania taxpayers are currently subsidizing healthcare providers’ MCare (Pennsylvania’s PCF) premiums through a 25 cent-per-pack cigarette tax increase.[1] Known as the MCare abatement, the tax increase was passed in December 2003 and used to cover 100 percent of MCare fund payments for high-risk specialists, such as obstetricians/gynecologists, and 50 percent of other physicians’ payments. Originally effective for 2004-2005, the abatement was later extended into 2006.[2]

Pennsylvania’s experience illustrates that the existence of a PCF is not enough to insulate a state from a medical malpractice insurance “crisis” and actually can contribute to one.[3] The state established The Medical Liability Catastrophic Loss Fund (“CAT Fund”) in 1975 as a mandatory PCF operated on a “pay-as-you-go” basis. In its early years, the fund’s payouts were relatively low because of the length of time it takes to resolve medical malpractice claims (an example of what one study labeled “a mirage-like advantage”[4] of pay-as-you-go PCFs), but by the mid-1990s annual assessments equaled roughly $200 million, far less than the unfunded liability of approximately $2 billion.[5] To close this gap, a number of reforms were undertaken, including emergency surcharges, adjustments to the basis of assessment in order to increase collections, and an increased threshold for coverage aimed at limiting future payouts.[6] By 2000, CAT Fund spending had risen to over $350 million as claims related to the program’s earlier years came due, and assessments on the state’s providers had increased as well. The MCare Assessments have increased since 2003. In each year since 2003, MCare participants have been assessed.[7] In 2003 and 2004 the assessments were over 40%.[8] In 2009, MCare participants can expect to be assessed 19%.[9]

In 2002, the Medical Care Availability and Reduction of Error Fund (MCare Fund) replaced the CAT Fund. Reforms associated with its establishment included the reduction of MCare liability to the layer of $500,000 to $1 million per claim (from $1.2 million); the appropriation of approximately $40 million from a state automobile insurance fund to help subsidize MCare surcharges for certain types of physicians; a requirement that MCare assess premiums on physicians on an experience-rated basis; and plans for a phase-out of the program entirely by 2009.[10] The MCare abatement funded by the increased cigarette taxes was passed in 2003, after legislators had considered other revenue-raising ideas including sales taxes on liquor by the drink and beer by the keg and a six percent tax on the gross revenues of Pennsylvania’s seven major league sports teams.[11]

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[1] Christopher Guadagnino, Long-term reforms stalled in 2003, Physician’s News Digest., (Jan. 2004), http://www.physiciansnews.com/cover/104.html (last visited Nov. 10, 2008).

[2] Pa. Renews Insurance Subsidy for Doctors, Insurance Journal, (Nov. 200, 2005), http://www.insurance

journal.com/news/east/2004/11/22/47897.htm

[3] Sloan, supra note 2, at 18. “The [CAT] Fund has contributed to the state’s liability insurance woes by increasing annual assessments on health care providers and by reducing its level of excess coverage, forcing providers to pay more for commercial primary coverage”.

[4] Pinnacle Actuarial Resources, Inc., Preliminary Report on the Feasibility of an Ohio Patients Compensation Fund 16 (Feb. 2003), http://www.ohioinsurance.gov/Legal/REPORTS/Prelim_Patient_Compensation_Report_03-03-03.pdf.

[5]Randall R. Bovbjerg and Anna Bartow, Understanding Pennsylvania’s Medical Malpractice Crisis:The Project on Medical Liability in Pennsylvania, 18 (June 2003), http://medliabilitypa.org/research/report0603/.

[6] Id. 18.

[7] Mcare, Notices from the Pennsylvania Bulletin, available at: http://www.mcare.state.pa.us/mclf/cwp/view.

asp?a=3&q=148333&PM=1&mclfNav=(last visited Nov. 10, 2008).

[8] Id.

[9] Id.

[10] Bovbjerg and Bartow, supra note 65.

[11] Tom Barnes and Bill Toland, Senate passes 10% tax hike House, governor must approve increase in Pa. income levy; slot machine haggling fails, (Dec. 21, 2003), http://www.postgazette.com/localnews/20031221statebudget

local1p1.asp (last viewed July 2005).