January 26, 2005
MEDICAL MALPRACTICE - MARYLAND
By: Janet L. Kaminski, Associate Legislative Attorney
You asked for a summary of the medical malpractice legislation recently enacted in Maryland and a comparison to Connecticut's PA 04-155, the medical malpractice act that the governor vetoed.
During a special session devoted to medical malpractice issues, Maryland's General Assembly passed emergency bill HB 2, the Patients' Access to Quality Health Care Act of 2004 on December 30, 2004. Although Governor Robert Erlich vetoed the act, the legislator's voted to override the veto on January 11, 2005. A copy of HB 2 is enclosed, as well as a copy of the Maryland Legislative Services Department's policy note, from which much of the below discussion is taken.
The act establishes the Maryland Medical Professional Liability Insurance Rate Stabilization Fund; repeals the 2% premium tax exemption applicable to HMOs; limits certain physicians' insurance premium increases to 5% instead of the previously scheduled 33% increase; freezes the non-economic damages limit at $650,000 for four years, eliminating the annual inflation adjustment for those years; caps non-economic damages in death cases at $812,500 for four years, half of the current amount; imposes stricter qualifications for expert witnesses; requires alternative dispute resolution before going to trial; requires an offer of judgment to be made not less than 45 days before trial begins; sets the penalty for not accepting an offer of judgment in certain situations at the offeror's costs incurred after making the offer; increases Medicaid reimbursements for physicians; lowers the standard of proof for the physician disciplinary board; establishes a “people's counsel” to represent consumers in malpractice insurance rate hearings; requires insurers to offer plans with varying deductibles; increases reporting requirements for medical malpractice insurers; and sets additional requirements for Medical Mutual Liability Insurance Society, the state's largest provider of medical liability insurance. The HMO premium tax revenue is allocated to the rate stabilization fund, which is made up of two accounts, a rate stabilization account to subsidize malpractice insurance premiums and a medical assistance account to increase the Medicaid reimbursement rates for specialists.
Although the Maryland and Connecticut acts each relate to medical malpractice insurance and tort reform, they are not very similar in content. Connecticut's PA 04-155 addresses mediation, the offer of judgment, physician discipline, and reporting requirements, though in different ways from Maryland. A summary of PA 04-155 is contained in OLR Report 2004-R-0522 (copy enclosed).
Rate Stabilization Fund
The purpose of the Maryland Medical Professional Liability Insurance Rate Stabilization Fund is to retain health care providers in the state by (1) allowing insurers to charge lower rates and (2) increasing the payments to specialty physicians and managed care organizations participating in the Maryland Medical Assistance Program, according to the Maryland General Assembly's Legislative Services Department.
The insurance commissioner administers the fund, which receives money from the 2% HMO premium tax required under the act. Disbursements from the rate stabilization account will be made to a medical professional liability insurer in exchange for the insurer charging physicians lower relative premiums. Premiums cannot exceed those for the previous 12-month period by more than 5%. Disbursements from the medical assistance account will be used to increase payments to obstetricians, neurosurgeons, orthopedic surgeons, and emergency medicine physicians. The commissioner may retain up to 0.5% of the fund annually for administrative costs. During the 2006 legislative session, the governor must propose legislation that provides an alternative method for distributing funds.
Caps on Non-Economic Damages
For a cause of action that arises between January 1, 2005 and December 31, 2008, non-economic damages are limited to $650,000. For a cause of action that arises on or after January 1, 2009, the non-economic damages cap increases by $15,000 annually. The cap applies in the aggregate to all claims for personal injury and wrongful death arising from the same medical injury, regardless of the number of claims, claimants, plaintiffs, beneficiaries, or defendants.
If there is a wrongful death action in which there is more than one claimant or beneficiary, whether or not there is also a personal injury action, non-economic damages are limited to 125% of the cap, regardless of the number of claims, claimants, plaintiffs, beneficiaries, or defendants (e.g., $812,500 for causes of action arising between January 1, 2005 and December 31, 2008).
Expert Witness Requirements
For a health care provider to serve as an expert witness, he must have: (1) clinical experience, provided consultation relating to clinical practice, or taught medicine in the defendants' specialty or related field within five years of the incident; and (2) board certification in the same specialty if the defendant is board certified in a specialty, unless the defendant provided care or treatment to the plaintiff unrelated to his area of board certification or the health care provider taught medicine in the same or similar field.
A health care provider who attests to or testifies about the merits of a claim or defense as a qualified expert may not spend more than 20% of his professional time with activities that directly involve testimony in personal injury claims.
Within 15 days after the date discovery is to be completed, a party must file a “supplemental certificate of a qualified expert” for each defendant that attests to: (1) the basis for alleging the specific standard of care, (2) the expert's qualifications, and (3) the standard of care. The plaintiff's supplemental certificate must also attest to: (1) the specific injury, (2) how the standard of care was breached, (3) what the defendant should have done, and (4) the inference that the breach proximately caused the plaintiff's injury. The defendant's supplemental certificate must also attest to: (1) how the defendant complied with the standard of care, (2) what the defendant did to meet the standard, and (3) if
applicable, that the breach did not proximately cause the plaintiff's injury. The plaintiff's failure to file may result in dismissal without prejudice. The defendant's failure to file may result in the court ruling for the plaintiff on the issue of liability.
Alternative Dispute Resolution
Within 30 days of the defendant's filing an answer to the complaint or a certificate of a qualified expert, which ever is later, the court must order the parties to engage in alternative dispute resolution (ADR) (e.g., mediation, neutral case evaluation, neutral fact finding, settlement conference) at the earliest possible date. ADR is not required if the court finds it would not be productive and all parties agree not to use it. The act sets procedures and establishes requirements for individuals serving as mediators. Mediators are immune from suit for any act or decision made during mediation and within the scope of authority.
Offer of Judgment
Not less than 45 days before the trial begins, a party may serve on the adverse party an offer of judgment, with an accounting of costs accrued to date. A party may also make an offer of judgment not less than 45 days before a hearing on the extent of liability after liability has already been determined. If an offer is declined and the trial verdict is “not more favorable to the adverse party” than the offer, the party who declined the offer must pay the offeror's costs incurred after making the offer.
Standard of Review for Physician Discipline
Factual findings by the Board of Physicians for physician disciplinary actions must be by a “preponderance of the evidence” standard, under which an assertion is proven if it more probably occurred than not. Previous law required a “clear and convincing evidence” standard, under which an assertion is proven if it is reasonably certain that it occurred. “Clear and convincing” is a greater standard of proof than “preponderance of the evidence,” but is less stringent than “beyond a reasonable doubt.”
A people's counsel, appointed by the Attorney General with the advice and consent of the Senate, is established in the Attorney General's office. The counsel may appear before the insurance commissioner or in court to represent the interests of homeowners and medical professional liability insurance consumers in the state and must review any proposed rate increase of 10% or more on behalf of these consumers. A special fund is established to pay the counsel's expenses. It is funded by assessments on insurers that sell homeowners or medical liability insurance.
Insurers that issue or offer medical professional liability policies must offer, in addition to the basic policy, policies with deductibles of $25,000, $50,000, and $100,000.
Professional liability insurers are required to report to the insurance commissioner on: (1) the nature and cost of reinsurance, (2) claims experience by category of health care providers, (3) the amount of claim settlements and awards, (4) reserves, (5) the number of structured settlements used, and (6) any other information the commissioner may require. The insurers must also report information on the insurer, the policy, type of injury, type of institution where the injury occurred, patient status, health care provider, and the outcome of the claim.
The commissioner must report annually to the Legislative Policy Committee on his findings regarding the effect of the 2004 special session legislation on the availability of malpractice insurance.
The commissioner must also prepare an annual comparison guide to medical liability insurance premiums and make it available on the insurance department's web site.
Medical Mutual Liability Insurance Society
Additional requirements apply specifically to Medical Mutual Liability Insurance Society of Maryland, a physician-owned insurance company and Maryland's largest provider of medical liability insurance. The society may not deny, cancel, or refuse to renew a physician's coverage based solely upon his: (1) employment or provision of services at an assisted living or nursing facility, or (2) provision of mammography or emergency room services. The society must report annually to the commissioner and the General Assembly certain financial information, including officer and director compensation.
Before approving a rate filing by the society that would increase premiums by more than 7.5%, the commissioner must determine whether the society has other financial resources that could be applied, rather than a rate increase. If the commissioner determines that the society has excess surplus, he is prohibited from approving a rate increase. If a policyholder purchases insurance directly from the society, rather than through a producer, then the society must give the policyholder a rebate or discount equal to the commission cost saved minus 1%.
CONNECTICUT PA 04-155
Although the Maryland and Connecticut acts each relate to medical malpractice insurance and tort reform, they are not very similar in content.
In comparison to Maryland's HB 2, PA 04-155 does not include a rate stabilization fund, caps on damages, expert witness requirements, a people's counsel, or policy deductibles.
PA 04-155 establishes a mandatory mediation program for medical malpractice lawsuits, unless all parties agree to use an alternative dispute resolution program.
With respect to an offer of judgment made by a plaintiff in a medical malpractice action, PA 04-155 changes the interest rate that a court can award a plaintiff if the verdict is more than the offer. For any portion of the award that is up to two times the offer, 8% interest is added. For any portion of the award that is more than two times the offer, 4% interest is added.
PA 04-155 requires the Medical Examining Board, with the Department's assistance, to adopt guidelines for physician discipline. It also requires medical liability insurance companies to file a closed claim report with the insurance commissioner on each claim closed, including information on the insured, insurer, injury, and amount paid on the claim. The commissioner must then annually report to the General Assembly's Insurance and Real Estate Committee and the public.