Legislature(2003 - 2004)

02/25/2004 01:04 PM House JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 472 - CLAIMS AGAINST HEALTH CARE PROVIDERS                                                                                 
Number 0068                                                                                                                     
CHAIR McGUIRE  announced that the  first order of  business would                                                               
be HOUSE  BILL NO. 472, "An  Act relating to claims  for personal                                                               
injury  or  wrongful death  against  health  care providers;  and                                                               
providing for an effective date."                                                                                               
Number 0164                                                                                                                     
REPRESENTATIVE ANDERSON,  speaking as  the sponsor, said  that HB
472 is an important piece  of legislation that proposes to modify                                                               
the current policy  regarding how much a person can  get for pain                                                               
and suffering in  medical liability cases.   Specifically, HB 472                                                               
proposes a hard  cap of $250,000.  Currently,  for most injuries,                                                               
AS 09.17.010 allows  for the greater of $400,000  or $8,000 times                                                               
the  life  expectancy  of  the claimant.    For  severe  physical                                                               
impairment or  severe physical  disfigurement, the  [current] cap                                                               
is  the  greater  of  $1   million  or  $25,000  times  the  life                                                               
expectancy of  the claimant.   Because these awards  "ratchet" to                                                               
the higher amount they are known as soft caps.                                                                                  
REPRESENTATIVE  ANDERSON said  he  believes that  a $250,000  cap                                                               
will improve the "medical liability  risk" environment in Alaska.                                                               
When medical-liability  insurance carriers  examine a  market for                                                               
the purpose  of [underwriting] policies,  they take  into account                                                               
many factors, one of which is  the likelihood of big payouts.  He                                                               
opined  that because  the current  situation in  Alaska regarding                                                               
big payouts  is uncertain many insurance  carriers have "departed                                                               
from  our   state."    Establishing   a  hard  cap   of  $250,000                                                               
establishes  certainty,  he   stated.    Representative  Anderson                                                               
informed  the committee  that beyond  the committee  packet, each                                                               
member  should  have  a  black   three-ring  binder  of  relevant                                                               
information.    He   explained  that  the  desire   is  to  place                                                               
[Alaska's] health  care in  line with  other states'  health care                                                               
while also ensuring affordable health care.                                                                                     
Number 0423                                                                                                                     
REPRESENTATIVE ANDERSON turned to  medical liability coverage and                                                               
pointed out  that in order  to protect their assets  most doctors                                                               
indemnify themselves  with insurance.   Furthermore,  health care                                                               
facilities require that doctors carry  insurance.  He pointed out                                                               
that  this  insurance  also  protects   the  patient.    However,                                                               
restrictions  or mandates  placed on  medical practitioners  will                                                               
extrapolate out to the public, he emphasized.                                                                                   
REPRESENTATIVE  ANDERSON said  that  it's  critical that  medical                                                               
liability insurance be available for  doctors, which he opined is                                                               
difficult at this  point [in Alaska].  He  informed the committee                                                               
that  just  a  few  months  ago  four  carriers  offered  medical                                                               
liability insurance in  Alaska.  However, now there  are only two                                                               
carriers.   If  one  of  the remaining  two  carriers leaves,  he                                                               
predicted  disaster because  the  remaining  carrier wouldn't  be                                                               
able to handle  all the physicians in the state.   Alaska is also                                                               
experiencing a  shortage of doctors.   As  a result of  all this,                                                               
the number of  claims on these insurance policies is  rising.  He                                                               
related  that  the  Physician Insurance  Association  of  America                                                               
reports that  nearly 8 percent  of all awards exceed  $1 million.                                                               
Without a hard cap, which  this legislation proposes, there is no                                                               
reason to think this trend  will change.  Representative Anderson                                                               
pointed  out  that  [Alaskans] depend  on  Alaska's  health  care                                                               
professionals for quality health care,  which is why he sponsored                                                               
HB 472.  Furthermore, these  health care professionals need to be                                                               
indemnified to provide that care.   In conclusion, Representative                                                               
Anderson  said  that  his  constituents  and  their  health  care                                                               
providers  are  depending  upon  the  legislature  to  create  an                                                               
environment in which insurance carriers  have confidence to write                                                               
these policies.                                                                                                                 
Number 0717                                                                                                                     
JAMES   JORDAN,   Executive   Director,  Alaska   State   Medical                                                               
Association (ASMA),  informed the  committee that he  also serves                                                               
on  the  Board  of  Directors for  the  Medical  Underwriters  of                                                               
California,  which  is  the "attorney  in  fact,"  the  operating                                                               
company,  for  the  Medical   Insurance  Exchange  of  California                                                               
(MIEC).   He explained  that he will  first discuss  the practice                                                               
environment  and the  environment in  Alaska with  regard to  the                                                               
recruitment of new  physicians.  Mr. Jordan  paraphrased from the                                                               
following written testimony [original punctuation provided]:                                                                    
     I would  like to tell  you a short story  about medical                                                                    
     care in Alaska.  This story  is about a patient who had                                                                    
     a  routine  physical  last summer  done  by  a  general                                                                    
     internist  in  Anchorage.    That  doctor,  during  the                                                                    
     course  of  the  examination  discovered  a  suspicious                                                                    
     tumor  in the  patient's  lower GI  tract.   A  hastily                                                                    
     arranged colonoscopy, along with  a biopsy, confirmed a                                                                    
     very rare  cancerous tumor -  and one that  is normally                                                                    
     without symptoms.   As a  matter of fact, this  type of                                                                    
     cancer is typically not discovered  until it has spread                                                                    
     to the  brain, heart, and/or  lungs.  The good  news is                                                                    
     that it was  caught at a very early stage  by a skilled                                                                    
     doctor  and   was  successfully  treated   by  surgical                                                                    
     removal.   So, you  may wonder why  I am  relating this                                                                    
     story to you that has a happy ending.                                                                                      
     For  one reason,  this  story is  very  personal.   The                                                                    
     patient  referred  to is  my  wife.   For  another,  it                                                                    
     highlights   the  need   in  Alaska   for  well-trained                                                                    
     physicians in  sufficient numbers  to provide  the care                                                                    
     that  our  citizens  need and  deserve.    The  general                                                                    
     internist who saw my wife  is Dr. Richard Neubauer, who                                                                    
     happens to be  about my age as well as  my own personal                                                                    
     physician.   Dr. Neubauer  graduated from  Yale Medical                                                                    
     School  and  did  graduate  medical  education  at  the                                                                    
     University of Michigan.  As  I previously mentioned, he                                                                    
     is  a general  internist.   General  internists are  in                                                                    
     very short  supply in Alaska.   A Fall  2002 Providence                                                                    
     study shows  a shortage of 43.25  full time experienced                                                                    
     general internists  in Anchorage alone.   I believe you                                                                    
     will  hear   testimony  that  the  number   of  general                                                                    
     internists  continues to  drop.    Those remaining  are                                                                    
     overtaxed in  their practices, in their  emergency room                                                                    
     call and  coverage schedules, and, in  some cases, have                                                                    
     simply left the state to  pursue a practice that allows                                                                    
     them to have a family life.                                                                                                
     What  would have  happened had  Dr.  Neubauer not  been                                                                    
     around for  my wife?   Or for  that fact,  the surgeon,                                                                    
     Dr.  June  George,  who  is   one  of  only  two  board                                                                    
     certified  colo/rectal surgeons  in  the entire  state?                                                                    
     Perhaps a  general surgeon could have  treated her, but                                                                    
     that same  Providence study also shows  a deficiency in                                                                    
     Anchorage alone  of 19.8  full time  equivalent general                                                                    
     surgeons.   The shortages are  real.  Dr.  Neubauer and                                                                    
     I,  being  contemporaries,  often muse,  "Who  will  be                                                                    
     around to care for us?"                                                                                                    
     HB 472 is an important  element necessary to create the                                                                    
     practice  environment that  will  help  us recruit  the                                                                    
     doctors we need in Alaska.                                                                                                 
MR. JORDAN said  that the $250,000 hard cap  on noneconomics will                                                               
set the standard  that will help Alaska recruit  physicians.  Mr.                                                               
Jordan informed  the committee that  there are two  supreme court                                                               
cases  that address  the  process of  informed  consent.   Alaska                                                               
statute,  he explained,  requires  that any  time  a health  care                                                               
provider  suggests a  course of  treatment, the  patient must  be                                                               
provided  with   sufficient  information  to  make   an  informed                                                               
decision with  regard to the  proposed care.   In 1993  Korman v.                                                             
Mallin  was the  first seminal  case involving  informed consent.                                                             
The  aforementioned case  established some  requirements for  the                                                               
process  of informed  consent.   However, it  didn't provide  any                                                               
guidelines for the  physicians.  Later, there  was the Marsingill                                                             
v. O'Malley  case in  which the Alaska  Supreme Court  rendered a                                                             
judgment in  the fall of 2002.   The Marsingill v.  O'Malley case                                                             
followed the  same course as  Korman v. Mallin and  again, didn't                                                             
provide any guidelines for the  physicians.  Additionally, Korman                                                             
v. Mallin involved  a phone call in the middle  of the night from                                                             
a  patient to  the surgeon.    The surgeon  recommended that  the                                                               
patient go to  the emergency room, which prompted  the patient to                                                               
ask whether  a tub  would be  put down the  nose to  the stomach.                                                               
The  patient  choose  not  to  go  to  the  emergency  room,  and                                                               
therefore several hours later the  patient collapsed and ended up                                                               
with  a cerebral  event.   In the  Marsingill decision  the court                                                             
gave  specific  directions  to  the lower  court  to  rehear  the                                                               
[Korman  v. Mallin]  case involving  the  informed consent  issue                                                             
with regard  to calls  in the  middle of the  night.   Mr. Jordan                                                               
pointed out that  [the committee packet should  include] a rather                                                               
extensive  analysis  by Anchorage  attorney  Howard  Lazar.   Mr.                                                               
Jordan  related  that  Mr.  Lazar indicated  that  this  type  of                                                               
potential liability could stop physicians  from taking calls from                                                               
patients and simply  rely on the standing  instruction to proceed                                                               
to the emergency  room.  However, from a  patient care standpoint                                                               
he didn't believe that was a  good idea.  Therefore, the language                                                               
in  HB 472  that relates  to  calls in  the middle  of the  night                                                               
[attempts]  to respond  to the  issues raised  in the  Marsingill                                                             
Number 1239                                                                                                                     
CHAIR  McGUIRE  explained that  [in  response  to the  Marsingill                                                             
case]  at the  legislative  level, there  have  been attempts  to                                                               
implement telemedicine  across Alaska.   Therefore,  she inquired                                                               
as to the impact the Marsingill case will have on telemedicine.                                                               
MR.  JORDAN  answered   that  he  believes  that   it  will  help                                                               
telemedicine.   The specific  language in HB  472 deals  with the                                                               
means,  as  in  "electronically  provided," and  deals  with  the                                                               
circumstance in which a patient  doesn't avail himself or herself                                                               
of  a  message  provided  electronically   from  [a  health  care                                                               
REPRESENTATIVE  ANDERSON,  in  response to  Representative  Gara,                                                               
clarified that his earlier statistic  regarding the percentage of                                                               
million dollar cases was a national statistic.                                                                                  
Number 1321                                                                                                                     
REPRESENTATIVE GARA  stated that  he didn't  have a  problem with                                                               
the   informed  consent   amendment,   which  seems   reasonable.                                                               
However, he noted that he bristled  a bit with the notion that an                                                               
informed  consent  amendment  is necessary  because  the  current                                                               
statute doesn't have any standards.   Representative Gara pointed                                                               
out  that  the  standard  is  clearly expressed.    In  the  jury                                                               
instructions,  it   states  "A   doctor  shall  give   a  patient                                                               
information  that a  reasonable  patient would  need  to make  an                                                               
informed   decision,   and   that   information   would   include                                                               
information  about  risks  and information  about  alternatives."                                                               
Furthermore, Representative  Gara was concerned with  Mr. Lazar's                                                               
letter  because it  did seem  to suggest  that doctors  shouldn't                                                               
take calls anymore.                                                                                                             
REPRESENTATIVE GARA commented that  historically Alaska has had a                                                               
problem  with   doctor  shortages.    However,   he  related  his                                                               
understanding  that  the growth  rate  of  doctors in  Alaska  is                                                               
higher than the national average.                                                                                               
MR. JORDAN said  that he didn't have any  information with regard                                                               
to how  Alaska compares with  the rest  of the nation.   However,                                                               
Alaska  has the  lowest number  of physicians  per capita  in the                                                               
Number 1414                                                                                                                     
REPRESENTATIVE  GARA  turned  to malpractice  rates,  which  have                                                               
always been high  in Alaska.  He inquired as  to how much doctors                                                               
are paid in comparison to those in other states.                                                                                
MR. JORDAN  said that such  data isn't  collected.  In  regard to                                                               
the decision-making process of the  physician, Mr. Jordan said he                                                               
would   provide  the   committee   with   the  American   Medical                                                               
Association's  (AMA) study  regarding the  considerations medical                                                               
students take  when deciding  where to do  their residency.   The                                                               
aforementioned study  has shown  that the legal  environment, and                                                               
the   availability  and   affordability   of  medical   liability                                                               
insurance is very  important in the recruitment  of physicians in                                                               
Alaska.   Mr. Jordan informed  the committee that Alaska  has one                                                               
residency  program,  family  practice  residency,  that  produces                                                               
eight [physicians], which is nominal.   Furthermore, an AMA study                                                               
relates that  70 percent  of residents  practice in  the location                                                               
where they performed their residency.                                                                                           
REPRESENTATIVE GARA asked if any  of the insurance companies have                                                               
said  that  they  would  lower  their  insurance  rates  if  this                                                               
legislation was passed.                                                                                                         
MR. JORDAN replied no.                                                                                                          
Number 1527                                                                                                                     
REPRESENTATIVE  GARA  informed the  committee  that  in 1997  the                                                               
state's  second  round of  major  tort  reform was  suggested  by                                                               
NORCAL  Mutual Insurance  Company  (NORCAL).   He explained  that                                                               
NORCAL said that the 1997  tort reform was necessary because when                                                               
there was  tort reform  in the medical  arena in  California, the                                                               
malpractice  rates decreased  significantly.   Therefore,  NORCAL                                                               
wrote [to  the Alaska State  Legislature] saying, "Over  the long                                                               
term  Alaska   physicians  and   hospitals  should   see  similar                                                               
reductions  in the  cost of  malpractice  insurance if  HB 58  is                                                               
enacted  and upheld  by the  courts."   Representative Gara  said                                                               
that he has  always been bothered by  the aforementioned promise.                                                               
Furthermore, he  said he was  skeptical that promise  would "hold                                                               
any water today."                                                                                                               
MR. JORDAN referred to a 1996  study done by the American Academy                                                               
of   Actuaries  entitled,   "Medical  Malpractice   Tort  Reform:                                                               
Lessons  from the  States".   Essentially,  this study  indicates                                                               
that effective medical liability reform  is a matter of a package                                                               
of reforms.   Therefore, what  occurred in  1997 was part  of the                                                               
package.  He  explained that the "gold  standard" is California's                                                               
Medical Injury  Compensation Reform Act (MICRA)  that was enacted                                                               
in 1976.   [Alaska's tort reform] in 1997 doesn't  include all of                                                               
the key  elements of MICRA.   The American Academy  of Actuaries'                                                               
study  indicates  that  one  of the  key  elements  [for  medical                                                               
malpractice tort reform] is a  cap on noneconomic damages that is                                                               
low  enough to  make  a difference.   The  cap  in California  is                                                               
$250,000.    Furthermore,  the   requirement  that  judgments  be                                                               
"annuitized"  in  California is  a  requirement  so long  as  the                                                               
judgment  is in  excess  of  $50,000.   However,  in Alaska  it's                                                               
REPRESENTATIVE  GARA  expressed  concern with  referring  to  the                                                               
California standard  as the "gold  standard."  He  explained that                                                               
noneconomic  damages covers  the  compensation  one receives  for                                                               
pain,  suffering, the  inability  to perform  various tasks,  and                                                               
other  damages that  are difficult  to measure  in dollar  terms.                                                               
Under a  $250,000 cap,  a badly paralyzed  individual with  a 40-                                                               
year  projected lifespan  would receive  about $22  per day.   He                                                               
asked if it's fair for someone  with a valid claim to receive $22                                                               
per day for the  loss of the ability to walk,  fish, carry his or                                                               
her child, et cetera.                                                                                                           
MR. JORDAN  pointed out that  [the noneconomic damages]  are only                                                               
one element,  noting that  there is  recompense for  the economic                                                               
damages.  In further response  to Representative Gara, Mr. Jordan                                                               
said that  this is a policy  decision with regard to  whether the                                                               
desire is to  create an environment that  would allow recruitment                                                               
of physicians  in the numbers  necessary to treat patients.   Mr.                                                               
Jordan  acknowledged that  the circumstances  that Representative                                                               
Gara  proposed  are  tragic,  and  reiterated  that  [noneconomic                                                               
damages] are only one element of  the recompense.  He pointed out                                                               
that  there is  no  limit, nor  has one  been  suggested, on  the                                                               
economic damages.   However, the recommendation is  that there be                                                               
a cap  on those  damages that  are most  subjective.   Mr. Jordan                                                               
indicated  that  the  legislature,  on  a  de  facto  basis,  has                                                               
established  caps on  noneconomic and  economic damages  with the                                                               
Motor Vehicle Safety Responsibility Act.                                                                                        
CHAIR  McGUIRE reminded  the committee  that although  she allows                                                               
quite a  bit of latitude  in the  committee, she didn't  want the                                                               
witnesses to feel as if they are on trial.                                                                                      
REPRESENTATIVE GARA stated  that a basic element  of the members'                                                               
decision  on  this  is  with  regard to  whether  this  is  fair.                                                               
Although Representative  Gara recognized that Mr.  Jordan doesn't                                                               
have to  answer, he maintained  his question regarding  whether a                                                               
$250,000 cap  in the  situation he  posed is fair.   If  it isn't                                                               
fair, the  committee has to  consider a lower  noneconomic damage                                                               
limit for non-serious cases and  have a higher limit for serious,                                                               
debilitating cases.                                                                                                             
CHAIR  McGUIRE   pointed  out  that   once  the   witnesses  have                                                               
testified, it will be the  committee's burden to weigh the policy                                                               
decisions of this.                                                                                                              
Number 1902                                                                                                                     
REPRESENTATIVE  OGG  related  his understanding  that  under  the                                                               
current soft cap,  with all the factors involved,  the maximum is                                                               
$2 million.                                                                                                                     
MR. JORDAN said he has seen that estimate.                                                                                      
REPRESENTATIVE OGG turned to the  area of intentional tort, which                                                               
is reckless disregard  and gross negligence.  He asked  if HB 472                                                               
leaves  an exception  for those  areas  in which  there are  "bad                                                               
MR. JORDAN,  noting that he  isn't an attorney, answered  that he                                                               
didn't believe HB 472 addresses that.                                                                                           
REPRESENTATIVE ANDERSON  said he didn't recall  [the legislation]                                                               
addressing that.                                                                                                                
CHAIR  McGUIRE   recalled  this  discussion  as   it  related  to                                                               
homebuilders  under HB  340 and  surmised that  issues of  actual                                                               
misconduct,  fraud,  and other  things  that  would be  licensure                                                               
actions  would  be  dealt  with   by  [ASMA's]  licensing  board.                                                               
Furthermore,  such  issues would  probably  be  dealt with  in  a                                                               
separate context.  Chair McGuire  said she didn't see anything in                                                               
HB  472 that  would preclude  a  separate cause  of action  being                                                               
brought.   However,  she indicated  the  need to  look into  this                                                               
between now and the next hearing on HB 472.                                                                                     
REPRESENTATIVE OGG  recalled that  the language "except  for" was                                                               
included  in the  homebuilders'  legislation.   He expressed  the                                                               
need  to be  sure that  the  legislation isn't  saying that  it's                                                               
acceptable to be a bad doctor.                                                                                                  
REPRESENTATIVE GRUENBERG  asked if  [ASMA] objected  to including                                                               
the above-mentioned exception in HB 472.                                                                                        
MR. JORDAN replied  that he didn't believe so, but  noted that he                                                               
hadn't spoken with [ASMA's] board.   However, this seems to enter                                                               
into the disciplinary area as  well as the general civil statutes                                                               
that deal with punitive damages.                                                                                                
REPRESENTATIVE OGG agreed that punitive  [damages] is a different                                                               
category than pain  and suffering.  He reiterated the  need to be                                                               
sure that  someone who  is acting  badly is  liable for  pain and                                                               
CHAIR  McGUIRE  reminded  Representative  Ogg  that  HB  340  was                                                               
intended to be  an exclusive limit on all causes  of action based                                                               
on  the   actions  that  were   derived  and  thus   it  would've                                                               
encompassed  everything.   Therefore,  the  committee decided  to                                                               
include  the language  saying  "except in  those  cases of  gross                                                               
negligence,  recklessness,  and  intentional disregard."    Chair                                                               
McGuire said she believes what is  being discussed with HB 472 is                                                               
a bit  different in  that it's  noneconomic damages,  which don't                                                               
include compensatory or punitive damages.                                                                                       
REPRESENTATIVE  GARA pointed  out that  as written  HB 472  would                                                               
impose  a $250,000  cap on  pain and  suffering damages,  even in                                                               
cases of  reckless conduct.   If it  was intentional  conduct and                                                               
amounted  to  something  like fraud  that  wasn't  a  malpractice                                                               
claim,  there  would be  an  argument  that this  [proposed]  cap                                                               
wouldn't apply.                                                                                                                 
Number 2152                                                                                                                     
ALEX   MALTER,  MD,   MPH;   President,   Alaska  State   Medical                                                               
Association, informed  the committee that  he is an  internist in                                                               
private practice in  Juneau.  In regard  to Representative Gara's                                                               
comment  that Mr.  Lazar's  letter was  a  bit inflammatory,  Dr.                                                               
Malter said  that his practice  has changed since  the Marsingill                                                             
decision.  Based  on Mr. Lazar's letter,  correspondence from his                                                               
malpractice carrier, and  what he has heard  about the Marsingill                                                             
case, Dr. Malter said he has  changed his practice.  For example,                                                               
in the past he would've attempted  to keep patients from going to                                                               
the  emergency   room  when  he  thought   it  wasn't  necessary.                                                               
However, he said that now  he much more quickly recommends people                                                               
go  the  emergency  room  unless it's  completely  clear  that  a                                                               
patient doesn't  need to go  in.   It's unfortunate that  this is                                                               
the situation, he remarked.                                                                                                     
DR.  MALTER  turned to  the  earlier  question regarding  whether                                                               
salaries are higher  in Alaska commensurate with  higher rates of                                                               
malpractice premiums.   He related that  a year ago he  looked at                                                               
different practices  in different  states and  all the  offers he                                                               
received  were   higher  salaries   than  he  makes   in  Alaska.                                                               
Therefore, he felt  it might be a bit simplistic  to presume that                                                               
salaries in Alaska  are much higher than elsewhere.   With regard                                                               
to the question  of a possible decrease  in malpractice premiums,                                                               
Dr.  Malter  emphasized  that  this   issue  isn't  simply  about                                                               
malpractice  premiums.   The issue  is  the desire  to develop  a                                                               
healthy  malpractice  liability  insurance  market  that  doesn't                                                               
encourage  insurers  to  leave  Alaska  and  is  attractive  when                                                               
physicians consider working in Alaska.                                                                                          
Number 2324                                                                                                                     
DR. MALTER  moved on  to his  prepared testimony  and paraphrased                                                               
from  the  following   written  testimony  [original  punctuation                                                               
     ASMA represents  physicians statewide and  is primarily                                                                    
     interested  in  ensuring  that  Alaskans  receive  high                                                                    
     quality health care.                                                                                                       
     I am  here today to  express ASMA's support of  HB 472,                                                                    
     and  to urge  you to  support the  bill as  well.   The                                                                    
     medical liability reforms  it establishes are important                                                                    
     to Alaskans for a variety  of reasons.  I expect others                                                                    
     to  testify,   for  example,  how  HB   472  will  help                                                                    
     stabilize  the professional  liability market,  and, by                                                                    
     so  doing,  effectively   temper  future  increases  in                                                                    
     federal  and  state expenditures  on  health  care.   I                                                                    
     would  like  to  concentrate my  remarks,  however,  on                                                                    
     explaining  how strong  medical liability  reforms will                                                                    
     be  critically  helpful  in  recruiting  and  retaining                                                                    
     enough  well-trained  physicians  to  provide  for  the                                                                    
     future health care needs of Alaska's citizens.                                                                             
TAPE 04-24, SIDE B                                                                                                            
DR. MALTER continued:                                                                                                           
     Access to health care  services is precariously limited                                                                    
     in the state.  Alaska has  one of the smallest-- if not                                                                    
     the smallest--  number of physicians per  capita in the                                                                    
     country.   A  January  19, 2004  American Medical  News                                                                    
     story  pertaining  to   the  special  Medicare  payment                                                                    
     reforms  for Alaska  noted the  crisis  in work  force:                                                                    
     "Alaska  has  long ranked  among  the  worst states  in                                                                    
     terms  of physician  supply.   In 2002,  the state  had                                                                    
     fewer  than  1,350  doctors  in  private  practice  and                                                                    
     another   few  hundred   in  the   military  or   other                                                                    
     government  posts.    The state  has  a  population  of                                                                    
     644,000....   Only  six states  had a  lower doctor  to                                                                    
     patient ration".                                                                                                           
     The  article went  on to  identify Idaho  as the  state                                                                    
     with  the  worst  physician shortage,  estimating  that                                                                    
     state had  one non-government  physician for  every 544                                                                    
     patients.    However  numbers   from  ASMA's  own  2002                                                                    
     database-- which  we believe  to be more  accurate than                                                                    
     data   used  in   the  article--   showed  only   1,115                                                                    
     physicians  in active  practice,  or approximately  one                                                                    
     physician  per  578  patients.     Thus,  it  is  quite                                                                    
     probable that  for 2002 Alaska actually  had the lowest                                                                    
     physician  to  patient  ratio   in  country.    Updated                                                                    
     calculations based on our 2003  number indicate this is                                                                    
     almost  certainly still  true, with  one physician  per                                                                    
     553  patients.   By  comparison, the  state would  need                                                                    
     about  50%  more   actively  practicing  physicians  to                                                                    
     approach  the national  average of  one doctor  per 360                                                                    
     Further  exacerbating the  problem, Alaska's  physician                                                                    
     work force  is relatively old  compared to the  rest of                                                                    
     the country.   The ASMA  database shows that  over half                                                                    
     of  the state's  practicing physicians  are older  than                                                                    
     51,  setting up  a  looming recruitment  crisis.   This                                                                    
     scenario  was ...  corroborated  by  the State  Medical                                                                    
     Board in a September  2002 Anchorage Daily News article                                                                    
     title "Shingle Shortage?"  Finally,  a 2002 local study                                                                    
     of physicians by Providence  Health System confirms the                                                                    
     work   force  is   aging,   and  highlights   immediate                                                                    
     shortages   of   certain  specialists   in   Anchorage,                                                                    
     including  general internal  medicine, psychiatry,  and                                                                    
     general surgery.                                                                                                           
Number 2294                                                                                                                     
     It  is because  of this  imminent recruiting  challenge                                                                    
     that   medical  liability   reform  is   so  critically                                                                    
     important in  Alaska right  now.   This state  does not                                                                    
     have  the capacity  to "grow"  physicians  on its  own.                                                                    
     Alaska has no  medical school, and of  the small number                                                                    
     of  students  who  graduate  annually  from  the  WWAMI                                                                    
     [Washington,  Wyoming, Alaska,  Montana, Idaho  Medical                                                                    
     Education  Program]  program,  some do  not  return  to                                                                    
     practice  here.   Likewise,  our  lone family  practice                                                                    
     residency-training   program   is   relatively   small.                                                                    
     Alaska is--  and will continue  to be-- a  net importer                                                                    
     of  doctors.   As such,  we compete  with other  states                                                                    
     that have  physician shortages,  a competition  that is                                                                    
     largely  influenced  by  the state's  medical  practice                                                                    
     A recent American Medical  Association study of medical                                                                    
     students  found  that  the legal  environment  and  the                                                                    
     availability of affordable  medical liability insurance                                                                    
     plays  a major  part  in a  graduate's  decision as  to                                                                    
     where to  consider setting up  practice.   Alaska needs                                                                    
     to optimize  its medical-legal  environment to  help us                                                                    
     recruit the  doctors we need.   That is why  the Alaska                                                                    
     State Medical  Association supports  HB 472.   With its                                                                    
     $250,000   cap  on   non-economic  damages,   the  bill                                                                    
     provides  the "gold  standard"  liability reforms  that                                                                    
     will help  create the  healthy practice  environment so                                                                    
     important to physician recruitment.                                                                                        
     ASMA understands that medical  liability reform is only                                                                    
     one  element in  developing  this healthy  environment.                                                                    
     Still, because the State has  already had the foresight                                                                    
     to enact  other important medical practice  reforms, we                                                                    
     believe liability  reform is the most  critical element                                                                    
     remaining.   Indeed, we are  pleased to have  been able                                                                    
     to  help  [the]  state  reach this  point  through  our                                                                    
     recent work  on other important  legislation, including                                                                    
     the  Alaska   Patient  Bill   of  Rights,   Prompt  Pay                                                                    
     legislation,  Physician Joint  Negotiation legislation,                                                                    
     and  federal  Medicare   payment  reforms  targeted  to                                                                    
     Alaska.   ASMA has  even offered  ideas to  the current                                                                    
     Administration regarding strategies  by which the state                                                                    
     could   actively   "market"  Alaska   to   out-of-state                                                                    
     physicians.  As a result  of these previous and ongoing                                                                    
     efforts, ASMA believes that,  except for strong medical                                                                    
     liability  reform,  Alaska's  practice  environment  is                                                                    
     actually quite favorable.                                                                                                  
     Finally,  I'd like  to point  out that  in the  gallery                                                                    
     today  are  Dr.  Jeanne Bonar,  ASMA's  immediate  Past                                                                    
     President,  and  Dr.  Paul  Worrel,  the  Association's                                                                    
     President Elect.   Their  attendance today,  along with                                                                    
     mine,  demonstrates  that  ASMA's  past,  present,  and                                                                    
     future are  all committed to  work to help  attract the                                                                    
     well-trained doctors  the state  needs.  Thank  you for                                                                    
     your  attention, and  I again  urge you  to support  HB
     I'd be happy to answer  any questions that you may have                                                                    
     at this time.                                                                                                              
Number 2184                                                                                                                     
CHAIR McGUIRE  recalled that  in the late  1960s to  early 1970s,                                                               
Alaska didn't  have medical malpractice insurance,  and therefore                                                               
the state  formed a risk pool.   Chair McGuire stressed  the need                                                               
for  everyone to  realize the  consequences  whatever the  policy                                                               
choice.  She highlighted the need  to understand that if the risk                                                               
isn't mitigated and the carriers  leave, then the state should be                                                               
prepared to again form a risk pool.                                                                                             
DR. MALTER  noted that  his partner was  around when  the medical                                                               
malpractice crisis  occurred some time  ago, which did  result in                                                               
the state forming  a risk pool.   He pointed out that  it takes a                                                               
lot of  money for the  state to capitalize a  pool.  It  has been                                                               
estimated that if  the situation becomes worse - to  the point of                                                               
not enough  carriers or  no carriers  - it  would cost  scores of                                                               
millions  of  dollars to  merely  get  started.   Therefore,  Dr.                                                               
Malter offered his  opinion as a layperson that  it would behoove                                                               
the state to have a strong medical malpractice market in place.                                                                 
DR.  MALTER  explained   that  when  two  of   the  four  medical                                                               
malpractice  carriers  left  Alaska,  one of  the  remaining  two                                                               
carriers  was limited  in the  number  of new  policies it  could                                                               
write   because  of   state   requirements  regarding   secondary                                                               
insurance.  Therefore,  NORCAL was limited and only  able to take                                                               
on a modest number of the  physicians that were left without when                                                               
the first two carriers left.   Because of the aforementioned, the                                                               
last remaining insurer was almost a  monopoly for a month or two.                                                               
Thankfully,  the physicians  seeking  coverage  didn't feel  that                                                               
they  were  taken  advantage  of   in  this  nearly  monopolistic                                                               
situation.     Dr.  Malter  stressed  that   until  recently  the                                                               
situation was one  in which there was close to  one carrier being                                                               
MR.  JORDAN informed  the committee  that the  capitalization for                                                               
the medical indemnity  appropriation of Alaska was  $9 million in                                                               
the mid 1970s.  He explained  that the amount of capitalization a                                                               
company has  as well as  its surplus  determines how much  it can                                                               
write.   He  agreed with  Dr. Malter's  characterization of  [the                                                               
late 1960s  to early 1970s] as  a crisis situation.   During that                                                               
time, a  number of  physician-owned insurance  companies emerged,                                                               
including MIEC.                                                                                                                 
Number 1871                                                                                                                     
REPRESENTATIVE  GARA related  his  understanding  that there  has                                                               
been  an  unintended  suggestion   that  the  two  carriers  that                                                               
recently  left  did  so because  of  high  malpractice  liability                                                               
exposure.   However, Representative Gara said  the information he                                                               
has doesn't support  that as the reason those carriers  left.  He                                                               
asked if  Dr. Malter had any  information with regard to  why the                                                               
two carriers left.                                                                                                              
DR. MALTER replied no.                                                                                                          
REPRESENTATIVE  GARA  related  his  understanding  that  CNA,  an                                                               
insurance   company,   basically  stopped   writing   malpractice                                                               
insurance nationwide.                                                                                                           
DR. MALTER  reiterated that the concern  is that this has  been a                                                               
crisis  nationwide, with  certain states  experiencing more  of a                                                               
crisis than  others.  Dr.  Malter reiterated that he  didn't mean                                                               
to suggest that the goal is  to reduce malpractice premiums.  The                                                               
main notion  is that  by setting a  cap, the  insurance companies                                                               
have a  better idea with regard  to future risk, which  creates a                                                               
market  that  is  more  attractive  to  enter.    Furthermore,  a                                                               
healthier environment for physicians  to practice and recruit new                                                               
physicians is created.                                                                                                          
REPRESENTATIVE GARA  commented that he believes  that makes sense                                                               
in that perhaps  a hard cap is necessary rather  than the current                                                               
soft cap.   He surmised that the soft cap  results in a situation                                                               
in which the [amount of the]  soft cap could continue to increase                                                               
unless  there   was  a  firm   guess  on  an   individual's  life                                                               
expectancy.  Representative Gara inquired  as to whether there is                                                               
any support  for a two-tiered  hard cap  that would have  a lower                                                               
damage cap, similar to what is  suggested in HB 472, for pain and                                                               
suffering and loss  of enjoyment of life and a  higher damage cap                                                               
for  a  life-long   debilitating  injury,  involving  significant                                                               
disfigurement, paralysis, or something of that nature.                                                                          
DR.  MALTER said  he  would have  to approach  the  board on  the                                                               
matter.  However, he expected that  some on the board wouldn't be                                                               
comfortable  with  that.    He   pointed  out  that  the  medical                                                               
malpractice liability  market is healthier  in the states  with a                                                               
single hard  cap.  Experiences  from other states are  being used                                                               
to develop statutes  that will help create  a healthy malpractice                                                               
market in Alaska.                                                                                                               
MR.  JORDAN turned  to Representative  Gara's understanding  that                                                               
CNA stopped  [writing malpractice insurance nationwide]  and said                                                               
that isn't the  case.  He informed the committee  that CNA is the                                                               
largest writer  of medical liability insurance  for physicians in                                                               
the State of Idaho.                                                                                                             
Number 1812                                                                                                                     
REPRESENTATIVE OGG  inquired as to  the number of  physicians, on                                                               
an annual  basis, in Alaska  from 1995 to  the present.   He also                                                               
asked if the earlier mention  of Alaska [having fewer than] 1,350                                                               
physicians  [in  private   practice]  includes  governmental  and                                                               
quasi-governmental physicians such as Native [physicians].                                                                      
DR. MALTER specified  that the 1,350 number was  an estimate from                                                               
the  national association  [AMA], but  ASMA believes  its numbers                                                               
are  [more accurate].   Reiterating  his  earlier testimony,  Dr.                                                               
Malter related  that ASMA data  shows that 1,115  physicians were                                                               
in private  practice and  thus there is  one physician  per [578]                                                               
patients.   He noted  that these are  the same  calculations that                                                               
are  done when  the  [AMA]  is comparing  states.   Although  the                                                               
numbers  may   not  seem  parallel,   the  belief  is   that  the                                                               
comparisons  with  other states  are  as  accurate and  valid  as                                                               
possible.  In further response  to Representative Ogg, Dr. Malter                                                               
said he  would provide information  with regard to the  number of                                                               
governmental and quasi-governmental physicians.                                                                                 
REPRESENTATIVE OGG  turned to  the issue  of aging  physicians in                                                               
Alaska and  the lack  of recruitment.   Having served  on various                                                               
boards  and having  held various  jobs over  the last  few years,                                                               
Representative  Ogg  opined  that   the  aging  population  isn't                                                               
strictly limited  to the  medical profession.   For  instance, he                                                               
predicted that  the age of  the average fishing permit  holder is                                                               
probably around  [51], and furthermore  the recruitment  into the                                                               
fishing  industry  is  [lacking  as well].    Representative  Ogg                                                               
suggested that  what is  occurring in  the medical  profession is                                                               
probably reflective  of the  state as a  whole.   Furthermore, he                                                               
suggested that  perhaps Alaska just  isn't that attractive  of an                                                               
environment,  especially  in  the   context  of  Alaska's  fiscal                                                               
DR.  MALTER said  that  the analogy  of the  fishermen  is a  bit                                                               
problematic.  There are people who  need medical care and thus he                                                               
contended  that  such  a  significant  dearth  of  physicians  is                                                               
potentially more problematic  to the public health  and safety of                                                               
the state than a dearth of fishermen.                                                                                           
REPRESENTATIVE OGG clarified  that he was attempting  to attain a                                                               
better  global understanding  of what  is  going on  and thus  he                                                               
surmised that  physicians looking around would  review the fiscal                                                               
situation of  the state.   He indicated that the  state's current                                                               
fiscal  state  could be  driving  the  situation being  addressed                                                               
CHAIR  McGUIRE  interjected  her  belief  that  it's  probably  a                                                               
combination of  factors, including  Alaska's remoteness  and lack                                                               
of  a medical  school.   Therefore, she  believes that  the focus                                                               
today should include  the other factors.  She offered  to work on                                                               
other  [factors]   while  noting   that  the  aging   of  Alaskan                                                               
physicians  is  a  large  problem,  especially  in  rural  areas.                                                               
Furthermore,  since there  are no  guarantees from  the insurance                                                               
companies,  the state  can only  try to  reduce its  exposure and                                                               
remain  attractive enough  to maintain  the current  carriers and                                                               
possibly attract more.                                                                                                          
Number 1511                                                                                                                     
REPRESENTATIVE  GRUENBERG  asked  if   [ASMA]  is  an  integrated                                                               
medical  association  in  which  everyone  has  to  join.    [The                                                               
response  was  inaudible.]   Representative  Gruenberg  suggested                                                               
that  perhaps  there  could  be  a  survey  either  directly  [to                                                               
physicians] or through the Division  of Occupational Licensing in                                                               
order to  determine the level  of job satisfaction.   He pondered                                                               
whether Alaska just doesn't offer  enough money for physicians in                                                               
comparison to other areas of the country.                                                                                       
DR. MALTER recalled that Mr.  Jordan pointed out that the largest                                                               
determinant  for the  location in  which people  practice is  the                                                               
location  of their  residency.   Alaska has  one small  residency                                                               
program.    Therefore,  the state  needs  to  import  physicians.                                                               
Having  50 percent  fewer  physicians per  capita  would seem  to                                                               
indicate that  Alaskans aren't receiving such  high quality care.                                                               
Although [the  state] is  a bit  constrained in  what it  can do,                                                               
[the  state]  can make  the  practice  environment conducive  [to                                                               
REPRESENTATIVE  GRUENBERG  highlighted   that  the  student  loan                                                               
program could  be used [to  address this problem].   He suggested                                                               
that  perhaps  nonresident medical  students  who  enter into  an                                                               
agreement  to practice  in the  state  could be  eligible for  an                                                               
Alaskan student  loan.   Representative Gruenberg  mentioned that                                                               
the  medical community  is accustomed  to thinking  creatively to                                                               
address  problems,   and  therefore  he  requested   the  medical                                                               
community's help with this.   Representative Gruenberg noted that                                                               
his own physician was present today.                                                                                            
DR.  MALTER noted  that the  administration  has been  approached                                                               
with regard to  ideas of addressing the recruitment  problem.  In                                                               
further response  to Representative Gruenberg, Dr.  Malter agreed                                                               
to provide the committee with a list of the ideas.                                                                              
Number 1205                                                                                                                     
GEORGE  RHYNEER,   MD,  Alaska  Heart  Institute,   informed  the                                                               
committee that  he is a  cardiologist who has been  practicing in                                                               
Alaska since 1971.  He further  informed the committee that he is                                                               
a  founding member  of the  Alaska  Heart Institute  and a  board                                                               
member  of   Alaska  Physicians   and  Surgeons.     Dr.  Rhyneer                                                               
encouraged the committee  to favor HB 472, which  is about access                                                               
to  medical care.   Dr.  Rhyneer  recalled that  when he  started                                                               
practice in 1971 there was no  heart program.  He and his partner                                                               
started the  heart program and the  first cardiac catheterization                                                               
laboratory  in  Anchorage.    Back in  1973,  the  heart  surgery                                                               
program was organized.                                                                                                          
DR. RHYNEER noted that other  physicians were attracted to Alaska                                                               
because  of  the opportunities  in  this  state.   There  was  no                                                               
problem finding  good employees,  an office,  a good  hospital in                                                               
which  to  practice, and  obtaining  malpractice  insurance.   He                                                               
referred  to   malpractice  insurance   [at  that  time]   as  an                                                               
afterthought  and noted  that  it was  only $80  a  year.   Since                                                               
Alaska  was  attractive  to  physicians,  Alaskans  have  enjoyed                                                               
remarkable  improvement in  access  to medical  care.   In  fact,                                                               
physicians  have  moved to  smaller  communities  and the  larger                                                               
cities  have sophisticated  services.    However, conditions  are                                                               
changing.  As the technical  ability to deal with serious illness                                                               
is   improving,  other   circumstances  are   worsening.     Many                                                               
physicians are nearing retirement age  and too few physicians are                                                               
being trained nationally.                                                                                                       
DR. RHYNEER echoed earlier statements  with regard to the need to                                                               
import virtually all  physicians in Alaska, but  pointed out that                                                               
it's difficult  to recruit physicians  to Alaska for a  number of                                                               
reasons.    He  informed  the committee  that  the  Alaska  Heart                                                               
Institute spends  $100,000 a year  recruiting constantly  and the                                                               
institute has always  "been behind."  Every  advantage to attract                                                               
physicians  is  necessary  and  a  good  legal  climate  for  the                                                               
practice of medicine is something  the [legislature] can provide.                                                               
Without readily available  malpractice insurance, recruiting will                                                               
be handicapped.   Furthermore,  without new  physicians, Alaskans                                                               
will  face  reduced access  to  care.   If  Alaska's  malpractice                                                               
insurance climate worsens, attracting  young physicians to Alaska                                                               
will be nearly  impossible, and thus, he opined, one  can be sure                                                               
that some Alaskans will go without medical care.                                                                                
DR.  RHYNEER stated  that  although  Alaska is  up  to date  with                                                               
medical treatment and  technology, Alaska has been  behind in the                                                               
social and business  upheavals that have been  experienced in the                                                               
Lower 48.   For instance,  managed care is something  that Alaska                                                               
has avoided by anticipating it.   Dr. Rhyneer recommended that by                                                               
looking at  the Lower 48  one could plainly see  Alaska's future.                                                               
In the  Lower 48  there is  a lot  of access  to medical  care by                                                               
patients.    Furthermore,  in  the Lower  48  there  are  massive                                                               
physician   migrations   and    early   retirement   and   crisis                                                               
legislation.   He suggested that  the aforementioned  events have                                                               
been created  by legal climates  that have made it  difficult for                                                               
insurance  companies to  predict  losses and  so those  insurance                                                               
companies  haven't   been  able   to  continue  in   the  medical                                                               
malpractice business.                                                                                                           
DR. RHYNEER said  that for that reason, many  companies have left                                                               
the  business  both nationally  and  locally  and some  of  those                                                               
remaining in business  require premium payments that  are so high                                                               
that  it   approaches  the  physician's  annual   take-home  pay.                                                               
Alaska's [medical malpractice] insurance  premiums are very high,                                                               
and more importantly, there are  very few companies offering this                                                               
insurance.   He  informed the  committee that  the remaining  two                                                               
companies are mutual companies  owned by physician policyholders,                                                               
most  of  which  live  in   California.    Last  year,  Northwest                                                               
Physicians  Mutual, the  company who  provided insurance  for the                                                               
Alaska Heart Institute, canceled  the institute's policy and left                                                               
the state due to high losses.                                                                                                   
DR.  RHYNEER   related  that  Northwest  Physicians   Mutual  had                                                               
requested a 100  percent increase in premium,  which the Division                                                               
of Insurance denied.   Another company did the same  thing to the                                                               
large  clinic in  Fairbanks.   The remaining  companies face  the                                                               
same  legal climate  that forced  the others  to leave.   If  the                                                               
remaining companies leave, "virtually all  of us" will be without                                                               
insurance.   Although some physicians  will probably  continue to                                                               
practice without coverage,  many of the older  physicians will be                                                               
forced  to  take  involuntary  early  retirement.    Dr.  Rhyneer                                                               
characterized  the  aforementioned  as a  monumental  catastrophe                                                               
that [the legislature]  has the ability to prevent.   With regard                                                               
to  the  notion  that  the state  could  form  another  insurance                                                               
company  as it  did in  the  1970s, he  pointed out  that such  a                                                               
company would  face the same problems  and it would be  costly to                                                               
DR. RHYNEER said,  "It's crystal clear we now  need a legislative                                                               
solution."   Although  the state  has changed  tort law  over the                                                               
years,  these modifications  haven't  completely ameliorated  the                                                               
problem, which he  admitted is, in part, a societal  problem.  He                                                               
identified the  $250,000 cap  on noneconomic  damages as  the one                                                               
legal  feature that  discriminates between  states with  a stable                                                               
malpractice environment  from those  without it.   Therefore, Dr.                                                               
Rhyneer  said he  supports [HB  472].   He acknowledged  that his                                                               
increase [in malpractice insurance] from  $80 to $20,000 per year                                                               
is due to many  causes.  However, it isn't due  to an increase in                                                               
the  rate of  malpractice  suits, he  said.   "You  are faced,  I                                                               
think,  with  a  tradeoff:    place a  limit  on  the  amount  an                                                               
individual  can get  for pain  and suffering  and in  return help                                                               
ensure that  all Alaskans continue  to have  physicians available                                                               
to  provide the  medical care  that  they need  and desire,"  Dr,                                                               
Rhyneer concluded.                                                                                                              
Number 0773                                                                                                                     
DR. RHYNEER,  in response to Representative  Gara, explained that                                                               
Northwest Physicians Mutual would  periodically publish data that                                                               
showed the amount  of suits filed and settled or  paid out, which                                                               
has remained about the same over  the years.  However, the actual                                                               
cost to  settle or  pay the  claim was  increasing exponentially.                                                               
In  further   response  to   Representative  Gara,   Dr.  Rhyneer                                                               
explained that  the data showed  that the increase  was partially                                                               
caused by defense costs, but a  large portion was the claims paid                                                               
to the  plaintiffs.  He  said he would  try to obtain  the above-                                                               
referenced information and provide it to the committee.                                                                         
Number 0628                                                                                                                     
JOHN  DUDDY,  MD;  President,  Alaska  Physicians  and  Surgeons,                                                               
informed the committee  that he is an orthopedic  surgeon who has                                                               
practiced in Anchorage  since 1999.  Dr. Duddy  explained that he                                                               
came to Alaska  after being recruited by  his now-senior partner,                                                               
Dr.  Mike  Neuman (ph),  who  had  spent two  unsuccessful  years                                                               
trying  to recruit  a physician.   Dr.  Duddy said  he found  the                                                               
practice environment  in Alaska to  be exceptional.   He recalled                                                               
that while practicing physicians  in the Midwest were complaining                                                               
about   malpractice  rates   and  availability   of  malpractice,                                                               
physicians  in  Alaska  were  upbeat and  happy.    The  practice                                                               
environment in  Alaska remained relatively  stable until  2001 or                                                               
2002 when  the AMA declared  that Alaska was at-risk  with regard                                                               
to a potential malpractice crisis.                                                                                              
DR. DUDDY said  he didn't notice the gradual change  until May of                                                               
2003,   when    Northwest   Physicians   Mutual    notified   its                                                               
policyholders that it  would no longer issue  policies in Alaska.                                                               
The   aforementioned  was   a  wakeup   call  for   many  Alaskan                                                               
physicians, although,  fortunately, a relatively small  amount of                                                               
physicians   were  covered   by   Northwest  Physicians   Mutual.                                                               
However, he suspected that those  covered by Northwest Physicians                                                               
Mutual who had  pending lawsuits or past suits may  not have been                                                               
able to obtain  malpractice insurance even with MIEC.   Dr. Duddy                                                               
related that the  loss of the two malpractice carriers  has had a                                                               
direct negative effect on his  ability to recruit new physicians.                                                               
In the Lower  48 Alaska is being characterized  as an unfavorable                                                               
environment to  practice.  For  example, the  three neurosurgeons                                                               
in the state  have been actively and  aggressively recruiting for                                                               
five  years, but  have been  unsuccessful in  attracting any  new                                                               
DR. DUDDY echoed  earlier testimony that not only  is it becoming                                                               
difficult  to  attract  new physicians  or  currently  practicing                                                               
physicians  to Alaska,  but as  the crisis  develops many  of the                                                               
practicing  physicians   will  retire  early.     Therefore,  the                                                               
combination of  the aforementioned  compounds the problem  of the                                                               
physician shortage.   He related that some  AMA officials believe                                                               
that Alaska  is one year away  from such a crisis.   He predicted                                                               
that  a   crisis  would  result   in  the   remaining  practicing                                                               
physicians  limiting their  practice.   Therefore, certain  high-                                                               
risk procedures and  traumas would be sent to the  Lower 48.  Dr.                                                               
Duddy stated  that there is  the chance  to avoid this  crisis in                                                               
Alaska  because it's  only a  matter  of time  before the  crisis                                                               
impacting  the states  without medical  liability  reform in  the                                                               
Lower  48  will  effect  Alaska.   He  related  his  belief  that                                                               
physicians support this legislation.                                                                                            
Number 0230                                                                                                                     
RICHARD  COBDEN,  MD,  Tanana Valley  Clinic;  Alaska  Healthcare                                                               
Network;  Alaska Orthopedic  Association; informed  the committee                                                               
that he  is a practicing  orthopedist in Fairbanks at  the Tanana                                                               
Valley Clinic.   This  legislation is  important because  it will                                                               
help all three  entities retain and recruit physicians.   He also                                                               
informed  the committee  that the  Tanana Valley  Clinic and  the                                                               
Alaska Healthcare  Network were  both covered  by CNA  until late                                                               
last year.   The aforementioned left the  two entities scrambling                                                               
and  ultimately   found  NORCAL  and   MIEC  to  cover   all  the                                                               
physicians.   However, 41  physicians were  within three  days of                                                               
having no  coverage at all.   Under the rules and  regulations of                                                               
the  hospital,  those  physicians  wouldn't  have  been  able  to                                                               
practice in  the hospital.   The  aforementioned would've  been a                                                               
disaster  because [those  41 physicians]  represent approximately                                                               
half of the physicians practicing in Fairbanks.                                                                                 
DR. COBDEN related that he was  told that CNA left Alaska because                                                               
of  anticipated loss  experience,  which was  a surprise  because                                                               
[the Tanana Valley Clinic] had  not experienced any lawsuits, and                                                               
furthermore  of the  41  other  physicians he  knew  of only  one                                                               
lawsuit  that was  pending.    Although there  weren't  a lot  of                                                               
lawsuits occurring, he agreed with  Dr. Duddy that it was related                                                               
to  the amount  of loss  per claim.   He  further noted  that CNA                                                               
cited an  unfavorable atmosphere  for insurance  in Alaska.   Dr.                                                               
Cobden mentioned  that NORCAL has  notified those it  covers that                                                               
it will likely raise the rates in the near future.                                                                              
TAPE 04-25, SIDE A                                                                                                            
Number 0001                                                                                                                     
DR. COBDEN  remarked, "We're  all waiting for  the other  shoe to                                                               
drop."   Dr.  Cobden  turned to  the  question regarding  whether                                                               
insurance companies  will lower rates  if legislation such  as HB
472  is  passed, and  related  that  they  won't.   However,  the                                                               
insurance companies may not raise  the rates or leave altogether.                                                               
With regard  to why  internists are leaving,  Dr. Cobden  said he                                                               
didn't believe that it directly  has to do with medical liability                                                               
insurance.  He related his  understanding that internists are the                                                               
most  highly  trained,   and  yet  the  most   underpaid  of  all                                                               
physicians.   Furthermore, internists deal largely  with Medicare                                                               
populations and Medicare  has been notoriously poor  in the realm                                                               
of  reimbursement.   As  the cost  of  providing care  increases,                                                               
including  insurance,  and  reimbursement  decreases,  fewer  and                                                               
fewer people are willing to enter  this field.  He mentioned that                                                               
Tanana Valley  Clinic is  currently in  the midst  of recruitment                                                               
for  internists and  it's very  difficult to  get individuals  to                                                               
come  to Alaska.    However, keeping  the  insurance rates  under                                                               
control would be helpful with recruitment.                                                                                      
DR. COBDEN turned  to the earlier question regarding  what a hard                                                               
cap  does  to the  overall  insurance  rates.   He  recalled  his                                                               
experience  practicing in  the  Sacramento,  California, area  10                                                               
years ago  [after that passage  of MICRA, with its  $250,000 hard                                                               
cap  on  noneconomic damages].    He  related  that many  of  the                                                               
insurance companies cite  [medical malpractice reform], including                                                               
MICRA,  as   one  of  the   reasons  the  rates   weren't  raised                                                               
significantly over the next 20  years.  The actual rate increases                                                               
over that  20 years in  California was  26 percent.   However, in                                                               
Nevada, a demographically and  geographically situated state, the                                                               
rates  increased by  2,700 percent  and Nevada  had no  hard cap.                                                               
Therefore,  Dr. Cobden  said he  believes there  is an  impact by                                                               
legislation such as HB 472.                                                                                                     
Number 0314                                                                                                                     
REPRESENTATIVE GARA said that he  is a bit uncomfortable with the                                                               
approach in  HB 472 because it  limits the rights of  people with                                                               
valid claims  who have severe  injuries.  These limits  are based                                                               
upon the  potential that insurance companies  will begin behaving                                                               
in a reasonable manner.   Representative Gara remarked that he is                                                               
looking at an  insurance crisis that, in many  cases, has nothing                                                               
to  do with  pain and  suffering damages.   He  pointed out  that                                                               
workers'  compensation folks  have  informed  the committee  that                                                               
their  rates have  increased upwards  of 50  percent in  the last                                                               
[few  years].   He noted  that under  workers' compensation,  one                                                               
isn't even  allowed pain  and suffering  damages.   Therefore, he                                                               
surmised  that   there  are   other  factors   causing  insurance                                                               
companies to lose  money and cut coverage,  especially since [the                                                               
terrorist attacks of September 11, 2001].                                                                                       
DR. COBDEN  agreed that there  are many factors [involved  in the                                                               
insurance crisis] and most of  those factors can't be controlled.                                                               
However,  [the  insurance  industry  has said  that]  this  small                                                               
factor  would make  a difference.    Dr. Cobden  opined that  the                                                               
insurance  problems throughout  the  state and  the country  need                                                               
constant review.                                                                                                                
Number 0486                                                                                                                     
RON  NEUPAUER,  President,  Medical Underwriters  of  California;                                                               
Medical Insurance  Exchange of California (MIEC),  explained that                                                               
Medical   Underwriters  of   California   is  a   physician-owned                                                               
insurance company that provides  coverage to physicians in Alaska                                                               
as well as three other states  in the West.  Medical Underwriters                                                               
of  California, the  attorney-in-fact  for  MIEC, began  offering                                                               
coverage  to  Alaskan  physicians   in  1977  and  began  writing                                                               
policies the following year.   Medical Underwriters of California                                                               
expanded  to include  Alaska  because, at  the  time, ASMA  faced                                                               
mandated  [medical malpractice]  coverage from  Medical Indemnity                                                               
Corporation of Alaska (MICA).                                                                                                   
MR. NEUPAUER  reiterated that Medical Underwriters  of California                                                               
is  a  physician-owned company  that  isn't  in the  business  of                                                               
insurance  for  its  own  sake  nor is  it  in  the  business  of                                                               
insurance  to make  money.    The promise  has  always been  that                                                               
Medical  Underwriters of  California would  have to  charge rates                                                               
that its actuaries  believe were necessary to pay  the claims and                                                               
expenses.    If  money  was  left  over,  it  would  be  used  to                                                               
strengthen the  company or  be returned  to the  policyholders in                                                               
the form of dividends.  Over  the years, the company has a strong                                                               
record  of  returning  dividends   when  claim  trends  are  more                                                               
favorable  than the  actuaries predicted.    However, when  claim                                                               
costs increase, the  rates have to be  increased.  Unfortunately,                                                               
that has  been the case in  every state over the  last few years.                                                               
Mr. Neupauer informed the committee  that Medical Underwriters of                                                               
California  has a  very strong  capital base,  and therefore  the                                                               
company  was  able to  step  in  [when  Alaska  lost two  of  its                                                               
carriers].   Mr. Neupauer  recalled a few  years ago  when Alaska                                                               
had vigorous competition.                                                                                                       
[The gavel was passed to Vice Chair Anderson.]                                                                                  
MR. NEUPAUER turned to California's  passage of MICRA tort reform                                                               
in 1975,  which has become  the benchmark for proposals  by state                                                               
legislatures across the  nation.  The centerpiece  of that reform                                                               
package  is  the  $250,000  cap  on  noneconomic  damages.    Mr.                                                               
Neupauer related  his personal belief  that it's not  possible to                                                               
quantify pain and  suffering.  However, when  [pain and suffering                                                               
awards] aren't limited,  it creates huge uncertainty.   In states                                                               
with  no noneconomic  cap  there  are occasionally  emotion-laden                                                               
verdicts  for   large  sums  that   can't  be  predicted.     The                                                               
aforementioned drives up the cost  of settlements in other cases.                                                               
He identified that  as part of the problem, pointing  out that in                                                               
a  small  population state  such  as  Alaska a  relatively  small                                                               
number  of very  large cases  has a  huge impact  on the  overall                                                               
result for  an insurance  company or a  risk-bearing pool  of any                                                               
kind.  Mr.  Neupauer said he thought the  aforementioned may have                                                               
been  behind the  decision to  exit the  state by  some of  these                                                               
other   carriers.      Mr.  Neupauer   announced   that   Medical                                                               
Underwriters  of California  has no  plan to  leave the  state as                                                               
long  as the  company is  able  to obtain  a rate  that pays  the                                                               
[The gavel was returned to Chair McGuire.]                                                                                      
Number 0877                                                                                                                     
REPRESENTATIVE  SAMUELS  inquired as  to  how  Alaska ranks  with                                                               
regard  to average  premiums  paid and  the  rate increase  since                                                               
[MICRA] in 1975.                                                                                                                
MR. NEUPAUER  said that although he  didn't have the data  at his                                                               
fingertips,  historically  the  rates  [Medical  Underwriters  of                                                               
California] has  had to  charge for  Alaska physicians  have been                                                               
considerably higher than  those in California.   He recalled that                                                               
in the early  1980s Alaska's rates had to  be raised tremendously                                                               
due to  a number of  large cases and  that happened again  in the                                                               
late 1980s.   In the 1990s the rates of  [Medical Underwriters of                                                               
California] in Alaska  began to decrease some while  the rates in                                                               
California were  stable.   Over the long  haul, he  recalled that                                                               
Alaska's rates have  been double to about 30  percent higher than                                                               
California's rates.                                                                                                             
REPRESENTATIVE SAMUELS asked if  Mr. Neupauer thought the earlier                                                               
example  of  Nevada's rate  increase  of  [2,700] percent  versus                                                               
California's 26 percent rate increase was typical.                                                                              
MR.  NEUPAUER characterized  Nevada as  an extreme  example of  a                                                               
tort  system gone  wrong.   Nevada is  the only  state that  MIEC                                                               
elected to depart after many years.   At the end of MIEC's tenure                                                               
in Nevada  last year,  MIEC was  charging 3.5  times more  in Las                                                               
Vegas than what  was charged in Northern California  for the same                                                               
practice.  "We didn't see any relief in sight," he mentioned.                                                                   
REPRESENTATIVE SAMUELS  inquired as to what  an Alaskan physician                                                               
pays  for liability  as compared  to another  state with  similar                                                               
laws and a hard cap.                                                                                                            
MR.  NEUPAUER answered  that  he believes  Alaska  pays more,  on                                                               
average, than  the states with  hard caps.  In  some comparisons,                                                               
Alaska  would pay  a  lot  more.   However,  he  noted that  many                                                               
factors beyond the hard cap  determine the [physician's premium].                                                               
The existence  of the cap  in California,  he said, has  kept the                                                               
rates  lower than  they otherwise  would be.   When  one compares                                                               
what  physician-owned  companies  charge throughout  the  nation,                                                               
last year  the average of the  five highest states was  about 2.5                                                               
times the rates in California.   He noted that Florida, New York,                                                               
Texas,  Illinois,  and  Michigan  are usually  the  five  highest                                                               
states.  "Alaska's  not that high, but it's  certainly well above                                                               
the average,"  he said.   In  further response  to Representative                                                               
Samuels, Mr. Neupauer  confirmed that he only knew  of [MIEC] and                                                               
one other carrier in Alaska, although  he noted that there may be                                                               
a few other carriers that insure  a small number of physicians in                                                               
Alaska  through specialty  societies or  on a  nonlicensed basis.                                                               
Mr.  Neupauer  confirmed  that  currently  [MIEC  and  the  other                                                               
carrier] practically split the market in Alaska 50:50.                                                                          
MR.  NEUPAUER, in  further  response  to Representative  Samuels,                                                               
reiterated that  [MIEC] maintains  a fairly  conservative capital                                                               
ratio that must  be available for its commitments in  all four of                                                               
the states in which  it does business.  He said  he becomes a bit                                                               
nervous when  contemplating being the  only carrier in  any state                                                               
because there should be choices.                                                                                                
Number 1112                                                                                                                     
REPRESENTATIVE GARA asked  if the number of  physicians, the size                                                               
of the  insurance pool,  in Alaska  has anything  to do  with the                                                               
high insurance rates.                                                                                                           
MR.  NEUPAUER  responded that  when  actuaries  look at  all  the                                                               
factors, they review  volatility.  As the  number [of physicians]                                                               
increases,  the  volatility  decreases  and thus  there  is  more                                                               
assurance that the numbers are  credible.  Therefore, the smaller                                                               
the pool, the  more variability there is from year  to year.  The                                                               
aforementioned would be  a factor for Alaska as  a smaller state.                                                               
In  further   response  to  Representative  Gara,   Mr.  Neupauer                                                               
recalled  that  in  comparison to  Hawaii,  Alaska's  rates  were                                                               
higher in the 1990s.  However,  currently the rates in Hawaii may                                                               
be  slightly higher  than in  Alaska.   Mr. Neupauer  pointed out                                                               
that Idaho  has the lowest  rates of any  of the states  in which                                                               
[MIEC] does business.  He  noted that Idaho recently re-enacted a                                                               
hard  cap  of  $250,000;  the   previous  cap  had  an  inflation                                                               
REPRESENTATIVE GARA recalled that  Mr. Neupauer said that without                                                               
a hard  cap it's hard  for a company  to know what  its liability                                                               
exposure might  be at  the end of  the year.   He asked  if there                                                               
would still be  an actuarial benefit if there were  two caps, one                                                               
for  non-serious  injuries and  a  higher  one for  very  serious                                                               
debilitating injuries, but a hard cap nonetheless.                                                                              
MR. NEUPAUER  said he believes  that perhaps  one or both  of the                                                               
major actuarial firms  that study this insurance  have produced a                                                               
study  that   specifies  that  at  levels   above  $250,000,  the                                                               
actuaries can't measure the beneficial effects of a cap.                                                                        
Number 1312                                                                                                                     
REPRESENTATIVE HOLM  asked if having  a hard cap would  result in                                                               
the insurance company merely writing  the check rather than fight                                                               
the case, which would essentially  lower the amount of attorney's                                                               
fees.   He  pondered whether  the unintended  consequence of  the                                                               
aforementioned would be settling a  number of cases that wouldn't                                                               
normally be settled.                                                                                                            
MR. NEUPAUER disagreed, pointing out  that its policies include a                                                               
clause that a  case won't be settled unless  the physician agrees                                                               
to do so.   Furthermore, the cases are peer-reviewed.   The long-                                                               
standing  history  of [MIEC]  is  that  if the  physician  didn't                                                               
depart from the standard of care, the company doesn't settle.                                                                   
REPRESENTATIVE  GARA noted  that  he  has information  specifying                                                               
that  since  1990 the  rise  in  malpractice insurance  rates  in                                                               
California  is about  twice as  high as  the rise  in malpractice                                                               
insurance rates nationwide.  He asked if that sounds correct.                                                                   
MR.  NEUPAUER  said  that  doesn't sound  correct.    In  further                                                               
response to Representative Gara,  Mr. Neupauer recalled that from                                                               
1990 and  the present California  rates may have increased  a bit                                                               
faster  than  Alaska's because  California's  rates  came from  a                                                               
lower  base.    However,  when  one  reviews  California's  rates                                                               
against  other states  without a  cap from  1985 to  the present,                                                               
it's  clear  that California  rates  have  increased a  fraction,                                                               
perhaps 30 percent as much as other states without a cap.                                                                       
Number 1481                                                                                                                     
LAURIE  HERMAN, Director,  Government Affairs,  Providence Health                                                               
System in Alaska, announced  Providence's wholehearted support of                                                               
HB 472.  Ms. Herman provided the following testimony:                                                                           
     As you've heard  today in a 2002  study commissioned by                                                                    
     Providence,  we  learned  that Anchorage  is  facing  a                                                                    
     physician   shortage,  one   of  the   causes  of   the                                                                    
     healthcare  access   problem  facing  Alaska.     While                                                                    
     limiting the  amount of noneconomic damages  in medical                                                                    
     malpractice  cases will  no  doubt  help in  attracting                                                                    
     physicians to Alaska,  it's not the end all,  be all of                                                                    
     possible  solutions  to   the  physician  shortage  and                                                                    
     resulting access problem.  I'm  speaking with you today                                                                    
     in an effort  to assure you that  Providence is working                                                                    
     on those  fronts where we  can effect  positive impacts                                                                    
     on these issues.                                                                                                           
     It  is difficult  to recruit  physicians  to our  great                                                                    
     state.    Research  indicates   that  the  majority  of                                                                    
     physicians  begin  their   practice  not  farther  than                                                                    
     within a  50-mile radius of where  they completed their                                                                    
     residency.     Providence's   Alaska  family   practice                                                                    
     residency  program is  designed to  help in  this area.                                                                    
     In  conjunction  with  the WWAMI  program,  the  family                                                                    
     practice  residency   is  designed  to  grow   our  own                                                                    
     physicians  and has  proven to  be  very successful  in                                                                    
     meeting that goal.                                                                                                         
     Of the 32 graduates who  have completed our program, 75                                                                    
     percent of them are practicing  in Alaska; half of them                                                                    
     are   practicing  in   rural  Alaska;   and  half   are                                                                    
     practicing in  urban Alaska, with many  of them serving                                                                    
     the  underserved  or  working with  the  Indian  Health                                                                    
     Service.  Of those  graduates not practicing in Alaska,                                                                    
     all but  one are enrolled  to entities who  are serving                                                                    
     the  underserved.   We  need to  grow  and expand  this                                                                    
     successful  program and  many of  us at  Providence are                                                                    
     working  diligently to  do just  that.   Unfortunately,                                                                    
     the program  costs Providence some  $2 million  a year,                                                                    
     but we  are working to  find ways to curb  those losses                                                                    
     and grow the program.                                                                                                      
     Alaska is  facing an aging physician  workforce, as you                                                                    
     heard today.   The average age of our  physicians is 51                                                                    
     and we  simply are not  recruiting at a rate  that will                                                                    
     allow  us to  replace  those physicians  who decide  to                                                                    
     leave their  practices once retirement age  is reached.                                                                    
     Providence  has  an  aggressive  physician  recruitment                                                                    
     program,  which  we hope  will  bring  more doctors  to                                                                    
     Alaska.     Continuing  to  run  a   successful  family                                                                    
     practice  residency  program  and   to  expand  it  are                                                                    
     certainly  other  ways  to   assist  in  this  dilemma.                                                                    
     Providence stands  ready to meet  the challenge  of the                                                                    
     physician  shortage  in our  state,  but  we need  your                                                                    
     Alaska's one  of the  costliest states  for physicians,                                                                    
     with   medical  liability   insurance  being   a  large                                                                    
     component of  that cost.   As you've heard,  Alaska has                                                                    
     experienced some  very dramatic  increases in  the cost                                                                    
     of  medical liability  insurance.   As I've  mentioned,                                                                    
     recruiting   physicians  to   practice  in   Alaska  is                                                                    
     difficult at best.  We  believe that putting a limit on                                                                    
     noneconomic damages  in medical malpractice  cases will                                                                    
     be a  big help in  our effort to bring  more physicians                                                                    
     to Alaska.   I ask for your support on  House Bill 472.                                                                    
     Thank you very much.                                                                                                       
REPRESENTATIVE  GARA  asked if  Ms.  Herman  has any  information                                                               
regarding how  private practitioners'  salaries in  Alaska relate                                                               
to the nationwide average.                                                                                                      
MS. HERMAN replied no, but offered to find out.                                                                                 
Number 1712                                                                                                                     
PAULA JACOBSON,  Attorney and Nurse, informed  the committee that                                                               
the  majority  of  [legal] cases  she  handles  involves  medical                                                               
issues, including  medical malpractice cases.   Ms. Jacobson said                                                               
that  she  didn't  know  of  any  "excess  verdicts"  in  medical                                                               
malpractice cases.   In  fact, she  only knew  of one  verdict in                                                               
excess of $1  million in the last 10-15 years.   She related that                                                               
the  cases  she  handles  that  result  in  large  awards  aren't                                                               
[recompense]  for  pain  and suffering  but  rather  for  medical                                                               
expenses  and  lost  wages.   Despite  the  fact  that  insurance                                                               
companies  would like  to have  certainty with  regard to  future                                                               
exposure, there is no certainty in that.                                                                                        
MS. JACOBSON  noted that  she has witnessed  all three  rounds of                                                               
tort reform and  each time the arguments driving  the tort reform                                                               
have  been  the  following:     frivolous  lawsuits,  large  jury                                                               
verdicts,  the  unavailability  of  insurance  for  doctors,  and                                                               
access  to medical  care.   In  the last  20 years,  there is  no                                                               
evidence, to her knowledge, that  capping noneconomic damages has                                                               
made insurance more available or  attracted new physicians to the                                                               
state.  In  fact, she said, there is no  evidence that Alaska has                                                               
a physician shortage because of the  lack of a $250,000 hard cap.                                                               
Testimony today  has reflected  that Alaska's  physician shortage                                                               
is caused by many factors, some  of which have nothing to do with                                                               
the medical or legal system in Alaska.                                                                                          
Number 1823                                                                                                                     
MS.  JACOBSON clarified  that [the  current  cap] on  noneconomic                                                               
damages is $1  million, not $2 million as  was mentioned earlier.                                                               
Furthermore, Alaska has  a two-tiered cap and  the maximum amount                                                               
an individual can obtain under  the current system is $1 million.                                                               
She  emphasized that  very  few people  receive  [the $1  million                                                               
maximum].  The $1 million  in noneconomic damages is reserved for                                                               
such severely  injured people that  it rarely happens,  she said.                                                               
The simple fact is that awards haven't increased.                                                                               
MS.  JACOBSON  then  turned   to  Representative  Gara's  earlier                                                               
comment that  there are  two sides  to every story.   On  the one                                                               
hand  there is  the  story  of the  physician  and the  insurance                                                               
company and on the other hand  there are the people most affected                                                               
by this.   From the  300-400 people a year  who want her  to take                                                               
their case, she is hearing  that Alaska's population is aging and                                                               
these are  the people  with no economic  loss.   Therefore, older                                                               
people as  well as rural  Alaskans and children will  be severely                                                               
penalized  by this  $250,000 cap  because they  have no  economic                                                               
loss.   She suggested  that there  may be other  ways to  reach a                                                               
compromise  such as  Representative Gara's  suggestion of  a two-                                                               
tiered system.   Ms. Jacobson said that based  on her experience,                                                               
the $250,000  cap is unfair  and won't make that  much difference                                                               
in the legal situation of the state.                                                                                            
Number 1964                                                                                                                     
REPRESENTATIVE  SAMUELS inquired  as to  the average  earnings an                                                               
attorney would receive on [a medical malpractice] case.                                                                         
MS.  JACOBSON answered  that an  attorney's  earnings depends  on                                                               
various factors.   She  explained that  she handles  many federal                                                               
cases and under federal law  an attorney's earnings [on a medical                                                               
malpractice] case  is 25  percent.   In some  of these  cases the                                                               
attorney  would  receive 30  percent  and  in rare  instances  40                                                               
percent.  Ms.  Jacobson informed the committee that  if she feels                                                               
that she has reached a fair  settlement in a sufficient amount of                                                               
time, she is willing to reduce  her fee.  However, she emphasized                                                               
that these  [medical malpractice] cases are  incredibly difficult                                                               
to handle,  noting that the only  persons who can testify  that a                                                               
professional has  breached the standard  of care are  experts [in                                                               
that  field].   In  a  complicated case,  $100,000  can be  spent                                                               
easily.  Therefore,  many people don't seek a remedy  due to what                                                               
has to be spent to handle the case.                                                                                             
MS.  JACOBSON, in  response  to  Representative Samuels'  earlier                                                               
question, clarified that under federal  law attorneys are limited                                                               
to two-tier [fee]  system.  If a case is  settled prior to filing                                                               
the lawsuit,  the attorney would receive  20 percent.  If  a case                                                               
is filed  and proceeds,  the attorney  would receive  25 percent.                                                               
The  nonfederal  cases  fall  under   a  graduated  fee  that  is                                                               
dependent  upon many  factors.   She estimated  that in  the last                                                               
nonfederal case that  she settled she received  a contingency fee                                                               
of 30 percent.                                                                                                                  
Number 2095                                                                                                                     
REPRESENTATIVE  GARA highlighted  that there  are no  regulations                                                               
with  regard to  state rates.    He informed  the committee  that                                                               
[contingency fees] range from 25  percent to 35 percent, although                                                               
some do reach 40 percent and  higher.  He recalled that "we" tend                                                               
to reduce the rates if the case  turns out not to be as difficult                                                               
as was  thought.  Representative  Gara turned to the  current cap                                                               
and asked if  it's $1 million or greater if  the individual has a                                                               
longer life expectancy.                                                                                                         
MS.  JACOBSON explained  that  there  are two  caps.   For  those                                                               
individuals  who aren't  severely and  permanently disabled,  the                                                               
cap  is $400,000.   For  those who  are permanently  and severely                                                               
disabled, the cap  is $1 million.  Furthermore, the  cap on death                                                               
claims  is $400[,000]  regardless  of [the  number of  dependents                                                               
left].  She pointed out that  HB 472 will cap medical malpractice                                                               
claims at  $250[,000].   Ms. Jacobson confirmed  that there  is a                                                               
multiple that  is multiplied by  the age,  but may not  exceed $1                                                               
Number 2207                                                                                                                     
DONNA McCRADY,  Past President, Alaska Academy  of Trial Lawyers,                                                               
said that  she wanted to  speak to  the reality of  practicing in                                                               
the  medical  malpractice  area  in Alaska.    She  informed  the                                                               
committee  that   there  are  very  few   practitioners  who  are                                                               
plaintiff  attorneys  that  actually  bring  medical  malpractice                                                               
cases in the state because these  are quite expensive cases.  One                                                               
can spend well  over $100,000 in these type cases.   She recalled                                                               
earlier  testimony  that  many medical  malpractice  cases  don't                                                               
settle  or do  so  late  in litigation,  and  pointed out  that's                                                               
because physicians have to agree to  settle.  Therefore, a lot of                                                               
money has been spent.                                                                                                           
MS.  McCRADY  turned to  the  matter  of expert  [witnesses]  and                                                               
highlighted that it's  very rare to hire  expert [witnesses] from                                                               
within  the state  and thus  one must  hire someone  from out  of                                                               
state, which is  quite costly.  Therefore, before  she takes such                                                               
a  risk, she  carefully reviews  the case.   Furthermore,  if she                                                               
takes a  case and  later learns  information suggesting  that she                                                               
may not  prevail, she  takes a  look at  dismissing the  case and                                                               
eating the  costs.  The  aforementioned is considered  because of                                                               
the  risk to  the  client who  could  go bankrupt  if  he or  she                                                               
doesn't prevail.   She pointed out that under Civil  Rules 82 and                                                               
68 [of the  Alaska Rules of Civil Procedure] if  a plaintiff goes                                                               
to trial and  doesn't prevail, the plaintiff could end  up with a                                                               
judgment against  him or her  by the  defendant for a  portion of                                                               
the defendant's costs  and fees.  However,  the plaintiff doesn't                                                               
have  insurance to  cover  the aforementioned  and  could end  up                                                               
CHAIR McGUIRE inquired  as to whether Ms. McCrady has  ever had a                                                               
client face a Civil Rule 82 case or even heard of such.                                                                         
MS. McCRADY replied  no.  She explained that  she has experienced                                                               
one case  in which the plaintiff  prevailed.  In other  cases the                                                               
plaintiff,  even with  a strong  case, was  afraid to  go forward                                                               
because  of the  significant risk.   Therefore,  those plaintiffs                                                               
were inclined to settle for much  less than what she believes the                                                               
case was worth.                                                                                                                 
CHAIR  McGUIRE surmised  then  that Ms.  McCrady  had never  seen                                                               
Civil Rule 82 applied.                                                                                                          
TAPE 04-25, SIDE B                                                                                                            
CHAIR  McGUIRE acknowledged  that there  are legitimate  cases as                                                               
well as  frivolous cases.   Although Civil  Rule 82 is  a remedy,                                                               
it's never applied.                                                                                                             
MS.  McCRADY maintained  that she  does have  clients who  settle                                                               
cases  which they  ordinarily wouldn't  because of  the fear  [of                                                               
Civil  Rule  82].   Furthermore,  she  noted  that she  has  read                                                               
supreme  court  cases  that   have  discussed  judgments  against                                                               
plaintiffs  when   they  haven't   been  the   prevailing  party.                                                               
Although Ms.  McCrady didn't  have the  statistics with  her, she                                                               
said she  could inform the  committee on this  matter anecdotally                                                               
because  it's  a small  bar  of  people who  perform  malpractice                                                               
cases.  Therefore,  she is very familiar  with malpractice cases.                                                               
She  noted that  there are  many defense  verdicts.   Ms. McCrady                                                               
offered to provide more information to the committee.                                                                           
MS. McCRADY emphasized that Alaska has  had caps since 1997.  She                                                               
commented that  she is a bit  baffled by some of  the [testimony]                                                               
that she has  heard because she if familiar  with the malpractice                                                               
cases in  the state.  There  is such a small  percentage of cases                                                               
that  are actually  brought forward,  and  furthermore there  are                                                               
many verdicts that are for  defendant physicians.  Therefore, she                                                               
said   she  is   struggling  to   understand  why   there  is   a                                                               
[malpractice] premium  problem in Alaska.   She pointed  out that                                                               
all the  data she has  reviewed shows that payouts  have remained                                                               
constant in  Alaska while premiums  have increased.   She related                                                               
her understanding that the aforementioned  is related to economic                                                               
forces  and is  absolutely  unrelated to  payouts.   Furthermore,                                                               
there isn't an  increase in the number of  malpractice cases that                                                               
have been brought forward in Alaska.   In fact, in the history of                                                               
Alaska  there has  only  been  one verdict  that  summed over  $1                                                               
million.  Therefore,  Ms. McCrady viewed HB 472  as hurting those                                                               
with a valid claim.                                                                                                             
Number 2254                                                                                                                     
MS. McCRADY recalled  Representative Anderson's earlier statement                                                               
that when  patients receive  a bad result,  they file  a lawsuit.                                                               
However, she pointed out that in  Alaska one can't file a lawsuit                                                               
merely  because  there is  a  bad  result.    In fact,  the  jury                                                               
instruction specifies that just because  one has a bad result one                                                               
can't  infer   negligence  against  the  health   care  provider.                                                               
Therefore, the  plaintiff's attorney  and the plaintiff  bear the                                                               
burden  of  proving  that  a  physician's  care  fell  below  the                                                               
standard of  care and caused an  injury.  Furthermore, it  has to                                                               
be a substantial injury for it  to be economical to bring a claim                                                               
CHAIR  McGUIRE   inquired  as  to   the  average   percentage  of                                                               
contingency fees that Ms. McCrady charges.                                                                                      
MS. McCRADY answered  that the average is 30  percent plus costs.                                                               
However, she noted that there  are times when she will compromise                                                               
that fee.   Ms.  McCrady remarked  that she  believes her  fee is                                                               
reasonable, especially when  one considers that she  spends a lot                                                               
of money on  cases and may recover nothing.   She emphasized that                                                               
she  takes  substantial  risk  in  taking  [medical  malpractice]                                                               
cases.  In further explanation,  Ms. McCrady specified that in an                                                               
average  medical malpractice  case her  costs may  be $70,000,  a                                                               
large  portion   of  which  is   expert  [witness]  fees.     She                                                               
acknowledged that defendants face  the cost of expert [witnesses]                                                               
as well.  If the case  goes through discovery, travel is required                                                               
because most of the time the  expert [witnesses] are in the Lower                                                               
Number 2139                                                                                                                     
CHAIR  McGUIRE  asked  if  most  malpractice  insurance  policies                                                               
include coverage pertaining to attorney fees.                                                                                   
MS. McCRADY replied yes and  deferred to Mr. Brown [who testifies                                                               
later in the hearing].   Returning to the expert [witnesses], Ms.                                                               
McCrady  clarified  that  these   expert  [witnesses]  are  other                                                               
physicians.   She  explained that  these cases  can't be  brought                                                               
forward unless a  physician practicing in the area  says that the                                                               
care  provided by  the  physician being  charged  fell below  the                                                               
standard of care.                                                                                                               
Number 2088                                                                                                                     
KATHY DALE  informed the committee  that she and her  husband are                                                               
victims of  malpractice.  On  May 18,  2000, her husband  went to                                                               
have  rotator  cuff surgery,  but  came  out  of surgery  with  a                                                               
complex,  severe  brain  injury  due to  the  negligence  of  the                                                               
certified nurse anesthetist.   If there had been  a $250,000 cap,                                                               
she and  her husband  wouldn't have  been able  to bring  a case.                                                               
The only  way that she was  able to uncover what  had happened to                                                               
her  husband and  why  was because  of the  ability  to hire  the                                                               
expert  witnesses.    She explained  that  rotator  cuff  surgery                                                               
entails lowering one's blood pressure.   When her husband's blood                                                               
pressure was  already low,  he was  administered two  other drugs                                                               
that had  the synergy of  lowering the blood  pressure [further].                                                               
Furthermore,   the  anesthetist   stopped  recording   his  blood                                                               
pressure or  any of his vital  signs for 45 minutes.   Therefore,                                                               
Ms.  Dale's husband  wasn't receiving  blood  circulation to  his                                                               
brain because  of his imperceptible  blood pressure and  thus her                                                               
husband now  has a complex  brain injury that  can be seen  on an                                                               
MRI  [magnetic resonance  imaging].   To even  discover that  her                                                               
husband had a brain  injury she and her husband had  to go to the                                                               
Lower 48.   Ms. Dale  stressed that because of  this [negligence]                                                               
she doesn't have the husband she had for over 42 years.                                                                         
MS.  DALE said  that she  didn't  believe the  proposed cap  will                                                               
accomplish what is being said.   Furthermore, those who have true                                                               
losses  will certainly  be robbed  of the  ability to  obtain any                                                               
remedy.  She related that in her  case, she was told that she had                                                               
no economic  damages because her  husband had recently  started a                                                               
new  business   and  they  couldn't  prove   any  economic  loss.                                                               
However, her husband's brain injury  makes him unemployable.  Ms.                                                               
Dale  implored the  committee  not  to pass  the  cap that  would                                                               
prevent  those  in  a  situation  similar  to  her  from  seeking                                                               
remedies under the legal system when there is negligence.                                                                       
Number 1955                                                                                                                     
CHAIR  McGUIRE remarked  that as  policymakers, legislators  face                                                               
the  challenge   regarding  whether  there  will   be  physicians                                                               
available to treat rotator cuffs in  the future.  [Alaska faces a                                                               
situation]  that  isn't  just the  cost  of  medical  malpractice                                                               
insurance  rather  it's  a  case  of  whether  it  will  even  be                                                               
available.  If medical malpractice  insurance isn't available and                                                               
the state has to go to a pool  similar to that used in the 1970s,                                                               
it  will be  done through  a  tax or  the use  of permanent  fund                                                               
dividends,  she   predicted.    Moreover,  she   questioned  what                                                               
physicians would want  to practice in a state that  didn't have a                                                               
sufficient medical  malpractice carrier.   Chair  McGuire assured                                                               
Ms. Dale  that this  isn't being  done to  rob anyone  but rather                                                               
attempts to weigh a serious  public policy matter.  Chair McGuire                                                               
inquired as to the percent contingency  fee Ms. Dale paid as well                                                               
as the additional costs.                                                                                                        
MS. DALE  answered that  the contingency fee  was 33  percent and                                                               
her  out-of-pocket costs  were in  excess of  $70,000.   Ms. Dale                                                               
said that  she understands that  [the legislature]  is attempting                                                               
to  preserve  the medical  community  in  Alaska.   However,  she                                                               
suggested  that if  the physicians  were more  willing to  police                                                               
their own, there wouldn't be the problem there is now.                                                                          
CHAIR  McGUIRE  remarked  that the  medical  licensing  board  is                                                               
working as  hard as  it can  to [police  it's own  community] and                                                               
agreed that has to be part of the equation as well.                                                                             
Number 1839                                                                                                                     
REPRESENTATIVE ANDERSON  clarified that he didn't  sponsor HB 472                                                               
to  limit damages,  especially with  regard to  economic damages.                                                               
Representative Anderson asked if Ms. Dale's case is over.                                                                       
MS.  DALE replied  yes.   In further  response to  Representative                                                               
Anderson, Ms.  Dale explained that  it was difficult  to quantify                                                               
the economic  loss given the  current laws.   She noted  that she                                                               
and her husband are in the 60-year-old age group.                                                                               
REPRESENTATIVE  ANDERSON  said  he  was  shocked  that  Ms.  Dale                                                               
couldn't obtain  any economic damages.   Representative Anderson,                                                               
drawing  upon Representative  Gara's  earlier question  regarding                                                               
whether $22 a day  for 40 years is fair, asked  Ms. Dale what she                                                               
believes would've been fair in her case.                                                                                        
MS. DALE  clarified that her  case didn't take into  account pain                                                               
and suffering.   She explained that she settled her  case for the                                                               
cost of  caring for her  husband if she  died first.   In further                                                               
response to Representative Anderson,  Ms. Dale confirmed that she                                                               
understood the  difference between economic damages  and pain and                                                               
Number 1707                                                                                                                     
REPRESENTATIVE GARA announced that he  disagreed with some of the                                                               
policies behind  HB 472 and sympathized  with Ms. Dale.   He said                                                               
he has a problem with the  policy that the legislation might slow                                                               
the increase  of [malpractice] insurance  rates because  there is                                                               
no commitment from  any insurance company that  such will happen.                                                               
Furthermore,  Representative  Gara said  he  had  a problem  with                                                               
giving away the rights of  those with valid claims of substantial                                                               
injuries in  order to  "perhaps punish  those who  file frivolous                                                               
lawsuits."    Representative  Gara  said  "The  fit  between  the                                                               
proposal and the evil, we have  ... to agree results in an impact                                                               
upon a completely  innocent class of people who  don't deserve to                                                               
have their rights taken away."                                                                                                  
REPRESENTATIVE GARA  said that  he wanted Ms.  Dale to  know that                                                               
there are differing  thoughts on this committee.   He related his                                                               
frustration with regard to the  myths surrounding these lawsuits.                                                               
Representative  Gara  explained that  Ms.  Dale  and her  husband                                                               
didn't have a  decent economic damages claim because  she and her                                                               
husband were  close to  60 years  of age.   Any  defense attorney                                                               
will claim  that [people in the  60 year old bracket]  were about                                                               
to retire  anyway, and  therefore the  economic damages  would be                                                               
limited.    Furthermore,  those  in rural  Alaska  might  live  a                                                               
subsistence  lifestyle and  the law  doesn't do  well quantifying                                                               
the wage  value of such  a lifestyle.   Therefore, Representative                                                               
Gara  specified  that  for  many people  there  are  no  economic                                                               
damages and  thus the recovery  is limited to pain  and suffering                                                               
Number 1609                                                                                                                     
RAY BROWN,  Attorney, Dillon  & Findley,  PC, began  by informing                                                               
the  committee that  he  learned of  this  hearing this  morning.                                                               
Therefore,  he requested  an  additional  opportunity to  present                                                               
some empirical evidence  to the committee, including  a survey of                                                               
medical malpractice  rates and a  history since the  initial tort                                                               
reform of the  mid 1980s, in order to determine  whether there is                                                               
any empirical reality to the statements made today.                                                                             
CHAIR  McGUIRE noted  that most  people have  been providing  the                                                               
committee with written  testimony and data.   She highlighted the                                                               
latitude  that   has  been   afforded  those   testifying  today.                                                               
Therefore, when  the bill returns  before the committee  20 trial                                                               
lawyers and 20 physicians won't  be allowed to testify again, she                                                               
MR.  BROWN  noted  his  appreciation of  any  latitude  that  the                                                               
committee  would  provide.   However,  he  emphasized  that  this                                                               
matter is  so significant  and the potential  impact is  so great                                                               
that he hopes the committee will allow both sides to be heard.                                                                  
CHAIR McGUIRE said she would [allow both sides to be heard].                                                                    
MR.  BROWN returned  to his  testimony  and said  that he  wasn't                                                               
aware  of a  medical malpractice  crisis  in Alaska.   Mr.  Brown                                                               
turned   to   Dr.   Neupauer's   testimony   comparing   [medical                                                               
malpractice] insurance  rates between California and  Alaska.  He                                                               
said  when  one  traces  the   history  of  [medical  malpractice                                                               
insurance],  it's  easy  to  discern  why  [medical  malpractice]                                                               
insurance rates have increased in  California while Alaska's have                                                               
not  since the  1990s.    He related  his  recollection that  the                                                               
original noneconomic  damages [cap] in  the 1986 tort  reform was                                                               
$500,000   while   noneconomic    damages   was   unlimited   for                                                               
catastrophic injuries.   In 1997  the aforementioned  was reduced                                                               
to what  he considered hard caps  in the amount of  $400,000 or a                                                               
multiple up  to $1 million  for catastrophically  injured people.                                                               
Catastrophically injured people would be  those who were severely                                                               
disfigured, blinded,  or had brain  injuries.   Additionally, the                                                               
medical  malpractice  carriers  were  given  an  additional  tort                                                               
reform  incentive in  that they  don't have  to pay  subrogation.                                                               
Therefore,  unlike  any other  insurance  carrier  in the  state,                                                               
medical malpractice  carriers don't have to  pay reimbursement to                                                               
any private health care insurer  for medical expenses tendered by                                                               
those carriers,  unless it's Medicare  or Medicaid or  some other                                                               
quasi-governmental health care  provider.  This is  the case even                                                               
if it results in malpractice.                                                                                                   
Number 1436                                                                                                                     
REPRESENTATIVE  HOLM  inquired as  to  what  Mr. Brown  means  by                                                               
subrogation in this case.                                                                                                       
MR. BROWN explained by posing an  example in which he was injured                                                               
in an automobile accident and  his insurance company paid $35,000                                                               
for  his recuperation  in the  hospital.   His insurance  company                                                               
would  have a  right to  recoup that  $35,000 from  the insurance                                                               
company of the driver  who was at fault.  However,  if he was the                                                               
victim of  medical malpractice,  the medical  malpractice carrier                                                               
wouldn't have to pay anything  in subrogation because the medical                                                               
malpractice  carriers are  protected from  that.   Therefore, the                                                               
medical  malpractice carriers  have  already received  tremendous                                                               
economic benefits from  prior tort reform.   Mr. Brown reiterated                                                               
that he wasn't aware that  the medical malpractice rates had been                                                               
increasing, and  furthermore he said  he would be  very surprised                                                               
[to  learn]   that  medical  malpractice  rates   have  increased                                                               
substantially or at an alarming rate.                                                                                           
MR.  BROWN turned  to the  perceived public  policy crisis.   Mr.                                                               
Brown  pointed  out  that  NORCAL  and  MIEC  have  both  written                                                               
coverage in  Alaska since the  mid 1970s, and both  companies are                                                               
good  companies that  are  very  well capitalized.    Of the  two                                                               
companies  that  left the  state,  he  understood that  CNA  left                                                               
Alaska for reasons unrelated to  claims in Alaska while Northwest                                                               
Physicians  Mutual was  grossly  undercapitalized.   In fact,  he                                                               
said  he wasn't  sure Northwest  Physicians Mutual  was still  in                                                               
existence.   Northwest  Physicians  Mutual  leaving doesn't  have                                                               
anything to do  with paying out settlements in  Alaska, rather it                                                               
has  to do  with the  company's underwriting  policy and  perhaps                                                               
settlements paid in other states.                                                                                               
Number 1317                                                                                                                     
MR. BROWN  remarked that there are  exceptionally good physicians                                                               
in Alaska, many of which  are his personal friends.  Furthermore,                                                               
Alaska has  a very  good health care  delivery system.   However,                                                               
it's not  without fault, he  emphasized.  When there  are faults,                                                               
they  can  result  in  catastrophic   consequences  as  Ms.  Dale                                                               
testified.   He explained  that his firm  screens over  140 cases                                                               
per year and  only takes 5 cases,  at the most.   Mr. Brown said,                                                               
"We save 135 doctors a year  from getting sued, some of those are                                                               
viable cases.  Unfortunately, they  are not economically viable."                                                               
Furthermore,  no attorney  on  either side  of  these cases  will                                                               
prosecute a claim or defend a claim that isn't meritorious.                                                                     
MR. BROWN noted  that in order to take these  cases, the firm and                                                               
the attorneys  have to  be extremely  competent and  well funded.                                                               
Therefore, he  said that he wasn't  aware of any major  law firms                                                               
or attorneys filing frivolous lawsuits  against physicians.  It's                                                               
not done  for ethical reasons,  and furthermore  filing frivolous                                                               
lawsuits would  be economic suicide.   Mr. Brown related  that he                                                               
charges 33.3  percent for a  medical malpractice case as  he does                                                               
for any  contingency case he  represents.  The  defense attorneys                                                               
charge $175  to $250  an hour.   "In  the end,  I don't  know who                                                               
profits more  from medical  malpractice, but  I know  who suffers                                                               
the most and  it's the people like Ms. Dale  and her husband," he                                                               
MR. BROWN remarked that if one  is 65 years old and retired, that                                                               
individual should be at the happiest  point in his or her life, a                                                               
time in which to enjoy things  and live off of retirement savings                                                               
or  social  security.   Unfortunately,  many  of the  victims  of                                                               
malpractice  are   over  age  65  and   [in  the  above-described                                                               
position],  and thus  have no  economic loss.   Accordingly,  any                                                               
claim that  could be made  would be  for the pain  and suffering.                                                               
If  this  proposed cap  of  $250,000  is [adopted],  those  cases                                                               
involving people who have  been catastrophically injured wouldn't                                                               
be litigated  because it would  cost more  to bring one  of those                                                               
cases than  could be recouped  under a $250,000 cap.   Therefore,                                                               
those individuals  would be  without any  recourse.   In closing,                                                               
Mr. Brown expressed  hope that a compromise could  be reached and                                                               
that  there  is  the  opportunity  to  discuss  the  matter  with                                                               
empirical evidence.                                                                                                             
Number 1004                                                                                                                     
MIKE HAUGEN,  Executive Director,  Alaska Physicians  & Surgeons,                                                               
Inc., informed  the committee that Alaska  Physicians & Surgeons,                                                               
Inc., represents  170 physicians.   With regard to the  debate on                                                               
the  caps on  noneconomic damages  and the  formula, he  recalled                                                               
that AS 09.17.010(c) states:                                                                                                    
          (c) In an action for personal injury, the damages                                                                     
     awarded by  a court  or jury  that are  described under                                                                    
     (b) of  this section may  not exceed $1,000,000  or the                                                                    
     person's  life   expectancy  in  years   multiplied  by                                                                    
     $25,000,  whichever is  greater, when  the damages  are                                                                    
     awarded  for severe  permanent  physical impairment  or                                                                    
     severe disfigurement.                                                                                                      
MR. HAUGEN posed an example of  a baby that was injured at birth.                                                               
The  average age  is just  short of  80 years,  and therefore  80                                                               
times  $25,000 sums  close to  $2 million,  which is  the outside                                                               
limit.   It's not the  lessor of  the $25,000 times  the person's                                                               
life expectancy of  $1 million; rather it's the  greater of those                                                               
two.  With  regard to the solvency of MIEC  and NORCAL, he agreed                                                               
that those two  are more stable than the two  carriers that left.                                                               
However, one  must remember that the  largest malpractice carrier                                                               
in  the country,  "St. Paul,"  left the  market because  its loss                                                               
ratio was  unsustainable.  He  noted that St. Paul  insured about                                                               
60,000   physicians.     Therefore,  even   the  best-capitalized                                                               
companies  in  the nation  are  at  risk  if this  problem  isn't                                                               
Number 0900                                                                                                                     
MR.  HAUGEN  turned   to  where  the  money   physicians  pay  in                                                               
[malpractice]  premiums goes  and what  it pays  for in  the tort                                                               
system.    He began  by  noting  that  about  60 percent  of  the                                                               
malpractice  claims are  actually  dropped or  dismissed and  the                                                               
defense costs  for those are  about $16,000.  Roughly  32 percent                                                               
of claims are  settled and for those the average  defense cost is                                                               
about $40,000.   Only about 7  percent of the claims  go to trial                                                               
and  of  that  6  percent  the  defendants  win.    However,  the                                                               
defendants still pay  about $85,000.  Therefore, only  in about 1                                                               
percent of  these cases  does the plaintiff  actually win  a jury                                                               
verdict.  He noted that this  information is in the [black three-                                                               
ring binder].   He further related that only about  20 percent of                                                               
the  tort dollar  actually  goes to  compensate  the victims  for                                                               
economic damages,  while about  58 percent  of every  tort dollar                                                               
never  reaches  the  victim  because  it  pays  for  defense  and                                                               
plaintiff   attorney    costs,   expert   witness    costs,   and                                                               
administrative costs.                                                                                                           
MR. HAUGEN informed the committee  that between 1995 and 1997, 36                                                               
percent of  plaintiff verdicts  were over  $1 million.   However,                                                               
that increased  to 54 percent  by 2001.   Mr. Haugen  pointed out                                                               
that  the tort  system in  this country  costs 2  percent of  the                                                               
gross  domestic product  and  it's expected  to  increase to  2.4                                                               
percent next  year.  One might  think that with this  increase in                                                               
expenses  for   the  malpractice  system,  physicians   would  be                                                               
committing  more   malpractice.     However,  the   frequency  of                                                               
malpractice  claims has  been declining  for the  last 10  years.                                                               
Therefore,  [the   problem]  is  the  severity   of  the  claims.                                                               
Research has shown that the  aforementioned has caused physicians                                                               
to practice  defensive medicine,  which the [U.S.  Department of]                                                               
Health and Human Services (HHS)  has estimated to add 5-9 percent                                                               
to the health care costs in  this country.  That estimate amounts                                                               
to $60-$108 billion a year  in physicians ordering extra tests to                                                               
cover all the bases.                                                                                                            
MR. HAUGEN turned to the  question regarding whether economic and                                                               
noneconomic  damage caps  actually  help with  patient access  in                                                               
Alaska.  He related that HHS  studies have also found that states                                                               
with noneconomic  damage caps have,  on average, 12  percent more                                                               
physicians per capita than the  states without caps.  Premiums in                                                               
states with  caps are 17  percent lower than those  without caps.                                                               
He   highlighted  that   California's   MICRA  has   dramatically                                                               
demonstrated how  caps on noneconomic damages  have kept premiums                                                               
lower.     For  example,  between  1975   and  2001  California's                                                               
malpractice  rates increased  182  percent  while nationally  the                                                               
rates increased 569 percent.                                                                                                    
MR.  HAUGEN  provided  a  quote  from  the  January  2004  Health                                                             
Tracking  by  Ken  Thorpe  who   states:    "It  appears  that  a                                                             
substantial  share of  the multi-state  physician-owned companies                                                               
have refocused  their efforts on  their state of domicile."   Mr.                                                               
Haugen  pointed  out  that  there   are  no  medical  malpractice                                                               
insurance  companies that  are domiciled  in Alaska.   Therefore,                                                               
[Alaska Physicians & Surgeons, Inc.]  fear that if this situation                                                               
isn't addressed, the state may return  to the 1970s with a state-                                                               
funded  plan.   Mr. Haugen  related  a quote  from Dr.  Neupauer:                                                               
"With the  supply of  physicians in Alaska  already at  risk, any                                                               
tort  lottery  induced  spiking   claims  and  subsequent  needed                                                               
premium   hikes  could   be  devastating   to  patient   access."                                                               
Therefore,  he  surmised  that  MIEC, the  stronger  of  the  two                                                               
carriers left in Alaska, is concerned as well.                                                                                  
MR. HAUGEN said that one must  remember that in Alaska the amount                                                               
of total premiums  written in the state is a  rounding error when                                                               
one considers how  much premium is written in  California and the                                                               
rest  of the  country.    Mr. Haugen  concluded  by relating  his                                                               
belief  that  Alaska  should  be  in  the  forefront  of  medical                                                               
liability  reform   in  order  to  keep   the  remaining  medical                                                               
malpractice companies in the state  and, almost more importantly,                                                               
to attract  young, new physicians.   The state  desperately needs                                                               
to create a "gold standard."                                                                                                    
Number 0539                                                                                                                     
REPRESENTATIVE GARA  said that there  is a response  statistic to                                                               
most of  those provided by Mr.  Haugen.  However, with  regard to                                                               
the  study  reporting  that  states  with  caps  do  better  with                                                               
[malpractice] premiums  than states without  caps, Representative                                                               
Gara pointed out that Alaska has a cap now.                                                                                     
MR. HAUGEN emphasized that there are various types of caps.                                                                     
REPRESENTATIVE  GARA surmised  that  the  study addressed  states                                                               
including Alaska because Alaska was a state with a cap.                                                                         
MR. HAUGEN said  he would have to check.   He reiterated that the                                                               
states with  the most  significant increase  are the  states with                                                               
hard caps.   More and more states are going  toward hard caps, he                                                               
REPRESENTATIVE GARA reiterated that he  would be sympathetic to a                                                               
hard cap  so long  as it  was flexible and  fairer [than  the one                                                               
proposed in HB 472].   Representative Gara recalled the statistic                                                               
that  60 percent  of [medical  malpractice] cases  are dismissed,                                                               
and  suggested  that  the  aforementioned  statistic  isn't  just                                                               
referring  to cases  that  have been  filed  because it  includes                                                               
MR. HAUGEN clarified that the  study specified that 60 percent of                                                               
medical malpractice claims never reach trial.                                                                                   
REPRESENTATIVE GARA said  that such studies often  define when an                                                               
attorney or a  client contacts a physician's office  to alert the                                                               
physician of  a malpractice  issue as  a claim  even if  the case                                                               
isn't pursued.                                                                                                                  
MR. HAUGEN  interjected that  such claims  are still  costing the                                                               
defense over $16,000.                                                                                                           
REPRESENTATIVE  GARA  highlighted  that  there  is  a  difference                                                               
between  invalid cases  that people  pursue versus  invalid cases                                                               
that people didn't pursue.                                                                                                      
CHAIR McGUIRE announced that HB 472 would be held over.                                                                         

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