Legislature(2003 - 2004)
03/16/2004 01:10 PM House JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 472 - CLAIMS AGAINST HEALTH CARE PROVIDERS Number 0977 CHAIR McGUIRE announced that the next 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." CHAIR McGUIRE announced that she would hold the vote on HB 472 until 3:00 p.m. when other members should be present. She then turned to public testimony. Number 0901 PATRICK LUBY, Advocacy Director, AARP Alaska, began by saying that medical mistakes happen. Therefore, AARP Alaska believes that this legislation should focus on error reduction rather than damages. Furthermore, the tort system encourages providers to cover up mistakes in order to avoid lawsuits rather than reporting errors and learning how to prevent them. Mr. Luby opined that someone who is hurt by a medical error is entitled to fair compensation, but emphasized that it's more important to ensure that errors are reported in order prevent future errors. MR. LUBY, noting that older people with limited income potential will receive less in economic damages than younger victims, informed the committee that AARP believes $250,000 is too low for noneconomic damages. He also informed the committee that the Institute of Medicine (IOM) has proposed testing nonjudicial no-fault alternatives to the tort system for medical errors. If Alaska adopted one of the IOM's recommended alternatives, it would foster fair compensation and error reduction, which should be the real goal of consumer-oriented reform, he opined. Under the IOM approach, compensation would be based on "avoidability" of error rather than negligence, and there would be preset schedules for compensation with reasonable limits that may help stabilize malpractice premiums. Mr. Luby relayed that the IOM believes that mandating the reporting of errors would help experts find systemwide [solutions] and improve patient safety. Mr. Luby encouraged the committee to review adopting some of the IOM's recommendations. Number 0743 REPRESENTATIVE ANDERSON noted that Mr. Luby has experience with California's model, and asked Mr. Luby his opinion of it. MR. LUBY commented that what works well is dependent upon the perspective. He relayed that the AARP takes the consumer's perspective, although reducing the number of errors would be in the best interest of all concerned. REPRESENTATIVE ANDERSON mentioned that he expected the legislation to move from committee today, but said he wanted to talk further with Mr. Luby. REPRESENTATIVE GARA relayed his sense that this legislation is going to move before anyone has time to consider IOM's proposal. Therefore, he inquired as to AARP's position if the legislation is left with the $250,000 noneconomic damages cap. MR. LUBY reiterated that the $250,000 noneconomic damages cap is too low, as is the current $400,000. Therefore, AARP would oppose the legislation. He reiterated the need for legislators to review the IOM recommendations and whether any can be incorporated into statute. The committee took an at-ease from 2:45 p.m. to 3:20 p.m. [Tape ends early; no testimony is missing.] TAPE 04-36, SIDE A Number 0001 CHAIR McGUIRE announced that HB 472 would be set aside briefly and be brought up later in the meeting. HB 472 - CLAIMS AGAINST HEALTH CARE PROVIDERS Number 0191 CHAIR McGUIRE announced that the committee would return attention to 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." REPRESENTATIVE ANDERSON, speaking as the sponsor of HB 472, recalled that at the last meeting there were two amendments that he was considering [one of which was offered as Amendment 1 and then withdrawn on 3/3/04]. He announced that at this time he wouldn't offer either amendment because he supports HB 472 as it is. CHAIR McGUIRE, in response to Representative Gruenberg, reminded the committee that the original version of HB 472 was before the committee. REPRESENTATIVE GARA recalled testimony from insurance company [representatives] regarding whether malpractice settlements have increased or decreased over the years. He noted that he'd provided the committee with the [Alaska State Medical Board's] record of all malpractice settlements and verdicts, which, he opined, illustrates that the settlements and verdicts radically change from year to year because these are statistically irrelevant samplings. Of the claims in 2003, the average settlement was about $341,000 while in 1991 it was $380,000. Representative Gara said that he didn't believe that there is any evidence which establishes that verdicts have increased in recent years. He also noted that he'd provided the committee with [the Alaska State Medical Board's] case by case [analysis] of each settlement and verdict over the last 15 years, and with information from Legislative Legal and Research Services regarding the number of physicians in Alaska. He pointed out that although there has been growth, the number of physicians in Alaska remains inadequate. Number 0488 REPRESENTATIVE GARA recalled debate over California's $250,000 cap and mentioned that he provided the committee with a document from the Foundation for Taxpayer & Consumer Rights [entitled, "Five Dangerous Myths About California's Medical Malpractice Restrictions"]. Representative Gara related that in 1975 Medical Injury Compensation Reform Act (MICRA) was enacted in California and was subsequently litigated until 1986 when the California Supreme Court upheld the $250,000 cap. He highlighted that in 1986, [medical] malpractice premiums didn't decrease but, in fact, increased. In 1988 California voters passed a proposition specifying that there shall be a reduction in premiums paid and it gave the insurance commissioner the right to reject rate increase applications and the right to lower insurance rates. From 1988 on, California experienced [medical malpractice insurance] rate reductions. Representative Gara opined that the proposition reduced the rates in California. REPRESENTATIVE GARA turned attention to the Legislative Legal and Research Services memorandum [dated March 16, 2004] regarding the daily recovery for noneconomic losses under a $250,000 cap even for the most serious injuries. He highlighted that the calculation specifies that under a $250,000 cap someone with a 50-year life expectancy is paid for the pain, suffering, and loss of enjoyment of life at the value of $13.69 per day. The aforementioned value is too low, he opined. Number 0713 REPRESENTATIVE GARA moved that the committee adopt [new] Amendment 1, labeled 23-LS1743\A.1, Bullock, 3/10/04, which read: Page 2, line 19, following "$250,000": Insert ", except that, in the case of severe permanent physical impairment or severe disfigurement, the damages may not exceed $1,000,000. The limit on damages applies" Page 2, line 25: Delete "$250,000" Insert "the maximum amount allowed under (d) of this section" CHAIR McGUIRE recognized that there was an objection. REPRESENTATIVE GARA explained that Amendment 1 would essentially reinstate the current two-tier damage cap that already exists. The current two-tier damage cap is $400,000 with the possibility of more for those with a long life expectancy. However, in cases of severe permanent physical impairment or severe disfigurement [the noneconomic damage cap] is $1 million or in some rare cases it could go up to $2 million, depending upon the life expectancy of the individual. Amendment 1 provides the insurance industry certainty with a hard cap [on noneconomic damages] of $250,000, except in cases in which there is severe permanent physical impairment or severe disfigurement which allows for a noneconomic damages cap of up to $1 million. Therefore, Amendment 1 addresses his concern with regard to valuing the damages of an individual at $13.69 a day. REPRESENTATIVE ANDERSON said that although he wasn't adamantly opposed to [Amendment 1] in the context of those severe cases, the other side is that such [noneconomic damage caps] would [work against] attracting new physicians and solidifying the insurance market. With regard to the argument about the $13.69 per day [damage award], Representative Anderson said he didn't believe the $400,000 cap would provide that much more per day. Furthermore, he posited, a $250,000 award could be quadrupled by the individual if he/she makes the proper investments. REPRESENTATIVE ANDERSON relayed his fear that the insurance companies wouldn't know whether the cap is $250,000 or $1 million until the jury [rules]. Therefore, he suggested that in order to protect itself the insurance company will assume every case is a $1 million worth of exposure and so perhaps the insurance rates would increase. Representative Anderson said that it's a balance between individuals who [should receive $1 million in compensation] for pain and suffering, and physicians leaving and the inability to recruit new physicians. Representative Anderson requested that the committee vote against Amendment 1 and allow [the legislation] to try to recruit more physicians. "Again, the cases where this occurs is so miniscule, I think the needs of the many outweigh the needs of the few," he said. Number 1015 REPRESENTATIVE HOLM said he agrees with Representative Gara on this issue, noting that he has received some compelling e-mails regarding the $250,000 cap, especially considering that that cap minus attorney's fees may result in nothing for a damaged individual. The compensation for malfeasance should be greater than $250,000, he opined, though he said he also agrees with Representative Anderson with regard to the need to attract more physicians to Alaska. Representative Holm said that he didn't believe that the case has been made that physicians will come because of a specific [noneconomic] damage cap nor has it been made that there will be any [rate] reduction or increased availability [due to this legislation]. Representative Holm announced his support of Amendment 1. REPRESENTATIVE SAMUELS expressed concern with insurance companies leaving the state as well as with the lack of physicians in the state. He inquired as to how one measures the person who has to catch a Medivac flight because there was no physician to perform a certain procedure and the individual dies en route. Representative Samuels asked if there are definitions for "severe disfigurement" or if it is based on what the attorney claims. Representative Samuels said that although he has no illusions with regard to insurance rates decreasing, he is fearful of it not being available. REPRESENTATIVE GARA explained that he thought it would be best to use the standard that has been on the books since the late 1980s, during the first round of Tort Reform. He noted that there is one supreme court case and several superior court cases that address it. The [current] standard seems to be a reasonable standard. In a case in which the individual isn't terribly injured, but the higher standard is satisfied, the question regarding what should be awarded in noneconomic damages would be submitted to the jury. Representative Gara highlighted that Alaska is a conservative state and that jury verdicts in the state tend to be so as well, especially in medical malpractice cases. Therefore, he opined, there shouldn't be a fear that there will be an automatic award of $1 million in a case that isn't serious. Representative Gara pointed out that the language is tailored narrowly. Number 1360 REPRESENTATIVE OGG turned attention to the [case by case analysis provided by ASMA], and highlighted those cases that were over the cap. He indicated that it seems the claim amounts are increasing, although he noted that the chart merely shows the total claim. The increase is concerning, he said, adding that he likes the $250,000 cap, although he noted that he is a bit uncomfortable with it having known individuals who have had something happen to them. The key, he said, is that the negligence or malpractice has to be proven. Although $1 million is a bit high, at least it's certain. REPRESENTATIVE HOLM asked if the [information provided by ASMA refers to] jury awards, and therefore are "agreed-to" settlements. REPRESENTATIVE GARA answered that these are mostly agreed-to settlements. He clarified that [the settlements] are all the payments, some of which are after a verdict while others are after a settlement. REPRESENTATIVE OGG announced that he would go along with Amendment 1. CHAIR McGUIRE clarified that the record shouldn't be construed to have emphasis on any one [issue] that has been discussed, since the record is comprehensive and includes testimony from various groups. She highlighted that [since the implementation of MICRA] in California, California's costs have only increased 100 percent while nationwide the costs have increased by over 563 percent. Although there is no proof or knowledge that this legislation will keep the two medical malpractice insurance providers in the state or will attract more physicians, the [committee] has looked to other jurisdictions to review what was done. California was the model for the $250,000 cap that appear to work, at least in part. CHAIR McGUIRE declared a conflict because her father is a physician [and requested that she be excused from voting]. REPRESENTATIVES GRUENBERG and OGG objected [and thus Chair McGuire was required to vote]. CHAIR McGUIRE specified that her father doesn't really fall into any of the categories listed. She further specified that she is reviewing this legislation in terms of the overall health of the medical industry in this state. Alaska is close to a crisis, and therefore it's incumbent upon the legislature to address it. Furthermore, it's important to remember that this cap is dealing with noneconomic damages. Number 1655 CHAIR McGUIRE remarked that [medical malpractice] suits are similar to aviation lawsuits because the liability has to be projected in terms of the possible amount that could be recovered. Therefore, it doesn't matter that there is information that says Alaska juries are more conservative. Insurance companies, she reiterated, have to factor in the entire amount that is possible to recover. The aforementioned is the problem with Amendment 1, she opined. Furthermore, the terms "serious physical impairment and disfigurement" aren't defined. She said she understood the reluctance to define those terms in this [statute] because they already appear in common law, but relayed that discussions with health care professionals have revealed that these terms have been interpreted more loosely than committee members probably envision. Furthermore, most cases are borne out through settlements, for which there are no statistics. The statistics are related to the trials. However, the real costs come into play with the settlements for which everyone pays the cost. CHAIR McGUIRE reminded the committee that during testimony she asked every medical malpractice attorney questions regarding contingency fees and costs. She relayed her understanding that it's illegal to include the cost of hiring experts as part of the [contingency] percentage. She reminded the committee that the federal government has said that the maximum contingency fee is 20 percent, unless it's 30 days prior to the trial in which case the maximum contingency fee is 25 percent. The aforementioned has to be addressed, she emphasized. After [the injured party] pays  percent in contingency fees and $50,000 in costs, she questioned what would be left for the injured party. Chair McGuire encouraged the trial bar to contemplate the aforementioned and she suggested that perhaps the trial bar would want to lower its contingency fees because 20 percent of $250,000 is a lot of money. CHAIR McGUIRE relayed her belief that Amendment 1 would gut the goal of HB 472, which is to reduce the amount of exposure and the amount of settlements. REPRESENTATIVE ANDERSON offered that it's a matter of balance. He reminded the committee that many of the hospitals and physicians, and the Alaska State Medical Association (ASMA) seem to believe this legislation will work. REPRESENTATIVE GARA informed the committee that the other important reason for Amendment 1 is that often [the injured party] doesn't receive anything outside of the noneconomic damages. Although the medical expenses are covered, those are paid to the entity for the services provided. Furthermore, many don't receive lost wages, such as seniors because they have stopped working. He questioned whether those following a subsistence lifestyle would receive lost wages. Therefore, there is little left once the $250,000 cap is reduced by one third because it's taxable and by another third because of attorney fees. Therefore, the two-tiered approach in Amendment 1 provides a compromise in which the insurance companies have a hard cap. REPRESENTATIVE ANDERSON maintained his objection. Number 2017 A roll call vote was taken. Representatives Gara, Gruenberg, Ogg, and Holm voted in favor of Amendment 1. Representatives Anderson, Samuels, and McGuire voted against it. Therefore, Amendment 1 was adopted by a vote of 4-3. Number 2037 REPRESENTATIVE OGG moved that the committee adopt Amendment 2, labeled 23-LS1743\A.3, Bullock, 3/10/04, which read: Page 2, line 22, following "death.": Insert "The limits on damages in this subsection do not apply if the personal injury or wrongful death was the result of gross negligence or reckless or intentional misconduct." Page 2, line 25, following "judgment": Insert "unless the personal injury or wrongful death was the result of gross negligence or reckless or intentional misconduct" Number 2040 REPRESENTATIVE ANDERSON objected. REPRESENTATIVE OGG explained that many insurance companies don't cover people for [personal injury or wrongful death] resulting from gross negligence or reckless disregard. Representative Ogg opined that [this legislation] would allow those who [commit conduct that is grossly negligent or reckless or intentional] to "walk." He said he wants to be sure that those who commit such conduct are accountable for the damage they do, which is why he offered Amendment 2. REPRESENTATIVE ANDERSON relayed that the associations believe Amendment 2 is irrelevant because punitive damages apply in these cases of gross negligence or reckless or intentional [misconduct]. He recalled that someone told him that 50 percent of punitive damages go to the state, and therefore it's believed that [Amendment 2] is an attempt to get around that arrangement. Representative Anderson specified that those supporting this legislation feel that this doesn't need any correction because there are adequate remedies in the statute. Therefore, he announced that he didn't concur with Amendment 2. REPRESENTATIVE GRUENBERG pointed out that punitive damages are extraordinary and not often awarded, and almost require a separate phase of the trial. Furthermore, punitive damages have to be proven by clear and convincing evidence, which is a much higher standard of proof. Therefore, [punitive damages] aren't a substitution for [Amendment 2]. REPRESENTATIVE GARA explained that [Amendment 2] would say that in the actual damages phase, the caps wouldn't apply for those who are [injured due to] gross negligence or worse. The punitive damages question would be separate. Therefore, by adding the [language] specified in [Amendment 2], the punitive damages wouldn't be reduced nor would the state's take be reduced. Representative Gara acknowledged that sometimes there is a bifurcated trial in which liability [issues] are addressed and then punitive damages are addressed; however, that's not required. Number 2184 CHAIR McGUIRE informed the committee that the section covering punitive damages under civil damages and apportionment of fault is AS 09.17.020 from which she highlighted the following: (b) The fact finder may make an award of punitive damages only if the plaintiff proves by clear and convincing evidence that the defendant's conduct (1) was outrageous, including acts done with malice or bad motives; or (2) evidenced reckless indifference to the interest of another person. (c) At the separate proceeding to determine the amount of punitive damages to be awarded, the fact finder may consider (1) the likelihood at the time of the conduct that serious harm would arise from the defendant's conduct; (2) the degree of the defendant's awareness of the likelihood described in (1) of this subsection; (3) the amount of financial gain the defendant gained or expected to gain as a result of the defendant's conduct; (4) the duration of the conduct and any intentional concealment of the conduct; (5) the attitude and conduct of the defendant upon discovery of the conduct; (6) the financial condition of the defendant; and (7) the total deterrence of other damages and punishment imposed on the defendant as a result of the conduct, including compensatory and punitive damages awards to persons in situations similar to those of the plaintiff and the severity of the criminal penalties to which the defendant has been or may be subjected. REPRESENTATIVE GRUENBERG indicated that the [financial condition of the defendant] isn't normally admissible. REPRESENTATIVE ANDERSON expressed concern with the "ceiling" aspect, which he said he didn't believe was fair. REPRESENTATIVE OGG remarked that he has offered Amendment 2 because when the conduct reaches the level specified in the amendment, there shouldn't be a protection for the individual committing [the misconduct]. Such an individual should be subject to the present law. CHAIR McGUIRE expressed interest in knowing the percentage of claims that are brought on the basis of the mental intent of simple negligence. She pointed out that now that Amendment 1 has been adopted, the [noneconomic damages] cap is essentially at $1 million. Furthermore, the common law interpretation of serious physical injury is broad enough to assume that the $1 million will be factored in and settlements will be adjusted accordingly based upon people's unwillingness to go through trials and pay the costs. REPRESENTATIVE OGG said that the claims brought on the basis of simple negligence weren't identified. REPRESENTATIVE GARA remarked that punitive damages and informed consent aside, all medical malpractice cases are brought on a simple negligence theory. TAPE 04-36, SIDE B Number 2393 REPRESENTATIVE GARA said that one would never find out which cases involved gross negligence because only negligence has to be proven in order to be entitled to basic damages. CHAIR McGUIRE surmised that [with the adoption of Amendment 2], there would be an incentive to argue the higher levels [of negligence] knowing that the caps would not apply. REPRESENTATIVE GARA interjected to say that such would be a separate claim. CHAIR McGUIRE opined that Amendment 2 should be rejected given the fact that the caps have been increased. She suggested that Amendment 2 "opens it up too far," highlighting that it's not what's proved but rather what's alleged. A clever attorney could easily argue gross negligence. Chair McGuire pointed out that this legislation doesn't impact punitive damages, which attempts to deter bad conduct. Compensatory damages aren't going to change due to one's mental intent, she noted. She also noted that there have been statements that noneconomic damages are being used to address loss of consortium, loss of enjoyment of life, and possibly to grant recovery to groups such as the elderly who don't have the ability to recover under an economic- damages basis. However, Chair McGuire opined, that's mixing apples and oranges because she believes that when the discussion is regarding someone's mental intent [at the level specified in Amendment 2], the discussion should be about punitive damages as a separate consideration. Therefore, Chair McGuire announced that she opposes Amendment 2. Number 2228 REPRESENTATIVE SAMUELS relayed his understanding that under the present law, the cap [for gross negligence or reckless or intentional misconduct] is $2 million. Therefore, Amendment 2 would [eliminate] the present cap. He expressed interest with regard to where the suits normally fall. Although he didn't believe there would be any argument regarding intentional misconduct, he doubted that there are many suits brought based on it. Representative Samuels asked if "this" is covered under the punitive damages portion. He expressed concern with proving negligence versus gross negligence to jurors who don't know anything about the law or medicine. Such a situation would seem to result in a contest of attorneys. REPRESENTATIVE OGG said he has a problem with those whose actions rise to the level [of gross negligence or reckless or intentional misconduct], and therefore he believes that such behavior should be reigned in somewhat. He echoed earlier comments that punitive [damages] are a separate category. He reiterated his understanding that the insurance companies don't cover claims of gross negligence, and therefore he didn't believe the notion that [injured parties] go for the deep pocket would fit in this case. REPRESENTATIVE GARA informed the committee that the only medical malpractice case he ever took involved intentional misconduct, for which others in the medical community congratulated him. He relayed that in most [medical] malpractice cases [there are charges of] negligence. However, in American society the thought is that if someone is hurt by exercising unreasonable care, the victim should be compensated. At some point, he remarked, the conduct becomes so egregious that there is no reason for society to offer any protections. Representative Gara relayed his experience with the medical malpractice case and highlighted the [usual] practice of offering a low settlement until the eve of trial. The aforementioned seems to be a strategy to deter people from filing for claims by "running them through the ringer if they file them." Furthermore, just because [a case] qualifies for a higher cap, it isn't the case that the money is just given out, because [the attorneys] take into account what a jury is likely to do with the evidence, the client, and the extent of the injuries. Representative Gara concluded that ultimately, there are some classes of conduct that the legislature shouldn't protect, and therefore he agreed with Representative Ogg. REPRESENTATIVE GRUENBERG turned attention to the [case by case] list of [malpractice cases], and commented that there are a number of things that are clearly negligence while there are others that seem to fall under Amendment 2. He pointed out that even for serious [misconduct], such as performing arthroscopy on the wrong knee, it doesn't necessarily result in a large settlement. He expressed the need to be fair. CHAIR McGUIRE, upon being informed that someone had flown in to testify on other legislation, announced that HB 472 would be set aside with Amendment 2 pending.