Illinois Business Journal - Dramatic changes follow Texas medical malpractice tort reform

In the past 18 months, the number of medical malpractice cases filed in the state of Texas has been cut in half. The number of practicing doctors is up. The number of insurance carriers has jumped. And the five largest physician insurers in the state have announced rate cuts this year, totaling approximately $50 million in premium savings to doctors and hospitals.

This has all been due to the passage of Texas House Bill 4 and Proposition 12, according to Jon Opelt, executive director for the Texas Alliance for Patient Access.

TAPA is a coalition of healthcare providers, consumer groups, professional associations and insurance carriers; it was formed in 2001 in response to the brewing medical malpractice crisis. The impetus of the nonprofit organization was to bring about medical liability reform.

HB 4 substantially amended Texas' law regarding medical malpractice torts, including establishing a cap of $250,000 per claimant on non-economic damage awards; limiting time for filing a cause of action; toughening the standard of proof; raising the bar on qualifying expert witnesses; and providing for periodic payments of damages. It was passed into law on July 1, 2003.

Like Illinois, the Texas Constitution prohibited caps on awards. Proposition 12 - to amend the constitution regarding caps - was put to the voters and passed in September 2003.

According to Opelt, the most important part of the legislation was the establishment of the $250,000 cap.

"Within a 10-year span from 1989 to 1999, non-economic awards and healthcare lawsuits in Texas had quadrupled," he said. "That was a huge factor in going to the legislature and asking it to do something - because this rise in non-economic awards, coupled with a high number of suits being filed without merit, had driven up insurance costs. And in many cases, this made it unavailable or unaffordable for many doctors."

Opelt said that as non-economic awards spiked, a number of insurance carriers left the Texas market.

"They either went bankrupt, they got out of that line of coverage, they left the state or they restricted their lines of coverage," he said. "We went from 17 insurers down to four, and that put roughly 6,000 doctors in peril."

Three thousand Texas physicians found a home in the state's Joint Underwriting Association, the state insurance pool of last resort, according to Opelt.

"So what you saw at that time was the rise in the awards, the reduction in the number of parties providing coverage, doctors scrambling to get coverage, doctors restricting their practices to minimize their liability, a flat line or a decrease in many specialties in medicine," he said. "And the 2002 liability study by the Texas Medical Association showed that six out of seven lawsuits against Texas physicians were being closed with no payment being made to the patient - suggesting that many of these should never have been filed."

Passing HB 4 and Proposition 12 was not an easy matter, Opelt said.

"In many counties there were marches on the courthouse, deemed a plea for survival by doctors and nurses," he said. "There was lots of debate. There was about $17 million spent on Proposition 12, lots of TV and it resulted in clear recognition that this was an issue affecting both patients and doctors statewide."

The Texas Medical Liability Trust, a physician-owned trust, is the state's largest physician insurer with slightly more than 40 percent of the market. TMLT has cut its rates twice in the past 16 months, totaling 17 percent. This led the way, Opelt said, to cuts by other insurance companies.

"The JUA announced a 10 percent rate cut a few weeks ago," he said. "It was a short time ago that the JUA had gone to the Texas Department of Insurance with a request for a 36 percent rate hike. That is a dramatic turnaround in the course of a year's time."

According to published reports in the Dallas Morning News, Texas trial lawyers concede that the tort reforms have dramatically reduced the number of suits filed. But they say that it's because plaintiff attorneys are now forced to turn down many cases because of the $250,000 cap. Local attorneys agree.

"Absolutely there are going to be fewer lawsuits because it gets to be a business question: 'Does it make sense to take the case?'" said Robert Rowland, a partner with the firm of Goldenberg, Miller, Heller and Antognoli PC in Edwardsville. "A complex medical malpractice case is going to cost you tens to hundreds of thousands of dollars in medical experts alone," he said. "If you have a situation where, let's say, the person is retired and he maybe has $50,000 or $100,000 in medical bills, you'll have a difficult time getting a verdict that would cover the medical bills and the expert witness fees. So as a businessman, you're not going to take that case."

Rowland says caps on awards deny justice to people who need it the most; that there is no correlation between lawsuits and insurance premiums; and that the stock market is the real force behind the current malpractice insurance crisis.

"Missouri just passed medical malpractice reform and revised its caps downward," he said. "I saw a recent article in one of the Kansas City papers that insurers have already acknowledged that rates aren't going to go down because of the recent cap adjustment. I think that's a damning admission - that there is very little link between lawsuits and insurance premiums. Market conditions and a lack of control over insurance companies are driving the bus in terms of increased medical malpractice premiums," he added.

Ron Motil, a partner with the firm of Beatty, Motil and Foster in Edwardsville, and president of the Madison County Bar Association, agrees.

"When President Bush came here in January, he said there were runaway verdicts against doctors in Madison County," Motil said. "That's simply not true. The statistics show that within the last nine years there have only been four verdicts against doctors. People then say that that must mean that most cases are settled. To make the assumption that most cases are settled for an equally high sum is also false because there have been many cases just dismissed or voluntarily dropped - or the attorney doesn't get the certificate of merit in order to file the claim."

Opelt points to the fringe benefits that have been produced by the tort reform measures.

"The Texas Hospital Association did a survey of its membership in 2003, and that showed that on average hospitals were experiencing a 54 percent rate hike," he said. "One year later, THA surveyed those same hospitals and recorded a 17 percent rate cut. That money was now freed up for other uses, so that hospitals could expand charity care, buy new equipment or launch some new patient initiative," he added.

But Rowland doesn't buy it.

"If you pass medical malpractice reform, those in our society who need help the most - children, older people, single mothers, people who don't have a big lost wage claim - are going to suffer the most," Rowland said. "It occurs to me that if you have a scheme by which the people who most need the help of the court system have the courthouse doors closed to them, there's something wrong."