Primary-care providers who practice at federally qualified health centers do not need to purchase medical malpractice insurance. Why? The government promises to cover any claims against them under the Federal Tort Claims Act. If a patient has a successful malpractice case against the health center provider, the government becomes the insurer and agrees to pay the claim.
The national health reform debate should include a proposal to expand Federal Tort Claims Act coverage to all primary care providers, regardless of where they practice, and to certain specialists (such as obstetricians) where access to care is threatened. Doing so would have multiple benefits: Doctors, nurse practitioners and other primary care providers would be freed from the burdens of finding and paying for costly malpractice insurance; future medical students would have an incentive to choose primary care, addressing a critical shortage; and we would finally begin to bend the "cost curve" in health care.
A number of states, including Pennsylvania, already have state-administered medical malpractice insurance. In Pennsylvania,
32. What is Mcare?
“Mcare” stands for the Medical Care Availability and Reduction of Error Fund. It was created under Act 13 of 2002 and is the successor to the Medical Professional Liability Catastrophe Loss Fund, better known as the “CAT Fund.”
33. How does Mcare work?
Currently, Pennsylvania law requires physicians to carry a minimum of $1 million of medical malpractice coverage per incident, and physicians must have this coverage in order to be licensed. The first $500,000 of medical professional liability coverage per incident, which is called the basic or primary insurance layer, is obtained through the private insurance market. The second $500,000 of coverage per incident is provided by the state-administered Mcare Fund. Hospitals must also maintain medical malpractice coverage and their required amounts are higher — $1 million worth of coverage for each incident and $4 million total coverage per year.
The fund is paid for primarily by a $.25 tax on every pack of cigarettes sold in Pennsylvania. Right now, the fund has a whopping $414 million surplus. All though the fund says that the surplus was caused by "the improvement in the medical malpractice climate in Pennsylvania," that’s not the whole story.
Government-administered casualty insurance programs run the gambit from fair and equitable, like the September 11 fund administered by Kenneth Feinberg, to hostile and vexatious, like the Pennsylvania Property and Casualty Insurance Guaranty Association (intended to cover insurance claims against insurers that have become insolvent), which has been reprimanded by the Pennsylvania Supreme Court for its "slash and burn approach to protecting PPCIGA’s assets."
Pennsylvania’s MCARE fund sits somewhere in the middle, and is not without its faults. Let me give you an example.
Not too long ago, I attended a court-ordered settlement conference in a medical malpractice action brought against two physicians and a hospital. The case was quite serious, with seven-figure damages, the absence of any good explanation for why the defendants did what they did, and highly damaging testimony by another physician at the hospital who had recognized the problem in a timely manner and yet had their recommendations for emergency treatment overruled.
The federal judge hearing the case (we were in federal court because the plaintiffs did not live in Pennsylvania) ordered the parties come to the conference with authority from the insurance carriers to settle. Such naturally included MCARE, which often ends up matching the contributions of the physicians and/or hospitals in a suit.
At the settlement conference one physician showed up ready to tender policy limits. The other physician and the hospital showed up with substantial authority and a willingness to negotiate.
MCARE sent a representative with little knowledge of the case and no authority to even begin negotiations, much less offer money. Such was, of course, a blatant violation of the court’s order requiring the insurance carriers appear with authorization.
The judge was not amused, and so requested the MCARE representative phone home until they reached someone who could authorize a settlement.
The representative’s efforts failed; not only did the representative not have any authority, but they couldn’t find anyone who did. Such would have been a typical example of settlement-conference rope-a-dope but for the authorization phrase in the court’s order. After the representative couldn’t find anyone, the judge started making the calls, until they found the highest-ranking officer who was available, who they calmly informed was in violation of a federal court order, and as such should prepare for a visit by U.S. Marshals.
After that, MCARE changed its tune, and we settled the case by the end of the day. Like I said: MCARE is somewhere in the middle. Had it been PP&CIGA, I wouldn’t have been surprised if they just dared the judge to send the Marshals out.
All of which is to say, it’s not crazy to think that the government can run a liability insurance company, but the devil is in the details (Feinberg wrote a book about the difficulties of evaluating damages in 9/11 Fund), because government-administered casualty insurance programs have the same institutional incentives to thwart claimants, but don’t have the same disincentives (such as the potential for bad faith lawsuits) against dilatory and obdurate conduct.