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F I S C A L I M P A C T R E P O R T

SPONSOR Park

DATE TYPED 3/06/05

HB HJM 67/aHJC

SHORT TITLE Study Malpractice Insurance Crisis

SB

ANALYST Ford

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to

HM 13, SM 7, HB 636, SB 6, SB 292

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Health (DOH)

Health Policy Commission (HPC)

Public Regulation Commission (PRC)

SUMMARY

Synopsis of HJC Amendment

The House Judiciary Committee amendment replaces references to the “malpractice crisis” with

“malpractice issue” and replaces a reference to “skyrocketing” costs with “increasing” costs.

The amendment corrects a misstatement in the findings by indicating that medical malpractice

liability is capped at $600 thousand for physicians who participate in the patient’s compensation

fund, rather than $200 thousand.

Synopsis of Original Bill

House Joint Memorial 67 makes a number of findings relating to the increasing costs of malprac-

tice insurance premiums and the detrimental effect on health access.

The Memorial requests the HPC to appoint a task force to address the malpractice insurance cri-

House Joint Memorial 67/aHJC -- Page 2

sis. The task force would be composed of representatives of the insurance industry, the insur-

ance division of the PRC, the Governor’s office, statewide associations with members affected

by rising insurance costs representing midwives, dentists, hospitals, nursing homes and trial at-

torneys, and other affected parties. The Memorial requests that the task force review all relevant

statutes and conduct a review of other states’ laws, programs and approaches and make recom-

mendations to appropriate interim legislative committees and the Governor’s office by Novem-

ber, 2005.

FISCAL IMPLICATIONS

The Memorial will result in costs to the HPC to convene the task force, as well as to departments

asked to serve on the task force.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Joint Memorial 67 relates to:

•

House Memorial 13, which would request that the Congressional delegation of the State

of New Mexico support the President’s medical malpractice reform proposal;

•

Senate Memorial 7, which would request the HPC and the insurance division of the PRC

to convene a task force on health care practitioner liability insurance to examine the mal-

practice insurance dilemma and its impact on providers and patients;

•

House Bill 636 and Senate Bill 292 (duplicates), which would amend the Risk Manage-

ment Act.

•

Senate Bill 6, which proposes to amend the Medical Malpractice Act.

TECHNICAL ISSUES

DOH suggests include a representative from Risk Management on the task force.

OTHER SUBSTANTIVE ISSUES

The HPC writes:

“In 1975, Travelers Insurance Company, New Mexico’s liability carrier, announced that

it would no longer provide medical malpractice insurance to the state’s physicians, citing

the lack of tort reform and the small amount of business available in the state.

“In 1976, the New Mexico Medical Malpractice Act was signed into law. The Act pro-

vides a CAP on liability of $600,000 plus past and future medical care, provides a statute

of limitations on claims, establishes a patient compensation fund, and sets up the New

Mexico Medical Review Commission, a medical-legal panel consisting of attorneys and

physicians, which must screen all potential legal actions before they can be filed in court.

“While physician liability rates in other states have soared - in some places to 500% -

New Mexico’s average rate increase last year was less than 10%. (Source: New Mexico

Medical Society) While this may not appear to be a crisis, New Mexico physicians and

nurse midwifes are finding it increasing difficult to afford the premiums. Obstetricians in

New Mexico are paying $90,000 annually for insurance, and general and orthopedic sur-

geons are paying $76,000.

House Joint Memorial 67/aHJC -- Page 3

“One of the issues that physicians and nurse midwives have involves the small size of the

risk pool in New Mexico. While the current medical society company, AP Assurance, is

the result of a merger in the mid 1990s with Michigan Mutual Liability Company, the

claims basis and liability rates for coverage are based upon New Mexico experience only,

so the pool size continues to be an issue. If passed, HJM67 will look at other states risk

pool size and claims experience to determine if other states’ best practices could be repli-

cated, and if pool size is a factor in New Mexico’s rate determination.

“Also, the state’s thirty-two midwives have a legal and regulatory issue with the managed

care organizations about the MCO requirements to carry professional liability insurance.

“Malpractice insurance covering home birth services is presently not available to any li-

censed midwives or certified nurse-midwives in New Mexico. As such, access to care

could be compromised.”

PRC writes notes that some of the WHEREAS statements maybe inaccurate. The first references

“skyrocketing malpractice insurance premiums for all types of health care practitioners and

providers” which may be an overstatement. For example, the premiums for the majority of

doctors who are currently in the Patients Compensation Fund have risen on average less than

25% over the last two years. This may not warrant the term “skyrocketing” although premiums

for many obstetricians and midwives are rising at higher rates.

The third WHEREAS statement that “medical malpractice liability is capped at $200,000 for

those physicians who participate in the patient’s compensation fund” is inaccurate. The cap is

$600,000 and applies to everything except lifetime medical bills (which are uncapped and are

paid by the patient’s compensation fund) and punitive damages (which would be paid by the

health care provider).

PRC also notes that several sources, including the American Medical Association, have

identified New Mexico as one of the states least in crisis regarding medical malpractice coverage

in general.

EF/yr:rs